G-20 leaders agree tax haven crackdown | ABC30 Fresno

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By ABC30

Thursday, April 2, 2009

LONDON (AP) The summit in London agreed that the Organization for Economic Cooperation and Development, representing the developed world, would immediately circulate a blacklist of countries that serve as tax havens.

Under the agreement reached at the G-20 meeting in London, countries that refuse to adopt new rules on financial openness could face tough sanctions -- including the withdrawal of investment funding by the World Bank or International Monetary Fund.

"The time of banking secrecy has passed," said French President Nicholas Sarkozy following the summit. "Everyone around the table wants an end to tax havens. Everyone knows we need sanctions."

The announcement follows mounting concern that banking secrecy in tax havens has helped to worsen the economic crisis by disguising the true value of some global assets. Anti-poverty activists also say the havens cost poor countries the funds they need to improve their lot, by providing corrupt officials with a safe destination for their money.

British officials said the OECD list would apply only to members of the organization, which some say is the world's club for rich nations.

The OECD has divided countries into three categories: those who comply with rules on sharing tax information, those who say they will but have yet to act, and nations which have flatly refused to change banking secrecy practices.

Switzerland and Liechtenstein, which both have strong traditions of banking secrecy and announced last month they would adopt international rules on tax cooperation, said they were ready to comply with the demands of the G-20.

Liechtenstein, Switzerland's tiny Alpine neighbor, said it has already met with British officials in its preparations for the new standards. Monaco has earlier said it would be more transparent with foreign tax authorities.

China said it supported the move, but would not agree to have two territories, Hong Kong and Macau, classified as tax havens.

Potential sanctions for transgressors include additional audits on the accounts of those who use tax havens and curbs on tax deductions claimed by businesses who use the territories. In their communique, leaders said they may also consider further penalties in their bilateral relations with tax haven territories.

German Chancellor Angela Merkel said Brown and President Barack Obama had been key in pressing the case for a crackdown on tax havens.

At least 35 offshore tax havens, from Britain's Channel Islands to the Cayman Islands in the Caribbean, have been under increasing pressure to provide more information to international authorities in order to stop people from avoiding taxes or hiding income by moving money there.

Stephen Timms, financial secretary to the British Treasury and part of the British delegation, said a culture of banking secrecy had worsened problems in the global economy.

"That lack of transparency -- that opaqueness -- has contributed to the severity of the problems we are seeing in the world economy at the moment," he said.

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Associated Press Writers Emma Vandore and Michael Fischer in London and Frank Jordans in Geneva contributed to this report