Ecofin Spreads Its Fins To Net Tax Havens.

Ecofin, the European Union’s band of finance ministers, is meeting in Brussels to put together a plan to plug all the legal holes, which till date has allowed corporations and individuals to avoid paying taxes in their host countries by transferring money or assets to such countries where there is no income tax or other taxes, and hence depriving these countries of these tax amounts.

This 27-minister team is working on a two pronged attack policy where one is to recover the taxes, which they feel is due to them while the other is to check out whether the funds parked in these accounts have been acquired through legal means or through illegal businesses such as drugs, organized crime, etc. Hence various governments are itching to get their hands on this money, which could be saved up by terrorist groups such as Al Qaida or rogue dictators of various countries. In fact the former managing director of the IMF, Mr. Michel Camdessus thinks that around 1 trillion pounds or roughly around 2% of the world’s GDP could be hidden in these secretive accounts and these were amounts that would not have been declared even in the own countries of these dictators or groups, since they were entirely illegal amounts.

There are many safe havens such as Switzerland, the Channel Islands and Andorra among many others, but the present focus is on Liechtenstein, Andorra and Monaco. With countries such UK losing around 23 billion pounds and Germany losing around 30 billion Euros every year as taxes, these tight strung finance ministers have decided to fight back and stop the flow. Germany has already tightened the screws on its rich and famous after obtaining around 900 names of its citizens who had transferred money to LGT, which is the biggest bank in Liechtenstein.

Even in the UK, the Revenue department has managed to snap up details of around 100 individuals who have managed to evade payment of taxes totaling 100 million pounds. England, Ireland and other countries are too following Germany in a bid to end the Tax leakage once and for all and Mr. Alistair Darling is aggressively pursuing Monaco by indicating that he would put a levy on any funds transferred to that country.

The Government is also planning to fine offenders up to 100% of the total amount of taxes owed by these people and could even jail them if they are convicted of deliberately avoiding paying the taxes. So, even though the database of these names seem to have been dubiously acquired by Germany and the UK, these governments are pursuing these people aggressively in order to recover their taxes and maybe even set an example to further tax avoiders of their fate if they were to follow in the same path.

These European countries are also planning on putting up official levies and trading sanctions against these non-co operating tax havens, which till now have proved to be tax-heavens for those wishing to save on taxes or simply those who have acquired money through illegal channels.

So, Ecofin is now starting to bare its teeth and this move could spell trouble not only for these tax havens but also for people who have parked their money in there under the assumption that no one except themselves would be able to touch it.

The stakes are high on both the sides and the fear is that closing down some tax havens could only result in opening of new ones or accounts being transferred to other countries such as Dubai or Singapore. Ecofin will therefore have to come up with ways in which they can permanently plug the legal loopholes and also end the menace of black money being laundered in these havens.