A United Nations panel on financial accountability, transparency and integrity is urging governments to do more to tackle tax abuse and corruption in global finance, following the publication of an interim report.
The report states that governments can neither agree on the problem nor the solution, while resources that could help the world’s poor are being drained by tax abuse, corruption and financial crime.
It estimates governments lose $500 billion each year from profit-shifting multinationals and that about $7 trillion in private wealth is hidden in haven countries, with 10% of global GDP being held in offshore assets.
Money laundering, the report estimates, accounts for about $1.6 trillion per year or the equivalent of 2.7% of global GDP.
The High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI) was set up by the presidents of the UN General Assembly and the UN Economic and Social Council.
The 17-member FACTI panel is composed of former heads of state and government, past central bank governors, business and civil society leaders, and academics.
It concluded that global finance controls have not kept pace with a globalised, digitised world.
Citing the recently leaked suspicious activity reports filed with FINCEN, the US Treasury bureau responsible for fighting financial crime, the panel said the reports are just the latest evidence that the system to regulate dirty money has major gaps.
“Corruption and tax avoidance are rampant. Too many banks are in cahoots and too many governments are stuck in the past. We’re all being robbed, especially the world’s poor,” said Dalia Grybauskaitė, FACTI co-chair and former president of Lithuania, in a press release. “Trust in the finance system is essential to tackle big issues like poverty, climate change and COVID-19. Instead we get dithering and delay bordering on complicity,” she said.
The FACTI panel interim report noted that criminals have exploited the pandemic, as governments relaxed controls to speed up healthcare and social protection.
“Our weakness in tackling corruption and financial crime has been further exposed by the COVID-19,” said Ibrahim Mayaki, FACTI co-chair and ex-prime minister of Niger. “Resources to stop the spread, keep people alive and put food on tables are instead lost to corruption and abuse.”
Although the abuses hit lower income countries the hardest, they are subject to norms and agendas set by the G20 and the OECD. As a result, the panel concluded that international tax norms are not well-adapted to developing countries’ needs and circumstances.
The efforts to improve the exchange and availability of tax information are severely impeded by the absence of a neutral and authoritative body with responsibility for collating and analysing tax data, the report noted.
Meanwhile, cross-border access to beneficial-ownership information was too difficult.
The FACTI panel is calling for total acceptance by UN members that the problems are systemic and require a more coherent and equitable approach to international tax cooperation. This should include taxing the digital economy, and more balanced cooperation on settling disputes.
The panel’s final report will be published in February 2021.
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