Tax authorities around the world will soon get a powerful new weapon in the fight against tax avoidance.
Next year will see the launch of the Common Reporting Standard, a new global system for the automatic exchange of financial account information between national revenue bodies. Set for launch in September 2018 the CRS has already been hailed as a game-changer.
The system represents the international community’s response to criticism of rampant tax avoidance through offshore accounts in the Panama Papers.
“Assets held by wealthy people will become fully visible,” said senior Japanese tax official. “Its power will be tremendous.”
That view appears to be no exaggeration.
Established by the Organization for Economic Cooperation and Development, the system automatically provides for the exchange of information on accounts across jurisdictions.
The data will include the names and addresses of account holders as well as the account balances and interest and dividends earned on the holdings.
Countries that try to spend their way out of crisis risk becoming stuck in a permanent malaise, according to the head of the Organisation for Economic Co-operation and Development (OECD).
Angel Gurria said central banks were running out of firepower to boost economies in the event of another sharp slowdown, while governments had limited space to ramp up spending.
The secretary general said structural reforms and more international co-operation were badly needed in a world of deteriorating growth.
“Countries that say: I’ll spend my way out of this third slump. I say: no you won’t, because you’ve already done that, and you ran out of space,” Mr Gurria said on the sidelines of the IMF’s annual meeting in Lima, Peru.
“Now countries are trying to reduce the deficit and debt because that’s a sign of vulnerability and the rating agencies are breathing down their neck – they’ve already downgraded Brazil and France.
“We don’t have room to inflate our way out of this one. So we go back to the same issue: it’s structural, structural, structural.”
Europe is facing an “unprecedented” refugee crisis, the OECD has warned, as up to 450,000 asylum seekers could be granted humanitarian protection by the end of this year.
The Paris-based body also cautioned that while refugees could make a valuable contribution to the European economy, this would depend on how successfully they were integrated. Meanwhile, processing and supporting such a large-scale inflow would be “costly”.
The warning comes as EU interior ministers met in Brussels to debate plans to relocate 120,000 refugees across member states.
The OECD estimates suggest that the numbers discussed by the European institutions are only a minority of the total influx expected to land on European shores in 2015.
About 700,000 asylum applications have already been filed this year and the number is expected to climb to 1 million by the end of 2015. This would be substantially higher than the number reached in 1992, during the Yugoslavian war, when EU countries registered 630,000 asylum requests.
“The current humanitarian crisis is unprecedented, with an appalling and unacceptable human cost,” the OECD said in the latest issue of its Migration Policy Debates publication. “Given the complexity of its main deriving forces, there is unfortunately little hope that the situation will improve significantly”.
A table of the OECD’s new and old projections is below.
Concerns about the health of the Chinese economy are spreading, as the Organisation for Economic Cooperation and Development, the well-respected Paris-based think tank, has cut its growth forecast for China.
The OECD says it now expects China to grow by 6.7 per cent in 2015 and by 6.5 per cent next year. This compares to an earlier forecast in June, in which the think tank for the world’s richest nations said growth in China would edge down to 6.8 per cent this year.
This would compare with GDP growth in China last year of 7.3 per cent. China’s National Bureau of Statistics recently downgraded its assessment of the economy last year from an earlier reading of 7.4 per cent.
A possible recession in China is now weighing on investors and economists’ minds. A well respected survey of asset managers by Bank of American Merrill Lynch yesterday highlighted that global investors are concerned about recession in the world’s second biggest economy and an emerging markets debt crisis. Citi’s economics team recently warned that a global recession led by China and starting in 2016 was its “main scenario”.
The Organisation for Economic Co-operation and Development has slashed its forecasts for global growth, as it warned that weak investment and disappointing productivity risk keeping the world economy stuck in a “low-level” equilibrium.
In its twice-yearly Economic Outlook, the Paris-based body expects the global economy to expand this year by 3.1 per cent, a sharp downgrade from last November’s forecast of 3.7 per cent.
The revision follows a weak first quarter for the global economy, the softest since the crisis, led by a sharp decline in the US.
The OECD is confident that the slowdown is likely to be temporary, as it predicts global growth to pick up to 3.8 per cent in 2016, broadly in line with its forecast seven months ago, However, it also warns that hopes of a swift recovery could be crushed again, as they have been in the past.
India has the lowest income inequality among all emerging economies, but it is much higher than most of the advanced economies, OECD said today.
The countries with higher income gap than India include Russia, China, Brazil, Indonesia and South Africa — which have recorded the highest income inequality among all developed and emerging economies studied by the Organisation for Economic Cooperation and Development (OECD).
Paris-based OECD, a grouping of the world’s 34 major economies, said the rich-poor gap in most advanced economies has risen to highest levels in past three decades, while it continues to remain much higher in many emerging economies.
Among both developed and emerging countries, the gap was found to be highest in South Africa and lowest in Denmark.
India had the lowest income gap, of the nine emerging economies studied by OECD, followed by Russia, Indonesia, Argentina, China, Latvia, Brazil, Columbia and South Africa.
For OECD countries, the income gap was highest in Chile, Mexico, Turkey, the US and Israel. The countries with lowest inequality are Denmark, Slovenia, Slovak Republic and Norway.
Growth momentum in the eurozone is continuing to strengthen even in laggard economies such as France and Italy, according to the Organisation for Economic Co-operation and Development (OECD), despite Greece continuing to cast a shadow over the future of the common currency area.
In its latest report, the respected Paris-based think tank said its “composite leading indicators”, which are designed to pick up turning points in economic activity relative to the wider trend, suggested the eurozone is strengthening (see first chart below) while there are “signs of easing growth momentum” in the US.
The research appears to support economists’ impressions that the European Central Bank’s €60bn a month quantitative easing programme is, as hoped, translating into improved growth in the eurozone.
The OECD said momentum was improving in France and Italy in particular.
The report comes ahead of a raft of European GDP data tomorrow, which is expected to show the French economy expanded by 0.4 per cent in the first quarter compared to lacklustre 0.1 per cent growth in the final three months of 2014.
Japan’s debt pile will grow out of control unless policymakers take steps to reform the country’s tax system and address its shrinking labour force, the Organisation for Economic Co-operation and Development has warned.
The OECD said gross government debt, which currently stands at a record 226pc of gross domestic product (GDP), would balloon to more than 400pc by 2040 if the government did not carry out reforms.
Angel Gurria, the OECD’s secretary-general, said monetary stimulus and stronger growth alone would not be enough to haul the economy out of its two-decade malaise.
“Japan’s future prospects depend on ensuring fiscal sustainability over the long term. With a budget deficit of around 8pc of GDP, the debt ratio is set to rise further into uncharted territory,” he said.
In its annual healthcheck of Japan, the OECD said the economy could be “at risk” if the country’s borrowing costs suddenly rose.