Wednesday, July 16, 2008

International News - July 16

** Also see for a permanent list of past story summaries; and Offshore Watch for more stories. **
Tax havens and the financial crisis
July 15 (TJN) - In a few years, we shall look back at this time as one that redefined the landscape of the US financial system and, by association, the workings of global capital markets. What roles have tax havens played in this gigantic, unfolding global mess? Some important recent pointers can be found here. But we will also be turning to this in the next edition of Tax Justice Focus, due out in the next few days.

Research workshop papers
July 10 (TJN) - The Association for Accountancy and Business Affairs, which hosts the Offshore Watch site, held a most successful conference at Essex University in the UK on July 3-4, in partnership with the Tax Justice Network and the Centre for Global Accountability. The papers are available here.

Nigeria's Blood Oil
July 9 (TJN) - "We have to put in place a tracking system. This is not a new idea. In 2003, Shell proposed the certification of oil exports based on chemical fingerprinting to prevent stolen oil being sold on the open market. Companies operating in Nigeria have the technology to trace oil to individual flow stations.

July 8 (TJN) – On a review of a book by the award-winning journalist Misha Glenny. “He ends with a call for action. The task, which no government wants to confront, is to regulate the global markets and above all the financial markets. National governments (including the British) which issue sanctimonious statements about global crime must start by closing down their offshore banking centres.

Mitchell's miracle in Iceland
July 2 (TJN) - Last August, Dan Mitchell of the Cato Institute and the Center for Freedom and Prosperity Foundation issued a press release about the virtues of Iceland's low-tax, flat-tax economic model. But is Iceland really doing as well as espoused?

Tax Haven Banks and U. S. Tax Compliance
July (US Senate) - The Permanent Subcommittee on Investigations has scheduled a hearing on July 17 to examine how financial institutions in offshore tax havens, including Liechtenstein and Switzerland, may be facilitating tax evasion and other misconduct by U.S. clients.

A national disgrace, a global menace, and a pre-democratic anachronism
July 15 (Guardian) - Britain's libel laws are a gift to the censorious and powerful. It's better to be caught mugging than to be caught speaking freely.

I.R.S. Aims to Give Teeth to a Program Meant to Counter Offshore Tax Avoidance
July 15 (NYT) The Internal Revenue Service plans to tighten the rules for a multibillion-dollar Qualified Intermediary program created to make sure offshore bank customers pay their United States taxes, top tax officials say.

Death of globalisation consensus
July 13 (Project Syndicate) - There was a time when global elites could comfort themselves with the thought that opposition to the world trading regime consisted of violent anarchists, self-serving protectionists, trade unionists, and ignorant, if idealistic youth. They regarded themselves as the true progressives. But that self-assured attitude has all but disappeared.

Shares of Freddie and Fannie plunge as bailout becomes possibleJuly 10 (IHT) - "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole told Bloomberg News.

Brazil's Richest Man Attracts Federal Probe
July 12 (WSJournal ) - Federal police Friday searched the offices of Eike Batista, Brazil's richest man, as part of a probe into government corruption and tax evasion.

Citigroup's $1.1 Trillion of Mysterious Assets Shadows Earnings
July 14 (Bloomberg) -- At an investor presentation in May by Citigroup Inc., nowhere mentioned in the 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books.``The banks will say that it was disclosed. Investors are saying, `Yeah, but it was cryptic. We really didn't know what you were telling us.'''

Time for comrade Paulson to pull the plug on the Fannie and Freddie charade
July 12 (FT)The creation of the Delaware SPV that houses $30 billion worth of the most toxic waste from the Bear Stearns balance sheet (with only $1 billion of JP Morgan money standing between the tax payer and the likely losses on the $29 billion committed by the Fed to fund the SPV on a non-recourse basis) is the clearest example of quasi-fiscal obfuscation I have come across in an advanced industrial country.

International Expansion: US hedge funds head to Asia
to include “This dispels the theory that hedge funds are opting out of London because of changes in tax treatment.

Hedge fund managers throw weight behind Obama
Jul 11 (Reuters) - Hedge fund managers are famous for betting against conventional wisdom, and this year many are doing just that by backing Democrat Barack Obama's White House bid and defying Wall Street's usual embrace of Republicans.

IMF Executive Board Integrates the Offshore Financial Center Assessment Program with the FSAP
Jul 9 (IMF) - In a bid to facilitate a more uniform and risk-based approach to financial sector surveillance and improve coordination of IMF analysis across jurisdictions, provide for a better allocation of Fund resources, and eliminate the need to maintain a potentially discriminatory list of OFC jurisdictions.

Natural Resource Endowments, Governance, and the Domestic Revenue Effort: Evidence from a Panel of Countries
July 1 (IMF) - Countries with large natural resource revenues typically raise less domestic taxation. Our results indicate that the offset between hydrocarbon revenues and revenues from other domestic sources is about 20 percent
Working Paper No. 08/168: The Distributional Impact of Fiscal Policy in Honduras
July 1 (IMF) - This paper uses household survey data to estimate the incidence of tax and spending programs in Honduras.

Liechtenstein wird weich and Angriff auf Vaduz
These two stories suggest that: 1) EU allows Liechtenstein to take part in Schengen in exchange for legal assistance not only in tax fraud, but also tax evasion ONLY with indirect taxes (tariffs, VAT); regarding income tax the text is more ambiguous stating that legal assistance not only in fraud, but also in 'similar offenses'. 2) german government is working on an anti-Liechtenstein-Law. 3) Liechtenstein appears to be willing to water down bilaterally banking secrecy and tax cooperation, in exchange for a DTT with Germany. In German: try

Iran bank's UK unit loses sanctions challenge
July 9 (Reuters) - A London-based unit of Iran's largest bank, Bank Melli, failed in a High Court challenge on Wednesday against an asset freeze imposed by the European Union.

‘Outrageous’ tax avoidance by PFIs must stop, says MP
Jul 8 (WalesOnline) – A Welsh MP Nia Griffith, the Labour MP for Llanelli, said it was “outrageous” that some companies given contracts under the Private Finance Initiative were registered abroad in order to reduce their tax bills, and will bid to change the law today to force firms that build schools, roads and hospitals to pay tax in the UK. (also see here )

Hedge funds invest in Hill allies
July 8 (Politico) - The hedge fund industry is upgrading its Washington operation in preparation for a showdown with Congress next year over taxes, regulations and a host of other issues.

New tax fraud allegations against former Cayman Islands banker
July 8 (Cayman Net News) - New allegations of tax fraud in the US have been made against a former Cayman Islands-based banker, John Mathewson. A new investigation began after another former offshore-based private banker allegedly “informed on Mathewson to the IRS and made a claim under the tax agency’s Informant Reward Program for 10 percent of any funds that are recovered.

Transfer pricing holds clues to international money laundering, terrorist financing, and more
July (Florida International University) – John Zdanowicz, professor and Florida International Bankers Association Chair, Department of Finance and Real Estate in the College of Business Administration, has recently launched a web site,, which enables interested parties to check prices of goods and determine if they are out of line.

Only 1% of Taxpayers Would Be Affected by Obama's Proposal to Increase the Social Security Payroll Tax for the Rich

July 7 (CTJ) - Presidential candidate Senator Barack Obama has proposed increasing the Social Security payroll tax on wealthy Americans to enhance the program's solvency for years to come. While several commentators and politicians have suggested that this would burden the middle-class, only around 1 percent of taxpayers would actually be affected by this proposal.

Jamaica signs double taxation treaty with Spain - Agreement to take island off 'tax haven' list
July 9 (Jamaica Gleaner) - Jamaica has signed a double-taxation treaty with the government of Spain, becoming the first Caribbean English-speaking country to so engage the European nation. But more important, once ratified, it will take Jamaica off Spain's list of 'tax havens' and clear the way for Spanish investors here to pay income tax in one jurisdiction instead of two.

Germany signs Jersey tax deal
Jul 7 (Accountancy Age) - Germany has made an agreement with Jersey for the exchange of information for tax purposes.

Swiss widen probe into BAE arms dealJuly 10 (AP) — Swiss authorities have widened a corruption investigation linked to arms deals by the British company BAE Systems PLC, prosecutors said.

€2bn duty loophole to remain for developers
July 7 (Herald) - A tax loophole allowing wealthy Irish developers to escape stamp duty will not be closed despite the super-rich benefiting by €2bn a year and with exchequer figures showing a shortfall of €1.5bn. Advice to the Government has been to allow the loophole to stay because of a downturn in the construction sector.

Tanzania: No Tax Holidays, Report Says
July 9 (Daily News) - The President's Committee on the Mining Sector has advised the government to stop throwing away the country's riches in lavish tax exemptions, saying the investors don't need any such coaxing. Instead, the Committee recommends increased royalties based on gross rather net-back values, which often suffer from under-declarations and other ways employed to evade tax.

Kenya: MPs Willing to Pay Taxes, Says Kalonzo
July 14 (AllAfrica) - Vice President Kalonzo Musyoka has re-ignited the debate of taxing allowances of members of Parliament, saying the MPs were willing to pay taxes. "All of us in Parliament are willing to be taxpayers," Mr Musyoka said yesterday. "We have to lead from the front.”
City watchdog rejects oil markets loophole
July 15 (FT) - Accusations that Britain’s oil markets operate under a “London loophole” of lax regulation were dismissed on Tuesday by the City watchdog.


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