Flags of the G20 Summit hanging up in street lamps of Saint Petersburg. (EC Audiovisual Services, 4/9/2013).
If restoring global confidence relied on G20 efforts to fight tax evasion and control money market funds (MMFs), then the earth could end up being a totally unsafe and risky place. Who can deny that it is like that today? Tax evasion grows fast and the same is true for financial profiteering. This last development it closely related with the free ranging MMFs. For one thing if MMFs were to be effectively controlled then automatically tax evasion would have taken a severe blow. But who really wants that? The infiltration and the access the financial industry has gained in the corridors of power is watering down all efforts to effectively control tax evasion and the creation of wealth out of nothing by shadow banking.
Today the leaders of the 20 largest nations of the world are gathering in Saint Petersburg for the 2013 G20 meeting. It’s more than certain that their main item on the parallel agenda will be Syria and the discussions among the most powerful of them on how they will divide the war-torn country. If they really wanted to effectively control tax evasion and MMFs they should have started first from their own countries erasing the dark spots in their back yards, in the Caribbean, the English Channel and even on EU soil.
Who believes the G20?
The European Commission issued yesterday a Press release entitled “The EU at the G20 Summit: stepping up global efforts to restore global confidence”. It reads nice like that, “Improving confidence in the global economy, making decisive progress on the way to sustainable and inclusive global growth, countering protectionism and stepping up the fight against tax avoidance and evasion worldwide: these should be amongst the main results of this G20 summit”.
Obviously the two EU Presidents who sign this text are not naïve people. Manuel Barroso, President of the EU Commission, and Herman Van Ropmuy, President of the European Council, know much better than that. The problem is however that in view of the 500 million European voters the two EU leaders are obliged to say what the majority of people want to hear. That is pompous announcements of a fight against tax evasion and increased efforts for more inclusive growth. Yet, when things come to the core matter, legislation always falls short of aspirations and pronounced goals.
It is very characteristic that the EU Commission proposals published yesterday on shadow banking and money market funds are limited to the introduction of restrictions on portfolio assets maturing in one week to be at least 20% and exposure to a single borrower of up to 5%. It is true that those constraints are more advanced than what the US authorities have already applied. But the US is the Alma Mater of MMFs. New York banks are the first to have based on MMFs their unbelievable success of the past two years. If Europe wanted to effectively control shadow banking, it would have introduced even stricter rules than the ones applying today on regular lenders, because MMFs are much more risk prone than their ‘sponsors’, the banks themselves.
Tax evasion flourishes
As for the tax evasion the efforts that the G20 is expected to promote are to a large degree fictitious. The nature of this institution and the reluctance of the majority of its member countries to control tax evasion even on their soil deprive G20 efforts of any effectiveness in this domain. Still the politicians keep talking about curbing tax fraud because this issue has become lately very sensitive.
Continuous cuts on social protection and pensions on the account of growing public debts have made very relevant the other end of deficits that is tax payments. While workers and employers continue paying their overweight social contributions and taxes, an increasing part of the population manages to escape from all of that through the holes left in the financial system.
That is why the average man in the streets of the G20 countries’ doesn’t expect anything good From Saint Petersburg G20 gathering. Russia itself has become the worst example in that unholy arrangement with oligarchs reining under Putin’s protection.
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