12 May 2023

Tackling offshore tax evasion and avoidance

Progress has been made, but this is not enough

Apostolos Thomadakis

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Offshore tax non-compliance and lost revenues on hidden assets overseas are long-standing issues. Tax competition and economic unfairness, as well as the opacity that offshore tax non-compliance leads to, can undermine effective markets. On top of this, banking secrecy can enable money laundering and increase income and wealth inequality. This is not only a problem for individual countries, but rather an international problem that requires strong international commitment and coordination. Unilateral actions alone are not enough to curb tax evasion and avoidance.

For this reason, a set of information exchange frameworks have been negotiated at the OECD and delivered through its member countries. The landmark framework that enables the automatic exchange of information between tax authorities is the Common Reporting Standard, or the Directive on Administrative Cooperation in the EU. With 167 members participating in the Global Forum on Transparency and Exchange of Information for Tax Purposes, around EUR 114 billion in additional revenues has been generated through voluntary disclosure programmes. However, this number amounts to just over 1 % of the EUR 10 trillion in assets that are held offshore.

The progress made has been substantial, but much remains to be done. Implementation should be enforced, not only with the automatic exchange of information, but also in the context of beneficial ownership registries. Information exchange frameworks should be adapted to the current realities (i.e. crypto-assets), and the assets falling under their scope should be expanded (e.g. real estate, art and gold). Tax authorities need to be equipped with all the necessary tools (e.g. artificial intelligence) and rules that will allow them to identify tax compliance risks and to process the data collected. International cooperation and communication between jurisdictions and different standard-setters should be strengthened, as well as in-country communication between the relevant authorities.