The momentous G-20 meeting has come and gone. Much was made in the run-up to the meeting about the need to end European bank secrecy so that governments, including the U.S. one, can more effectively collect taxes.
First, no U.S. state was put on the tax haven blacklist, as suggested by Luxembourg's leader. That means the financial and tax-friendly laws of Delaware, Wyoming and Nevada will continue as is.
As for other actions, The Independent, a daily newspaper in the United Kingdom, put out "A Citizen's Guide" to the G-20 meeting. The paper's Q&A format looks at the many areas world leaders discussed last week. As for tax havens, here's what the paper (I've retained the European spellings) has to to say:
What was decided on tax havens?
Some of the summit's greatest tension surrounded tax havens. In one corner was the not so diplomatic [French president] Mr. [Nicolas] Sarkozy, in the other Hu Jintao, the president of China. Mr. Sarkozy wanted to endorse a list of rogue tax havens listed by the Organisation of Economic Co-operation and Development; Mr. Hu was more sceptical. US President Barack Obama found a compromise, whereby the duo would take note of the list. All this means that there will be a crackdown on tax havens, signalling an end to banking secrecy.
Will the action on tax havens work?
Probably. The world's major economies are in agreement that banking secrecy undermined the global economy, with a lack of information making it impossible to calculate the scale of the problems. The likes of Switzerland and Liechtenstein had already agreed to adhere to international rules on tax co-operation in the run-up to the summit. That left just only nations – the Philippines, Costa Rica, Uruguay and the Malaysian territory of Labuan – blacklisted as unco-operative tax havens that will suffer yet to be decided sanctions which are currently under consideration.
Meanwhile, Great Britain's Prime Minister Gordon Brown has declared "the era of banking secrecy over" and called the heads of Britain's banks and Downing Street to make sure new G-20 regulations on bonuses, capital and tax havens are implemented properly.
French President Nicolas Sarkozy called the G-20 results "beyond expectations."
And the Organization for Economic Cooperation and Development has published a
report on progress by 84 countries and territories toward financial openness on the exchange of tax information.
The OECD divides countries into three categories: those who comply with rules on sharing tax information (white list), those who say they will but have yet to act (gray list), and nations which have not yet agreed to change banking secrecy practices (blacklist.)
But, and you knew there would be a "but" here somewhere, there's also this report from Reuters that the Swiss plan to defend bank secrecy despite pressure. Switzerland is on OECD's gray list.
A couple of key lessons: In the wake of all the recent attention on bank secrecy and tax shelters, tax lawyer Hale Stewart explains tax havens. There's some good stuff in Stewart's Huffington Post piece, but I want to highlight his two key points:
Bank secrecy has been under assault since Sept. 11, 2001. It will continue to be under assault for our lifetimes. More and more jurisdictions are signing mutual assistance treaties which allow one jurisdiction to obtain confidential information from another jurisdiction in certain situations and cases.
U.S. taxpayers are allowed to plan their affairs to minimize taxation and have been allowed to do so since 1936. They are not allowed to deliberately evade taxation, which is criminal.
Just be sure to keep that second point in mind when looking for a way to correctly cut you tax bill down to a more manageable, and legal, size.