G-20 cracks whip on tax havens; OECD publishes blacklist

The G-20 leaders on Thursday agreed to crackdown on tax havens, paving the way for the 'naming and shaming' of countries that fail to comply with internationally agreed standards.

The leaders of the most powerful 20 nations in the world, which together represent roughly two thirds of the global population and 90 per cent of the world's gross domestic product (GDP), agreed to fix the loopholes that currently exist around hedge funds and tax havens.

After the agreement at the G20 summit in London yesterday to act against uncooperative countries, the Organisation for Economic Cooperation and Development (OECD) named Costa Rica, Malaysia, the Philippines and Uruguay on its black list.

The OECD said these countries had ''not committed to the internationally agreed tax standard''.

It listed another 38 territories as those that ''have committed to the internationally agreed tax standard but have not yet substantially implemented'' the measures.

They included Belgium, Brunei, Chile, the Dutch Antilles, Gibraltar, Liechtenstein, Luxembourg, Monaco, Singapore, Switzerland and Caribbean island nations including the Bahamas, Bermuda and the Cayman Islands. (See: Switzerland, other tax havens agree to ease banking secrecy rules).

A third list of 40 countries named those that had substantially implemented the internationally agreed tax standard. It included Britain, China (with the exception of financial centres of Hong Kong and Macau), France, Germany, Russia and the US.

British prime minister Gordon Brown hailed the agreement as he issued a blunt warning to individuals and corporations that invest in renegade tax havens that their money will be unsafe.

"People will increasingly see that it is unsafe to be in a country which still wants to declare itself as a tax haven," the prime minister said.

"There will be no guarantee about the safety of funds there. If tax information is exchanged on request, as these countries have agreed to, then the benefits from being in these countries will diminish every day."

The G-20 agreement was only concluded in the final minutes of the summit after a row between Nicolas Sarkozy, the French president, who pressed for every country in the world to be included in the OECD list, and Hu Jintao, the Chinese president. Jintao finally succeeded in exempting Hong Kong and Macau from the list, though they will eventually be included.

Ángel Gurría, the OECD secretary-general, said: "We now have an ambitious agenda that I believe the OECD, working with other relevant organisations, is well placed to deliver on. I am confident that we can turn these new commitments into concrete actions which in turn would strengthen the integrity and transparency of the financial system."

Stephen Timms, the financial secretary to the UK Treasury, warned that tax havens that fail to clean up will face sanctions.