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- [00:01]
A
Well, let's move away now to France, because the government of the French President Francois Hollande has been rocked by a tax scandal recently. His former budget minister is now charged with fraud over a secret Swiss bank account. And this is all the more embarrassing because Mr. Hollande came to power promising to deal with the excesses of the super rich. And now the President's fighting back. Yesterday he called for the eradication of all the world's tax havens. A great idea, maybe, but would it even be possible? Alex Cobham is senior fellow at the center for Global Development in Washington, which says it works to reduce global poverty and inequality. So should be right up Alex's street. Hello, Alex.
- [00:44]
B
Hi, Ron.
- [00:45]
A
Hi. Well, is there any merit in this idea, and has anybody before proposed outlawing tax havens?
- [00:55]
B
Well, on the one hand, I think you're quite right to be slightly cynical about this. You know, we have heard this kind of rhetoric before. Recently at the London G20 meeting in 2009, we heard the French, British and American heads of state effectively say that this was the beginning of the end for tax havens. And we've seen little progress since. But there is a sense that this time it may be different, not only in France, but actually across most of the rich countries in the world. There's so much pressure on tax revenues and such public anger about the ways in which, whether it's members of the elite, as in this case in France and similarly in Spain and Greece, or its large companies like Starbucks and Google have been high profile cases in the UK that really, it feels like politicians are on the verge of taking some really serious steps. And that would be good for developing countries to.
- [01:54]
A
And of course, over the years, I mean, we've seen tremendous movements in Switzerland, for example, to tie down this idea of anonymous accounts.
- [02:04]
B
Well, that's right. And it's the kind of thing that's been embedded for so many years and has so many people in fact, committed to it, both personally, politically and indeed financially, that it's very difficult to start to unwind that kind of secrecy. But one thing that was also significant today was we saw the British, French, German, Italian and Spanish governments agree for the first time to exchange tax information automatically among themselves. And that's the basis of a model which, if extended to a great many more jurisdictions, really would be the end of tax havens. You take away that secrecy and there's no point putting your money in Switzerland anymore, or indeed in Jersey, so on.
- [02:49]
A
And we're talking about not just offshore tax havens like the Caymans But European tax havens too, aren't we? Places with really quite restrictive financial reporting?
- [03:01]
B
That's right. And you know, the European Union Savings Tax Directive does involve automatic exchange of information, at least about bank accounts. But we've got two EU countries, as well as Switzerland, which is kind of on the edge, which refuse to take part in that exchange of information. That's Luxembourg and Austria. What we've seen in the last couple of days is first Luxembourg and then to a slightly lesser extent, Austria indicate that they can see automatic exchange of information is the direction of travel. And once that happens, I think there's a great pressure, you know, that bulwark goes. There's a great pressure on anyone left who's resisting the idea of automatic.
- [03:43]
A
And when that happens, that's just like. Yeah, sorry, I just. I'm sorry, I thought you were finished there, Alex.
- [03:51]
B
I apologize. I was just getting excited. I was going to say, finally, we may see countries like, never mind the UK and the us, but Zambia able to get the information they need from a country with banking secrecy about what their own residents are doing. And that will really see a change for development.
- [04:11]
A
And I was just going to say that when that happens, then that will be just like your bank sending a little note to the government of interest earned. It will be as transparent as that, will it that if you're a UK national and you've got an account in Luxembourg, somehow the Luxembourg bank will automatically report at the end of every year?
- [04:32]
B
That's exactly right. It's a fact of life that we know this from the data in the United States, for example, that where you have taxes based on things, where there's automatic reporting of information. So, for example, when employers automatically report to the tax authorities the income that people get, even though the tax authorities could never deal with the quantity of information they receive, the rates of compliance are well above 90%. Where we have income streams, where there's no automatic reporting, even in a country like the United States, rates of compliance can fall below 10%. So just the fact of having that automatic reporting in place, you can expect to have a pretty dramatic impact on people's tax compliance.
- [05:21]
A
Alex, thank you very much. It's just after half past one. On digital radio, digital TV, mobile and.
- [05:29]
B
Online, this is BBC Radio 5 live.