Abstract: The purpose of this article is to investigate the accounts payable management practices of small, medium and micro enterprises (SMMEs) in the Cape Metropolis. The study is motivated by a lack of research on payable management practices of SMMEs in South Africa. Data are collected from a sample of 200 SMMEs by means of a closed-ended questionnaire and analyzed using descriptive statistics and inferential statistics. The findings of the study indicate that 70% of the sampled SMMEs purchase only on cash basis. Of the sampled SMMEs, 22% purchase on both cash and credit, while 8% purchase only on credit basis. Of those that purchase on credit, 72% pay their creditors promptly to take advantage of discount facilities. To manage their accounts payable, 52% of the SMMEs use computers. Only 43% settled accounts payable on the last day that the payment is due. The results further indicate that a lack of personnel and time are the main factors that inhibit the SMMEs from managing their accounts payable effectively. The above results suggest that SMMEs are inclined towards purchasing on cash or paying promptly when they purchase on credit, which could indicate that they had a lower bargaining power relative to that of suppliers who may have viewed these entities as risky ventures to which they were reluctant to extend credit terms. Based on the above findings, this study recommends that the SMMEs decision-makers be educated on the competitive advantages gained by buying on credit, most important of which are improving cash flow and building supplier relationship. In addition, the decision-makers may be trained, perhaps through Government intervention, on how to overcome the factors that inhibit them from managing their accounts payable effectively, by using computers. The Government may also provide guarantees to SMMEs’ suppliers to relax the credit terms extended to these entities. This study makes several original contributions to literature. It is the first study to investigate the accounts payable management practices of SMMEs in the Cape Metropolis. Entities whose management of accounts payable had up till now been neglected appeared in the prior research to their peril. Secondly, this study provides a unique insight into SMMEs management of their liquidity by focusing on their management of most immediate obligations (accounts payable), which are critical for these entities’ survival given their limited access to finance. The proposed study thus fills the gap in research on the accounts payable management practices employed by SMMEs in South Africa. Although various studies have been published on the accounts payable management practices on SMMEs in other countries, no study was found within the South African context. This study therefore contributes to the debate on the accounts payable management practices of SMMEs in a unique context of South Africa and inspires other researchers to investigate the same in other Metropolis in the country.

Abstract: Private firms in China have led the explosive growth of the country’s economy, but with restricted or no access to formal financing. It is puzzling that these firms use relatively less trade credit than their counterparts in developed countries. We argue that firms with more growth opportunities should rely mainly on internal financing owing to high asymmetric information, especially in a financial market environment biased towards state-owned enterprises (SOEs) such as China. To explore growth opportunities, these firms may reduce their level of trade credit in the trade-off they face in deciding where to invest. Using panel data of Chinese non-financial listed firms for the period 2003–2013, we find that the relationship between growth opportunities and trade credit (both accounts receivable and payable) is significantly negative and is more pronounced in private firms than in SOEs. Furthermore, we also find that subsequent to the new receivable pledge policy being introduced, Chinese firms with...

Abstract: This study is designed to determine the motives for trade credit in Korean firms. Based on data collected from 14,660 firm-year observations running from 1992 to 2011 on the Korean Stock Exchange, this paper finds strong evidence on determinants of trade credit based on financial characteristics. The principal result is that older firms with larger size, lower growth, and higher profits tend to extend accounts receivable. This evidence, while consistent with the access to financing and price discrimination hypothesis, is difficult to reconcile with the growth hypothesis. Second, this paper provides evidence that firms with larger size and greater leverage, as well as young firms, appear to use accounts payable. This finding, while consistent with the financial constraint hypothesis, is difficult to harmonize with the financing and growth hypothesis. The paper contributes to the argument about trade credit motives. It may help managers in making financial policy concerning improving firm value in the Korean market. Keywords: trade credit, accounts receivable, accounts payable JEL classification: M41

Abstract: This study aims to determine the effect of the components of working capital management, which consists of cash conversion cycle, days in account receivable period, days of inventory, and days in account payable period for profitability measured by return on asset, return on equity and gross operating profit The sample used in this research includes 42 SMEs that ever listed on PEFINDO25 index 2009-2014 The results showed that there was a negative effect from cash conversion cycle on return on assets and a positive effect on return on equity The components of working capital include days in accounts receivable period positively affect return on assets and return on equity, while days of inventory negatively affect return on assets and a positive effect on return on equity and gross operating profit, and days in accounts payable period positively affect gross operating profit Meanwhile leverage have negative effect on gross operating profit While size does have positive effect to the profitability These results indicate that the company's managers and investors need to pay attention to the cash conversion cycle, days in accounts receivable period, days of inventory, accounts payable days in period leverage and size to increase profitability in SMEs In addition, the government can also provide credit policy and creating a business environment conducive to SMEs

Abstract: When firms are incorporated, equity capital is the most available source from the promoters. Equity financing consist of ordinary share capital, preference shares, and retained earnings. As business improves, additional capital may be required and debt option is usually the fastest given there are fewer regulatory barriers. In the recent years the performance of some companies listed at the NSE, has been dismal due to their high level of debt compared to equity. The objective of this research was to assess the effects of accounts payable on financial performance of publicly listed manufacturing companies at NSE, Kenya. Census sampling technique was used and the study used secondary data, which was obtained from the companies’ statistics and journals at the Nairobi Securities Exchange. SPSS was used to carry out the descriptive analysis of the variables, requisite analysis and advanced analysis of the data. A multiple regression model was used to test the relationship between the Accounts payable and firm performance. The results from this research suggested that in most of the manufacturing firms listed at the NSE, there was a direct positive relationship between Accounts Payable and the dependent variable, Profitability and Liquidity, supporting the Pecking Order Theory.

Abstract: The purpose of this study is to examine the relationship between liquidity and profitability of firms at hotels and travels sector in Sri Lanka. Cash conversion cycle (CCC) and its properties namely accounts receivable outstanding days (AROD), accounts payable outstanding days (APOD) and inventory outstanding days (IOD) have been used to explain liquidity management. Profitability is measured through return on asset (ROA), return on equity (ROE), gross profit margin (GPM) and net profit margin (NPM). Analyzing a sample of 26 randomly drawn companies listed in Colombo Stock Exchange (CSE) in hotels and travels sector over three years from 2011 to 2013, the study finds that CCC is positively and significantly related to the profitability. Regression models with AROD, APOD and IOD as predicting variables instead of CCC better explain nearly all profitability measures. This effect of disaggregation is more sensitive when the profitability is measured in terms of net profit margin. Hotels and travels companies can increase profitability by allowing more credit outstanding days and having lower inventory conversion period. Accounts payable outstanding days are found to be insignificantly related to profitability. The findings reveal the effects of aggregation and de-aggregation of CCC in predicting profitability of firms in hotels and travels sector. The study also informs the hoteliers and travels firms about how different components of CCC are to be managed for increased profitability. This investigation is also significant as prior literature on liquidity and profitability nexus in hotels and travels sector is extremely limited. Findings obtained here are useful for hoteliers and policy makers to ensure efficient working capital management at hotel sector in Sri Lanka. Profitability of hotel sector firms in Sri Lanka is investigated in this paper with aggregated and de-aggregated models of cash conversion cycle.

Abstract: The study examined the effect management of accounts payable on the financial performance of Industrial/Domestic manufacturing companies in Nigeria. The data were collected from the Annual Reports of the companies under study. The hypotheses were tested using multiple regression technique. At the end of the study, the results showed that accounts receivable had positive and significant effects with the profitability ratio at 1% levels of significance. This means that unit increase in the variables shall bring about corresponding increase in the profitability ratio of the Building/Chemical and paint companies in Nigeria. Both Debt ratio and sales growth rate had negative and non-significant effect on these companies.

Abstract: This article integrates the company operations decisions (i.e. location, production, inventory, distribution, and transportation) and finance decisions (i.e. cash, accounts payable and receivable, debt, securities, payment delays, and discounts) in which the demands and return rate are uncertain, defined by a set of scenarios. The cash flow and budgeting model will be coupled with supply chain network design using a mixed integer linear programming formulation. The article evaluates two financial criteria, that is, the change in equity and the profit as objective functions. The results indicate that objective functions are partially interdependent, that is, they conflict in certain parts. This fact illustrates the inadequacy of treating process operations and finances in isolated environments and pursuing objective myopic performance indicators such as profit or cost. Due to the importance of the supply chain network design problem, a multi-objective robust optimization with the max–min version is extende...

Abstract: This article offers empirical evidence on the relationship between the working capital and corporate profitability for the chemicals distribution sector in Colombia. The study looks at 48 companies during the 2008-2014 period. The results provide empirical evidence that there is a significant relationship between the factors pertaining to working capital and corporate profitability in the sector distribution sector in Colombia. The study looks at 48 companies during the 2008-2014 period. The results provide empirical evidence that there is a significant relationship between the factors pertaining to working capital and corporate profitability in the sector. There is negative and significant relationship between days sales outstandingdays payable outstanding, the cash conversion cycle, and corporate profitability

Abstract: The study examined the effect of cash conversion cycle on the Financial performance of Building materials/chemical and paint manufacturing companies in Nigeria. Cash conversion cycle, receivable ratio, payable ratio, and inventory ratio are the variables studied in this study. Data were sourced from the annual reports of Health care companies in Nigeria. Generalized Least square multiple regression analytical tool was used to test the Hypotheses. The findings show that, Inventory ratio and Accounts receivable ratio had significant and positive effect on firms profitability, accounts payable ratio and Cash conversion cycle had positive and nonsignificant effect on firms’ profitability.

Abstract: The objective of this research work is to evaluate the measurement of the level of compliance with tax obligations in the purchase book in PLUMROSE, 2010. To carry out the research, the type of study was defined as a descriptive, field research, not Experimental, transectional or cross-sectional, the survey technique was used to collect the data through the application of the structured direct questionnaire as a data collection instrument, based on expressions and in absolute terms specifically bar graphs and frequency tables. The investigation shows, as conclusions, that the process of registering data in the accounts payable of the Purchase Book during the year 2010, demonstrates that the company PLUMROSE, CA, complies with the billing requirements that and formal duties established in the legal regulations , so that the company guarantees those responsible for custody and the preparation of documents to make accounting records, because the work is verified the operation for error detection. Likewise, it is recommended to improve the selection of the human resource required for the success of the functions and activities through recruitment strategies and selection of the personnel of the company PLUMROSE, C.A.

Abstract: We construct network centrality measures for customer and supplier industries in the U.S. economy. Consistent with Ahern, et al. (2014), we find central suppliers have higher levels of systematic risk than central customers and therefore more exposed to sectoral shocks. We posit that central suppliers have incentives to channel funds to their customers via trade credit. Our empirical results are consistent with such a view. We find that the cash to cashflow sensitivity and value of cash is significantly higher for central suppliers than non-central firms, even among those financially unconstrained. In contrast, central customers have no cash to cash flow sensitivity, consistent with supplier trade credit redistribution helping to relieve customers’ financial constraints. Using the 2008 financial crisis as an exogenous shock, we document that central suppliers with high pre-crisis liquidity decrease their investment, while only customers without central suppliers are sensitive to the crisis. Similarly, only customers without central suppliers are sensitive in their payable days to the crisis.

Abstract: The invention provides a driver client bill settlement method, a taxi-taking system server and a related system. The settlement method is applied to the taxi-taking system server; when a bill settlement request sent by the driver client is received, whether the account balance of a passenger client is enough to pay the bill or not is determined; when the account balance of the passenger client is not enough to pay the bill, other payable account information associated with the passenger client is pushed to the passenger client, the passenger is prompted to use the other payable account to recharge or pay; and the recharging or paying request sent by the other payable account is received, and therefore the payment of the bill is completed. According to the scheme, when the taxi-taking service is finished and the passenger's account has unsufficient balance or is deducted unsuccessfully, other payable account is pushed to the passenger client to pay the bill, the bill is settled normally, the order service is completed smoothly, and the usage experience of the driver and the passenger are improved.

Abstract: Business plays an important role in economic growth, which increasingly draws public attention in recent decades. Previous literature discusses the reasons why the companies offer and receive trade credit. However, it lacks empirical evidence to confirm the relationship between trade credit and profitability. This work focuses on how trade credit, from both the supplier side and the demand side, influences the profitability of SMEs. We investigated 100 firms to establish a long-term relationship with their suppliers to gain credits since accounts payable is positively related to the profitability. Meanwhile, I find that there is no clear relationship between accounts receivable and profitability. Keywords : Trade credit Accounts revivable Accounts Payable Profitability SMEs Transaction theory

Abstract: In response to globalization, International Financial Reporting Standards (IFRS) has become the norm of the global capital markets. Companies preparing financial statements using IFRS may make the financial situation fully disclosed. Nevertheless, an overestimated accrual expense of a balance sheet may not only underestimate the earnings data, but also increase the cash outflows of the statement of cash flows. When the accrual expense is underestimated, corporate earnings will inflate earnings statistics. In addition, the problem of funds shortage may occur upon actual payment because the cash outflows of the statement of cash flows is underestimated. In this paper, we adopt the prediction mechanism in data mining to predict the unused vacation time of employees, which in turn becomes a part of the accrual expenses in the balance sheet. The prediction target is the bonus of unused annual leave in terms of unused hours so that the estimated amount of fees payable accuracy in the balance sheet can be improved. Both decision-tree models and regression analysis are used. Comprehensive experiments show that the decision-tree method outperforms the regression analysis method, with MAE of −23.1 and RMSE of 43.1.

Abstract: The lack of information about the mining resource rent sharing between governments and investors is an easy statement in Africa. Existing public databases are often insufficient for a deep analysis of the African tax law applied to natural resource sectors, which limits the academic and operational work. The FERDI publishes the first tax and legal database which specifies the tax regime applied to industrial gold mining companies in 14 African countries from the 1980s to 2015. The database featuring three major innovations: (i) an inventory of taxes and duties (rate, base and exemptions) payable during the prospecting phase and mining phase of a gold mining project; (ii) an entirely new level of historical depth; (iii) the link between each piece of tax information and its legal source. This database is used to make a first analysis of tax regimes and rent sharing in gold producer countries. The first results emphasize heterogeneity of tax regimes between English-speaking and French-speaking countries with a convergence of the average effective tax rates that increase in most countries following the tax reforms undertaken since 2010.

Abstract: This paper investigates which forms of trade credit finance which corporate activities of non-state-owned enterprises in China, comparing coastal and interior areas. Using firm-level panel data for 1998–2007, we find: (1) trade credit in China supports investment by non-state owned-enterprises; (2) trade credit in the form of notes and accounts payable is more developed and actively used to finance investment in the coastal areas compared with the interior; and (3) the dominant and significant form of trade credit changes from deposits received to notes and accounts payable, likely driven by development of interfirm trust and increasing market competitiveness.

Abstract: The management of corporate liquidity plays a pivotal role in maintaining the financial health of the company during the normal course of business. The objective of this study is to examine the effect of corporate liquidity and profitability of listed Food and Beverages Firms in Nigeria. The study covers the period of six years 2009 to 2014. Data for the study were extracted from the firms’ annual reports and accounts. After running the OLS regression, a robustness test was conducted for validity of statistical inferences, the data was empirically tested between the dependent and the independent variables. A multiple regression was employed to test the model of the study using Robust OLS. The results from the analysis revealed a strong positive relationship between quick ratio, accounts payable, IFRS, firm size and ROA of Listed Food and Beverages Firms in Nigeria, while accounts receivable was found to be inversely significantly related to ROA of Listed Food and Beverages Firms in Nigeria. Cash conversion cycle was inversely but statistically not significantly related to ROA. In line with the above findings, the study recommended that the management of listed Food and Beverages Firms in Nigeria should maintain a higher quick ratio as it will have a positive impact on their profitability and that it has empirically proved that higher quick ratio signifies more profitability, they should also try to reduce their collection period because shorter collection period increases their profitability. Finally, the management should also delay their short term obligations as it was found that more profitable firms do wait a little longer to pay their bills. Keyword: Quick ratio, accounts receivable, accounts payable, cash conversion cycle, IFRS, firm size, return

Abstract: Prior to 2012, the Chinese VAT applied primarily to supplies of goods, with supplies of services, including financial services, subject to a turnover tax known as the Business Tax. The value of financial services in respect of a loan was interpreted as the gross interest payable on the loan. As a consequence, a 5% turnover tax was applied to interest payments, with no input tax recovery by business customers in the VAT system. The result was overtaxation of all borrowers and, in particular, business customers facing significant biases and distortions from the compounding tax liability. Since 2012, Chinese authorities have gradually been shifting services subject to the Business Tax into the VAT. Yet to be moved are loans and similar financial services as there is no clear agreement as to how the Business Tax rules on financial services might be integrated into the VAT. Somewhat ironically, depending on how they are migrated into the VAT and the VAT input tax system, these unprincipled and distorting rules might end up providing a model for taxing financial services in a VAT. The result has the potential to be the benchmark for reform of the VAT in the 21st century.

Abstract: The invention belongs to the network data processing technology and particularly relates to an E-commerce finance management method and system. The E-commerce finance management method comprises steps of registering information of stores to be managed, financial management, asset management, unamortized expense management, and output of a financial statement. The financial management comprises steps of registering financial information of each store and generating an accounts receivable and accounts payable summary account and an accounts receivable and accounts payable detail account; the asset management comprises steps of registering asset information and setting asset depreciation; the unamortized expense management comprises the step of calculating the unamortized expense according to asset management information; and the output of the financial statement comprises steps of generating an operating profit form and an asset debt table according to statistic information. The e-commerce finance management method and system calculate out the operation profit form and the asset debt table through arranging the fixed assets and unamortized expense of all stores of the e-commerce platform in order to clearly and comprehensively know profit-loss conditions of the store and an operator. The e-commerce finance management method and system perform unified digitalized management on various store accounts of multiple platforms to perform large-scale operation, save labor and reduce error rates.

Abstract: The study investigated the effect of working capital management on the profitability of Flour Mills of Nigeria Plc. Specifically the study sought to determine the extent to which Number of Days of Accounts Receivable; Number of Days of Inventory; and Number of Days of Accounts Payable affect Gross Profit Margin (GPM) of Flour Mills of Nigeria Plc. The study was anchored on Trade-off theory of capital structure. The study adopted co relational descriptive non-experimental research design approach based on data derived from the past annual reports of Flour Mills of Nigeria Plc. Data collected was analyzed using Pearson correlation technique via the Statistical Package for Social Science (SPSS) version 20. The study reports a positive and significant influence of Number of Days of Accounts Receivable; Number of Days of Inventory; and Number of Days of Account Payable on gross profit margin (GPM) of Flour Mills of Nigeria Plc. The implication of the result which showed a positive impact of working capital management variables on gross profit margin of FMN indicates that the longer the number of days it takes a firm to be paid for sales made and inventory held, the less profit it is expected to make. The study recommended that Flour Mills of Nigeria Plc should be very apt in reducing the number of days of account receivables and inventories to a reasonable minimum in order to boost profitability. Keywords : Working capital, Profitability, Accounts receivable, Accounts payable, Inventory, Flour mills, Nigeria.

Abstract: The article analyzes the results of a research on the capital structure of small and medium business and identifies the financing peculiarities of Ukrainian and European enterprises. The author calculates the financial leverage of Ukrainian companies and shows that Ukrainian SMEs have higher level of financial leverage and risk compared with large enterprises. Structure of equity and debt financing was analyzed. It was determined that small and medium enterprises have a higher proportion of authorized capital in the structure of financial resources due to the lower possibility of attracting debt financing. The high level of retained losses of Ukrainian small and medium enterprises demonstrates the failure to finance their activities from internal sources, as well as a higher probability of bankruptcy. The author analyzed the debt structure of Ukrainian firms and revealed a significant prevalence of short-term debt in the debt structure of enterprises of all sizes due to intensive usage of trade credit. At the same time, it was found that a high level of financial leverage of European SMEs was mainly caused by intensive usage of bank lending, but not accounts payable. It was identified that the capital structure of SMEs in Italy, Portugal and Slovakia are similar to Ukrainian enterprises.

Abstract: Through efficient management of working capital components (cash, accounts receivable, inventory, and accounts payable), companies can increase the value of the company The purpose of this study is to determine the impact of working capital components turnover period towards the price to book value ( PBV ) This study uses 42 samples from 14 companies within three periods The variables of this study is the PBV as the dependent variable and as the independent variables are cash turnover period , accounts receivable turnover period , inventory turnover period and accounts payable turnover period To analyze the phenomena, the multiple linear regression is used to examine the effect of independent variables on the dependent variable The results of the study indicate that the turnover period of cash, accounts receivable and accounts payable have significant effect to PBV, while inventory turnover period does not have significant effect to PBV Key Words : Price to book value (PBV), cash turnover period , account s receivable turnover period , inventory turnover period , account s payable turnover period

Abstract: The research aimed to compare the calculation method of income tax using methods of “pembukuan” and “pencatatan” based on the income tax law (UU PPh) No. 36 year 2008, as well as the calculation method according to the government regulation (PP) No. 46 year 2013, regarding the trade sector of MSMEs. The research data was obtained from questionnaires and interviews directly sent to the owners of the trade sector MSMEs in Kecamatan Tengaran. The sampling method of this research is snowball sampling technique. The tax payable that have been calculated by the respondents were compared to respondents’ nature of the business, commodity type, and business size. The result of this study showed that the tax calculation based on government regulation (PP) No. 46 year 2013 was the method that lead to the most efficient tax payable for the trading business for both retail and distributor for clothing, vegetables and daily needs trading business; and also for small scale trading business. However for micro scale trading businesses, the method of “Pencatatan” was the most efficient method for these respondents group. The research concluded that there was no single method providing results as the most efficient tax payable for all group of respondents. Based on this finding, it can be recommended to the regulator to make the income tax calculation method is as an option instead of rigid regulation, as the background of the regulation is the simplicity to the tax payer (particularly on Government Regulation (PP) No 46 year2013) and in order to achieve the principle of taxation, namely the principle of economic efficiency.

Abstract: The purpose of this study is to examine the relationship between liquidity and profitability of firms at hotels and travels sector in Sri Lanka. Cash conversion cycle (CCC) and its properties namely accounts receivable outstanding days (AROD), accounts payable outstanding days (APOD) and inventory outstanding days (IOD) have been used to explain liquidity management. Profitability is measured through return on asset (ROA), return on equity (ROE), gross profit margin (GPM) and net profit margin (NPM). Analyzing a sample of 26 randomly drawn companies listed in Colombo Stock Exchange (CSE) in hotels and travels sector over three years from 2011 to 2013, the study finds that CCC is positively and significantly related to the profitability. Regression models with AROD, APOD and IOD as predicting variables instead of CCC better explain nearly all profitability measures. This effect of disaggregation is more sensitive when the profitability is measured in terms of net profit margin. Hotels and travels companies can increase profitability by allowing more credit outstanding days and having lower inventory conversion period. Accounts payable outstanding days are found to be insignificantly related to profitability. The findings reveal the effects of aggregation and de-aggregation of CCC in predicting profitability of firms in hotels and travels sector. The study also informs the hoteliers and travels firms about how different components of CCC are to be managed for increased profitability. This investigation is also significant as prior literature on liquidity and profitability nexus in hotels and travels sector is extremely limited. Findings obtained here are useful for hoteliers and policy makers to ensure efficient working capital management at hotel sector in Sri Lanka. Profitability of hotel sector firms in Sri Lanka is investigated in this paper with aggregated and de-aggregated models of cash conversion cycle. Keywords: Liquidity, Profitability of Hotel Companies, Sri Lanka, Cash Conversion Cycle

Abstract: The necessity of analytical support of managing enterprise accounts payable is substantiated, since the development of the market relations enhances the responsibility and autonomy of the enterprises in making and approving managerial decisions after ensuring the effectiveness of payments to creditors. The increase or decrease in accounts payable lead to changes in the financial position of the enterprise. Basic information needs of management regarding debts are determined. It is noted that the effectiveness of debt management depends greatly on the quality of its information support, which, in its turn, is based primarily on the analysis of the available information base concerning enterprise’s debt. The methods of debt analysis aimed at information management, namely the total amount of accounts payable, its dynamics; content of accounts payable by certain types, terms of formation; quality of accounts payable, which is one of the indicators of the credit rate and business image of the enterprise; ratio of receivables and payables of the enterprise and indicators of their circulating capacity are studied. The best state is an equality of the specified amounts of debts. Suggestions for the improvement of analytical support of the enterprise’s accounts payable are made.

Abstract: When rights and obligations are not recognized as assets and liabilities on a government’s balance sheet, the government’s deficit can be reduced by selling off-balance-sheet assets or incurring off-balance-sheet liabilities. This paper examines how much progress has been made in recognizing assets and liabilities and thus dispelling the fiscal illusions that such transactions create. Looking at the accounts, government-finance statistics, and long-term fiscal projections produced in 28 advanced economies in the period since 2003, it finds good progress in the recognition of some assets and liabilities, such as accounts payable and simple financial assets, but much less in others, such as civil-service pensions.

Abstract: In the late 1990s, the OECD increasingly took formal notice of a phenomenon occurring in select jurisdictions around the world that was causing serious harm to fiscal authorities (of members and non-members alike) and impeding the organization’s aims to advance global economic growth and development. This phenomenon or problem manifested itself in places where financial institutions from Europe to the Caribbean could offer bank accounts on which little or no taxes were payable by the account holders. At the heart of this problem were the jurisdictions’ strict secrecy laws that forbade, including under threat of criminal penalty, the disclosure of the account holders’ identities. This combination of low taxes and bank secrecy offered citizens and residents of OECD member countries a unique investment service that their home country could not provide (or compete with) — a place to grow their wealth and hide both assets and income from tax authorities. These “tropical investment conditions” had serious global financial, economic, and political repercussions that the OECD recognized and began to take aim at. As explained in this chapter, the cannon that the OECD constructed in 2002 to destroy tax havens’ bank secrecy laws was a single-purpose bilateral treaty known as the Agreement on Exchange of Information on Tax Matters. Automatic exchange of information (EOI) was not yet the primary focus of the OECD during the period 1996 to 2013, and is discussed in Chapter 8.