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Fighting tax evasion: notes from the International Anti-Corruption Conference

Anders Hjorth Agerskov's picture



The irony was hard to miss.

Last month, leaders from the public and private sectors, civil society, international organizations, academia, and the media met at the International Anti-Corruption Conference (IACC) in Copenhagen.

At this year’s conference, news broke that a network of banks, lawyers, and stock traders had engaged in a criminal form of tax evasion called CumEx. The price to European taxpayers: about EUR 55 billion. Denmark, the host of the IACC, was the hardest hit, suffering some EUR 2 billion in losses.

Thanks to a tip from another country, the Danes were able to stop the financial hemorrhage. They subsequently alerted the Norwegians, who were able to take preventive measures, losing “only” some thousands of Euros. The example shows the importance of interagency cooperation and the need for developing countries to be more aware of advanced tax fraud activities that may subsequently occur in their countries.

The value of interagency cooperation

In this context, the World Bank/OECD report Improving Co-operation between Tax Authorities and Anti-Corruption Authorities in Combating Tax Crime and Corruption was launched during the IACC. Moderated by the World Bank and the OECD, it formed the basis for a session with representatives of the governments of France, Ghana, and Kenya.

The report shows that more effective cooperation is needed between tax and corruption investigators. For example, only 55 percent of the developed and developing countries we surveyed require their corruption investigators to report suspected tax crimes. When it comes to information-sharing, even fewer countries mandate it—just 44 percent. The report also provides practical examples for how to overcome barriers to interagency cooperation.

Still, some countries are making good progress in fighting tax evasion and other fraudulent activities. A few years ago, for example, Kenya established a Multi-Agency Task Team (MATT) comprising all of the country’s enforcement agencies. The MATT reports directly to the president and has access to a central pool of funds. Its work has resulted in several convictions. This type of coordination is lacking in many developing countries—and even in some of the wealthiest OECD members.

Deborah Wetzel (Senior Director, Global Governance Practice, World Bank) and Kwaku Kwarteng (Deputy Minister of Finance, Ghana) speak at the IACC in Copenhagen on breaking down the silos between the enforcement agencies.


Corruption leads to tax evasion

The IACC concluded with a Joint Statement signed by 18 nations (Afghanistan, Argentina, Australia, Burkina Faso, Denmark, Finland, France, Ghana, Indonesia, Ireland, Kenya, Norway, South Korea, Sweden, Tunisia, Ukraine, the U.K., and the U.S.); several international organizations, including the World Bank Group; and businesses.

As noted in this excerpt, the Joint Statement explicitly recognizes the importance of fighting tax evasion: “Tax evasion undermines domestic resource mobilisation and sustainable development and disadvantages the law-abiding. We support decisive action against tax evasion and actions to explore coordination between anti-corruption and tax enforcement activities.”

This call to action is important. There are many types of financial crimes crippling developing countries, so why should we focus only on corruption? By recognizing financial crime more broadly, we expand the tools we have available. To me, it makes a lot of sense.
 
Practical takeaways

In collaboration with the East African Community, the Netherlands’s Fiscal Information and Investigation Service, the U.S. Internal Revenue Service (IRS), and the Danish Tax Agency (DTA), the World Bank is also crafting a program to help developing countries fight tax evasion—an “International Fusion Center” that will be launched sometime next year.  The idea is to leverage developed countries’ IT savvy, knowledge, and business smarts in support of the World Bank’s lending and technical-assistance work.

It’s invigorating to learn about progress made around the world. While I couldn’t attend every session at the IACC, I can offer a few practical takeaways:

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