G20

What did the G20 Summit accomplish? The official communique includes broad language of cooperation among the central banks, nonbinding "take action" phrases such as "to extend regulation and oversight to all systemically important financial institutions, instruments and markets", and an increase of funds available to the IMF. It's great to read about a "single set of high-quality global accounting standards" but until tangible work towards these ideals occurs these summits come off as international posturing. The central banks already reacted to the international credit crunch and the alignment of policies probably would have occurred with or without this summit. The policy intentions evoked were more or less drafted in advance (ever try to write a paper with 20 co-authors in a single day?) while the the notion of a new international currency was not mentioned despite the public remarks indicating interest.

I found one of the empty phrases intriguing:

to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information.

In other words, the member nations intend to target operations in non-member nations. To recap, the members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States of America, and the European Union. Switzerland is neither a member of the G20 nor the European Union. Neither are Caribbean nations that host many offshore operations. The Organization for Economic Cooperation and Development (OECD) list demonstrates the lines drawn. Costa Rica, Malaysia, the Philippines, & Uruguay are isolated as nations yet to commit but the list omits most African nations and does not encompass all nations. It is unclear what incentives these nations have to change, especially if the changes elsewhere drive businesses into areas that still offer tax safe havens. It is unclear what leverage will be employed against those who do not comply.

This issue is entirely about taxes, not business; the same operations with offshore locations submit detailed earnings statements for shareholders. How will international governments enforce actions against nations who choose to act in self-interest rather than for the benefit of the top economies in the world, to what extent will the top economies make this a priority, and how far will they go towards this end? Very interesting, if the "era of banking secrecy" is indeed going to be such a target.