The Australian Government endorses the strong action taken by 17 countries at the Finance Ministers meeting in Paris on Transparency and Exchange of Information convened by France and Germany.
Australia was one of the few non-European OECD members who were invited to the Finance Ministers meeting.
"Australia is at the forefront at global action on enhancing tax transparency and information exchange," Assistant Treasurer Chris Bowen said.
"It is important that Australia is involved with these global efforts, because ultimately, these actions are vital in ensuring the integrity of our tax base.
"Australia's involvement at the Paris meeting was recognition of our long-standing support of the Organisation for Economic Cooperation and Development’s (OECD) Harmful Tax Practices Initiative (HTPI), which aims to promote international cooperation to combat tax evasion.
"The Australian Government endorses the principles outlined in the meeting communiqué, particularly the move to greater coordinated defensive measures.
"We are concerned that some OECD countries have failed to adopt the OECD principles on transparency and information exchange.
"We also support the meeting's call for the OECD to draw up lists of countries that meet and those who do not meet the OECD standards on tax transparency and information exchange.
"The Rudd Government's commitment to tax-related defensive measures is reflected in the election and budget announcement that the benefits of the reduced withholding tax rates on certain distributions from managed funds to non residents would be limited only to those countries with effective exchange of information arrangements."
The OECD principles on transparency and information exchange are reflected in two key OECD model instruments:
- the 2002 OECD Agreement on the Exchange of Information on Tax Matters (upon which Australia’s Tax information & Exchange Agreements are based); and
- Article 26 (Exchange of Information) of the OECD Model Tax Convention on Income and on Capital (upon which Australia’s tax treaties are based).
"This meeting is a timely reminder to tax havens that there is a growing appetite for further coordinated global action against tax and financial secrecy," Mr Bowen said.
22 October 2008
Attachment
Conference on the fight against international tax evasion and avoidance
Improving transparency and stepping up exchange of information in tax matters
Paris – 21 October 2008
Summary of Conclusions
- On the initiative of Mr Eric Woerth, Minister for the Budget, Public Accounts and the Civil Service of France, and Mr Peer Steinbrück, Minister of Finance of Germany, 17 countries have come together in Paris on the 21st October to discuss how to respond to offshore non-compliance with their tax laws.
- They note that recent scandals in Europe and elsewhere have now implicated more than 40 countries around the world and highlighted the impact that tax havens and secretive jurisdictions are having on their economies. They also underline that investors located in jurisdictions providing an opaque environment have added to the current financial crisis and that the need for public funds resulting from this crisis makes the fight against the loss of tax revenue more important than ever.
- A lack of transparency and exchange of information provides an environment that facilitates cross-border tax fraud and evasion. As a result, investment decisions may be prompted by the will to evade taxes instead of the search for economic efficiency. This creates distortions of competition. Furthermore, tax fraud and tax evasion by few reduce the revenue available for funding vital public services or increase the tax burden weighing on honest taxpayers. Moreover, not only is it a concern for developed countries, but it also undermines developing countries' abilities to strengthen their public finances and modernise their economy.
- The Organisation for Economic Co-operation and Development (OECD) work on transparency and exchange of information is central to efforts in this area. But, while many countries and territories identified as tax havens made commitments to transparency and the exchange of information, implementation of these international standards through the signature of Tax Information Exchange Agreements has been slow.
- In order to treat fairly countries and territories identified as tax havens, the OECD extended its transparency and exchange of information requirements by amending Article 26 of its model tax convention. However, a few OECD member countries and some other significant financial centres still do not implement them in their bilateral conventions.
- Therefore, the countries convened here today favour action against jurisdictions whose legal and administrative frameworks facilitate tax fraud and evasion.
- In view of the above, the participating countries:
- Are very concerned that the overall progress in implementing the present international standards on transparency and exchange of information has been slow.
- Recognise the efforts made by certain jurisdictions that have set out a new direction for their financial centres and have signed Tax Information Exchange Agreements, which constitute effective instruments for fighting international tax fraud and evasion.
- Urge all countries and territories that have not committed to the OECD standards yet, including significant financial centres, to do so.
- Insist that all jurisdictions that have not, despite their commitment, implemented the OECD standards to do so.
- Support the principle of converging responses to counteract tax fraud and evasion, through the adoption of measures appropriate to each country and a co-ordination of some of their actions. In particular, the participating countries express their willingness to use the latest version of the Article 26 of the OECD Model Tax Convention when initialling new double taxation agreements and to consider in due course terminating some of their existing treaties, in case those could not be amended accordingly.
- Strongly encourage the current negotiations aiming at improving the effectiveness of the EU Savings Directive, including the extension of its geographical scope, and underline that the continuation of the transitional withholding tax mechanism applied by a few States should be reconsidered.
- Call on aid agencies to give extra weight to the principles of tax transparency and information exchange when designing their aid programs.
- Ask the OECD to establish a methodology to provide a clear distinction between the countries and territories which have substantially implemented the OECD standard on exchange of information and those which have not, and to publish its conclusions in 2009. The participating countries also ask the OECD to require from States which want to join the Organisation to implement prior to membership the OECD principles on transparency and exchange of information.
- The participating countries see this meeting as providing the political support needed for a successful conclusion of both the OECD and EU initiatives. They will meet again before the summer 2009 in Berlin in order to review the progress made and to PROVIDE further assistance to countries to protect their tax base from jurisdictions that fail to meet the OECD standards on transparency and exchange of information.