Swiss tax info sharing move to benefit developing nations: WB
Oct 24 2013 , Washington
Marking the end of strict banking secrecy practices, Switzerland earlier this month agreed to automatic exchange of information and mutual administrative assistance in tax matters with overseas authorities.
In a blog, World Bank has said Swiss government's decision to sign OECD's Convention on Mutual Administrative Assistance in Tax Matters is the latest of a series of developments that have radically increased amount and quality of tax information available to governments.
"For developing countries, being able to access and use that information to address tax avoidance could mean billions of dollars in increased revenue, particularly in the extractives sector," World Bank's Otaviano Canuto said in a blog posted on the multilateral lender's website.
Canuto is the Bank's Senior Advisor on BRICS, Development Economics Department. He has written the blog along with Havard Halland, Economist with the Governance and Public Sector Management Unit at the World Bank.
The OECD convention, which has now been signed by 58 nations, including India, provides for sharing of information and mutual cooperation among all its signatories.
Paris-based Organisation for Economic Cooperation and Development (OECD) is an international policy-advisory body that sets global tax standards.
Citing estimates from Boston Consulting Group, the blog said that Switzerland's financial sector manages about USD 2.2 trillion of offshore assets.
According to the blog, dated October 22, Switzerland is one of the main global transaction hubs for the oil, gas and mining sectors, which in many developing countries dominate production and exports.
Companies in this sector, it has been claimed, frequently dodge billions of dollars in taxes payable to developing countries by shifting profits to low-tax jurisdictions, it added.
Attributing to "one widely cited estimate", World Bank said that African countries annually lose USD 38 billion to abusive transfer pricing, one of the main forms of profit shifting.
"To place that figure in context, it slightly exceeds the flow of development assistance to the continent. Other estimates suggest annual losses from corporate tax avoidance for developing countries range from USD 98 billion to USD 160 billion," it said.