The Organisation of Economic Cooperation and Development (OECD) is a familiar name to most people that follows the news, but few of us know what the OECD really does.
The aim of the body is to promote policies and social well-being around the world as a sort of global think-tank.
However, the OECD is much more than that.
Inside the OECD is a private forum where the governments of 34 of the world’s richest and leading industrialised countries sit down and agree political agendas that they will all follow together.
These behind closed doors meetings discuss data collected by the OECD and then formulate government policy based on the recommendations arising from the secret meetings.
A good example of this is the current struggle by governments to crack down on the amount of tax paid by multinational companies.
The OECD is looking at how to stop companies from shifting their profits between nations so their operating bases become the country charging the least tax regardless of where the sale took place.
For instance, if you buy a book online in the UK, the OECD is putting together a tax framework that means the tax on any profit made by that sale is paid in the UK and not moved to a country with a lower rate.
The OECD is also looking at tax avoidance by individuals and putting together a policy based on the USA’s Foreign Account Tax Compliance Act (FATCA) which forces foreign banks and investment firms to report the financial activities of customers from other countries.
This new network is due to start in 2018 and already has almost 100 countries signed up.
Countries are now aligning their laws to meet this new tax deadline.
Black money crack down
For instance, India has just launched a ‘black money’ amnesty for taxpayers who have failed to report cash remittances from overseas. The amnesty offers a 60% penalty discount until 2017.
“India and the rest of the world are not willing to tolerate tax havens which thrive in secrecy,” said finance minister Arun Jaitley.
It’s not coincidental that India is an OECD member and is ready to implement the tax avoidance legislation that will follow the end of the amnesty.
Regardless what banks and taxpayers think about FATCA and other tax avoidance laws, there is no doubt that governments intend to rip down the veil of secrecy tax havens draw over the financial activities of their customers.
The USA, Britain and Europe are already leading the way – and countries like India and China are soon to follow, leaving no place to hide.