IN ON A PARADISE ISLAND
Age, 23 January 2003 [EXTRACT]
A 2001 OECD report Behind the Corporate Veil: Using
Corporate Entities for Illicit Purposes drew attention
to the misuse of corporate entities for 'money laundering,
bribery and corruption, shielding assets from creditors,
tax evasion' and other illicit activities.
The US Internal Revenue Service has noted a 'proliferation
in the use of (offshore financial centre) trusts and
corporations in tax evasion schemes due to the difficulty
in tracing their beneficial owners'.
The veil of secrecy provided by corporate entities
in some jurisdictions 'may also facilitate the flow
of funds to terrorist organisations', it says. The
OECD is urging governments to share information about
ownership and control with law enforcement authorities
domestically and internationally.
However, the Society of Trust and Estate Practitioners
challenges the OECD report. Colin Sharp, chairman
of STEP Worldwide, voices 'very serious concerns'
that models proposed by the OECD and the Financial
Action Task Force on money laundering do not meet
a number of requirements, including 'client privacy'.
He says: 'It is understandable that the state may
need to invade privacy in the name of the war on terrorism,
but it is more difficult to see why one should accept
incursions in the name of tax efficiency. Honest people,
it is said, have nothing to hide. But that assumes
that governments (or at least the people within them)
are honest too. Honest people might have good reason
to protect themselves from dishonest governments.
We cannot assume that all banking information will
not be misused.'
In a joint report with the International Tax and Investment
Organisation, the society warns that business could
migrate to jurisdictions insulated from pressure for
The report calls for 'new regulation premised on a
truly level playing field, one in which all countries
conducting cross-border financial services participate
on an equal basis in setting the new standards which
will affect them'.
Some progress has been made.
Two years ago Oxfam called for a more inclusive approach
and last October the Cayman Islands hosted a meeting
of the OECD Global Forum on Taxation.
The OECD said it brought about an 'enhanced sense
of inclusive partnership amongst OECD and non-OECD
Certain countries, in particular the UK, have a special
responsibility because many tax havens are UK dependencies
or associated territories. There is still a long way
to go, but in the meantime ordinary taxpayers and
smaller businesses are picking up the tab.
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