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Obama plans to prise open tax havens

The world’s most secretive tax havens are to be prised open after Barack Obama’s new administration endorsed far-reaching legislation to tackle them.

The decision to force “secrecy jurisdictions” to reveal the identities of the super-rich and major corporations who use them came from U.S. Treasury Secretary Timothy Geithner at a congressional hearing and will be seen as a blow to places such as the Channel Island of Jersey, the Cayman Islands and Switzerland.

“We fully support the legislation ... on offshore tax centres, and we look forward to working with you as part of the broader effort to address international tax evasion and close the tax gap,” Mr. Geithner told the House Ways and Means Committee late on Tuesday.

His commitment was followed by supportive comments from British Prime Minister Gordon Brown during his speech to Congress on Wednesday. But the Prime Minister will come under intense pressure to resist the move from the financial sector in the city of London and the tax havens that are U.K. dependencies or overseas territories.

Britain has recently faced international criticism for blocking European measures to reveal details of those who deposit huge wealth in tax havens.

The Tax Gap series of articles in the Guardian last month examined the extent of tax avoidance by big business.

With an estimated $13 trillion of untaxed wealth held in offshore centres, taxing them would add $255 billion of revenue to governments — more than double the global aid budget to poor countries.

Key measures in the new legislation, now likely to be in force within 12 months, include revealing the beneficiaries of secretive trusts and identifying “offshore secrecy jurisdictions” that “unreasonably restrict U.S. tax authorities from obtaining needed information” as well as severely increasing penalties against tax evaders and closing numerous loopholes.

Senator Carl Levin, who along with Mr. Obama introduced similar legislation in recent years only for it to be thwarted by George Bush, said: “President Obama’s support for the Stop Tax Haven Abuse Act, as announced by Treasury Secretary Geithner, is very welcome news and greatly improves the chances of an offshore tax bill becoming law this year. It also sends a strong signal to tax havens that this administration is not going to tolerate the kind of offshore tax abuses that have been draining $100 billion a year from the U.S. treasury and that, as a result, offload the tax burden on to the backs of honest taxpayers.”

The U.S. underlined its intent last month when it demanded that Swiss bank UBS surrender the names of 52,000 American account holders in a case that threatens to end centuries of Swiss bank secrecy.

Mr. Geithner’s comments come as European leaders grow increasingly agitated at how tax havens have fostered secrecy which has contributed to the collapse of banks the world over.

“We want to put a stop to tax havens,” France’s President Nicolas Sarkozy said recently. “We want results on this, with a list of tax havens and a series of consequences.” — © Guardian Newspapers Limited, 2009

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Obama plans to prise open tax havens

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