The following editorial appears in Tuesday’s Yomiuri Shimbun:

To eradicate tax havens of a pernicious nature, it is essential to expand an international circle of mutual surveillance and support.

The Organization for Economic Cooperation and Development (OECD), at its Fiscal Affairs Committee meeting held in Kyoto, decided on the criteria for identifying countries and regions that are uncooperative in measures against international tax evasion.

Those that fail to respond sufficiently to other countries’ requests for information disclosure, or do not take part in mechanisms for countries to automatically exchange such information as bank account data, would be published on a blacklist by the OECD starting next year.

The criteria are expected to be approved at the meeting of finance ministers and central bank governors of the Group of 20 economies to be held late this month.

The OECD member countries, including Japan and the United States, will also discuss the imposition of economic sanctions on blacklisted countries and regions.

Tax havens, which become hotbeds of tax evasion, have become a focal point in connection with the exposure of the so-called Panama Papers. Countries must cooperate and intensify pressure.

At the Kyoto meeting, progress was also made on a project for implementing common international rules on business taxation, aimed at putting the brakes on excessive tax reduction by multinational companies.

The number of countries and regions taking part in the project has increased from 46 to 82; Singapore and Hong Kong are among the new members. By the end of this year, the number is expected to reach about 100. It is vitally important to close tax-evading loopholes by increasing this number further.

The rules include a mechanism whereby incomes of overseas subsidiaries are added to the incomes of their parent companies; ways to deal with dual taxation; and the creation of a system in which member countries can share information on the corporate activities of multinational companies.

Regarding a system of mutually monitoring and evaluating the degree to which member countries and regions implement the rules, the participants agreed to work out concrete steps by next January.

It is important to enhance the system’s effectiveness so that the framework for international cooperation does not become a mere scrap of paper.

Corporate activities are undergoing marked changes, including the rapid spread of internet sales. It is also necessary to review rules.

Yet there are not a few newly emerging countries that have yet to fully establish taxation systems and structures of tax authorities. Active support from industrialized countries is called for.

A fair and highly transparent taxation system would also bring to companies such benefits as reducing the risk of having unexpected taxes levied on them. Viewed in a long-term perspective, such a taxation system will contribute to countries by attracting business enterprises.

The publication of the Panama Papers uncovered tax evasion through the use of tax havens by politicians and wealthy people in many countries. Meticulous vigilance is needed in this respect.

Through exchanging information across national borders, efforts to identify real owners of dummy companies via bank accounts and others should be promoted steadily.

(c) 2016, The Japan News/Yomiuri · No Author