Jorge Rachid, Carlos Marcio Cozendey – The Financial Times, 05/26/2016
Gabriel Zucman, author of The Hidden Wealth of Nations, estimates that 8 per cent of global wealth, or $7.6tn, is deposited in jurisdictions commonly known as tax havens. This includes the financial assets of individuals and companies who seek not to pay tax, or pay less tax, in their home countries.James Henry, an economist, lawyer and investigative journalist, estimates the value of unreported financial assets at between $21tn and $32tn.
In a democratic social contract, the financing of states requires every citizen to pay taxes according to their ability to do so. So it is necessary to curb the use of artificial mechanisms to avoid due taxes. One such mechanisms is “aggressive tax planning”, which explores gaps between different national tax laws and embraces legal and accounting manoeuvres for profit or asset shifting towards jurisdictions with favourable taxation and little tax transparency. Certain jurisdictions allow the concealment of the beneficial owner of profits and incomes, undermining the actions of tax authorities.
To address this issue, the G20 group of the world’s largest economies has increased cooperation in actions to fight tax evasion, tax avoidance and money laundering. Such initiatives include the Global Forum on Transparency and Exchange of Information for Tax Purposes (GF) and the Base Erosion and Profit Shifting project (BEPS). The Brazilian government is actively involved in both.
With more than 130 participants, the GF evaluates the tax laws of its members and the practical application of standards to exchange tax information. It also recommends that its members sign the Convention on Mutual Administrative Assistance in Tax Matters. The accession of Brazil to this Convention, signed in 2011 and already approved by Congress, will allow the country to comply with the G20 collective commitment to begin the automatic exchange of financial accounting information for tax matters with other signatories. This will be an important and effective step to curb misconduct within the international environment, including corruption and financing of terrorism.