Efforts around the world to crack down on tax dodges by businesses and wealthy individuals via overseas tax havens are making progress. A draft criteria compiled by the OECD to beef up international rules on taxation is likely to be formally approved at the Group of 20 summit in Hangzhou, China, early next month, with the number of countries taking part in the framework for such efforts expected to top 100 by the end of the year.
This is a positive development that will enhance transparency in the flow of money, which is crucial for fair taxation. The efforts have been driven by the rise in international criticism against overseas tax evasion triggered by the Panama Papers scandal, which exposed how multinational corporations, wealthy people and some politicians hid their assets in tax havens — whereas previously the moves led the OECD Committee on Fiscal Affairs and other parties for measures to tighten the screws on tax evasion and excessive tax-saving measures have often been hindered by the secrecy surrounding countries and jurisdictions that serve as tax havens.
Tax evasion by way of tax havens not only expands unfairness in taxation. Tax dodging by businesses, which some estimates put at roughly ¥24 trillion around the world, eats into the financial resources of governments. Money that dodged taxation by state authorities makes for a pool that supplies massive speculative funds that can be a source of financial crises, and can be a hotbed of financing for terrorist activities. The time is ripe for countries to beef up the international regime to fight tax evasion.