Podcast Summary: The CGD Podcast

Episode: Alex Cobham on BBC - 2

Date: May 1, 2013
Host: Center for Global Development
Guest: Alex Cobham, Senior Fellow at the Center for Global Development
Theme: Eradicating Tax Havens: Is Global Transparency Possible?

Overview

In this episode, CGD Senior Fellow Alex Cobham discusses recent global developments aimed at eradicating tax havens, spurred by a high-profile tax fraud scandal in France. Responding to President Francois Hollande's call to "eradicate all the world's tax havens," Cobham examines the feasibility of this goal and the role of automatic information exchange in increasing transparency and combating tax avoidance—both among wealthy elites and large corporations. The implications for both developed and developing countries are explored.

Key Discussion Points & Insights

1. Political Context and Public Pressure ([00:01]–[01:53])

• French Scandal as a Catalyst:
  The episode opens with context about France’s tax scandal involving a top minister, highlighting public outrage and President Hollande's strong anti-tax haven rhetoric.
• Recurring Rhetoric vs. Real Action:
  Cobham expresses skepticism, noting previous pledges (like the 2009 G20 summit) to end tax havens yielded limited results.
• New Momentum Across Developed Countries:
  “There’s so much pressure on tax revenues and such public anger… it feels like politicians are on the verge of taking some really serious steps.” — Alex Cobham [01:31]

2. Shifts Towards Transparency ([01:53]–[02:48])

• Historic Secrecy, Slow Change:
  Switzerland’s longstanding culture of banking secrecy is cited as difficult to unwind due to entrenched interests.
• Breakthrough in Government Cooperation:
  Recent agreement among the UK, France, Germany, Italy, and Spain to automatically exchange tax information is highlighted as a historic step.
• Potential Impact:
  “If extended to… 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.” — Alex Cobham [02:34]

3. The Scope of the Problem: Not Just "Exotic" Havens ([02:48]–[03:42])

• European Centers of Secrecy:
  Beyond offshore locales like the Caymans, European countries like Luxembourg and Austria are identified as key holdouts resisting transparency.
• New Willingness to Engage:
  “First Luxembourg and then… Austria indicate that they can see automatic exchange of information is the direction of travel.” — Alex Cobham [03:25]
• Domino Effect:
  Once a few major centers agree, holdouts face increasing pressure to comply.

4. Automatic Information Exchange: A Game Changer ([03:42]–[05:21])

• Implications for Developing Countries:
  With transparency, developing countries like Zambia could access data about residents’ offshore holdings—potentially transformative for domestic resource mobilization.
  • “Finally, we may see countries like… Zambia able to get the information they need… and that will really see a change for development.” — Alex Cobham [03:56]
• How It Works:
  Comparable to a domestic bank reporting annual interest to tax authorities. With automatic reporting, international banks would do the same.
• Staggering Compliance Impact:
  When information is automatically shared, tax compliance soars above 90%; in its absence, compliance can dip below 10%, even in the U.S.
  • “Just the fact of having that automatic reporting… you can expect to have a pretty dramatic impact on people’s tax compliance.” — Alex Cobham [05:09]

Notable Quotes

• “There’s so much pressure on tax revenues and such public anger about the ways in which, whether it’s members of the elite… or large companies like Starbucks and Google… it feels like politicians are on the verge of taking some really serious steps.”
  — Alex Cobham [01:31]

• “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.”
  — Alex Cobham [02:34]

• “When employers automatically report to the tax authorities the income that people get…the rates of compliance are well above 90%. Where we have income streams, where there’s no automatic reporting… compliance can fall below 10%.”
  — Alex Cobham [04:47]

Timestamps for Important Segments

• [00:01] Scandal in France sparks tax haven debate
• [00:55] Previous international pledges and current political will
• [02:03] Long history and difficulty of unwinding banking secrecy
• [02:34] Breakthrough agreement among five European governments
• [03:25] European tax havens (Luxembourg, Austria) signal cooperation
• [03:56] Potential impact on developing countries
• [04:31] Explanation of how automatic reporting would work
• [04:47] Dramatic difference in tax compliance with automatic information exchange

Conclusion

Alex Cobham delivers a candid, evidence-based analysis of the current momentum for eradicating tax havens. While he remains cautious due to decades of empty promises, he identifies real shifts in policy—especially the move toward automatic information exchange among governments—as potentially transformative for global tax justice and development. The episode makes a clear case: transparency is within reach, and the global tide toward automatic information sharing may finally bring about the change long demanded by citizens and reformers alike.