Tax havens are the key enablers for a wide range of criminal and unethical activities, including fraud, money laundering, embezzlement, bribery, drugs, insider trading, transfer mispricing, and tax dodging on a massive international scale. US$1.6 trillion of dirty money flows annually into offshore accounts, approximately half of which originates from developing countries (Baker 2015). Baker suggests the proceeds from illegal activities originating from developing and transitional economies account for 35% of cross-border dirty money flows (Baker 2015). There is no way to get rid of corruption without also eliminating tax havens and their code of secrecy. Government officials of tax havens countries aid in the process of illicit capital flight and tax evasion by providing lax regulation combined with secrecy and the absence of effective information exchange (Christensen …show more content…
Several solutions have been proposed that would eliminate loopholes and toughen the restrictions on individuals and companies to exploit tax structures around the world. Implement tougher accounting rules to combat transfer pricing. About half the illicit flows of capital on developing countries are related to the under or over pricing of transactions between the subsidiaries of multinationals in order to shift profits to jurisdictions with lower tax rates (The Economist 2011). There should be a new system of automatic information exchange identifying who control or benefit from companies and trusts on public record (Christensen and Shaxson 2011). This would improve the current system of exchange that relies on individual information requests between jurisdictions. Countries must require businesses to real who actually owns and control a company. A public database would eliminate the use of nominee owners to conceal ownerships and obtain benefits through shell companies. IFRS must require businesses to publish their financial reports separately for each country in which they operate. It must be transparent what activities and where it’s taking place. Together these measures would help curb illicit financial flows on developing