Mon | Sep 25, 2017

Referencing Panama Papers, IMF says well-off must pay fair share of taxes

Published:Friday | April 15, 2016 | 4:00 AMMcPherse Thompson

WASHINGTON, DC:

The International Monetary Fund (IMF) said it is ready to engage with its broad membership of 189 countries to help them put in place systems to ensure the necessary information on taxpayers is available so people can be confident that everyone is paying their fair share.

The fund's intent, disclosed by VÌtor Gaspar, director of the Fiscal Affairs Department of the IMF, came against the background of revelations in the leaked Panama Papers, which show how wealthy individuals, including public officials, hide their assets from public scrutiny.

"At this point in time, people all around the world care deeply about these issues because these issues are perceived as fundamental issues of justice, in a situation where economic prospects are not brilliant, where, in many places around the world, people are asked to contribute more to public finances," Gaspar said.

"It is simply unacceptable to have a perception that the well-off are not paying their face share in the effort, that they use methods, legal or illegal, to evade or avoid taxation," he said at a press conference at the IMF and World Bank Spring Meetings.

Gaspar said that apart from the deep care by people around the world about the issue, another that has become very salient with respect to the Panama Papers is the opaqueness, which is not an issue that is specific to a group of countries.

"It is a matter of global relevance. It affects advanced countries; it affects emerging countries; it affects low-income developing countries; it affects everybody," he said. "It is an issue of universal concern".

He said a lot of progress has been made considering the Global Forum on Transparency and Exchange of Information for Tax Purposes, the standards and codes for the exchange of information pertaining to individual taxpayers, and

the efforts in the context

of the Organisation for Economic Cooperation and Development's (OECD) Base Erosion and Profit-Shifting initiative (BEPS) in the area of corporate taxation.

"But clearly, what we now perceive, and it is something that we very much welcome, is that there is a very strong call for action," said Gaspar.

"One needs to act now and at a systemic level," he said. "The requirement for information exchange and transparency has to become systemic and universal. In that context, the IMF will be cooperating with the OECD, with the World Bank, with the United Nations, in order to make sure that such process is implemented and put in place as fast as possible."

What is the

Panama Papers?

The Panama Papers is a set of 11.5 million confidential documents that provide detailed information about more than 214,000 offshore companies listed by the Panamanian corporate service provider Mossack Fonseca, including the identities of shareholders and directors of the companies.

World Bank Group President Jim Yong Kim also weighed in on the leak on Thursday.

"We knew that these things were happening, but I want to stress that when taxes are evaded, that when state assets are taken and put into these havens, all of these things can have a tremendously negative effect on our mission to end poverty and boost shared prosperity," he said.

Referring to the World Bank's Stolen Asset Recovery programme - StAR - Kim said there have been success over the years but there remains "great, great concern and we would bunch all of these kinds of activities under what might be called illicit financial flows, where corporations don't pay taxes, where individuals take profits out of a particular country".

He said countries are turning to the World Bank Group to help them "track down these illicit financial flows to make sure that the fair share of taxes are being paid, so that much of these assets that are taken out of the hands of government can be reutilised" to tackle poverty and inequality.

At yet another news conference later on Thursday, IMF Managing Director Christine Lagarde said she was not necessarily passing judgement on the legality or illegality of one scheme or another, but noted that it is problematic when the rules appear to be skewed in the favour of some.

"But clearly what has resulted from the review of these Panama Papers indicates that, however important BEPS is - the Base Erosion and Shifting commitment, and the automatic exchange of information - it is unfinished business," she added.

Lagarde said taxation is regarded as a local matter, associated with sovereignty, but international cooperation has to be significantly improved.

"We will be happy to play our part," she said. "We have a membership of 189 countries now and all countries will have to be included in that effort," she said.

The Republic of Nauru became the 189th member of the IMF when it was admitted on Tuesday this week.

mcpherse.thompson@gleanerjm.com