The OECD project started back in 1998. At that time, I think we had perhaps an oversimplistic approach to the issue of tax havens. It was very much a “name and shame”: you identified a tax haven using the definition I've just described, and then you put it on a list, and then you whacked in sanctions as defensive measures.
It was an aggressive approach. We were actually surprised that the tax havens responded to that approach by saying, “Before we get down to sanctions, let's start talking. Let's see whether we can have an agreement, because if we can have an agreement that we all buy into, then the agreement is much more likely to stick than just hitting us with sanctions.”
Between 1998 and 2000, we worked on that. We got a set of standards. In 2002, we had an agreement between the OECD countries and the tax havens on a model information exchange agreement. It wasn't easy getting places like the Caymans, Barbados, and OECD countries like Switzerland and Luxembourg to sign on to that, but we have it, and that agreement now forms the basis for these 600 tax information exchange agreements around the world.
I think the key turning point occurred in April 2009 at the London G-20 summit. At that point all of the G-20 leaders, including the Canadian leader, basically sent a very strong message to the offshore world: “Your time is up. We are no longer prepared to tolerate tax havens.”
To me it was surprising that it took so long to get there. I think there are many reasons explaining why that was the case, but at that London summit it was very clear that the political message had gone out that it was not acceptable.
At that point you saw the changes. You saw countries like Switzerland and Luxembourg saying they would come on board and sign the standards. You saw countries like Panama and Barbados saying they would come there as well.
This was because at the same time as the G-20 made that statement, the OECD issued its list—we don't call it a list, but that's what it is—that basically identified three categories of jurisdictions. There are those that have committed to the standard and have these 12 agreements, and so have partially implemented them. People call that the white list. I don't like that, because having 12 agreements doesn't mean you've done everything you need to do. The second part of the list was those that have committed to the standards but have not substantially implemented them. The third part was those jurisdictions that neither endorsed nor implemented the standards at all.
That list, because it was made with a “name and shame” approach, was very effective, because then you can saw the way countries began to move forward. What we've seen from April 2009 right though the Toronto G-20 summit and then to the last G-20 summit in Seoul is a massive increase in the number of these agreements.
Our focus now is on making sure that these operate in practice. I think one of the speakers said a moment ago that you have to be able to provide the name, the address, and the name of the bank before you can ask for information. That's not correct. All you have to do is provide sufficient information to enable the requested state to be able to go to the banking community and get that information. For example, if you have an e-bank number, that in itself is enough to do this.
These are some of the key timelines for this project. It's going to be ongoing, because as long as we have taxes, we'll have people who want to evade taxes. As long as you have people who want to evade taxes, you'll have offshore standards that would facilitate doing so.