Small Commonwealth countries and jurisdictions need an evidenced-based approach to understand the impact of international tax policies on institutions that offer financial services to overseas clients, Commonwealth Secretary-General Patricia Scotland said today.
The Secretary-General was speaking at the end of the first day of a two-day Commonwealth International Tax Roundtable in London for countries that host International Financial Centres (IFCs). IFCs offer overseas clients services such as international banking, investment management and insurance.
Participants at the event are considering a response to recent international tax developments, including those raised by the Panama Papers leak of documents in April, which sparked concerns about wealthy individuals and corporations using overseas financial facilities to avoid or evade tax.
Secretary-General Scotland said: “The current international taxation and regulatory agendas present particular challenges for many of the jurisdictions represented in the roundtable. Whilst many jurisdictions are at the forefront of efforts to promote global tax transparency, it highlights the need for all of our jurisdictions to keep on top of what is now a very quickly evolving landscape, and be proactive in responding to it.”
She added; “One of the issues raised today, is the matter of how we collect data, because having similar data sets and understanding those data sets, may be critical to us being able to investigate exactly what is happening and understand how we can best assist each other.”
The Roundtable follows a call from Commonwealth Finance Ministers at their 2015 summit for members to work more closely together on issues around global taxation policies and regulations.
In addition to senior officials from IFCs, tax and regulatory experts and thought leaders from various organisations such as the Global Forum on Tax Transparency and Exchange of Information for Tax Purposes, the Organisation for Economic Cooperation and Development and the Tax Justice Network, are taking part in the roundtable.
Lucas Rutherford, an Economic Adviser for the Commonwealth, said the event is giving smaller jurisdictions that host IFCs a unique opportunity to come together to explore the recent developments and the best way forward.
“Over the last few years there have been significant and positive developments in global efforts to fix an out-of-date international taxation framework and to promote greater levels of transparency to address tax evasion and other illicit activities.
“The rapid pace of change presents challenges for all jurisdictions, but it presents a unique set of issues for small states that host IFCs. As well as ensuring that jurisdictions are aware of the implications of these developments, it is also important they are given a voice - to ensure that any international action results in a level playing field, where all jurisdictions, big or small, are held to the same standard.”
Donville Inniss, Barbados’ Minister of Industry, International Business, Commerce and Small Business Development, emphasised the need to act together and speak with one voice.
He said: “We must not sit back and believe that we cannot be a voice of reason and the voice at the table that matters most. The reality about it, even in the absence of deep empirical evidence, is that this sector, the international business and financial services sector, is extremely critical to the economies and societies of each and every one of us.
“In Barbados’ case, we estimate it is about 10 per cent of our GDP, second only to tourism. Over 4000 companies, maybe 5000 employees directly and many more indirectly and almost 950 million dollars towards our economy on an annual basis.”
Discussions at the roundtable also considered the unintended economic consequences and other negative impacts that “de-risking” is having on small state IFCs and the role that standards designed to combat money laundering and the financing of terrorism are playing in driving "de-risking".
Many banks, for example, are reluctant to provide services to money transfer businesses, because of the perceived level of risk associated with the remittances sector, which is negatively affecting migrants working in developed economies sending money to their homes in less-developed countries.
The Secretary-General called for “a conversation” to help the international community better understand the impact policies are having on, what should be, legitimate businesses.
She said: “The Commonwealth can really broker this sort of conversation amongst members, that may have different but equally valuable perspectives on these difficult issues.”