NEWS,16.6.2013

Tax evasion, bank secrecy: G8 talks tough

Tax evasion and banking secrecy, hot topics and top targets because of the financial crises and austerity, could be the focus of strong statements at the G8 meeting this week.
The British government, organising the meeting in Northern Ireland, has promised big developments on the basis of substantial progress recently in clamping down on evasion and bursting bank secrecy.
But many observers from civic bodies are pessimistic and say that the summit on Monday and Tuesday will amount to a lost opportunity despite the public outrage over recent brazen cases at a time of tax rises and budget cuts.
The tightening up of tax systems across borders, and opening up information on how businesses do their accounting across borders, are two of the burning issues for Britain which is currently chairing the G8 (Group of Eight) leading countries.
The G8 comprises the United States, Japan, Germany, France, Canada, Britain, Italy and Russia.
British Prime Minister David Cameron has prepared the way for the summit of heads and state and government by stating the "ambition" that the meeting at Lough Erne will "knock down the walls of banking secrecy" with "concrete measures".
French President Francois Hollande, badly bruised by a recent scandal involving an admission by his budget minister Jerome Cahuzac, also responsible for fighting tax evasion, that he had hidden money abroad, has said: "Tax havens must be eradicated in Europe and throughout the world."
The climate has turned strongly in favour of tough action: pressure on these two fronts, which seemed to have eased after progress in 2009, is again at a high pitch.
First, a new law in the United States, called Fatca, obliges all banks to provide US authorities with all information they hold concerning all assets owned by US taxpayers.
Meanwhile, revelations by journalists, known as "Offshore Leaks", have further strengthened the perception that no bank account can be considered secret and that hidden funds are liable to exposure.
The consequence of this is that the gates of some strongholds of banking secrecy, such as Switzerland, are beginning to give way.
The European Union, in which some countries have arrangements considered favourable to those seeking to dissimulate funds, seems to be overcoming internal divisions and trying to catch up with the United States, even though Austria and Luxembourg still show some reticence.
The G8 leaders are expected to make strong statements calling for a "truly global system of multinational information exchange", according to a draft final statement. But concrete measures appear unlikely.
Cameron has opened a second front to combat strategies by multinational companies to avoid paying tax via transfer pricing and other techniques to generate costs in high-tax countries and profits in low-tax countries or tax havens.
"Missed opportunity"
Public opinion in several countries, already inflamed by stories of tax evasion and tax avoidance at a time of austerity, has been roused further by revelations in the United States and Europe that international brands such as Starbucks, Google, Amazon and Apple, pay little tax in countries where they have high-volume business.
In Northern Ireland, the G8 leaders, all of whom are facing national budget pressures, will support an action plan to be put forward soon by the Paris-based Organisation for Economic Cooperation and Development.
But even under this programme, hard-hitting measures will have to wait, mainly because of diverging interests.
Sources in Paris which are close to the talks said that "France is most interested in digital issues" while "American negotiators are not particularly enthusiastic."
One of the most sensitive matters concerns trusts and other structures which can be used as legal shields to conceal the identities of people with offshore activities and assets.
Britain has put transparency in this field on the agenda, saying that change is needed also to help fight the laundering of illicit funds.
Cameron, to show goodwill, has also urged British crown dependencies and territories such as the Cayman Islands and British Virgin Islands, reputed to be flourishing tax havens, to join in and ramp up their cooperation against evasion.
However, the outcome of this appeal is unclear since some of them, such as Bermuda, are reluctant to sign an agreement put forward by Cameron. This could be a blow to the position taken by the G8.
Non-governmental organisations are calling for "public registers of the owners and real beneficiaries of companies and other legal entities offshore," in the words of Mathilde Dupre, the coordinator of a body called the tax and judicial haven platform.
"This is a long way away," she said, noting that the draft final statement so far referred only to vague "national action plans."
At the NGO called One, founded by rock star Bono, Guillaume Grosso commented that "in the field of registers, Cameron has been unable to turn intentions into acts."
He held that the United States and Russia had countered what would have been "the big step forward by the G8."
Judging that this was "a missed opportunity", he said that "these issues could just be forgotten."

Obama heads to prickly Putin talks

President Barack Obama meets Russia's Vladimir Putin on Monday for potentially vexatious talks, as both leaders now offer open military backing to rival sides in Syria's civil war.

Obama, who leaves Washington on Sunday, will confront Putin at the G8 summit in Northern Ireland, after his administration signalled it would begin arming vetted rebels battling Syria's government, Russia's top Arab ally.

That decision last week complicated the already delicate politics of the Obama-Putin meeting and prompted Russia to acidly decry US claims that Syria crossed a 'red line' by using chemical weapons as unconvincing.

Washington, trying to preserve the troubled notion of a Geneva peace summit co-organized with Moscow, wants a change of strategy from Putin, who has backed President Bashar Assad even as Obama has repeatedly demanded he leave power.

But no one expects the Russian leader to yield, especially in the wake of battlefield gains against the rebels by Assad's forces bolstered by Hezbollah militia fighters and Iran.

Putin may also be taking some Machiavellian comfort from the public agonising consuming Western governments over what to do about Syria, which has been particularly acute inside the Obama administration.

"We still continue to discuss with the Russians whether there is a way to bring together elements of the regime and the opposition to achieve a political settlement," said Ben Rhodes, a deputy US national security advisor.

"There are no illusions that that's going to be easy."

Different opinions

US officials will try to convince Putin that a descent into deeper chaos and instability in Syria is not in Moscow's national interests.

Top US officials, keen to avoid in Syria the messy splintering of state institutions that led to chaos in Iraq, are stressing the idea that if Assad leaves, elements of the regime, presumably sympathetic to Russia, might stay.

But the argument's potency has weakened given indications that Assad's position is more stable than it has been for months.

"I don't think Obama is going to shift Putin in his way of thinking. The French and the British certainly won't be able to do this," said Michael Geary, a European Studies fellow at the Wilson Centre in Washington.

Putin seems in no mood to compromise, and on Sunday hit out at the decision to arm Syrian opposition factions.

"It is barely worth it [supplying arms] to support people who not only kill their enemies but open up their bodies and eat their internal organs in front of the public and the cameras," Putin said in London.

Western powers may hope that by arming selected rebels they can shift the dynamics of the fighting on the ground, which could chip away at Assad's position and raise pressure on Putin to reengage.

"We would very much like to see the Russians taking a similar view about the importance of an inclusive political process to create a transition that Syria needs," a Western diplomat said.

"We would like to see Russia engaging on what that means, less directly attached to the continuation in power of Bashar Assad."

Obama may press Putin on whether Russia plans to complete the delivery of S-300 anti-aircraft missiles to the Damascus regime, which could complicate any future US or Western air operations over the country.

Relationship already shaky

Disagreements over Syria have frayed an already testy relationship between Russia and the United States, which has deteriorated since the "reset" engineered by Obama and former president Dmitry Medvedev.

Yet US officials believe progress may be possible in some areas, especially ahead of a planned meeting between the leaders when Obama heads to St Petersburg for the G20 summit in September.

Obama will likely probe whether Putin is ready to talk about weapons cuts as he seeks to cement his nuclear arms reduction legacy after agreeing on a new START treaty with Moscow in his first term.

Both sides also have a renewed interest in co-operation on counter-terrorism issues, following the bombing of the Boston marathon by attackers with origins in the Caucasus region of Russia.

Obama and Putin are not expected to take questions after their talks, but will make statements to the press at the G8 venue in Loch Erne.

Journalists and analysts will be reduced to sifting visual clues.

"I think if we see scowling and stiff body language, you will interpret that one way," said Heather Conley of the Centre for Strategic and International Studies.

"If we see smiles and backslaps, you will interpret it in another way."

Israel: Iran sanctions should increase

Israel on Sunday warned the international community against easing sanctions on Iran following the election of a reformist-backed president, saying the country's nuclear efforts remain firmly in the hands of Iran's extremist ruling clerics.

Prime Minister Benjamin Netanyahu issued the warning a day after the surprise victory by Hasan Rowhani. Although Rowhani is considered a relative moderate and had the backing of Iranian reformists, Supreme Leader Ayatollah Ali Khamenei is the ultimate authority on all state matters and key security policy decisions, including nuclear efforts, defense and foreign affairs, remain in the hands of Khamenei and his powerful protectors, the Revolutionary Guard.
Netanyahu noted that the Iranian clerics disqualified candidates they disagreed with from running in the election. He said the international community must not get caught in "wishful thinking" and ease the pressure on Tehran, saying "Iran will be tested by its deeds".
Israel considers a nuclear-armed Iran to be an existential threat, citing Iranian calls for Israel's destruction, its support for anti-Israel militant groups and its missile and nuclear technology.
Tehran insists its nuclear program is peaceful, a claim that Israel and many Western countries reject.
Netanyahu said that sanctions on Iran should be increased. "The more pressure increases on Iran, so will the chance of ending Iran's nuclear program, which remains the biggest threat to world peace," Netanyahu said.
Israeli President Shimon Peres took a softer line. While Peres said it was too early to make predictions, he felt the vote was a clear sign of dissatisfaction with Iran's hard-line leadership and its outgoing president, Mahmoud Ahmadinejad.
"More than half of Iranians, in their own way, in my judgment, protested against an impossible leadership," Peres told The Associated Press. "Ahmadinejad spent hundreds of billions of dollars to build an idol of uranium. What for? He brought down the people on their knees. The economy is destroyed. Children don't have enough food. Youngsters are leaving the country. Iran became a centre of terror, they hang people, they arrest people. What for?"
He said the biggest loser in the vote was Khamenei. "It is clearly a voice of the people and a voice that says, 'We don't agree with this group of leaders'," Peres said.
Israel has said that it prefers diplomacy and sanctions to end Iran's nuclear program but has hinted that military action would be an option if peaceful attempts fail. It has called on the international community to issue a clear ultimatum to Iran to curb its nuclear programme.
Some Israeli analysts felt having a more moderate Iranian president might make the Islamic Republic harder for Israel to deal with.
Meir Litvak, head of Iranian studies at Tel Aviv University, told Israel Army Radio that Rowhani's "smiley face to the west" might make the option of military action less likely.
In contrast, Uzi Arad, Netanyahu's former security adviser, said that Rowhani's taking over might be good for Israel.
"It's true it might be easier to have an unstable, screaming and vulgar character like Ahmadinejad. but at the end of the day it might be better to have a character that you can deter and can convince via pressure to get the desired result," Arad said.
Arad told Israel Radio that it was a good sign that millions of Iranians voted for a candidate who "explicitly spoke about acting to ease sanctions and strive for talks with the West."

North Korea proposes talks with US

North Korea's top governing body on Sunday proposed high-level nuclear and security talks with the United States in an appeal sent just days after calling off talks with rival South Korea.

The National Defense Commission headed by North Korean leader Kim Jong Un issued a statement through state media proposing "senior-level" talks to ease tensions and discuss a peace treaty formally ending the Korean War.
In Washington, a National Security Council spokesperson said talks with North Korea would require that it comply with UN Security Council resolutions and live up to its international obligations.
Foreign analysts expressed scepticism over the North Korean proposal, saying the impoverished country often calls for talks after raising tensions with provocative behaviour in order to win outside concessions.
The rare proposal for talks between the Korean War foes follows months of acrimony over North Korea's defiant launch of a long-range rocket in December and a nuclear test in February, provocative acts that drew tightened UN and US sanctions. The US and South Korea countered the moves by stepping up annual springtime military exercises that prompted North Korea to warn of a "nuclear war" on the Korean Peninsula.
However, as tensions subsided in May and June, Pyongyang has made tentative overtures to re-establish dialogue with South Korea and Washington.
In a notable shift in propaganda in Pyongyang, posters and billboards calling on North Koreans to "wipe away the American imperialist aggressors" have been taken down in recent weeks.
Meanwhile, a recent proposal from Pyongyang for Cabinet-level talks with South Korea (the first in six years) led to plans for two days of meetings in Seoul earlier this week. The talks dramatically fell apart even before they began, amid bickering over who would lead the two delegations.
North Korea fought against US-led United Nations and South Korean troops during the three-year Korean War in the early 1950s, and Pyongyang does not have diplomatic relations with either government. The Korean Peninsula remains divided by a heavily fortified border.
Reunifying the peninsula was a major goal of North Korea's two late leaders, Kim Il Sung and Kim Jong Il, and is a legacy inherited by current leader Kim Jong Un. North Korea is expected to draw attention to Korea's division in the weeks leading up to the 60th anniversary in July, marking the close of the Korean conflict, which ended in an armistice. A peace treaty has never been signed formally ending the war.
As Pyongyang continues to shun disarmament and shut out nuclear inspectors, Washington's top worry is North Korea's nuclear weapons programme. Pyongyang is estimated to have a handful of crude nuclear devices and has been working toward building a bomb it can mount on a missile capable of striking the United States.
Earlier this year, Kim Jong Un enshrined the drive to build a nuclear arsenal, as well as building the economy, as national goals. North Korea claims the need to build atomic weapons to defend the country against what it sees as a US nuclear threat in Korea and the region.
North Korea will not give up its nuclear ambitions until the entire Korean Peninsula is free of nuclear weapons, a spokesperson from the National Defense Commission said in a statement carried by the Korean Central News Agency.
"The denuclearisation of the Korean Peninsula does not only mean 'dismantling the nuclear weapons of the North'", but also should involve "denuclearising the whole peninsula, including South Korea, and aims at totally ending the US nuclear threats" to North Korea, the spokesperson said.
The US denies having nuclear bombs in South Korea, saying they were removed in 1991. However, the US military keeps nuclear submarines in the region and has deployed them for military exercises with South Korea.
After blaming Washington for raising tensions by imposing "gangster-like sanctions" on North Korea, the unnamed NDC spokesperson called on the US to propose a venue and date for talks but warned against setting preconditions.
US National Security Council spokesperson Caitlin Hayden said on Sunday that the US hopes to have "credible" negotiations with North Korea.
"But those talks must involve North Korea living up to its obligations to the world, including compliance with UN Security Council resolutions, and ultimately result in denuclearisation," she said. "We will judge North Korea by its actions and not its words and look forward to seeing steps that show North Korea is ready to abide by its commitments and obligations."
Washington has been burned in the past by efforts to reach out to Pyongyang. Months of behind-the-scenes negotiations yielded a significant food-for-disarmament deal in February 2012, but that was scuttled by a failed North Korean long-range rocket launch just weeks later.
Pyongyang's bid to reach out to the US comes as South Korea's new president, Park Geun-hye, is to sit down for talks with China's new leader, Xi Jinping, in Beijing later this month.
Park, whose North Korea policy calls for building trust while remaining firm on provocations, has been active in reaching out to Beijing. Xi, meanwhile, met recently with Obama in California.
China crucially supplied North Korea with troops during the Korean War, and has remained a key ally and benefactor since then, but has pushed Pyongyang to return to disarmament talks.
"The fact that North Korea proposed talks [with the US] ahead of the South Korea-China summit signifies its intent to keep China in check," said Kim Yong-hyun, a professor of North Korean studies of Dongguk University in Seoul, South Korea.
Pyongyang also is sending a message to South Korea warning that if Seoul does not actively try to improve relations with North Korea, the regime will go directly to Washington, sidelining Seoul, he said.