Tackling offshore tax evasion and avoidance: progress has been made, but this is not enough

Offshore tax non-compliance and lost revenues on hidden assets overseas, are long-standing issues. Tax competition and economic unfairness, as well as the opacity that offshore tax non-compliance leads to, can undermine effective markets. On top of this, bank secrecy can enable money laundering and increase income and wealth inequality. However, this is not only a problem for one country, but rather an international one that requires strong international commitment and coordination – unilateral actions are not enough by themselves to curb tax evasion and avoidance. 

For this reason, there is a set of information exchange frameworks negotiated at the OECD and delivered through its member countries. The landmark framework that enables the automatic exchange of information to the tax authorities is the Common Reporting Standard (CRS), or the Directive on Administrative Cooperation (DAC) in the EU. With 167 members participating in the Global Forum on Transparency and Exchange of Information for Tax Purposes, around EUR 114 billion in additional revenue has been generated through voluntary disclosure programmes. However, this number is just a bit more than 1 % of the EUR 10 trillion of assets that are held offshore. 

The progress made has been substantial, but much remains to be done. Implementation should be enforced, not only with the automatic exchange of information, but also in the context of beneficial ownership registries. Information exchange frameworks should be adapted to the current realities (i.e. crypto-assets) and there should be an expansion of the assets under their scope (e.g. real estate, art, gold). Tax authorities need to be equipped with all the necessary tools (e.g. artificial intelligence) and rules that will allow them to identify tax compliance risks and process the collected data. International cooperation and communication between jurisdictions and different standard setters should be strengthened, as well as within-country communication between the relevant authorities.

Apostolos Thomadakis, Ph.D. is Research Fellow at ECMI and CEPS.

This Policy Brief builds on the discussions held during a half-day conference organised by ECMI-CEPS in cooperation with the UK Mission to the European Union on ‘Tackling offshore tax evasion and avoidance’, on 21 March 2023.