The “Panama Papers” revelations have shone the light on Panama’s culture and practice of secrecy. Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities. The OECD has been leading a global crackdown on these practices since 2009, working hand-in-hand with the G20. Through the Global Forum on Transparency and Exchange of Information, we have constantly and consistently warned of the risks of countries like Panama failing to comply with the international tax transparency standards. Just a few weeks ago, we told G20 Finance Ministers that Panama was back-tracking on its commitment to automatic exchange of financial account information. The consequences of Panama’s failure to meet the international tax transparency standards are now out there in full public view. Panama must put its house in order, by immediately implementing these standards.
While the “Panama Papers” data expose nefarious activities, they also show a decline in the use of offshore companies and bearer share companies, which is a testament to the incredible transformation effected in the last 7 years to establish robust international standards on tax transparency, including on beneficial ownership: 132 jurisdictions have committed to the standard on exchange of information ‘on request.’ Of those, 96 jurisdictions will introduce automatic exchange of financial account information within the next 2 years. Almost 100 jurisdictions have joined the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. As a result of our in-depth peer review process, the use of bearer share companies is close to being eliminated across the world, and the beneficial ownership rules have been strengthened to ensure that information is now available to tax authorities when they need it.
Establishing global standards and making commitments are just the start though. Effective implementation is the key to lifting the veil of secrecy once and for all and eradicating tax evasion. The time has come to make sure that no jurisdiction can benefit from failing to meet their commitments. In the run-up to September’s G20 Leaders’ Summit in Hangzhou, we must use every opportunity to deliver. The next G20 Finance Ministers meetings and the Global Anti-Corruption summit taking place in London in May will be critical.
The Global Forum on Transparency and Exchange of Information for Tax Purposes monitors the standards on tax transparency: tax information exchange ‘on request’ (EOIR), and automatic exchange of information (AEOI). Both of these standards can be effectively implemented through the multilateral Convention on Mutual Administrative Assistance in Tax Matters.