G20 - interviews

Tax havens for the banks and stimulus packages for the poor

by Salil  Sarkar

Article published on the 2009-04-02 Latest update 2009-04-03 08:57 TU

Leaders of the G20 summit in London on 2 Aprill 2009.
(Photo: Reuters)

Two of the tasks leaders at the G20 summit were charged with were to clamp down on offshore tax havens and help alleviate the weight many of the world's citizens, especially the poor, are buckling under. The first issue looks at some of the world's wealthiest and the latter looks at its poorest.

One of the top issues at the G20 summit in London this year was abolishing tax havens.

Prior to the summit, the United States signed a new agreement with Gibraltar to exchange tax information, and Britain reached an agreement with Liechtenstein to swap details on tax cheats.

Linda Yueh, an economist from Oxford University, told RFI how tax havens create a number of problems for the world financial system.

"Tax havens offer a place for banks to lodge their off-balance sheet losses making it hard to know how fragile their capital base is," Yueh says.

This allows a shadow banking system to take root and any capital kept in the havens is entirely unregulated.

"The issue of financial stability is very much tied up with getting tax havens abolished and moving shadow banking system into a governed regulated space."

Meanwhile, the question of who is hit the hardest from the global financial crisis is not debatable, at least according to South African activist Kumi Naidoo. It is the poor beyond all doubt, he says.

Naidoo, who is with the NGO Global Call for Action against Poverty, was in London for the summit and told RFI that those that are the least culpable are paying the biggest price.

He cites the failure of countries attending the G8 to follow up on their promises to dedicate 50 million dollars (37 million euros) per year to the developing world.

“We talk about debt in the developing countries as third world debt […] perhaps our strategy has been wrong. As campaigners we should have been saying, what we need for the developing world are stimulus packages because suddenly, when you use this language and you aim it at the most powerful and the wealthiest, huge amounts of money can be found. “

Naidoo is hopeful that something good could come out of the current financial and environmental problems.

“We could use this opportunity to move towards a serious green economy, develop in sustainable jobs, but it requires political will.”