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The Stampede Towards Transparency

Kitty Miv, Editor
14 November, 2013

Kitty's Kountry Rankings are below, with a description of how they are kompiled. This week, as every week, I give out Encomiums to countries which have done Good Things, and award Execrations for countries which according to my highly personal and partial views have done Bad Things.

Scene: A bar in Casablanca, sometime in the early 21st century.

Dramatis Personae: A senior data analyst from the NSA (we'll call him Edward); a journalist from the Grauniad (we'll call her Rebecca); a spymaster from Moscow (we'll call him Vladimir); and a top official from a four-letter multilateral (we'll call him Angel).

Edward is explaining that there are no secrets any more. "We have it all," he says. "Transcripts of world-wide leaders' mobile phone conversations; beneficial owners of every bank account in the world, details of all transactions; likewise, owners of all real estate worth more than a few bucks. You name it; we've got it."

"Where it is?" asks Vladimir, ever practical. Edward explains that it's all heavily encrypted, under a mountain in the West, but he has a copy of it, about the size of a small pebble, in a safe deposit box somewhere in Asia Pacific. And no, he won't sell it; he's going to release some of it through Rebecca's newspaper, just to set the cat amongst the pigeons. He does though accept Vladimir's offer of political asylum in Russia, although it's got to be made to look fortuitous.

Edward asks Angel if his organization would be interested in the beneficial ownership data, but Angel, while tempted, doesn't quite see how he could use information which he hadn't collected directly himself.

"The matter is," says Vladimir, "all countries making the great rush to sign the agreement exchange, so why is it tell them information already take out?"

"Don't you think they know already?" asks Rebecca. "What about those German CDs? It's fairly obvious that the information is common currency. As Edward says, there's no such thing as a secret nowadays."

"Of course they know," says Vladimir. "We know, so why not they know?"

"They have to pretend they don't know," says Angel, "same as you and us. It would look too bad if people found out that all the governments are sharing their secrets already. But the fact that they do know explains why they're all falling over themselves to sign up to information exchange and transparency. That won't work, of course, it's too complicated; but it gives them the excuse to have the information without having to tell the truth about where they got it from."

"Do you mean that my secrets aren't secret after all?" asked Edward.

"I didn't like to tell you," admitted Rebecca. "You're just a fall guy, I'm afraid. Did you really think the NSA would let you get away with all that data if it actually was secret? This way they can explain how the data got out, and strike ethical, patriotic poses at the same time."

Edward had fallen silent.

"Don't be worry," said Vladimir, "They not try so hard catch you. How you say in English? They not shoot their fox? You more useful running!"

* * * * *

My daughter was working as a barmaid in Casablanca at the time, which is how I know about the meeting. With me as a parent, you can be sure that she bugged every joint she ever worked in.

Well, you can believe that if you like. But if you don't, then you need to explain what's going on with the stampede towards transparency. Meanwhile, black marks all round for the countries which are prancing up and down the catwalk explaining how delighted they are to give away the information about you and me which they obtained on the understanding of privacy and which it turns out is already in that pebble from under the Rockies (or is it the Urals, or even the Cotswolds?). Here is a list of recent announcements from our news service:

November 11: The Principality of Monaco has signed a letter of intent to join the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. "The signing of the accord is in line with the commitments undertaken and respected by the Principality in terms of tax transparency and information exchange." It's fair to add that Monaco is making its participation subject to wide acceptance of transparency standards.

November 8: The Andorran Government announced the signing of the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

November 8: The Cayman Islands signed an intergovernmental agreement with the United Kingdom on November 05, 2013, laying the foundation for the automatic exchange of financial information about UK taxpayers who hold accounts in the Cayman Islands.

November 8: The Organization for Economic Co-operation and Development (OECD) commended Guernsey for leading the way in tax transparency and co-operation after it concluded its 50th Tax Information Exchange Agreement (TIEA). The island territory's latest TIEA was signed with Bermuda. In recent weeks it has also completed TIEAs with Switzerland, Gibraltar, Hungary, Slovakia, Swaziland and Lesotho.

October 28: Chile has become the 59th country to join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, following hot on the heels of Switzerland, which signed up the week before. A signing ceremony with Chile's Finance Minister Felip Larraín took place on October 24. According to the OECD, Chile's action "is very timely, given the recent political focus on tax matters, and in particular the high level of support for automatic exchange of information at the international level."

October 25: The Turks and Caicos Islands is set to meet its obligations on tax transparency, the territory's Deputy Attorney General, Rhondalee Braithwaite-Knowles, said.

October 25: Guernsey and Jersey have both signed inter-governmental agreements with the UK to improve the automatic exchange of tax information between the jurisdictions.

October 24: During an annual meeting in Lisbon, Spain's Financial State Secretary Miguel Ferre and Portugal's State Secretary for Tax Affairs Paulo Núncio signed agreements aimed at developing and strengthening mutual assistance in tax matters, and at permitting a direct exchange of tax information between the two countries.

That's eight in just over two weeks; and it's been going on like that for months.

Well, what does it matter if everything is public? The thought steals into my mind. I can imagine lots of ways in which it would be inconvenient for people: you wouldn't be able to lie to your husband's divorce lawyer about how much money you had in the Cayman Islands; or to the IRS of course; you'd have to fess up to the insurance company about the accident you had on holiday in Malaga. And for companies: Erin Brokovich would be out of a job if all those pollutant test records were on the public file. In fact a lot of lawyers would be out of a job. The reality is that deception forms a major part of the armoury of human relationships, including self-deception of course. Loads of academic tomes have been written about it.

Would we be better off without deception? Even transhumanists are not sure about the answer to that one, although they want to improve almost everything else about humans; and I'm out of space, so you'll have to wait a while for my pearls of wisdom on the subject!


Kitty's Encomiums and Execrations

Methodology: each week (this is the 78th) two or three countries are given encomiums and two or three are given execrations. Well, this week it's just execrations. Those are the entries below with descriptive links. In the following week, each encomium counts as + 1 for that country, and each execration counts as - 1, being added to that country's existing score. Over time, therefore, a ranking will build up for each country, and further countries will join the listing. Germany is on + 1, since in the second week it had an execration and in the first week it had an encomium, leaving it at neutral; then it had an execration in week four, thus dropping to - 1, and another one in week six, dropping to - 2; finally in week 13 it got something right, so it went back up to - 1; then in week 16 it gained a further star, so then it was in neutral territory until week 23 when it dropped back to minus one, but reverting to neutral territory in the following week, then dropping to minus one in week 50, and back up to plus one in week 51, then to plus two in week 52. Some weeks ago it dropped a place, but last week recovered one step.

The rankings are intended to be a proxy for business friendliness; evidently they are highly partisan, but as time goes by they are becoming useful for decision-making. For any country in negative territory, you should think carefully before starting a business there.

Kitty's Encomiums:

Andorra being transparent

Cayman Islands being transparent

Guernsey being transparent

Jersey being transparent

Monaco being transparent

Turks & Caicos Islands being transparent

And Kitty's Execrations:

Spain being transparent




About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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