The events of 2008 have made a lasting impression on the way global markets have been managed.
Global regulatory standards and processes have seen significant evolution and a number of reforms, especially in the area of international tax transparency.
A number of reforms driven by governments across the world have looked at how they can bring in more tax revenue, or to be more precise, reduce tax leakage. A great deal of the focus has been on reducing the ‘tax gap’ by looking at ways of reducing illegal tax evasion across the global economy.
Although it is sometimes argued that efforts on reducing the tax gap might well be better spent on improving means of collecting tax in ‘shadow economies’ – where tax is not reported or recorded –governments and supranational bodies have looked at evasion overseas with particular vigour.
1) Today: Regulatory change and its drivers
One of the biggest global initiatives addressing tax evasion has been the Action Plan on Base Erosion and Profit Shifting (BEPS), launched by the OECD in 2013.
This comprises 15 actions aimed at tackling tax planning strategies used by large companies who use double tax agreements to shift profits from higher tax to lower tax jurisdictions.
Specifically in the UK, we’ve seen this manifest itself in a number of ways with house hold names such Starbucks and Amazon feeling the wrath of the Public Accounts Committee and prominent tax campaigners.
Another OECD initiative is the Common Reporting Standard (CRS), launched in 2014. The OECD called on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis.
Transfer of information has also moved up the agenda in the form of Tax Information Exchange Agreements (TIEAs), which are bilateral agreements under which territories agree to co-operate in tax matters by sharing information.
This enables governments to enforce their own tax laws by exchanging information relevant to a tax matter.
There are further examples beyond those listed here, but it gives a flavour of the activity underway around the world to clamp down on international tax evasion.
In fact, in the years since the last global financial crisis there has been a resurgence in the role of the OECD and its Global Forum on Transparency and Exchange of Information for Tax Purposes.
The Global Forum’s numbers have swelled dramatically by 70 per cent and today it is comprised of 139 country members.
This is just one sign of how countries across the world have risen to the challenge of regulatory shifts. Importantly however, it’s not just the largest economies that have responded. Smaller offshore financial centres, such as those in the Caribbean, are very much in lock step with the G20.