Tracking through tax

Given the strong connection between tax evasion and money laundering [1], it would seem common-sense to suppose that tax cooperation agreements (TCAs) between countries where information about taxes paid or not paid is shared would be a powerful deterrent to the launderers. Yes and no, writes Alan Osborn. There has been an improvement in anti-money laundering (AML) prosecution rates in recent years while there has been a sharp rise in the number of TCAs but it may be too early to make a causal link. Some authorities and professional commentators are gung-ho about going down this route, others say that the theory is sound but the effects in practice are not what they should be.

Mutual benefits

As one might expect, the agency most enthusiastic about international tax cooperation is the Organisation for Economic Cooperation & Development (OECD), which has set the blueprint for creating TCAs and made major promotional efforts in this field in recent years. In an interview with MLB, Jeffrey Owens, director of the OECD Centre for Tax Policy and Administration, said his starting point was that whether you looked at tax evasion, money laundering or corruption generally, “all of these are activities that thrive in an environment which is non-transparent, weakly regulated and where there is not strong international cooperation between the relevant law enforcement agencies.” The environment which facilitated such activities was very similar, he said, adding: “In a globalised economy, in an economy where financial markets are very closely linked, all of these activities are easier to undertake and therefore governments need to have a response.”