What measures are Denmark taking to prevent capital flight and support tax mobilisation?

Presentation by Steen Lohmann Poulsen – Danish Ministry of Finance

23.10.2009 2

The problem of capital flight and tax evasionThe problem of capital flight and tax evasion

•Estimates of proceeds from criminal activities, corruption and tax evasion in developing and transition economies range from 500-800 billion US dollars per year.

•Of this, roughly 250 billion US dollars per year is from tax evasion.

23.10.2009 3

The Legal Framework – OECD and UNThe Legal Framework – OECD and UN

•OECD’s Global Forum on Transparency and Exchange of Information:

– Exchange of information on request

– No restriction on information exchange due to bank secrecy

2 OECD models – double taxation and exchange of information (TIEA)

•UN model double taxation convention

– follows OECD standards to a large extent

– targeted bilateral agreements between developed and developing countries

23.10.2009 4

The EU frameworkThe EU framework

• Savings Tax Directive (2003)

– Coverage: only taxation of savings income – interest payments

– Automatic exchange of information. Transition period for Luxembourg, Austria and Belgium

– Corresponding agreements with Switzerland, Liechtenstein, Monaco, San Marino and Andorra (withholding tax)

23.10.2009 5

Progress in G20Progress in G20

• G20 declarations call for:

– the end of bank secrecy

– adherement to international standards for information exchange

- expanding the OECD Global Forum to also include developing countries

– countermeasures against tax havens from March 2010

23.10.2009 6

Multilateral initiativesMultilateral initiatives• OECD:

– multilateral negotiations of bilateral agreements on exchange of information

– opening the Convention on Mutual Administrative Assistance in Tax Matters to developing country participation - multilateral agreement drawn up by Council of Europe and OECD which covers:

• information exchange on request

• indirect and direct taxation

• all legal persons (both individuals and companies)

• upcoming revision: remove restrictions on bank secrecy

23.10.2009 7

OECD – ”White” list, October 20th, 2009OECD – ”White” list, October 20th, 2009

Jurisdictions that have substantially implemented the internationally agreed tax standard

Argentina Estonia Jersey SeychellesAruba Finland Korea Slovak RepublicAustralia France Luxembourg SloveniaAustria Germany Malta South AfricaBahrain Gibraltar Mauritius SpainBarbados Greece Mexico SwedenBelgium Guernsey Monaco SwitzerlandBermuda Hungary Netherlands TurkeyBritish Virgin Islands

Iceland Netherlands Antilles

United Arab Emirates

Canada India New Zealand United KingdomCayman Islands Ireland Norway United StatesChina Isle of Man Poland US Virgin IslandsCyprus Israel PortugalCzech Republic Italy Russian FederationDenmark Japan San Marino

23.10.2009 8

OECD – ”Grey” list, October 14th, 2009OECD – ”Grey” list, October 14th, 2009

Jurisdictions that have committed to the internationally agreed tax standard, but have not yet substantially implemented

Jurisdiction Year of commitm

ent

Number of

agreements

Jurisdiction Year of commitmen

t

Number of agreemen

ts

Tax havensAndorraAnguillaAntigua and BarbudaBahamasBelizeCook IslandsDominicaGrenadaLiberiaLiechtensteinMarshall Islands Montserrat

20092002

2002200220022002200220022007200920072002

(0) – (5)(4)

(7) – (9)(1) – (3)(0)(0) – (1)(1)(1)(0)(1) – (10)(1)(0)

NauruNiuePanamaSt Kitts and NevisSt LuciaSt Vincent and the GrenadinesSamoaTurks and Caicos IslandsVanuatu

20032002200220022002

20022002

20022003

(0)(0)(0)(1) – (5)(0)

(0) – (5)(0) – (3)

(0) – (5)(0)

Other Financial CentresBruneiChileCosta RicaGuatemala

2009200920092009

(5) – (6)(0)(0)(0)

MalaysiaPhillipinesSingaporeUruguay

2009200920092009

(0) – (2)(0)(0) – (11)(0) – (2)

23.10.2009 9

What measures have Denmark taken?What measures have Denmark taken?

• Bilaterally - recent revision of agreements with Switzerland, Austria, Luxembourg and Singapore in accordance with the OECD standards

• Nordic cooperation - bilateral information exchange agreements within a multilateral framework. Agreements with Jersey, Guernsey, Isle of Man, Cayman Islands, Bermuda, the Virgin Islands, Aruba og the Dutch Antilles.

• EU - pushing for speedy adoption of a revised Savings Tax Directive and anti-fraud agreements with Liechtenstein and other third countries

• OECD - supports work in the Global Forum

23.10.2009 10

The international work program:The international work program:• EU

– Anti-fraud agreements with third countries

– Revision of the Savings Tax Directive to increase coverage

• OECD - responding to G20 call to make it easier for developing countries to benefit from tax cooperation – report expected prior to G20 Finance Ministers meeting in November

• Denmark – continuing to push for progress in the EU and work for more tax agreements within the Nordic framework

23.10.2009 11

The way forward for developing countries?The way forward for developing countries?

Proposals:

•Country-by-country reporting?

•Multilateral agreements?