Non-compliant tax havens risk sanctions

Offshore jurisdictions flouting their pledges to comply with international standards have been threatened with sanctions at a Berlin meeting of International finance ministers.

German finance minister Peer Steinbrueck and French budget minister Eric Woerth said countries that do not comply with the Organisation for Economic Cooperation and Development (OECD) standards of transparency and information sharing risk sanctions.

France and Germany spearheaded the campaign to combat tax evasion last October, bolstered by G20 leaders who agreed to step up pressure on tax havens, with the OECD publishing a "grey list" of jurisdictions which have not yet implemented tax standards.

Conference participants from the UK, Switzerland, Austria and Luxembourg agreed countries shirking the pledge should face possible sanctions.

"Declarations alone, as important as they are, have to be followed up with action," says Steinbrueck.

Woerth adds: "The sanctions are very important, otherwise there's no credibility."

International ministers vowed to tackle foundations and holding companies, designed to make tax avoidance easier, while a system for monitoring the transition toward greater transparency was also announced.

In a flurry of activity, more than 40 tax information exchange agreements (TIEAs) have been signed since the financial crisis took hold and fresh attacks on offshore jurisdictions began, most within the last six months, says the OECD.

Swiss finance minister Hans Rudolph Merz, agreed to press ahead with talks to revise a double-taxation agreement with Germany and officials form the two countries will meet again on 13 July.

"We see no reason why there can't be quick progress. Our position as a financial centre doesn't depend on tax evasion, let alone tax fraud," says Merz.

Steinbrueck says Switzerland, Austria and Luxembourg have now shown "full co-operation," having criticised their tax regimes in the past.

Austrian finance minister Josef Proell, says: "We are prepared to share more information faster than we have before."

Switzerland and Germany has previously traded insults over the tax haven issue.
In May, Steinbrueck listed Luxembourg, Liechtenstein, Switzerland and Austria alongside "Ouagadougou," the capital of Burkina Faso, on tax matters, and went on to accuse Switzerland and Liechtenstein of deliberately encouraging German taxpayers to commit fraud.

"I take this issue very seriously, that's why you can't always be diplomatic," Steinbrueck says in Berlin. "Sometimes you have to sharpen the point."

Merz said it is time to "put these emotions aside" because "it doesn't get results."