China agrees to join global crackdown on tax evasion

Thomson Reuters Foundation, WASHINGTON

Fri, Aug 23, 2013 - Page 15

China has agreed to join the international effort by the G20 leading economies to combat tax evasion by signing an agreement to share tax records, the Organisation for Economic Cooperation and Development (OECD) said on Wednesday.

China’s decision means that all G20 countries now have agreed to cooperate on tax avoidance, a priority set by global leaders to address the causes of the 2007-2009 financial crisis and to help combat corruption.

The OECD, the global economic policy forum, said that Chinese Tax Commissioner Wang Jun (王軍) will sign the convention on Mutual Administrative Assistance in Tax Matters in Paris next week.

China recently has ramped up its efforts to crack down on corruption in the world’s second-largest economy, arresting public officials on bribery charges, banning their elaborate expense-account dinners and investigating corporate activities.

Tax avoidance is frequently linked to corruption. Illicit funds, earned from crime, corruption and tax evasion, often are moved out a country via tax havens and by using shell companies.

Sharing tax information can be an important tool in helping to track these funds.

Global Financial Integrity, a financial watchdog group, has estimated that more money flows out of China from illicit financial activity than any other developing country.

Its latest report estimates the losses between 2000 and 2011 at US$3.79 trillion.

China has yet to join the OECD’s Anti-Bribery Convention, the international standard for how to combat graft of public officials in foreign business transactions.

Drago Kos, the OECD’s incoming anti-graft chief, said in a Thomson Reuters Foundation interview that getting the biggest developing economies on board will be a priority for his tenure.