Global Policy Forum

World Bank to Study Offshore


World Bank President Robert Zoellick has Accepted Norway's Plan
to Fund and Lead a World Bank Initiative to Study the Offshore Phenomenon.

TaxJusticeNetwork USA
September 12, 2007

The World Bank had refused until now to try to measure seriously the tax haven problem. Norway therefore had indicated its intention to commission and pay for a World Bank report on illicit financial flows. However, Zoellick, the World Bank's new president, wrote a letter on September 5th to Erik Solheim, Norway's minister of international development, saying that "a study of the development impact of off-shore financial centers would be a valuable contribution to the governance and anti-corruption agenda," and that the Bank would be pleased to collaborate with Norway on taking this forward.
In addition, at a September 3rd meeting of the Leading Group of countries on Solidarity Levies to Fund Development, in Seoul, Mari Skíre, a senior advisor to Norway's Ministry of Foreign Affairs, announced that Norway is also willing to take a lead in an LG task force addressing the role of tax havens and capital flight from developing countries. LG members France, Spain and Chile have already indicated their interest.

Skíre said: "One objective should be to get more data on the table. We need to have better knowledge and understanding of the nature of the financial structures and what role they play in money laundering and hiding stolen assets. The cross border flow of the proceeds from criminal activity, corruption and tax evasion is estimated to be between 1 and 1.6 trillion dollars every year. A large chunk of this comes from developing countries. We need to know more about these flows and the mechanisms and financial structures that support them. We are particularly interested in understanding the role of tax havens in hiding stolen assets deriving from resource extraction and the role of these structures in what is referred to as the paradox of plenty."

The United Nations hosted a conference on Financing For Development in Monterrey, Mexico, in 2002, which was attended by more than 50 heads of state or government, and which called on developing countries to mobilize domestic resources for development, including the need for "equitable and efficient tax systems and administration." The Monterrey Conference led to the "Monterrey Consensus" and a number of projects, including plans for an International Conference on Financing for Development to review the implementation of the Monterrey Consensus, which will be held in Doha next year, probably in December.
Mari Skíre said: "In the Monterrey Consensus it is stated that a critical challenge is to ensure the necessary internal conditions for mobilizing domestic savings, and that an enabling domestic environment is vital also for reducing capital flight. Another side of the equation are financial centers - often located in developed countries - set up to hide stolen assets. These mechanisms need to be better understood and we hope that a task force under the Leading Group can contribute to the Finance for Development Process by raising awareness and identifying key areas for action."

TJN's role in making this happen
TJN has been pushing for this. TJN has raised the issue last year and this year at meetings of the Leading Group, consultations organized by five governments (Brazil, France, then expanded to include Chile, Spain, Norway) which are committed to using special taxes (in this cases a tax on airline tickets) to fund purchase or subsidies of medicines and care for people living in developing countries and suffering from HIV-Aids, Malaria or TB.
The Leading Group involves civil society in its deliberations, and NGOs, including TJN, have been invited to past meetings. In Paris, February 2006, Bruno Gurtner of Alliance Süd, a Swiss development group and TJN member, was a leader of NGOs that raised the point that while an airline tax to fund medical care may be useful, the participating countries ought to focus on the much larger sums that evade international taxes, especially through the use of the offshore system.

The declaration by NGOs presented to the meeting said: "Finally, efforts to collect new international resources must go hand-in-hand with the strengthening of national fiscal regimes that should remain the priority. This requires a resolute fight against tax evasion, dumping and tax havens. We are grateful for the mention in the declaration of the fight again tax evasion, and we ask the ratifying States to commit themselves to much more ambitious objectives to this end. Tax evasion and tax havens leads to the loss of fiscal revenues running into hundreds of billions of dollars annually for countries in the Global North and South, consequently weakening fragile democratic processes in the countries of the South and that deprives their budgets of vital income. In this respect, opposite to what this declaration could lead to believe, the fight against tax evasion and tax havens is at least as much the responsibility of the countries of the North as of the countries of the South."

That was signed by several dozen NGOs, including Tax Justice Network and individually by TJN members including Alliance Süd, Switzerland; Association for Accountancy & Business Affairs, UK; ATTAC France; ATTAC Switzerland; Comité catholique contre la faim et pour le développement (CCFD), France; Secours catholique - Caritas France; The Bern Declaration, Switzerland. A Brasilia meeting in July 2006 built on that, and though the focus was still on the airline tax, the organizers had invited TJN to speak at a panel on "Tax on Financial Transactions and other forms of taxation and the fight against Tax Havens."

At the July 2006 Brasilia meeting, the issue of tax evasion was raised strongly by TJN-USA Co-chair Lucy Komisar in her panel talk and echoed by other civil society representatives and some governmental delegates. The summary presented at the end of the meeting by the chair, an official of the Brazil foreign ministry, repeated the TJN proposal that tax evasion be put much higher on the LG agenda and that the LG hold an international meeting on tax evasion. Lucy Komisar met with the head of the Norway delegation, who was slated to run the next consultation. He said he would consider very positively putting the tax evasion issue high on the agenda for the technical meeting in October 2006 and the full LG meeting in early 2007 in Oslo. And he indicated he wanted TJN to play a role.

TJN international director John Christensen attended and spoke at the Oslo meeting, moving the issue forward. He and TJN member Sony Kapoor prepared a report on tax evasion which the Norwegian government issued there.
John Christensen addressed a plenary session in Seoul. He said in his speech: "The damage done by tax havens and capital flight extends beyond the purely eonomic. Encouraged and facilitated by tax havens, corruption threatens the viability of weak states and has a negative impact on democratic processes. Good governance is undermined by regulatory and tax competition, and ethical practitioners of corporate responsibility place their companies at a disadvantage by not engaging in the tax evasion practices of their competitors."

"The idea that rich and powerful elites can 'game the system' using tax havens undermines public confidence in the rule of law, and corrupts the integrity of the rules, systems and institutions which shape society. This corruption is so deeply embedded in the modern world that the majority of people take it as a fact of life. Small wonder then that so many people have become cynical and pessimistic about the current world order."
What is at stage is huge.



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