Wednesday, December 29, 2010

Offshore and the struggle for sovereignty

Some people claim that tax policy is a central plank of national sovereignty, for which reason they resist attempts to harmonise corporate tax bases. They delude themselves. Governments have a degree of sovereignty in some areas, including taxing land, labour (up to a point) and consumption, but not when it comes to taxing multinational corporations. As William Brittain-Catlin points out in this Guardian article, banks and large corporations shifted their tax affairs offshore decades ago and there has been little or no political will to tackle this massive global problem.

So what is to be done? Brittain-Catlin recommends that governments of progressive nations should refuse to truck with corporations having offshore operations, applying strict due diligence to ensure compliance:

Onshore you're in, offshore you're out, simple as that. And let us subject every company and individual to the onshore test: a rigorous due diligence investigation to make sure that there is absolutely no offshore tax haven link to any company or person that wishes to use the onshore nation as place to do business in. Those that pass the onshore test will then be welcomed to join in and establish the new order.


Some French regional authorities have already taken steps in this direction. We would like to see local authorities in other countries take similar steps, if only to raise the profile of this extraordinary threat to democracy and market economies.

But TJN has a more ambitious agenda. We see the tax haven threat as systemic, which means we must pressure politicians to adopt systemic solutions at a global level. Thus paradoxically, we see international cooperation on tax matters as the only effective means of reasserting democratic national sovereignty on taxing multinational companies and the rootless parasitical elites who free-ride on the backs of those who live, work and pay tax onshore.

So what do we propose? Well for starters we propose automatic exchange of tax information as the effective solution to cross-border tax evasion. In the same vein, we propose a radical shift away from the current system of taxing multinational corporations to a system based on a formula approach to dividing profits between the countries where they are actually generated.

We also propose global rules for transparency of corporate ownership to prevent dodgy people from hiding behind secret offshore companies. And we propose an international standard for financial reporting on a country-by-country basis requiring multinational corporations to reveal appropriate accounting information for their subsidiaries in every country where they operate.

These proposals might not sound very exciting, but cumulatively they would roll back all those sneaky little dodges and rigged rules that have enabled the exploitation of tax havens for so many decades. These are the measures we demand of our politicians, and we call on ordinary people in all countries to rally to support them.

Tackling the tax haven issue must become a central feature of global economic reform. In 2011 the G-20 falls under the presidency of Nicolas Sarkozy of France. We must join our French colleagues in insisting that tax havens feature prominently on their agenda.

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Tax and corporate integrity: an accreditation scheme

We have been contacted by businesses wanting to know whether TJN provides accreditations to organisations who pay their tax at the correct rate, at the right time, and in the appropriate amount. The short answer is that while we don't do this ourselves, we know someone who does. For several years we have cooperated with London-based SEE Companies on pioneering work with companies who are genuinely committed to social, environmental and ethical practices. You'll find the tax related question in the Donations and Payments section.

We think this work is an important part of the process of developing understandings of corporate integrity. Our director, John Christensen, is a special adviser to SEE Companies, and we would strongly recommend that any business wanting to avoid the social opprobrium now being heaped on Vodafone, Boots, HSBC and Arcadia's Philip Green (click here to see what we're referring to).

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A one trillion dollar Christmas ask

Bloomberg is reporting that US business executives visited the White House mid-December to ask for a tax break (yes, another tax break) to encourage them to repatriate over one trillion of offshore earnings sitting in tax havens.

In normal circumstances these earnings would be subjected to a 35 percent tax rate when they are repatriated to the US, but as Jesse Drucker explains in the article, companies devise all sorts of strategies, including the Killer B and the Deadly D to avoid paying the tax.

The lawyers are using schemes so complex that, as one lawyer put it,

"One diagram resembled a schematic from the Manhattan Project."

It is a game of cat and mouse: countries put up defences against offshore abuse, and the lawyers set to work defeating the will of elected legislatures.

“Some of the best minds in the country are spent all day, every day, wheedling nickels and dimes out of the tax system,” said H. David Rosenbloom, an attorney at Caplin & Drysdale in Washington, D.C., and director of the international tax program at New York University’s school of law.

Joe Slemrod, economics professor at the University of Michigan’s school of business and former senior tax economist for President Reagan’s Council of Economic Advisers, says the business lobbyists' arguments that repatriating over a trillion dollars of offshore cash would promote investment "holds no water at all": U.S. companies are already sitting on a record pile of cash -- $1.9 trillion in liquid assets, according to Federal Reserve data. They ain't investing - and so how will letting them bring that money back make a difference? It will just mean higher executive bonuses and more private jets - and fewer public services

Read the full article here. It's an important one.

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Friday, December 24, 2010

Tax Justice Network - a Guide for New Members


This guide is intended to help new and potential members of Tax Justice Network (TJN). It takes the form of mostly frequently asked questions, and the answers link through to sources which will hopefully provide sufficient details for most purposes.

What core themes does TJN work on?
TJN is an open and democratic network dedicated to promoting tax justice. The core themes of our work are clearly explained on this page of our website. Our mission statement can be downloaded in a wide variety of languages here.

Who can be a member of TJN?
Membership of TJN is open to any organisation or person who shares the concerns and supports the stated aims of our Declaration. TJN does not allow political parties to become members, and Article 5 of our Constitution allows for the exclusion of organisations and individuals who are known to be racist or in any way hostile to the ethos of democratic pluralism.

Who are the existing members of TJN?
Membership of TJN can be at national level through our national chapters, or at the international level. Members of TJN at the international level are listed on this page of our website.

What rights does TJN membership carry?
Membership brings voting rights on TJN's general assembly - called the Tax Justice Council. The Council meets every two years and decides on all matters relating to international strategy. It also elects our global Board of Directors. Voting at the Council works on the basis of one member, one vote.

What responsibilities do members have?
At the international level TJN operates through a Belgium-registered international not-for-profit association. Membership responsibilities are laid out in the Constitution of that association.

How do prospective members apply to TJN?
An application form for international membership can be downloaded here. Once completed, the form should be sent to TJN's International Secretariat at info(at)taxjustice.net.
Membership applications are considered at the monthly meetings of TJN's global Board of Directors. Once a membership application has been agreed by the Board it requires ratification by the Tax Justice Council. Prospective members wanting advice about joining our international network should contact our International Secretariat at the following email address: info(at)taxjustice.net.

How much does membership cost?
Membership subscription fee rates for organisations vary according to their size and location. We recommend minimum annual rates on our application form, and also offer the opportunity for members to contribute higher fees if they can afford to do so.
Individual member fee rates vary according to location.

How does TJN keep in contact with its members?
In almost all instances TJN communicates via digital media, including our international, regional and national websites, our blogs, twitter, RSS feeds, our newsletter [Tax Justice Focus], and through a range of email bounce services. Members can choose to be added to our research email bounce system (Intertax); our email bounce service for people and organisations engaged in campaign and advocacy work (the 'activist' list); regional email bounce services (e.g. AfriTax); and non-English language email bounce services. The International Secretariat helps members select whichever services suit their needs.

What is the role of the Tax Justice Council?
The Tax Justice Council, which meets once every two years, is responsible for setting global strategic priorities, agreeing our budgets, electing the Directors of the global Board, appointing regional steering committees, and other responsibilities as laid out in Article 7.1 of our Constitution.

What is the role of the global Board of Directors?
The Board of Directors is responsible for implementing the decisions of the Tax Justice Council. It is assisted in this task by the International Secretariat, which is accountable to the Board. The composition and powers of the Board are laid out in Articles 10 to 18 of the Constitution.

What is the role of TJN's International Secretariat?
The International Secretariat acts on the instruction of the global Board of Directors. In addition to providing secretariat facilities to the Board, it also acts as a communication hub for the network; coordinates research, campaign and advocacy activity; organises TJN's representation at international fora; publishes regular blogs and newsletters; and organises research workshops and conferences. The priority tasks of the International Secretariat are agreed every year by the global Board and are published in the Director's Report, a recent copy of which is available here.

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Luxembourg: an economic conundrum

Is Luxembourg the most successful economy in the world? CIA world rankings place the Grand Duchy third on the list, but we should set Liechtenstein (number one) and Qatar (two) aside on the grounds that the former is dodgy beyond belief and the latter is a rentier state built on exploitation of hydrocarbon reserves and migrant labour.

So wherein lies Luxembourg's success? Not in steel, which has long since diminished in importance, nor in agriculture, which accounts for a mere 0.4 percent of GDP. According to national income stats, services (86 percent of GDP) provide the powerhouse to the domestic economy, with offshore financial services being the principal motor driving downstream activity in construction, retailing and hospitality services.

Now the IMF has published a fascinating new study of global foreign direct investment flows which reveals, among other things, that tiny Luxembourg has attracted inwards investment of US$1.8 trillion (i.e. 1.8 million million dollars) while at the same time is responsible for outward direct investment of, err, US$1.8 trillion. On this basis, Luxembourg has attracted over three and a half million dollars of investment for each and every of its 497,538 inhabitants, and invested an almost identical sum overseas.

It doesn't take an advanced degree in economics to come to the conclusion that while the IMF cross-border investment data might be accurate, it highlights a fascinating but unexplained story about the role of secrecy jurisdictions in global investment flows. Does Luxembourg add value to the process, or is it merely used as a conduit for tax cheating? Most people can guess the answer to that one: for the record, Luxembourg scores a very weak 13 percent on our Financial Secrecy Index and comes second behind the USA on our ranking of secrecy jurisdictions.

Hat tip to Peter Chowla at Bretton Woods Project.

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Jersey: the UK has the power to intervene on tax matters

The Jersey Evening Post is carrying a letter from Pierre Horsfall concerning the failed zero-ten policy. The gist of the letter is that since the island is not part of the European Union (its relation to the Union is defined in a separate protocol to the UK's treaty of accession) it does not have direct relations to the EU and that neither the EU nor the UK have the power to intervene in the island's fiscal policies.

We believe Horsfall is wrong. The EU Code of Conduct process was initiated to iron out harmful tax practices that would distort Europe's markets. For obvious reasons, Brussels sought to ensure that tax havens on the European periphery would not provide boltholes to circumvent this process. The UK agreed this position. The question is: does the UK have the power to intervene in Jersey's fiscal policy making? The answer is yes. Despite a long-standing tradition of non-intervention, the UK is fully responsible under international law for the good governance of the British Crown Dependencies. This extends to matters relating to how the latter's fiscal policies impact on third party countries. Brussels has determined, rightly in our opinion, that the details of the zero-ten policy were designed for the purpose of creating a ring-fence mechanism that differentiated between local resident shareholders and non-resident shareholders. This contravened the Code of Conduct, and has consequently been deemed unacceptable.

The EU is right to have struck down the detail of the zero-ten policy, and is right to require the UK to enforce the good governance of its dependent territories. Horsfall (who was President of the island's Finance & Economics Committee during the period when many tax haven measures were implemented) and his successors are deluding themselves - and more importantly their fellow islanders - by trying to pretend that the UK has no power to impose on the island's tax policies. They have such powers and are right to use them to counter the abusive aspects of the zero-ten policy. The shame lies in the fact that Jersey's rulers pushed the abuse to the point that the UK government has had no choice other than to intervene in matters where historically they have preferred to respect a high degree of local autonomy.

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Thursday, December 23, 2010

What can we do about Britain's tax cheating culture?

We have received a number of emails from supporters of the UK UnCut movement asking what can be done to curtail tax cheating in Britain. We are happy to contribute the following ideas to the melting pot.

Britain has a particular problem with tax cheating. London lies at the centre of a global tax haven empire and tax cheating has become the norm at boardroom level and among rich people. It is not helpful that so many politicians are themselves users of tax havens. This has meant that despite years of promises of action, ordinary people in Britain have suffered a generally deteriorating situation as the business community has become more aggressive in its tax avoidance and British banks have become more devious in supporting tax cheats.

But that doesn't prevent ordinary people from pushing ideas for changes: not a single measure, but several measures that will cumulatively roll back the culture of tax cheating that is robbing us of our public services and contributing to Britain's extraordinary inequality.

The first measure we would mention is a General Anti-Avoidance Principle, which would clearly signal, above all to the courts, that avoidance, while legal, is cheating and not acceptable. This will tip the balance away from the whiners who moan that the UK UnCut protesters don't understand the difference between evasion and avoidance. The South African finance minister recently said that we have allowed avoidance to become too respectable: this is a lesson Britain's tax cheating community needs to learn.

Second, TJN is the main mover behind a global campaign for an international financial standard on country-by-country reporting. British businesses are trying to water this standard down to a voluntary rather than mandatory standard, which will make the standard meaningless. The UK government should commit itself to supporting a mandatory standard.

Third, we want to see the European Union's savings tax directive (STD) strengthened to, among other things, include offshore trusts: trusts are a favourite tool of the tax cheating industry. Behind the scenes British officials are blocking moves in this direction. A strengthened STD would provide the effective model for tackling tax evasion.

Fourth, Britain's non-domicile rule is an appalling example of Britain's cynical support for tax havenry. It has attracted many dubious characters to these shores, and their contribution to the real economy is zilch (and might possibly be destructive since these people typically invest in property and similar rentier investments which inflate prices without adding value). The non-dom rule should be abolished: period.

Fifth, Britain should require all of its offshore secrecy jurisdictions to engage fully with automatic information exchange on a multilateral basis, starting with full cooperation with the EU STD, and should command its dependent territories to cease forthwith from lobbying to undermine that directive.

Sixth, Britain should require all of its offshore secrecy jurisdictions to place offshore company ownership information on public record, and no tricksy use of nominee directors and shareholders - we want the real identity of the warm-blooded person who ultimately owns the company. Ditto for disclosure of who benefits from offshore trusts.

Seven, the government should stop cutting back on staff at HM Revenue & Customs. The revenue service is already unfit for purpose, and the further cutbacks proposed for 2011 will make the situation worse.

Eighth, the British government should put a halt to the British Channel Island 'fulfilment industry', a pernicious example of how special tax treatments distort markets, reduce consumer choice, and lead to economic idiocies. We cannot understand why this little bit of trickery, which loses British taxpayers hundreds of millions of pounds every year, has been allowed to persist. But a nagging doubt at the back of our minds suggests that big business funding of political parties might be at least part of the reason.

Killing the tax cheating culture in Britain's boardrooms will not be achieved with a single well-aimed blow: it will take a number of carefully targeted slices. Cumulatively, the steps outlined above will be a major step in the right direction. It needs to go further, however.

If the UK government seriously wants to tackle global poverty and inequality, it should stop undermining the UN Tax Committee and push for multilateral and effective steps to tackle tax evasion and corporate tax cheating.

Sadly, there is little evidence of any political will within the Conservative-led coalition government to do anything other than window-dressing: hence the need for ordinary people to take to the streets and target the most egregious offenders.

But be aware, too, that we will be announcing something else, very big, within the next two weeks. Watch this space.

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Wednesday, December 22, 2010

UK UnCut, we salute you

After so many years of mindless consumerism and pandering to bling, we take pride in the dignity and intelligence of the current protests, and hope to see this phenomenon build in 2011. We joined this event on Oxford Street and words can't describe how much more fun this was than Christmas shopping.

Enjoy . . .


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Links - Dec 22

This blogger is now off for the Christmas Holiday. Posting will be quite thin during the festive season. Merry Christmas!

WikiLeaks cables: US suspected Allen Stanford long before ECB deal - Guardian
Shows U.S. diplomatic staff in a flattering light. But why didn’t anyone do anything earlier?

Tax dodging by multinationals: Zug tricks Ghana - Alliance Sud
A nice summary by a Swiss NGO of what we’ve already reported, showing that there is a lot of opposition within Switzerland to its financiers' offshore tricks.


Deutsche Punished On Bogus Shelters - WSJ
Deutsche Bank AG agreed Tuesday to pay $553.6 million and admitted criminal wrongdoing to settle a long-running probe over fraudulent tax shelters that allowed clients to avoid paying billions of dollars in U.S. taxes.

HSBC Asks Australian Government To Abolish Tax Measures - Tax News
The Report says: “Under current interest withholding tax arrangements, authorized deposit taking institutions in Australia are required to pay a 10% interest withholding tax on the interest they pay for funds borrowed from their parent or affiliated banks offshore. Similarly, foreign bank branches in Australia are required to pay 5% interest withholding tax on the interest they pay to their parent company. HSBC wants to stop all this, and more, and make Australia more like a tax haven.

What Countries Get For Their High Taxes -
SFGate
Contrary to its famous advertising slogan, Disneyland may not be the "happiest place on Earth." According to studies conducted through the Blue Zones Project, that distinction belongs to the tiny country of Denmark. How is this possible when the Danes pay the highest taxes in the world? A trawl through various countries.

Supertaxman can’t avoid the leakers - FT
On disaffected taxmen who have been leaking stories to the media, particularly to the satirical magazine Private Eye. Comes down in favour of the leakers.

The Coming Iraqi Business Boom – WSJ
The WSJ reveals it hasn’t a clue about Adam Smith or taxing rents.

Does anyone in America believe in the rule of law?Salon
ON a casual approach to the law, on the left and on the right. On the right: on libertarians and conservatives who defend the offshore tax havens that defraud federal, state and local governments of tens of billions of dollars in tax revenue each way. The "dark matter" of the "shadow banking system" created by these complex law avoidance schemes contributed to the global financial crisis and today's prolonged recession.

Shadow banking – in pictures. Federal Reserve Bank of New York
The picture on the first full page shows the monster in pictures; the table a few pages later shows how this has grown bigger than the traditional banking system. For shadow bank wonks. Hat Tip: Andreas Missbach, Berne Declaration.

Senators Drop Tax Item Affecting Foreign Companies - WSJ
Foreign-based multinational corporations won a victory in the U.S. Congress as senators agreed to drop a provision targeting some cross-border transactions from legislation that could pass before year’s end.

Ernst & Young 'sat by silently' as Lehman Brothers tried to hide financial troubles, lawsuit allegesTelegraph
More ghastly revelations about accountants. Also see Tax Research on this, here (And see Accounting Majors Score Lowest in Verbal and Writing Among All Grad Students - Taxprof - with a Monty Python sketch on accountants thrown in.

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The FT supports massive corporate tax reform

The Financial Times is running an editorial entitled a taxing world which is mostly very good.

First, though, after a brief exploration of the UK Uncut phenomenon ("the group has a point") there is something we'd disagree with. The FT says this:
"Tax avoidance is legal and legitimate. Unlike tax evasion, it is not obviously immoral to exploit the tax code to pay the least that is legally required."
It is up to government to plug the leaks, the FT says. No. For starters, as we constantly argue, what is legal is not necessarily what is legitimate - slavery was legal once. And also remember the "golden rule" - who has the gold, makes the rules. Corporations punch loopholes into the tax code so that they can get out of paying tax. Other corporations then enter those holes. We have to hold these corporations' feet to the fire, as well as keeping government on its toes.

So far, so familiar. But then the FT gets onto something interesting. It first notes that the European Commission on Wednesday closes a commission looking at whether to go for country-by-country reporting - a concept pioneered by TJN's Senior Adviser Richard Murphy. The FT seems supportive: publication of this data is unlikely to prove too burdensome, it reckons (as does the World Bank, among many others). So far so good. But now get this.
Civil society groups think such reporting will unveil tax avoidance undermining developing countries’ tax revenues. In fact, the greater impact may be to expose the scandalous tax treatment of multinationals in the rich world.
Well, we think that the first point is probably the big one. But it's related to the second. And what exactly do they mean by "scandalous tax treatment?"

Multinational corporate taxation is largely a voluntary gesture these days, the FT notes, because of multinationals' ability to shift profits around the world's tax havens so that they realise their costs in the high-tax nations, and their profits where taxes are lowest. This harms governments at both ends of the cross-border investment: if, say, a U.S. corporation invests in Burkina Faso, then this so-called transfer pricing manipulation stiffs both Uncle Sam and the Burkinabé government. This is one of the relatively rare agendas where citizens of rich and poor countries can fight in a shared common cause.

And then the FT says that the EU will soon propose what is known by the horrible name of formulary apportionment, by which states divide up multinationals’ tax base according a formula based on real economic activity. Under such a system, if you have a one-man booking office in Luxembourg, then only a miniscule part of your income will be "apportioned" there under the formula to take advantage of Luxembourg's zero tax exemptions. The rest would get taxed at proper rates, where the real stuff happens.
"The prize is worth the effort – even if some states go ahead on their own."
This is exactly, exactly, as we have been arguing. It would have a massive impact. A large part of the tax haven business - not to mention the political cover that multinational corporations provide for their continued existence - would disappear. We think the editoral writer should now, as a precautionary measure, don a hard hat.

At a meeting on December 8th in Brussels, TJN's John Christensen outlined this proposal to an assembled grouping from non-governmental and official bodies, and one participant raised his hand up to complain, along the lines of:
"we have only just started getting up to speed on all the other stuff you have been pushing. Now we have to get our heads around this one!"
Well, we are sorry if it's a lot to take on board. It's a lot for us too. But this problem is complicated - there's no getting around it - and we have to push forwards. This agenda is a big one.

Interestingly, at that same meeting Christensen had a long conversation with an FT editorial writer - about exactly, exactly this. Coincidence? We like to think not.

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Tuesday, December 21, 2010

Links - Dec 21

Some links. Apologies for thin posting today.

When zombies win - Krugman
“Ireland,” declared George Osborne in 2006, “stands as a shining example of the art of the possible in long-term economic policymaking.” Whoops. It’s one thing to make deals to advance your goals; it’s another to open the door to zombie ideas. When you do that, the zombies end up eating your brain — and quite possibly your economy too.

MPs banned from US over Charterhouse Daily Nation (Kenya)
The US has slapped a blanket ban on up to 11 MPs who are members of the House Finance, Trade and Planning Committee which tabled a report, passed in parliament, that cleared the scandal-plagued Charterhouse Bank and called for its re-opening. Now there is a motion to expel the U.S. ambassador.

Clegg wants full tax transparency - IoM Today
Asked whether he viewed the Isle of Man as a tax haven, Nick Clegg, leader of the junior party in Britain’s coalition government, rejected the use of such ‘artificial labels’. Coward.

The World Bank’s Slippery Advocacy of Tax Cuts - Progressive Economics
On the World Bank’s doing business rankings. The best scores go to countries with both ultra-low tax rates and streamlined administration.

Rock of wages: online gaming keeps Gibraltar's residents at work - Guardian
Gibraltar's gambler-friendly laws and tax regimes are turning it into a virtual Las Vegas. while British-based web operations paid a 15% gross profits tax and a 10% racing industry levy, offshore operators paid as little as 1.5% in tax . Under EU legal challenge, taxes will now rise, but “Nobody will leave.” An estimated 200,000 Spaniards bet €575m online in 2009. Unless they are honest enough to declare them, they pay no taxes on their winnings. Straightforward criminal abuse, courtesy of a UK Overseas Territory.

Proposal to Mauritius for Clampdown on Fund Transfers Outlook India
Concerned over high volume of black money routing to the country as investment, New Delhi has approached the Mauritius government to curb such fund transfer. These officials will have to be incorruptible, and will need rocks in their head the size of Gibraltar if they are to resist the repression, lures, pressures and blandishments they will face on a daily basis.

UK tax authorities morale at rock bottom - PCS
Years of cuts and under-resourcing at HM Revenue and Customs have led to rock-bottom morale, with staff saying they have little confidence in their senior managers. In the latest departmental staff survey (pdf), only 11% of respondents expressed any positive confidence in senior managers’ decisions, with just 12% believing HMRC is managed well and only 15% believing the senior management team has a clear vision for the future.
Hardly surprising, in light of all the sweetheart deals, attacks and cutbacks.

$2tn debt crisis threatens to bring down 100 US cities - Guardian
“We spent money we didn't have. We borrowed money just crazily. The credit card's maxed out, and it's over” Yikes. This could ignite tax debates.

India Has Created 10 Overseas Income Tax Units - Taxnews
The Indian Government has created 10 overseas income tax units and two of these, in Mauritius and Singapore, have already become operational. These offices will be used for the exchange of information, speeding up of the resolution of tax disputes and also assistance in transfer-pricing cases. These folk will have to be iron-willed and uncorruptible, or they will succumb to the lures and pressures.

Ordinance on the Administrative Assistance according to Double Taxation Conventions = Switzerland
The link to the English version of the Swiss ordonnance on international administrative assistance in tax matters. The rules for requests for administrative assistance are substantially more restrictive than OECD Article 26... The ordonnance will soon be transformed into a law project (with public consultation beginning in mid-January)

Germany raises 1.6 bln euros from tax evaders - AFP
German tax authorities recovered 1.6 billion euros this year from citizens who had stashed their cash in secret accounts in Liechtenstein and Switzerland, according to the weekly Der Spiegel.. . thanks to secret banking data from both countries which they had acquired relatively cheaply. Excellent value for money.

Auditors Face Fraud Charge - WSJ
New York Set to Allege Ernst & Young Stood By as Lehman Cooked Its Books. This would mark the first time a major accounting firm was targeted for its role in the financial crisis

Johann Hari: Your right to protest is under threat - Independent
When our politicians complained over the past few decades, in a low, sad tone, that our young people were “too apathetic” and “disengaged”, it was a lie. A great flaring re-engagement of the young has take place this year. With overwhelmingly peaceful tactics, they are demanding policies that are supported by the majority of the British people – and our rulers are trying to truncheon, kettle and intimidate them back into apathy.

Tax avoidance, tax compliance – and tax cheats - Tax Research.
On the differences between tax avoidance and tax compliance

BAE to admit failure in accounts records - FT
Lawyers say the case is likely to embarrass both BAE and former executives by detailing the convoluted and at times murky arrangements through which the company deployed agents to act on its behalf, often paying them through opaque tax havens.


The philosophical significance of UK-Uncut - Open Democracy
ethics and ideology are once more at the forefront of political contest in Britain


Why don't Britain's rich give to charity like wealthy Americans? - Daily Mail
the ­richest third of donors in Britain actually give less to charity, as a proportion of their earnings, than the poorest third. Americans who earn more than £150,000 a year give a staggering eight times as much to charity as do their British counterparts. We in Britain have lost sight of our own history of philanthropy. This week the Mail revealed that several of this country’s biggest companies are moving their headquarters abroad in order to avoid paying tax in Britain.

How corporate tax evasion can be tackled worldwide - FT letter
A treaty should provide for an objective definition of which taxable activity falls within which tax jurisdiction, based on the location of production, sales and management, and render the notion of an “official domicile” redundant. One possible approach to unitary taxation with formulary apportionment - see here for more background.

Lady Green’s dividend was funded by a loan - FT letters
From someone who doesn't understand what constitutes tax avoidance (see here) - but makes an interesting point to counter those who say that dividends were paid out of profits that had already been taxed in the UK.

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Monday, December 20, 2010

Simon Kuper of the FT gets it

Simon Kuper of the Financial Times, a sports journalist with an eclectic background, is one of the newspaper's best writers. He has just written one of the best short articles on tax havens in any newspaper in a very long time. Read it all, if you can get past the subscription wall. Here is a brief taster of some of the goodies:
increasingly, the rich inhabit a low-tax universe segregated from everyone else.
So true.
Monaco "has survived both the recession and demands for transparency just fine. The men are still wrinkly, and the women blonde and armed with tiny dogs."
Just as we have been saying.
"I met a millionaire’s son who had been hauled off for questioning after he was spotted hanging around outside unshaven in jeans."
This is a repressive place. A whole lot more on this broad subject of repressive tax havens, in January.
"states need money from someone, and so the poor pay instead."
Yes, indeed. Absolutely.

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Country by Country reporting - new web page

We now have a new web page dedicated to Country by Country reporting. Over time, we will populate it more thoroughly and it will become an essential historical resource.

This follows our relatively recent new pages on information exchange, on transfer pricing, and on the links between tax havens and the latest financial and economic crisis.


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Sunday, December 19, 2010

Philip Green luxuriates in Barbados while protestors target his shops

Britain's Mail on Sunday newspaper reports that while supporters of UK UnCut protest his tax avoidance via Jersey and Monaco, Philip Green has headed off to Barbados where he is staying in a £16,000 a night villa - yes you read that right, £16,000 a night. Ironically, Green has been appointed by the UK's Conservative-led government to advise on how to impose austerity measures. Protesters point out that Green avoided £285 million tax by routing a dividend payment to his Monaco-based wife.

The Observer reports that UK UnCut activists targeted tax avoiding businesses in 55 towns and cities across Britain yesterday. TJN's director, John Christensen (seen below in his ECONOMIC ADVISER jacket), joined the events at TopShop's flagship store on Oxford Street, where despite strong-arm tactics by security guards (with tacit support from aggressive police) the activists went ahead with an entirely peaceful and good-humoured blockade.

Another article in the same paper outlines how UK UnCut, whose activities have spread like wildfire across Britain, is winning the battle of ideas. While company executives stumble in their efforts to justify tax avoidance, "tax efficiency" and "tax competition", the protesters are winning public support for their central message: the austerity measures are entirely a political choice made by an ideological government that wishes to push forward with cuts to public services. Tackling Britain's £120 billion a year tax gap would more than cover the public sector deficit caused by the banking collapse.

The success of this amazing campaign lies in the links being made between complex tax matters and the lives of ordinary people who will suffer from government imposed cuts. At Vodaphone, links were made between their £6 billion tax deal and the closures of libraries and other public facilities throughout Britain. The protests at TopShop made the link between Green's egregious tax scamming and the proposed cuts to school sports facilities. Activists dressed in football kit called on the government to restore sports funding, which will impact the health of future generations, and Nick Christensen, who joined his father at the protests on Oxford Street, is quoted in the Observer saying: "Teachers and pupils should not be made victims because companies avoid paying their taxes."

This quote hits at the heart of the problem. While the tax avoidance industry seeks cover behind weak arguments about their clients acting legally, the activists counter by pointing out that cheating is not strictly illegal in most circumstances, but that doesn't condone the actions of the cheats, and it sure as heck doesn't promote useful competition. Quite the opposite: cheating harms markets and public interest. The fact that successive British governments have condoned tax cheating for decades speaks volumes about whose interests that actually serve.

While some shoppers on Oxford Street yesterday moaned about the inconvenience of not being able to visit TopShop, others praised the blockade and supported the calls for governments to crack down on tax dodging as a matter of priority. Taking tax justice to Britain's high streets on the busiest weekend in the Christmas period couldn't have been more appropriate: if Christ stood for anything it was justice.

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Saturday, December 18, 2010

Sudan President may have $9 billion with UK bank

Via Wikileaks and Global Witness - this one is a scorcher. US$ 9 billion!
If the cable is correct, this bank would not only be dealing with an indicted war criminal, but "could be in some sense contributing to instability and mistrust in Sudan at the most fragile moment in its history,” warned Palmer.
Lloyds issued the following statement to the Guardian:
"We have absolutely no evidence to suggest there is any connection between Lloyds Banking Group and Mr Bashir. The group's policy is to abide by the legal and regulatory obligations in all jurisdictions in which we operate."
For a more general look at British banks in Africa, take a look at the Nigeria-focused Global Witness report International Thief Thief.

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Friday, December 17, 2010

Big Society Revenue & Customs announces Pay Day for Britain's tax dodgers

UK UNCUT: 50 ANTI-CUTS PROTESTS TO HIT TAX DODGERS ACROSS THE COUNTRY

This Saturday UK Uncut will hold their biggest day of action yet against the coalition's public sector cuts and wide-spread tax avoidance by the wealthiest in society.

Branded, 'pay-day', there will be at least 50 protests by the Big Society Revenue Customs taking place on high streets up and down the country as people expose the arguments behind the austerity cuts as lies. 1

Sir Philip Green and Vodafone are likely to remain the focus of the growing public anger against tax avoidance by multi-national corporations and extremely wealthy individuals, that is estimated to cost the public purse £25billion every single year. 2

In reference to Vodafone and Sir Philip Green, the call-out for action reads: “both have been shaken up by the protests so far, but on December 18th they will face protests on a scale they could not have imagined just a few months ago” 3

Each action has been organised autonomously by local people, often rapidly via Twitter and Facebook. Protests planned for tomorrow include pickets, sit-ins and flashmobs. There will be a disruptive tour of tax dodgers in Brighton and a 'Monaco Grand Prix' around Topshop in Oxford. In London, hundreds of protesters will hit Oxford Street. Divided into two groups, they will stage a 'read in' at Vodafone's flagship store and a 'sports day' inside Topshop's flagship store, to highlight cuts to local libraries and school sports. Philip Green's £285m tax dodge could pay for two years of school sports and Vodafone's tax dodge could pay for every single cut to local governments this year.

Protesters have even designed an iPhone app to help people angry at the cuts to locate their local tax avoider and join their nearest protest. 4

Just two weeks ago 23 protests were held on high streets across the country. On Oxford Street, Topshop’s flagship store was forced to shut-down, and in Brighton protestors super-glued themselves to the window display of Topshop, closing it for the day.

Sir Philip Green owns the fashion empire Arcadia, which spreads across 2,500 UK stores and includes top brands such as Topshop, Miss Selfridge and Dorothy Perkins. 5

Green’s empire Acardia is owned by Taveta Investments Limited – a holding company registered to a small office on the tax-haven island of Jersey.

Sir Philip Green is not however the official owner of Taveta Investments. Instead, the owners are his wife and immediate family, who reside in Monaco.

Monaco is of course famous for its 0% income tax. As a result, when Sir Philip Green – the 9th richest man in the UK with wealth estimated at £4.4bn in 2008 10 – in 2005 made the largest single dividend payout in UK corporate history to his wife of £1.2bn, he avoided paying a reported £285million in tax to the British public purse.

Amid criticism from key MPs, Sir Philip Green was also asked by the coalition government this year to advise them on austerity and cuts within the civil service.

Steven Hall, 31, said “Philip Green is a multi-billionaire tax avoider, and yet is regarded by David Cameron as an appropriate man to advise the government on austerity. His missing millions need to be reclaimed and invested into public services, not into his wife’s bank account.”

The UK uncut movement started in October, when over 30 Vodafone stores were closed by ordinary people who blockaded and picketed the store’s entrances to stop trading 13.

Those protests were sparked after Vodafone reached a ‘settlement’ on a long standing tax dispute with HMRC earlier this year, following the change in government. Some experts believe the deal meant that Vodafone saved up to £6bn in tax. 6

When questioned about what the meaning of the BSRC, Steven said “HMRC is due to lose 13,000 jobs. David Cameron wants ordinary people in their spare time to carry out vital state run services that have been cut, so this is exactly what we’re doing. If they won’t chase down tax avoiders, then we will. 15”

Rebecca Davies, 32, said: “£25bn will be lost to tax avoidance this year, which could pay for virtually all of George Osborne's proposed cuts."

"The argument that only way to cut the public deficit is to cut public services is a lie. The coalition is ideologically smashing a public sector that supports the poorest in society."

Looking ahead to the 18th, she continued, “Ordinary people around Britain will stand up and show that they will not be lied to, and that we will not let these unnecessary cuts happen without a fight.”

ENDS
………………………………………..
For further comment:
UK Uncut: | ukuncut@gmail.com | 07597354939 | 07591992825 |
……………………………………….

Notes to Editor:

1 Details can be seen on the website ukuncut.org.uk

2 Richard Murphy, a long standing and respected campaigner on the issue of tax-avoidance has produced a report stating that 25bn is lost to the public purse by tax avoidance. £13bn through individuals. £12bn through large corporations.
http://www.tuc.org.uk/economy/tuc-14245-f0.cfm

3 The call out can be read on the website ukuncut.org.uk

4 http://ukuncut.mobi

5 www.arcadiagroup.co.uk/about/index.html Arcadia also own, Burton, Wallis, Evans and Topman.

6 The original investigation was completed by Richard Brooks, a former tax inspector, for Private-Eye, but has since been written about by other journalists.
www.private-eye.co.uk/sections.php?sect...
www.thisismoney.co.uk/news/article.html...=514832&in_page_id=2
www.guardian.co.uk/commentisfree/2010/n...




--

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Conference proceedings: Private Sector Turn

On November 22nd 2010, CounterBalance and the Bretton Woods Project hosted a conference in London on "The Private Sector Turn" - the increasing shift from public to private funding in development finance, the forms it takes and what it means for activists and affected people.

In 2000, 90% of multilateral development bank funding went to public sources, largely developing countries governments, and only 10% to the private sector. By 2007, the proportions were 30/60 and headed for a complete inversion, led by the World Bank's private lending arm, the International Finance Corporation (IFC), and the EU's house bank the European Investment Bank (EIB). Much of the private turn funding goes not only into private sector-led projects, but into two new and rapidly growing areas: global loans to chains of intermediary banks, and investments in private equity and hedge funds. Development banks are moving offshore into opaque intermediary and equity investments, with damaging effects on bank safeguards and policies, and a race to the bottom on standards. This is leading to increasing financialisation of the economy, with adverse cultural impacts, larger destabilising speculative capital flows, and many other ills.

Richard Brooks of Private Eye, a long-term observer of the UK development finance group, CDC, which also invested in Emerging Capital Partners, declared himself "cynical about the possibility of using private equity for development", based on several examples from CDC's portfolio. He felt that, considering CDC's investments in agriculture had all but disappeared and investments in infrastructure fell by 70% over a period of 20 years, it was hard to justify forgoing several investment opportunities in Ghana for a luxury shopping mall with questionable development benefits for the local population.

Independent researcher Dotun Oloko, in contrast, argued that private equity fuels corruption in developing countries, talking us through the case of a Texan hedge fund backed by EIB instrumental in a money-laundering scandal costing hundreds of millions of dollars. Dotun was alarmed by the fact that a fund manager acting on behalf of a DFI could, when carrying out due diligence, miss that the beneficial owners of the company set to receive financial backing were at the time under investigation for corruption.

TJN's John Christensen kicked off the debate on intermediaries by defining what they are and how they work, noting in the process that current flows tend to focus on 'rent-seeking behaviour' with far too much going to mergers and acquisitions, stripping assets and leveraging them with debt typically through offshore subsidiaries.

We now have a summary of the proceedings available, along with the presentations themselves.

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Links - Dec 17

Links - Dec 17, 2010

Large Bank, Hedge Fund Bundle Small Tax Debts Into Private Investments - Center for Public Integrity
Property owners suddenly finding themselves in debt to the new Wall Street taxman. Barely more than a year after a taxpayer bailout of major financial institutions, Bank of America and the hedge fund Fortress Investment Group spotted a fresh money-making opportunity – collecting the tax debts of tens of thousands of people. They can add interest charges and fees and bundle the debts as securities for investors. When bidding, They didn’t use their names but donned multiple other identities. The bonds were sold privately, so there’s no public record indicating who purchased them, the prices paid, or the anticipated return. Government officials often don’t even know who their new tax collection partners are. Good Grief.

Wall St Whitewash Paul Krugman
We have learned what happens when an ideology backed by vast wealth and immense power confronts inconvenient facts. And the answer is, the facts lose.

Liechtenstein Tax Evasion Settled for $67 Million - Reuters
A German prosecutor says a tax evasion case against Liechtenstein's state-owned LGT bank has been settled with a fine of euro50 million ($67 million). This was a lost opportunity. They should have gone for a full prosecution, then, if successful, the bank should have been shut out of Europe and its officials arrested. Instead, it is still firmly in place.

Financial Times falls for PWC’s taxwash - FT
The FT headline is “UK Financial services’ tax bill tumbles” and it claims that "Banks and other financial services companies paid about £53bn in taxes during the year ended in March." This is false. The real story is that the corporations paid £5.7bn in corporation tax receipts, a tenth of the headline figure. They did pay that; the rest is taxwash, derived from PWC's public-relations exercise (report is here) known as its Total Tax Contribution, under which corporations claim that taxes paid by others are their own tax payments. Read more on this here. Still, it's interesting to note that Corporation tax receipts from the sector have suffered the biggest hit, falling 54 per cent over the past three years. Many of the companies have corporation tax losses that can offset their tax bills; more than two-thirds of companies reported having tax losses available to carry forward into future years, with more than a third receiving a corporation tax refund for 2010.

A UK manifesto for tax justice - Tax Research
In light of the ongoing tax avoidance protests, Richard Murphy sets out some ideas.

"Why Aren't More Bankers Going To Jail?" - Economist's view.
On the criminalisation of U.S. corporate governance. One reason is that criminal cases are becoming increasingly difficult to win, in light of all the complexity, and the difficulty in obtaining evidence. And there’s nothing that generates financial complexity, or obstructs discovery, like secrecy jurisdictions.

Credit Suisse employees raided in German tax probe - Reuters.
A spokesman for the Duesseldorf prosecutor's office on Thursday said four employees of Credit Suisse are being probed on suspicion of aiding tax evasion. Perhaps that’s more like it – but remember this.

U.S. Rep. Doggett: Tax Cut Deal is “Mish-Mash of Rejected Republican Ideas that Cost too Much, Accomplish Too Little - Doggett
Under this misbegotten deal, we will borrow immense amounts from the Chinese and others to provide the wealthiest 1 percent of Americans with a tax cut that is greater than the median income of a Central Texas family for an entire year. Nice quote. See the video here.

New York more unequal than chile.
Far worse than for the U.S. as a whole. Blame the financial sector, puffed up with offshore incentives. And high-income residents pay a smaller share of income in local taxes than residents in the middle of the income structure. Hat tip: Naked Capitalism – see the graph.

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Thursday, December 16, 2010

Zero Ten: it is Europe Jersey should worry about

The Jersey Evening Post is carrying a letter From Richard Murphy, director, Tax Research LLP and a senior adviser to TJN. This follows mutterings from the Jersey financial sector that they would like to break away from Britain - a desire that is not supported, it seems, by the island's populace.

Richard's letter refers to an article by the former Bailiff of Jersey, Philip Bailache, in which the latter criticised the UK government for not protecting Jersey's abusive zero-ten policy which puts a ring-fence between resident and non-resident individuals receiving dividends.

Now the Bailiff is a Crown appointment: he has the dual role of head of the judiciary and president of the legislative chamber - a lack of separation of powers that contributes to poor governance on the islands. However, when Bailache was Bailiff he often abused his position (through what he called the bailiff's prerogative) by making political speeches (see here.) When TJN's John Christensen was Economic Adviser to Jersey he used to get complaints from politicians along the lines of 'we've been summonsed to Headmaster's office - he won't allow us to ask a question because the question is not acceptable.' This particularly applied to questions seeking to investigate and challenge the government's policy towards tax haven activity. The Bailiff would block these questions, as a matter of routine.

Anyway, back to Murphy's letter. It is an important one, and we reproduce it in full.
SIR Philip Bailhache (JEP, 14 December) is wrong when he says Jersey’s fight over zero-ten is with the UK. It never has been, and it is not now.

Indeed, until 2009 it is almost certainly true that the UK provided considerable protection for the Crown Dependencies against the impact of the EU Code of Conduct on Business Taxation.

It is well known that Dawn Primarolo MP, who chaired this group for a decade while a UK Treasury Minister from 1997 onwards, took the view Jersey now promotes that personal taxation was outside the scope of the code and as such zero-ten worked despite the continued ring fence created by the enforced distributions of companies being taxable within the personal taxation system even though this was very obviously a blatant ruse designed to undermine the whole purpose of the code.

It was only in 2009 that this position changed in the Treasury, when more enlightened ministers stood back and looked at what they were being asked to support and realised it was akin to blatant and aggressive tax avoidance. They then withdrew their support for the position the Crown Dependencies have maintained. To their credit coalition ministers have supported this view.

Whether or not they did and do, however, is not relevant. It was always going to be the European Commission who reviewed the compliance of the Crown Dependencies with the code and their reviews, undertaken recently and which I have seen, are unambiguous. In terms of overall approach and in respect of three out of the five detailed areas where compliance is required the European Commission has found that the zero-ten systems of each Crown Dependency (including, implicitly, Guernsey) failed to comply with the code of conduct. This was not a UK decision. I stress, the technical analysis was done by EU staff. I have seen their work and the rulings are unambiguous. They have been adopted by EcoFin on behalf of the European Commission as a result.

It is equally unambiguous that the UK must comply with this decision and impose – I stress, impose, even if against the will of the Crown Dependencies – this decision on Jersey, Guernsey and the Isle of Man. But that is not whether or not the Treasury wants to do so; it is because the EU requires the UK to do so because as far as the EU is concerned the Crown Dependencies are, at least for these purposes, part of the UK.

In that case almost all that Sir Philip Bailhache writes is straightforwardly wrong and thoroughly misleading, as is his claim that he is writing in his capacity as a lawyer. I doubt that. I think he is writing as a well-known proponent of Jersey becoming independent from the UK. No doubt in that context he would like a constitutional fight with the UK, but it’s one he can’t win, and nor can Jersey. That is because the costs of independence will be far higher when Jersey’s inability to manage its budget – which has now been ongoing for several years – becomes more starkly apparent as events develop over the next few years and Jersey needs every friend it has got to bail it out.

The reality is then that, as I predicted in 2005, Jersey has created a tax system which was always and very obviously going to fail to meet Europe’s requirements. I knew that at the time because unlike Jersey officials I went to Brussels and bothered to ask them. In which case it is now time for Jersey to stop laying down smoke screens and accept the truth which is that this is the time for it to stop abusing international rules on tax and get on and comply with them.
At the end of that 2006 blog we raised the following challenge:
Here's a challenge to Philip Bailhache: Let's see whether your ideas can survive critical scrutiny from real experts. Provide answers to the above questions and I will have them published in the next issue of Tax Justice Focus, which as it happens will have tax competition as its principle theme and me as its guest editor.
We are still waiting to hear from him - or his successor.

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The Daily Mail gets stuck into thin capitalisation

Our last links blog just mentioned a long (and excellent) article by the Daily Mail, a right-of-centre popular British tabloid newspaper looking at the snowballing tax protests. We have long been told that our issues, especially on the subject of tax, are too complex to interest the vast majority of people. Tax is certainly complex - and international tax more so. It may be that tax professionals use some of the most awful names to describe what are often very simple principles: (try "unitary taxation with formulary apportionment," for example.)

The Mail looks at the case of Alliance Boots, which was bought up by a private equity firm in 2008 and shifted (at least its legal base) to a nondescript building, 94 Baarerstrasse in Zug, Switzerland. A company which had a tax bill of £89 million in the last year it was quoted on the stock exchange cut its tax bill to a tenth of that amount now - even though sales and trading profits have consistently grown. The trick it used was an abusive transfer pricing trick known as 'thin capitalisation.' It's a horrible name, but the Mail explains it very simply, and very clearly.
As part of the takeover, Alliance Boots borrowed almost £9billion from various banks. That debt incurs interest, and interest payments can be offset against profits when calculating the company’s taxable income. A higher interest bill means lower profits — and less tax to pay.
And of course the place where it realises those profits are in Switzerland - where the taxes on those profits are small. Very simple to understand.

There's surely plenty more to the tax story than this - other jurisdictions will presumably have been involved too - but the basic point is entirely valid. This is straightforward, unadulterated, abuse: a transfer of wealth from taxpayers to extremely wealthy private equity officials.

The Mail also explains transfer pricing, again very clearly:
a device which allows multi-national companies to lower their overall tax bill by making bigger profits in countries with lower taxation rates than they do in high ‑tax countries.
Indeed. And we have a lot more on that here. The article also looks at AstraZeneca (of course,) Starbucks, WPP, Shire, Experian, Wolseley, Kraft and Cadbury, and others. And the Mail digs up more dirt on Philip Green and one of his businesses, BHS.
Between 2002 and 2004, Bhs paid dividends totalling £423million. Virtually all of these went to offshore companies linked to Green’s wife. But no tax was paid on dividends to these companies. Had Tina Green been living in Britain, the tax bill would have been at least £100million.

Furthermore, the dividends from both Bhs and Arcadia were possible in part because the companies increased their borrowing to fund the payouts. That meant higher interest bills on their debts. And that, once again, meant that, in turn, the companies reduced their taxable UK profits — and thus faced smaller corporation tax bills.

On top of this, Bhs has done business with Carmen Properties, a firm based in the tax haven of Jersey and controlled by the Green family.

In 2001, Bhs sold a clutch of its stores to Carmen for £106million. Carmen thus became Bhs’s landlord, and over the subsequent seven years received £81million in rents, providing a further source of income for the Green family. It also reduced Bhs’s profits, thus cutting its tax bill.

And there's more. Read it. As we have so often said, our campaign is - like the fight against corruption, not a left- or right-wing issue. It's for everyone.

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Links - Jan 16

Some links for December 16, 2010

Europe warns Switzerland - EU Observer
European Union foreign ministers have issued a tough-worded warning to Switzerland that its relationship with the bloc is dysfunctional and must be radically changed. . . . . they suggested that it is time for Switzerland to decide whether it wants closer integration with the bloc or to be cast out into the market-access wilderness. See (again) Thomas Cottier's article in Tax Justice Focus.


India worries about illicit outflows - Calcutta Telegraph
The Indian government expresses concern over the “unmistakable trend” of private players parking money in overseas tax havens and low tax jurisdictions.

Middle Britain and the tax protests - Daily Mail
An excellent investigative story routed through 94 Baarerstrasse in Zug, Switzerland; Berkshire; Luxembourg (of course); Monaco, Jersey, that “the shameless strategy of tax avoidance continues in the world of big business, and the losers are the millions of hard-pressed taxpayers who are left to take up the slack.” We couldn’t have said it better ourselves. And Look at this extraordinary list of locations where protests are planned.

Tax revenues fall in OECD countries - OECD
Tax revenues as a share of GDP - the tax burden - are also trending downward across OECD countries to the lowest level since the early 1990s.

Tax dodging: what would Jesus do? - New Statesman
Were he alive today, Jesus would be leading the campaign to crack down on tax-dodging billionaires and multinational corporations. Hat tip: Offshore Watch.

U.S. prosecutors go after smaller Swiss bank - NY Times
Federal prosecutors on Tuesday accused a former UBS banker of advising wealthy American clients to avoid disclosing their hidden offshore accounts held at a smaller Swiss bank because they were unlikely to attract scrutiny from the United States tax authorities. He was arrested on Nov. 8 and was to appear in Federal District Court in Miami on Tuesday.

What Is Money?Paul Krugman. Looking at the arguments of the paleo-monetarists. The offshore Eurodollar market had a lot to do with central bankers’ loss of control.

Taxation and Democracy - Leadership (Nigeria)
On the implicit linkage between payment of taxes by citizens and the duty imposed on government at every level to institutionalise good governance.

Calling all accountants: the developing world wants YOU! - Financial Task Force
How can developing countries build capacity to shape these treaties in order to bring them needed revenue for public services? Multinationals have teams of accountants and lawyers. What kinds of resources do developing countries have? I asked an official at the OECD for his opinion on whether or not the OECD had plans for that kind of work. He denied that they did. He did suggest, however, that NGOs could play an important role in bringing together stakeholders, constituents, civil society groups, and expert accountants so that governments would have greater capacity to design treaties and implement tax systems to enhance their development.

Cyprus court delays verdict on Russian assets - Reuters
A court in Cyprus reserved judgement on Wednesday on whether to maintain a freeze on Russian assets worth $6 billion, including a stake in potash maker Uralkali (URKA.MM: Quote) and mining group Polyus Gold (PLZL.MM: Quote). Recently, Organized Crime and Corruption Reporting Project "found not a few bad apples, but an entire industry willing to help organized crime launder illegal earnings, avoid taxes and hide from law enforcement."

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Country-by-country reporting – TJN submission to the European Union

From Richard Murphy's Tax Research blog:

The European Union is undertaking a consultation on country-by-country reporting, the closing date for submissions being 22 December.

At their request I have prepared a quite lengthy submission which elaborates and advances the case for country-by-country reporting by multinational corporations in a number of significant ways. This has been published by the Tax Justice Network.

As the summary says:

This report is a full response to the questions posed by the European Commission in public consultation on country-by-country reporting by multinational companies, published in October 2010. The submission elaborates the summary responses posted on line to the European Commission and is an integral part of the overall submission.

In summary the submission argues that:
  • Country-by-country reporting is financial reporting data;
  • Country-by-country reporting data is essential information likely to have significant impact on economic decision making by investors and other users of financial statements.
  • As such country-by-country reporting requirements should be included in International Financial Reporting Standards, or failing that in the European Union Seventh Directive on Financial Reporting;
  • This information is material without exception for the users of financial statements located in the jurisdictions in which multinational corporations trade (as indicated by their having a taxation permanent establishment in that location) and as such must be published for all such jurisdictions, with the sole exception being that some trading data may be omitted when immaterial to the jurisdiction in question.
  • Most country-by-country reporting data should be audited but this should not impose significant additional cost on multinational corporations, all of whom must already have all the necessary data if they are to fulfil their legal obligation to maintain adequate internal control systems capable of determining their assets and liabilities at any point in time.
  • Country-by-country reporting data would substantially enhance taxation governance within multinational corporations, jurisdictions and internationally;
  • There are significant benefits to full country-by-country reporting for the extractive industries and that this requirement complements and does not in any way undermine the disclosures required by recent US legislation and the Extractive Industries Transparency Initiative.
  • Whilst country-by-country reporting by all multinational corporations would be invaluable, greatest benefit is secured from this disclosure by what are defined as ‘very large’ corporations and some other quoted companies.
  • Adds essential information for the effective operation of capital markets to that available in existing financial statements.
  • That all these users need country-by-country reporting data because this data:
  • Ensures that all users of accounts receive the information that they require to appraise the performance of the reporting entity.
  • Provides essential information required by users of accounts which is not made available by existing International Financial Reporting Standards;
  • Provides that information, if delivered consistently across Europe, on as basis that ensures that comparison can be made between reporting entities, which is a key attribute essential to successful interpretation of financial data;
  • Will increase the well-being of the people of Europe as a consequence of the enhanced return likely be made when directors of multinational corporations are held accountable for locating corporate investment in those places where their use is likely to be most advantageous.
  • Emphasises the duty of directors to exercise sound governance over the assets of which they have stewardship, including the decisions they make as to where to invest those assets and to undertake trade.
We would, of course, be delighted if people would like to support this submission.

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