Australia a safe haven for illicit funds, US overtakes Cayman as tax shelter for rich

Australia hosts significant quantities of illicit funds from outside the country, according to the 2015 Financial Secrecy Index.
The Tax Justice Network’s index, released every two years, rates countries based on financial transparency.
The latest index rates Australia 44 out of 100 (from 47 in the previous survey) meaning it must make “major progress” in offering satisfactory financial transparency.

The index also shows that the United States, third on the list, has overtaken countries that have traditionally been used by multinationals and wealthy individuals as tax havens, ahead of Singapore (fourth), Cayman (fifth) and Luxembourg (sixth).

The Tax Justice Network said the US was “the jurisdiction of greatest concern”, and was “posing serious threats to emerging transparency initiatives”.
“The US is one of the few whose secrecy score worsened after 2013,” the Tax Justice Network said in a statement.

Switzerland stayed at the top of the index, followed by Hong Kong. “Despite what you may have heard, Swiss banking secrecy is far from dead, though it has curbed its secrecy somewhat,” TJN said.
It said the United Kingdom also remains a huge concern, with its jurisdictions – the Overseas Territories and Crown Dependencies still operating “in deep secrecy”.

Switzerland stayed at the top of the index, followed by Hong Kong. “Despite what you may have heard, Swiss banking secrecy is far from dead, though it has curbed its secrecy somewhat,” TJN said.
It said the United Kingdom also remains a huge concern, with its jurisdictions – the Overseas Territories and Crown Dependencies still operating “in deep secrecy”.

Australia host to illicit funds

The report said Australia had taken significant steps to address tax evasion and tax avoidance, especially to stem revenue loss from Australia.

“However, its record of helping other countries combat tax evasion and money laundering is somewhat mixed,” it said.
“A number of recent cases demonstrate that Australia undoubtedly hosts significant quantities of illicit funds from outside the country.”

Tax Justice Network’s report said, overall, when seeking to tackle illicit outflows from Australia, including the protection of tax revenue, “Australia has taken an innovative and highly proactive approach”.

It referred to the ATO’s Project Wickenby taskforce, which under the Coalition government has now been replaced with the Serious Financial Crime Taskforce.

It also referred to former treasurer Joe Hockey’s legislation to stop multinational profit shifting, and Australia’s decision to sign up to the OECD Common Reporting Standard for the automatic exchange of financial information.

The report said that due to the nature of illicit financial flows, comprehensive data was not available. It instead referred to recent media reports by Fairfax Media regarding Australia’s role as a safe haven for corrupt funds.

It said in 2007 the then Labor government released draft legislation to extend anti-money laundering provisions to real estate agents in relation to the buying and selling of property, dealers in precious metals and stones, lawyers, accountants, Australia notaries and company service providers. But this legislation was never implemented.

In April, Financial Action Taskforce released its latest mutual evaluation report of Australia’s anti-money laundering and counter-terrorist financing system. Real estate agents and lawyers have been identified as a high money laundering risk in Australia, where regulations do not require them to report suspicious transactions.

Call to identify secrecy jurisdictions

Financial Secrecy Index project leader Markus Meinzer said the United States was a disappointment, “by refusing to participate directly in global transparency initiatives such as the multilateral automatic information exchange, and inexcusably, lobbying hard against public country-by-country corporate disclosure”.

“It is high time for the USA to overcome its historically rooted opposition to reasonable tax data sharing.”

Renowned economist Thomas Piketty, author of Capital in the Twenty-First Century, said tax issues should not be left to those who want to escape taxes. “Change will come when more and more citizens of the world take ownership of these matters,” he said.

Washington-based Financial Accountability and Corporate Transparency Coalition (FACT) said: “the world’s most important providers of financial secrecy are not small, palm-fringed islands as many suppose, but some of the world’s biggest and wealthiest countries – including the United States”.

“The implications for global power politics are clearly enormous, and help explain why widely heralded international efforts to crack down on tax havens and financial secrecy have been rather ineffective, despite many fine words from G20 and OECD countries,” it said.

The only way to end the problem was to identify the jurisdictions that make it their business to provide offshore secrecy.

“Gaps in US money laundering laws allow US financial institutions to handle the proceeds of a long list of crimes, as long as those crimes are committed outside the US. A significant share of US residential and commercial property is owned by offshore shell companies, under secrecy arrangements that help non-resident foreigners earn income that can be kept secret from the tax and criminal authorities of their home country,” it said.