It has been an extraordinary 12 months for tax crackdowns. And now the Paris-based Organization for Economic Cooperation and Development says its has obtained 195 tax information exchange agreements, as opposed to 23 in 2008, to clean up tax havens.
And now we have new reports that the G20 is broadening its tax crackdown. It's encouraged the developing countries to sign up on the understanding that they will get a windfall, collecting all those unpaid revenues. At the same time, we have reports that the Internal Revenue Service will force companies to reveal even more information about their transactions.
So what's driving this? It's pretty obvious. Governments around the world have rolled out trillion dollar rescue packages and have amassed unsustainable budget deficits in the process. The challenge for governments is to bring in more revenue to wind those deficits down. But because it is politically unpalatable to raise taxes, they are just tightening the rules.
Tax havens are just the first target. You can bet that tax agencies around the world are going to make it harder and harder for businesses. While the agencies are supposed to be independent of government, the massive deficits will put pressure on them to take a hard line. And that will only get worse.
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