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Illicit Financial Flows from Developing Countries

Measuring OECD Responses

image of Illicit Financial Flows from Developing Countries

This publication identifies the main areas of weakness and potential areas for action to combat money-laundering, tax evasion, foreign bribery, and to identify, freeze and return stolen assets. It also looks at the role of development agencies and finds that the potential returns to developing countries from using ODA on issues like combating tax evasion or asset recovery are significant.  Finally, it identifies some opportunities for a scaled-up role for development agencies.

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Tax evasion and illicit financial flows

Effective exchange of information between tax authorities is critical for combating all forms of international tax evasion and avoidance. OECD countries are generally compliant on standards for the effective exchange of tax information as set down by the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum). Cross-border agreements to assist developing countries in collecting taxes could provide critical support in recovering the taxes legally due. Developing countries need to continue to expand their network of agreements with relevant jurisdictions and they will need the technical capacity and political will to actively pursue international tax evasion through exchanging information. While the existing standard is based on exchange on request, the G20 is committed to automatic exchange of information and significant capacity building support for developing countries is needed in this area. Donors should play a role by helping to build the necessary technical expertise in developing countries to comply with international standards and to detect and pursue tax crimes effectively.

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