The world’s richest countries are falling short of their promises to help poorer nations by cracking down on tax evasion, according to a new study.
The Organisation of Economic Co-Operation and Development (OECD) issued a damning indictment on the efforts of the 34-nation strong group to curb tax evasion.
The OECD says figures from Global Financial Integrity, an American non-governmental organisation specialising in monitoring tax, alleges $5.8 trillion was misrouted between 2001 and 2010 by money laundering, multinational corporate bribery, recovery of stolen assets and tax evasion, including abusive transfer pricing.
China came in for special criticism as responsible for half of the total.
Mexico was the second worst country for tax evasion – but the Chinese total was five times more.
Corruption rife
The OECD says despite public pledges by world leaders, specifically naming British Prime Minister David Cameron, poor countries saw less aid due to tax evasion, pushing some into a worse economic position.
The OECD says all member countries fell short of their promises to tackle tax evasion and corruption and government compliance with agreements to track down the true ownership of offshore companies remains low.
“The results are appalling,” said an OECD spokesman. “It’s striking how poorly G8 countries score on core recommendations, which have to do with due diligence and beneficial ownership. They are weakest on issues where they make the grandest statements.
“Many are less keen to address tax avoidance in their own countries, as it involves their own elites.”
In 2012, 221 individuals and 90 companies were sanctioned for overseas bribery, yet around half of all OECD countries have yet to see a prosecution.
Every country falls short
Despite David Cameron promising to tackle the issue of who really owns offshore shell companies with shadow directors often created by multinational companies and wealthy individuals to transfer cash to offshore centres to avoid tax, the OECD says little progress has been made.
The G8 pledged to set up a public register exposing the beneficial ownership of such companies but, says the OECD report, 27 of the 34 OECD countries fail to keep this information and not a single country complies fully with the recommendations required by the register.
“Every country needs to improve their compliance to fight tax evasion,” says the report. “Few carry out any due diligence to check customers. A recent study showed a third of British banks routinely flout these checks even when the customers are identified as risks to their businesses.”