Tax evasion crackdown

The meeting in Berlin on Tuesday brought together 20 finance ministers of the 30-nation Organisation for Economic Cooperation and Development (OECD).

It was called by German Finance Minister Peer Steinbrueck and his French counterpart Eric Woerth, and was aimed at intensifying the struggle against cross-border tax evasion.

After the meeting, Steinbrueck said he was "extraordinarily satisfied" with the results, which constituted "substantial progress."

In a final document, the 20 finance ministers agreed to toughen measures against countries which fail to implement OECD tax standards.

National governments are called upon to scrap tax benefits for businesses dealing with such "non-cooperative" countries.

In addition, it was suggested that higher taxes should be levied on financial transfers to tax havens.

Getting off the "grey list"

The talks follow a similar meeting in Paris on October 21, 2008. Then, it was decided that governments should crack down on tax havens said to be partly responsible for the kinds of upheavals in financial markets that lead to the current economic crisis.

Since the year 2000, the OECD has blacklisted countries which fail to comply with the organisation's tax standards, and suggested imposing sanctions on them.

At the moment, there are no entries in the OECD’s black list, as countries considered tax havens - including among others Andorra, Austria, Liechtenstein, Luxembourg, and Switzerland - promised to cooperate with the OECD.

However, they are still listed on a "grey list" which names countries that have not yet implemented the OECD standards.

The OECD also requires that these countries sign bilateral tax information agreements with a minimum of 12 industrialized nations before they can be scrapped from the grey list.

Steinbrueck the taskmaster

Steinbrueck has been a vocal critic of international tax havens, and has pressed for sanctions against countries aiding tax evasion.

According to the German Taxpayers‘ Federation, Berlin loses an estimated 30 billion euros in taxes each year - money that often ends up in the vaults of banks in Switzerland, Luxembourg and other tax havens bordering on Germany.

Steinbrueck has presented sweeping new laws against tax dodging under which all financial transfers to tax havens must be declared.

The German finance minister has also caused a diplomatic rift with Switzerland and Luxembourg recently, as he compared taxation rules there with those allegedly existing in Ouagadougou, the capital of the African nation of Burkina Faso.

He also suggested that other countries should "crack the whip" on the Swiss to combat tax evasion and bank secrecy.

But on Tuesday,Steinbrueck explicitly praised Switzerland, Luxembourg and Austria for supporting the OECD measures. On Monday, Switzerland agreed to negotiate a new double taxation agreement with Germany.

After talks with Steinbrueck in Berlin, the Swiss Finance Minister Hans-Rudolf Merz said his country would seek to introduce legislation easing the country's bank secrecy as quickly as possible.

He also said Swiss banks would be obliged to exchange tax data in response to a "well-founded request" from other countries.

The Swiss government hopes to ratify a dozen accords governing double taxation practices by the end of the year. If it does so, the country would finally conform to the OECD standards, and could then be taken off the grey list.

uh/AFP/IPS/Reuters
Editor: Andreas Illmer