Friday, September 30, 2011

More reasons to doubt Switzerland's good faith

From the Treasure Islands site:

Private Eye has another excellent short article on p29 of in this week's edition, complementing my recent Guardian article (and more to come from me quite soon) but with a much better headline: Swiss Swizz. I would love to reproduce it all, but can't, so, first, here's a snippet which shows Private Eye at their understated best:

"The whole process will be audited by the Swiss tax authority, which, claimed Hartnett, “has a pretty fearsome reputation for the way in which it audits Swiss banks”. It is not a reputation that has spread far and wide, and whether Swiss tax inspectors will be so keen on chasing money on behalf of a foreign country is also uncertain, to say the least."

But now here's a real killer.

"Under an existing agreement between the UK and Switzerland that provides for tax details to be shared, the Eye has discovered under FoI [Freedom of Information] laws, Switzerland has not provided a single piece of information off its own bat in seven years (even Jersey, Guernsey and the Isle of Man have been more forthcoming)."

Another shocker. These kinds of agreements are supposed to be the backbone of the international transparency system. Which just goes to illustrate how ineffective it all is.

P.S. the Private Eye article doesn't seem to be online, though it is worth reading if you can find it. Their earlier one is also a good 'un.


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Thursday, September 29, 2011

Links Sep 29

Barroso enters the fray Europolitics
Sep 28 - "In a surprise move, European Commission President José Manuel Barroso personally joined the combat the Union is trying to lead against tax evasion."

MEPs say race to the bottom must be stopped starting with double non-taxation EURODAD
Sep 28 - On a report by the Committee for economic and monetary affairs (ECON) in the European Parliament, "containing both concrete measures and broader statements against the race to the bottom in European corporate taxation, citing the financial strain this is placing on European countries and their citizens."

The suits in Strasbourg – Yukos Oil, tax evasion and human rights UK Human Rights Blog

Sep 27 - The collapse of the Russian oil giant Yukos following enforcement proceedings for multi-billion tax evasion has not prevented the ghost of the now-defunct company appearing in Strasbourg as a “victim” of the Convention. Hat tip: Alex Marriage.

African governments urged to curb tax evasion Africa News
Sep 19 - "African governments have been urged to introduce legislation that makes tax evasion a money laundering offense as a way of deterring those who engage in the vice and therefore denying them income."

Transfer pricing law - reflections & prejudices Business Standard
Sep 12 - "Last few weeks saw Indian media debating on how multinational corporations are at logger heads with Indian Revenue in relation to shifting profits out of India. In the world of taxation this concept of transfer pricing is amongst the more popular topics."

India: Patil Likely to Press Switzerland on Black Money Issue Daijiworld
Sep 29 - "India is likely to renew its request to the Swiss government to end bank secrecy and to help get billions of dollars stashed in secret accounts by some Indians when President Pratibha Patil meets her Swiss counterpart Micheline Calmy-Rey next week." But beware the fig-leafism of Tax Information Exchange Agreements (TIEA's) .

India: I-T dept''s special units for high profile cases functional MSN News
Sep 29 - "The Income Tax Department has operationalised its ''Criminal Investigation'' units, which have been tasked to crack high-profile tax evasion and track money laundering cases."

U.S. client tax indictment raises pressure on HSBC Reuters
Sep 29 - "The United States heaped more pressure on HSBC Holdings, Europe's second-largest bank, on Wednesday with an indictment that laid out the role of two unnamed senior HSBC executives in providing tax evasion services to Americans born in India."

You Do the Math: Adding Up the Costs of Complying with FATCA Task Force on Financial Integrity and Economic Development
Sep 28 - In our earlier blog Crying Wolf: why are banks frightened of FATCA? we challenged banks to show us the numbers on which to base their claims that costs of complying with FATCA would be crippling ( we also observed and compared their costly lobbying against FATCA.) Now, a new survey by RBC Dexia Investor Services reveals: “about 85 percent of the banks estimated the cost of complying with FATCA at up to $1 million and 54 percent expect to spend less than $100,000.”

The Need for the “Buffett Rule”: How Millionaire Investors Pay a Lower Rate than Middle-Class Workers
Citizens for Tax Justice
Sep 27 - In his September 19 speech outlining his deficit-reducing plans, President Obama proposed what he called the "Buffett Rule," the principle that the super wealthy should not pay a lower rate of federal tax than middle-class taxpayers. CTJ's report shows why the Buffett Rule is sorely needed.

Another take on Martinelli's Panama Newsroom Panama

Sep 29 - An apparent fan of tax havenry declares: "Sure, at first glance today you might think the TIEA and the politics of Ricardo Martinelli have sullied Panama’s status as the world’s ultimate offshore haven. But let me assure you: They haven’t." See a recent link here on the Panama situation.

"Something Has Started": Michael Moore on the Occupy Wall St. Protests That Could Spark a Movement Democracy Now
Sep 28 - This piece also reports on over 100 non-violent protesters being arrested, while observing the impunity for bankers who created the financial schemes that destroyed the economy.

See also:
Sorry, but this trader's banking confession was no prank Guardian

Sep 29 - Yesterday we linked to commentary by a financial trader in It's time that Goldman Sachs stopped ruling the world Tax Research UK. Here The Yes Men write that they have been blamed for the trader's comments on the financial crisis - "But sometimes truth outdoes satire."

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No vote, no tax - the Suffragettes and their tax protest

Guest blog by Colin Cartwright

Drawing a straight line from the fussy and oppressive finery of late Victorian women’s fashion, to the racey, straight lines of the 1920s ‘flapper’ describes a surprisingly short period in history. In between these two incarnations of feminine style, stands the original ‘wild child’ of the early 20th century. Called ‘the Shrieking Sisterhood’, these hysterical suffragettes were mad, bad and dangerous to know. So much for historical stereotypes.

While some suffragettes chalked lines on pavements and wielded hammers and stones to smash windows in the streets, others were just as busy using hammers to barricade themselves in their homes. The lock-in became a means of protest against the obvious injustice of women being locked out of national politics. It is still profoundly shocking to realise that less than 100 years ago, it was illegal for women to take part in a British Parliamentary election. It was only in 1928 that women were finally granted voting rights equal to men.

Over twenty years before this, in 1906, the Liberals were swept into government by a landslide, helped in no small part by an army of women volunteer organisers. It was not until their second term in government, led by Asquith and Lloyd George, that the Liberals began to introduce a completely new system of taxation, including introducing National Insurance to try to provide some form of pension provision for ordinary workers. This provided the back-drop for one type of lesser-known protest, which aimed to pressure the government into granting votes to women.

Women householders were expected to pay their Imperial taxes, but were not considered full citizens of the state. The injustice was most obvious and often felt most keenly by wealthy, well-educated women landowners. Some of these voteless women were increasingly affronted by the fact that many of the male farm workers on their estates could vote, thanks to the electoral reform of the 1880s. The inconsistency of the situation was heightened by the fact that women householders had been granted municipal voting powers since 1869.

There were a few women tax resisters during the late Victorian period. It was not until the advent of a wider campaign for women’s suffrage, however, that the tax protest began to gain more momentum. It was perhaps afforded some legitimacy by an earlier campaign of ‘passive resistance’ to taxation conducted by Nonconformists against the Education Act of 1902. Thousands of church ministers and chapel-goers refused to pay church rates over an extended period. A few even went to prison over this matter of conscience. However, perhaps due to its sectarian nature, the protest failed to capture the public imagination or national headlines.

Given their association with the increasingly bitter struggle of the suffragettes, women tax resisters gained some notoriety, especially those whose protests ended in prison terms. The six week seige of Dora Montefiore’s home in 1906 London was widely reported at the time. Other tax resisters began to gather under the banner of the Women’s Tax Resistance League, formed in 1909. These women, many of them steeped in English history, drew their inspiration from a figure who at that time towered alongside Oliver Cromwell in the national consciousness: John Hampden. Hampden, an MP for the Aylesbury area, was seen as a Buckinghamshire hero for having refused to pay the ‘Ship Money’ of King Charles I. Several other Buckinghamshire people, including four women, also added their names to the initial protest.

It was this stand against what John Hampden saw as an unconstitutional tax, which drew Mrs Emmeline Pethwick-Lawrence to visit the Hampden monument at Chalgrove in 1910. Following the visit, the Women’s Social and Political Union also adopted tax resistance as one of its recognised means of protest. Their slogans included the war-cry of the American Rebels: ‘No taxation without representation’ and the more direct declaration: ‘NO VOTE, NO TAX’. Mrs Lawrence commented, "Just as John Hampden offered first passive resistance to authority and then active resistance, so the women had their course clearly marked out before them" (‘Votes for Women, Oct 7th 1910, p.4).

By July 1910 the WTRL boasted over 100 members, all of whom enlisted as being willing to take up this form of protest. However, a two-tier approach was adopted, which meant that some took action immediately, while others declared they were willing to become tax protesters once the total number of members reached 500. However, the total never exceeded 200 and even by 1911 there were still only 40 women actively making tax protests, according to Miss Raleigh of Uxbridge

Another was a resident of the town of Wendover in Buckinghamshire, Mrs Hamilton. Two years running, some of her goods were distrained and sold at the Red Lion pub in the centre of the town, where a meeting was then held to explain Mrs Hamilton’s reasons for resisting her Imperial taxes. Her arguments must have been persuasive for some. A local man, quoted in Mrs Hamilton’s Women’s Freedom League obituary, was reported to have said, "If ever there was a rebellion in the quiet village of Bucks, it was that day".

More impressive still was the Mrs Hamilton’s arguments seem to have won over the local tax collector himself, Mr Frederick Mead, who at a suffrage meeting in Aylesbury in November 1911, declared that he was in favour of women who had the municipal vote also gaining a vote for Parliament. Of course, his wife, who was active in hosting suffrage meetings herself, may have also played a part in persuading him!

The Women’s Tax Resistance League was particularly active in John Hampden’s own county (the photo here shows the sign outside Saint Nicholas' church, in Great Kimble, close to Hampden's family roots) . In 1912 they organised a march to Aylesbury prison, to protest at the forced feeding of hunger-striking suffragettes held there. There were riotous scenes in the market square afterwards, with suffragette speakers being drowned out and roughly treated by elements in the crowd. Sylvia Pankhurst arrived to speak in the town the next day but suffragettes were refused permission for a public meeting by the town council.

Later that year, women tax resisters and their supporters were grudgingly allowed to lay a wreath at the unveiling of the statue of John Hampden in the market square. The wreath bore the names of the four original women tax resisters: Mrs Westall and Widows Bampton, Goodchild and Semple. The suffragettes reportedly handed out two thousand leaflets on the day and sold 200 copies of a booklet about John Hampden, written by Mrs Darent Harrison. Mrs Harrison was to be beseiged in her own home in Hastings the following year, after she refused to pay her taxes and also blocked attempts to have her goods distrained (see here).

Find out more about the suffrage protesters of Buckinghamshire, by pre-ordering the book: ‘Burning to get the Vote - The Women's Suffrage Movement in central Buckinghamshire (1904 - 1914)’. This is due for publication in 2013, to coincide with the 100th anniversary of the national Women’s Suffrage Pilgrimage. Pre-ordered copies attract a 20% discount (£12 compared to the RRP of £15). To pre-order copies, please send your name and address to colin@chesham4fairtrade.co.uk.

Click here for the link to the John Hampden Society website.

This blog is one of an occasional series about famous figures or events in the history of tax justice. Click here for a blog on Thomas Paine, and here for a blog about the 14th century 'Peasant's revolt' in England, which was brutally supressed by London's mayor.

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Wednesday, September 28, 2011

Links Sep 28

Can’t get accurate data? Then ignore the problem! Treasure Islands
Sep 28 - "It’s incredibly hard to get accurate numbers on tax haven issues, not least because you’re trying to measure secret stuff. An assets/liabilities discrepancy noted by the IMF for the Cayman Islands ($2.2 trillion vs. $768 bn) is just a case in point" On this subject of data, Nick Shaxson has recently had a bit of an email back and forth with someone from the Cayman Islands..."

Tackling India’s Black Money The Diplomat
Sep 26 - "What we do need is public pressure on the government to come up with a plan of action that provides strict timelines for procedures that will bring the tax evaders and money launderers to book ... now seems a good time for India to set a shining financial example for the world."

End for tax evasion, but not havens: Kuhn Business Live
Sep 27 - A managing partner of major international beancounters Ernst and Young comments on the Swiss-German and Swiss-UK tax deals - "It's the end of tax evasion in Switzerland, but tax havens still enjoy competitive advantages. Wealthy people in particular still believe in the capabilities of Swiss banks." We don't agree that these shameful deals are the end of tax evasion.

Ignoring tax cheats Reuters
Sep 27 - David Cay Johnston observes "Why has nothing been done for more than 11 years to make the cheats in New York pay what the law requires? ... It is time for New York’s three top state officials, all Democrats with higher ambitions, to do their duty, especially since the thieves are virtually certain to include some of their campaign contributors."

'Tick the box' was no accident - this was tax abuse by design Tax Research UK
Sep 28 - Richard Murphy on a simple rule meant to cut paperwork for US companies that has grown into one of the biggest multinational tax breaks around, as an FT/ProPublica report says.

Private Equity Bribery Risk Grows As Tax Shelters Clamp Down Wall Street Journal

Sep 27 - "The private equity industry will be at a higher risk of violating foreign bribery laws as a result of money barred from tax shelters, according to one expert. The world of capital flight has shrunk, as countries like Switzerland try to shed the image of being havens for tax evaders and heads of state to park stolen assets ... The possibility of such assets ending up in private equity funds represents an “added peril” to private equity."

It's time that Goldman Sachs stopped ruling the world Tax Research UK

Sep 28 - See this video, broadcast on the BBC this morning. This shows the mindset of some of those in powerful seats in finance. Possibly, you will not be surprised.

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Tax goes bananas - in pictures

From Christian Aid's new report Hungry for Justice: a nice picture based on investigations by The UK's Guardian newspaper:


Original reports via here.

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Monday, September 26, 2011

Links Sep 26

Memo to the G20: stop turning a blind eye to tax dodgers Guardian
Sep 25 - Article by Christian Aid's David McNair. "While media attention at Friday's G20 meeting in Washington focused on the Eurozone crisis, finance and development ministers were quietly backing away from their commitments to help poor countries collect more of the billions they lose to tax dodgers."

All bets are off on another financial calamity Tribune Magazine
Sep 24 - Article by Prem Sikka. The banking crisis has been making headlines for the past three years. Bankers indulged in an orgy of irresponsibility. Yet there has been no public inquiry, no royal commission and no prosecutions. A report from the Independent Commission on Banking's 358-page report shows no urgency and says reforms can wait until 2019.

Ten basic questions on tax and equality La Nacion (In Spanish)
Sep 26 - Jorge Gaggero writes on the challenges of measuring the impact of tax on equality in Argentina, with proposals for the way forward. Noted, is the need for a broad socio-political coalition that claims and supports necessary and substantial changes in the field of income distribution, and strong political will at the highest political levels to initiate and sustain those changes required.

Why the tax gap matters - or why I appeared in court for UK Uncut Tax Research UK
Sep 25 - Richard Murphy, as an expert witness, explaining the links between tax avoidance and the government cuts. "There’s cash out there; this government needs it and UK Uncut and others expect them to collect it, now, for the sake of us all."

Goldman Critic Sides With Buffett to Shut Futures Tax ‘Loophole’ Bloomberg
Sep 20 - Senator Levin, one of the greats of the U.S. political system,"has a new target -- a tax benefit for derivatives traders that has also been derided by Warren Buffett, the billionaire investor and tax-code critic."

Big banks targeted by IRS on tax breaks Financial Times
Sep 25 - "US tax authorities are targeting cross-border finance deals worth billions of dollars between leading US and UK banks as they step up efforts to clamp down on abusive tax avoidance, a joint investigation by the Financial Times and ProPublica, a non-profit news organisation, has found."

Capital Moving From Bermuda To Ireland Bernews
Sep 26 - From a report by the Republic of Ireland’s Central Statistics Office - "43% of net or final inward investment of some €19.9 billion [$26.7 billion] came from Bermuda ...A crackdown on tax havens by the US government has made Bermuda less attractive for the global reinsurance and investment companies.”

A budget-friendly haven for banks and robbers The Sydney Morning Herald
Sep 25 - A travel article with an interesting take on Andorra. Hat tip: Offshore Watch. I ask my Catalan hostess, "Who runs Andorra?" She glowers at me, mutters "ze banks" and changes the subject to soccer.

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Protest in Spain against Swiss bankers and Swiss secrecy

We've previously noted a story about data leaks from HSBC Switzerland, where information has emerged about thousands of tax evaders with secret accounts, leading to probes into the affairs of account holders by French, German and UK authorities. But there seems to have been some reticence in naming and shaming.

In Spain, voices are now making themselves heard in demanding redress and action. On 23 September, a crowd of "indignants" from the organization 15-M, and others, protested outside the headquarters of HSBC in Madrid and then the Swiss Embassy. The "Indignants" have sent a letter to the head of HSBC in Spain, and to the Swiss Ambassador, stating their demands on combating tax evasion.

They asked the director of HSBC to open up the accounts that Spanish tax evaders hold in his bank in Switzerland, and to guarantee payment of the amount of unpaid taxes. They also demanded that if he refused to do so, he should leave the country. In the letter to the Swiss ambassador, they asked whether he considers it legitimate that the Swiss banking industry profits through the theft of tax revenues from other countries.

They warn that if the secret, tax evading accounts and account holders are not given up to the Spanish tax authorities, 15-M movement and allies will "request to the competent authorities that Switzerland is unworthy of being part of the international community, and should be banned from international agencies and included in the blacklist of tax havens."

You can read a report, in Spanish, here, from Red por la Abolición de la Deuda Externa y la Resitutión de la Deuda Ecológica.

There was a time, not long ago, when tax evading by wealthy people through secret bank accounts was considered an entitlement of the privileged class. Times are changing, in many places. Our hearty thanks to the Spanish "indignants" for shining light on the abuse and for demanding redress and accountability.

Hat tip: Markus Henn of WEED.

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Norway's Ministry of Finance proposes Country-by-Country Reporting

Guest blog by Peter Ringstad, Coordinator, Tax Justice Network - Norge

Breakthrough as official CbC-proposal for all sectors goes on public hearing in this fall.

As the EU Commission's proposal on CbC is nearing, the State Secretary for the Ministry of Finance in Norway, Roger Schjerva, announced on Wednesday 21st September that there will be a round of public hearing on the introduction of CbC in Norway after the European proposal is introduced. Schjerva said that the best alternative would be if the international or European community acted in concert on this issue, but that Norway also could be willing to go at it alone. This would follow up the Action Plan Against Economic Crime from earlier this year, where the Government stated that it was open to implement CbC rules in Norway as a part of a EU legislation process, or on an individual basis.

The public hearing will provide an opportunity for important input to secure that Norway implements a solid CbC standard. Especially if the EU proposal will be a watered down version of full Country-by-Country reporting, it is vital that Norway can move ahead to show that thorough reporting can and should be accomplished, and is practically possible. The Norwegian hearing will also provide an arena to argue for country-by-country reporting on all sectors, not only for the extractive industries sector, that looks likely to be the subject of the forthcoming EU proposal. Schjerva has been quoted in the press saying that the Ministry of Finance supports a CbC for all sectors.

The State Secretary's speech in English is here.

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TJN: two spots in top 30 'most influential thinkers.'

TJN's Richard Murphy and Nicholas Shaxson have been nominated on a shortlist of the 30 most influential thinkers by the top UK blog Left Foot Forward.

Read all about it here.

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Friday, September 23, 2011

Links Sep 23

Rubik wreaks havoc in Union Europolitics
Sep 23 - "The conclusion of bilateral tax agreements between Switzerland on the one hand, and Germany and the United Kingdom on the other, is creating real havoc in the European Union. Luxembourg and Austria, in any case, used it as a pretext to block any compromise, on 22 September, on revision of the EU's savings taxation directive and it's agreements in this area with Switzerland, Liechtenstein, Andorra, San Marino and Monaco." Hat tip Offshore Watch. See also yesterday's story about how the deals will fail to collect the money in any case.

Tax treaty rejig on hold as Mauritius faces political crisis The Economic Times
Sep 22 - "India loses an estimated over $600 million a year in revenues on account of the tax provisions in double taxation avoidance agreement (DTAA) with Mauritius."

"This Is The Greatest Financial Crime In The History Of The World And No One Senior ... Has Gone to Jail" Zerohedge

Sep 17 - On an interview with William Black, Associate Professor of Economics and Law at the University of Missouri and author of the book “The Best Way to Rob a Bank Is to Own One.” See the links in this post. Hat tip The Cynical Tendency.

HMRC and the tax gap: their data just does not stack at all (wonkish, but worth reading) Tax Research UK

Sep 23 - Richard Murphy on how likely it is that the tax gap is vastly bigger than HMRC say - "But still ministers will argue otherwise. What are they trying to hide? Could it be they really don’t want to collect tax from the crooks and the cheats? Is that their reason for denying the truth? Anything else is very hard to imagine."

U.S.: Offshore tax dodgers pay IRS nearly $3B The Monitor

Sep 22 - "The IRS began a stepped up enforcement program in 2009 when it offered to allow people who had secret foreign bank accounts to come forward and pay back taxes, interest and penalties to avoid prosecution and possible prison...The IRS said 30,000 people have taken advantage of the program." Hat tip Offshore Watch.

Revenue targets accounts of 2,000 suspected tax dodgers Irish Examiner

Sep 23 - "High Court orders have been obtained against clearing banks in Ireland — those permitted to transfer money offshore — ordering them to release details of foreign lodgements to the Isle of Man, Jersey, Guernsey, Switzerland and Liechtenstein."

How to Hide (and Find) Assets Bloomberg Businessweek
Sep 22 - "Layers of companies can serve to mask the owners of assets, but be careful whom you alienate..."

Outspoken top athlete takes stand on politics swissinfo
Sep - "Triathlon champion Magali Di Marco-Messmer says she abhors political games. And she cannot understand why many of her fellow citizens defend Swiss banking secrecy."

Greece moved offshore to become tax haven The Poke

Sep 21- "Crisis News: The IMF, supported by the City of London and the European Union, have thrown Greece a lifeline today by proposing a new scheme to float the country far enough out into Mediterranean for it to qualify as an ‘offshore tax haven’."

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Thursday, September 22, 2011

Guardian: UK's Swiss tax deal will fail

From the Treasure Islands blog, involving today's article in The Guardian:

Three weeks ago I promised something meaty on the UK-Swiss deal. It's taken me a little longer than I'd hoped, as the first real information about the deals only became available this week. But here it is: an article in The Guardian today, explaining how the whole thing is not just sordid, wrong, and all that - but that it's simply not going to collect the money that's promised. It is riddled with loopholes.

Britain's sordid Swiss tax deal will fail

The UK is about to sign an agreement with Switzerland under which Swiss banks levy taxes on secret Swiss accounts held by UK and German tax evaders, while keeping those accounts secret. The UK says the deals will raise billions.

It is bad enough that this sabotages major European efforts to tax their citizens properly and to penetrate secret banking, and that wealthy criminals will get impunity. But there is an even harder objection: the deals will fail. They will raise only a small fraction of what has been promised.

After all, Swiss banks are supposed to deduct up to 34 percent from their clients’ capital assets, then impose taxes of up to 48% on the subsequent income. Given how massive a chunk this will take out of these assets and income, it is astonishing that there has been hardly a murmur of protest from Swiss bankers. Indeed, they are purring about how ‘fair’ it is.

The details are not yet published (why is it being kept secret?), but we now have a good idea. Yesterday, Switzerland published the text of a parallel agreement with Germany, which the Swiss have said is essentially the same as the UK deal except for the tax rates concerned. Taking them at their word, we can now see how both deals will fail.

Banks are supposed to withhold taxes first on the initial capital, then on interest, capital gains and capital income owned by their UK taxpayer clients. But a Swiss bank would rarely hold John Smith’s account in the name of “John Smith” but in the name of, say, ABC Liechtenstein foundation or XYZ discretionary trust. Some private banks don’t hold a single account in an individual’s name.

The German deal claims to tackle these structures by saying that the tax will fall on the people that have the right to use these assets. But foundations and discretionary trusts are exceedingly slippery. Although somebody is always ultimately behind them, from a legal point of view nobody has the rights to their assets. That is the whole point of these things! And if you can’t identifiy who has legal rights to the assets, you can’t say if the person ultimately behind it is British, German, Nigerian or Martian. So the bank cannot apply the UK-Swiss deal to it and withhold the upfront capital tax.

They may, perhaps, find out who is really behind the structure when it finally makes a distribution, but this may be decades later and may be paid out as loans or consulting fees, say, or be paid to the client once he or she has moved to Spain to retire - and will therefore fall outside the agreement’s scope.

There is a much better way to go about all this.

European countries already have a multilateral agreement to collect tax and share information with each other about interest earned by each others’ citizens, to help each country tax its own citizens. The European Savings Tax Directive, as it is known, covers EU countries plus Switzerland, Liechtenstein, Britain’s Crown Dependencies (such as Jersey) and Overseas Territories (such as Cayman) and others. (The non-EU members have agreed to adopt equivalent measures.)

The Directive is full of holes, partly because of the above loophole, and has raised a tiny fraction of the amounts originally expected: Jersey, with £165 billion in bank deposits, paid out just £4 million last year under the scheme, a miniscule fraction of what you might expect.

But major EU amendments, coming soon, will make the Directive a very different, beefier beast with serious teeth, using concepts never previously wielded in international tax. It will make the management of the structure, rather than the bank, responsible for applying the tax provisions. It will either consider the taxpayer to be the individual who initially contributed the assets, or apply the tax provisions when the structure pays out.

The German deal misses these clever tricks, which are essential for success. It also loses a massive opportunity: it could easily have brought the foreign branches of Swiss banks in Singapore and other places into its scope – but, inexplicably, it does not. It has several other big loopholes. All of which probably explain why Swiss bankers are so happy with the deals.

The only upfront money the governments of the UK and Germany are sure to receive will be small payments from accounts in individuals’ own names. It would be surprising if this collects more than a tenth of the sums that have been promised.

In early 2010 Switzerland, under strong EU pressure, was showing signs – at long last – of considering serious moves towards transparency. The British and German deals sabotage political progress. Swiss shutters are down again.

As a tax adviser in Switzerland puts it: “Britain and Germany will destroy so much – for tuppence.”

The German deal faces massive political resistance and looks likely to get shot down in the German parliament, leaving the UK out on a limb. Britain should scrap this bilateral deal and throw its weight behind EU measures, which could raise major tax revenues and seek widespread multilateral information exchange as the long term goal. Nobody pretends this will be easy. But it is far better than the UK’s sordid deal, which won’t work anyway.

END

One other thing - confirming what is likely to be in the text of Britain's agreement with Switzerland, we can turn to the recent words of HMRC head Dave Hartnett:

"Where we have gone with the structures and trusts is that Swiss banks will require disclosure to them of beneficial ownership, and if that shows a connection to the United Kingdom, there will be withholding against those investments, and the Swiss tax authority will audit this in relation to the Swiss banks. It has a pretty fearsome reputation for the way in which it audits Swiss banks."

If he's talking about 'disclosure of beneficial ownership' - then there's clearly, as my article explains, a problem with structures that have no beneficial owner.

What have they been thinking?

For German speakers, a more detailed analysis of the deals is available here, with a basic web translation here. This has been reported in Germany in the Tages Anzeiger, Frankfurter Rundschau, Boersego, and elsewhere.

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Links Sep 22

European Parliament backs Publish What You Pay rules; sends strong signal to the European Commission Publish What You Pay
Sep 13 -Publish What You Pay issued a press release welcoming the European Parliament’s endorsement on Tuesday of plans for EU laws that will require oil, gas and mining companies to be more transparent about their tax payments to governments around the world.

See also:
Global Witness welcomes landmark U.S. effort to curb corruption and promote transparency Global Witness

Sep 20 - "The United States’ dual pledge to implement the Extractive Industries Transparency Initiative (EITI) and to support legislation that would stop U.S. states from allowing secretive front companies to be set up represents an important step forward in the global fight against corruption and corporate secrecy."

See also:
Pure hypocrisy from the UK by refusing to join the Extractive Industries Transparency Initiative Tax Research UK

Sep 22 - On debunking the UK government's rationale as to why it refuses to commit to the EITI.

Introduction of transfer pricing rules in Uganda to boost tax man Business Daily
Sep 21 - Reporting on the budget speech by Uganda's Finance Minister Maria Kiwanuka: "One major highlight ... was the emphasis by the minister that issues to do with ‘transfer pricing’ demand urgent action and thereby introduced the transfer pricing regulations 2011." Hat tip Sandra Kidwingira.

11 million Swiss Francs placed with HSBC Geneva by a relative of the Ben Ali clan Tribune de Genève (In French)
Sep 19 - Despite anti-money laundering legislation, the brother-in-law of Ben Ali, the deposed president of Tunisia, holds 11 million Swiss francs in an account with HSBC Private Bank in Geneva. (Curiously, the HSBC Private Bank website states: "Our motto is 'We connect your wealth to the world'.")

Swiss banks: masters of ‘compliance’ Treasure Islands
Sep 21 - Er, not exactly. Rather, masters of attempted spin. Nick Shaxson brings us a shining example. While some Swiss banks are claiming reticence in allowing German customers to withdraw cash before the Swiss-German tax bilateral tax deal is fully in place, they are, nonetheless, allowing wire transfers.

Credit Suisse settles tax dispute with Germany swissinfo
Sep 19 - "Credit Suisse has agreed to pay €150 million (SFr180.8 million) to settle tax evasion proceedings against its employees in Germany ... In April, Zurich-based private bank Julius Bär reached a similar deal with German authorities, agreeing to a settlement of €50 million in order to avoid protracted legal proceedings over tax evasion cases." All providing hidden identity and impunity for the tax evaders.

And see:
Swiss parliament may block U.S. tax deal: report Reuters

Sep 19 - "Political opponents could block a compromise between Switzerland and U.S. tax authorities that would settle a dispute on untaxed money in Swiss accounts ... confidential documents showed a one-off payment would allow Swiss banks to get rid of claims, concerning past wrongdoing, in the United States."

Automatic information exchange or bankers' pet scheme: Europe remains undecided Eurodad
Sep 15 - A good summary of the status within Europe on the Swiss "Rubik" bilateral tax deals, currently in motion with UK and with Germany that we have blogged on extensively - includes information on the European Commission analyzing whether the final withholding tax deals are compatible with EU law.

India: Amnesty scheme on cards for black money The Times of India
Sep 21 - The Indian finance ministry is devising a voluntary tax disclosure scheme that will allow corporates and others who have maintained secret accounts in foreign countries to declare their unaccounted wealth and bring it back into the economy after paying a "levy".

UK: HMRC admits corporate tax deal errors Guardian
Sep 21 - "Britain's most senior taxman has admitted making 'governance errors' when agreeing multibillion-pound settlements with large companies. Dave Hartnett, HMRC's head of tax, has conceded that Revenue officials did not follow correct procedures in two high-profile cases that could have left taxpayers millions of pounds out of pocket." See our recent blog on this scandal here.

HMRC announces crackdown on tax-avoiding footballers Guardian
Sep 20 - Britain's tax authority has launched a clampdown on tax evasion in football (soccer) to ensure players are not dodging payments during the country's economic turmoil.

Ireland asks EU to amend treaties Financial Times
Sep 15 - "The Irish government has asked the European Union to amend its treaties in order to provide specific legal assurances that the country can continue to control its own corporate tax rate. The request, which comes against a backdrop of growing calls for greater fiscal union in the EU, reflects Ireland’s concern that it could be forced to raise its ultra-low 12.5 per cent corporate tax rate."

Obama’s Plan a Massive Tax CUT Despite GOP Claims of “Largest Tax Hike in Modern History”
Citizens for Tax Justice
Sep 20 - See CTJ's Statement on President Obama's Jobs and Deficit Plan.

Tax Cuts Don't Create Jobs: 3 New Fact Sheets on State Economic Development Citizens for Tax Justice
Sep 16 - The Institute on Taxation and Economic Policy (ITEP) offers a series of Policy Briefs designed to provide a quick introduction to basic tax policy ideas that are important to understanding current debates at the state and federal level - see three new briefs that focus specifically on taxes and economic development.

This is what Apple Itunes Europe looks like Treasure Islands

Sep 17 - Courtesy of the French site OWNI (hat tip Mathieu), we are invited to view just how the "mighty European domicile for this major part of what was briefly the world’s biggest company" is in Luxembourg - although a passer-by would hardly, if at all, notice.

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Forthcoming G20 communiqué watered down - Christian Aid

From Christian Aid:
G20 RISKS UNDERMINING FIGHT AGAINST TAX DODGERS, WARNS CHRISTIAN AID

September 22 2011 - The world’s most powerful countries may be about to renege on their pledges to help developing nations fight massive tax dodging by multinationals, Christian Aid is warning.

Leaked documents suggest that a communiqué due to be issued by G20 development ministers in Washington tomorrow (Friday) has been dramatically watered down from earlier versions which made strong commitments to tackle the tax dodging that harms poor countries.

‘We are alarmed by what we have heard about the draft communiqué,’ said Dr David McNair, Christian Aid’s Principal Adviser on Economic Justice.

‘Tax dodging costs developing countries some $160billion a year - far more than they receive in aid - and in 2010, G20 heads of state committed themselves to helping poor countries increase their tax revenues

‘But we fear that on Friday, the G20 may downplay the seriousness of this menace and renege on its promises to help fight it.

‘We hear that in the latest draft communiqué, the importance of transfer-pricing – which unscrupulous companies abuse in order to evade tax– is downplayed, while references to reforms which would force multinationals to reveal more about their finances have been deleted.

‘Furthermore, we hear that even an acknowledgement that some multinational companies do dodge tax in poor countries has been deleted from the draft, along with a commitment to help poor countries improve their ability to collect taxes.

‘We would be delighted if these leaks prove wrong and if the final communiqué on Friday contains the stronger language and commitments which appeared in earlier drafts, which are the minimum acceptable.’

Alvin Mosioma, Co-ordinator of Tax Justice Network Africa, said: ‘These leaks suggest the G20 is in danger of undermining developing countries’ efforts to boost their own incomes, which they need to do to reduce poverty and fund sustainable development.

‘Other institutions such as the Africa Union and UN Economic Commission for Africa are taking concrete steps to combat illicit financial flows. But given the influence of the G20 on the global financial architecture, it is in danger of inflicting a huge setback on efforts to curb the illicit flows that are absorbed by secrecy jurisdictions—most of which are located in G20 countries.’

Christian Aid supporters are today (Thursday) emailing G20 development ministers, reminding them of G20 heads of states’ 2010 commitment to help poor countries increase their tax revenues.

ENDS

For more information and to arrange interviews, please contact Rachel Baird on 07545 501 749 or rbaird@christian-aid.org

Ends

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Switzerland and Germany sign tax agreement

The details of the Swiss-German tax deal have been released, following signature of the agreement in Berlin yesterday.

The text of the agreement is available in German and French.

We will comment on the details soon.

Our first comment is by Markus Meinzer, in German. More, in English, to follow.

The deals are creating havoc in Europe.

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Wednesday, September 21, 2011

USA set to tackle beneficial ownership?

A little while ago, TJN-USA and the FACT coalition published a fact sheet, entitled Anonymous U.S. “Shell” Corporations: A National Security Code Red. It noted, as we never tire of reminding people:
American and foreign terrorists, narco-traffickers, arms dealers, corrupt foreign officials, tax evaders and other criminals easily and regularly set up U.S. shell companies, without providing any information about who owns or controls such companies, to launder their criminal money in the United States.
. . .
there is a solution – ensure that each time a company is created within the U.S., information on the true owners and controllers of the company is also collected.

And there's much more in there, of course. Now we are absolutely delighted to see that there appears to have been action in the United States on this.

Take a look now at President Obama's new Open Government Partnership, which contains this fantastically useful section:
"8. Increase Transparency of Legal Entities Formed in the U.S.
Legal entities can provide access to the international financial system for illicit actors and may frustrate financial investigations. To increase transparency over the next year, we will:
• Advocate for Legislation Requiring Meaningful Disclosure. As a critical element of a broader strategy to safeguard the international financial system from such abuse of legal entities, the Administration will advocate for legislation that will require the disclosure of meaningful beneficial ownership information for corporations at the time of company formation."
Now this, in itself, is not new legislation. But it is important. Heather Lowe of Global Financial Integrity, who has been highly active in this area, sent us this appraisal:
"While the Action Plan is a voluntary initiative, at the end of the year each government has to publish a self-assessment on its progress on their Actions and Civil Society is also supposed to provide an assessment on the progress. Civil society organizations in the US have been working with the government on our Action Plan and have been told that the government sees everything in this document as achievable within a year. They have ideas on how to achieve some of it, but welcome ideas from civil society and the public on the best ways to implement any or all of the Actions so that they do so in the most publicly accessible and useful way possible. They also consider this to be a living document and will consider adding new things to the Action Plan if they receive good ideas from civil society or the public.

There is a real energy about the initiative among the Administration staff (from several different agencies), and that is key to making this a successful initiative."
And, as Global Witness reminds us, there is legislation put forwards in this respect:
"Senator Levin’s Incorporation Transparency and Law Enforcement Assistance Act would require states to collect this information. The bill already has the support of a number of U.S. law enforcement agencies, whose investigations are often stifled when they reach a Delaware, Nevada or Wyoming company whose real owners have not been declared. Global Witness has previously revealed how Teodorin Obiang, playboy son of the President of corrupt, oil-rich Equatorial Guinea, bought a $35 million Malibu mansion using a U.S. front company, despite his $6,000 a month salary."
Excellent progress. We also believe that hard-hitting reporting by Reuters has contributed to state-level initiatives in this respect.

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Tackling the Shadow Financial System -- conference in Paris


Tackling the Shadow Financial System: A Working Plan for the G20

When: Oct 6-7, 2011
Venue: Cercle National des Armées
Where: Paris, France

The 2011 annual conference of the Task Force on Financial Integrity and Economic Development will take place at the Cercle National des Armées in Paris, France from October 6-7.

Speakers and panelists at this year’s conference will address the implications of and solutions to the shadow financial system, including: country-by-country reporting, beneficial ownership of accounts, automatic exchange of tax information, curtailment of trade mispricing, and tax evasion as a predicate offense for anti-money laundering.

Breakout sessions will focus on the 2011 Financial Secrecy Index, illicit trafficking, socially responsible investing, media messaging, the “Arab Spring,” and more.

Together, speakers and participants will craft a message to the G20 member governments ahead of the November 2011 French summit on how they can address the global ills that result from illicit financial flows.

With Special Presentations by (but not limited to):

Jeffrey D. Sachs
The Earth Institute

Jon Lomøy
Organization for Cooperation and Economic Development

Abdalla Hamdok
United Nations Economic Commission for Africa

Christian Masset
French Ministry of Foreign and European Affairs

Sanjay Mishra
Indian Ministry of Finance

Illicit financial outflows from developing countries—the proceeds of crime, corruption, and tax evasion—total approximately $1.3 trillion per year. These outflows undermine economic development efforts and sustain corrupt and criminal elements in the developing world.

With links to such historic events as the “Arab Spring” and the 2008 global financial crisis, efforts to understand and curtail these illicit flows are crucial to the G20’s efforts to foster global economic growth, tackle corruption, and strengthen financial mechanisms to prevent further economic shocks.

To learn more about attending the conference or to obtain additional information on specific panels, speakers, and conference materials, contact Monique Perry Danziger: mdanziger@financialtaskforce.org, +1 202 904 3113.

###

Contact:

Monique Perry Danziger
mdanziger@financialtaskforce.org
+1 202 904 3113

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Tuesday, September 20, 2011

The Pin-stripe Mafia

pin-stripe n. (in textiles) a very narrow stripe in fabric, used especially in men's suits

Ma+fi-a
or Maf-fia n. 1. the. an international secret organisation founded in Sicily. It developed into a criminal organisation and in the late 19th century was migrated to the U.S. 2. any group considered to resemble the Mafia. See also Cosa Nostra, accounting firms

Our friends Austin Mitchell and Prem Sikka have penned another of their excellent monographs for the Association for Accountancy and Business Affairs. The title hints at the possibility that accounting firms might not be in favour: The Pin-stripe Mafia: How Accounting Firms Destroy Societies.

Over the top? Well we've just skimmed through it and find ourselves nodding in agreement with Austin and Prem. Take this for example:

The loss of tax revenues is a major cause of the current economic crisis that is inflicting misery on millions of people. Tax avoidance is part of the guerrilla warfare conducted by accountancy firms against the people. Each year, about 30%-40% of the financial legislation outlaws tax dodges dreamt up by accountancy firms. The UK tax tribunals and courts hear around 11,000 cases and many of these relate to dodges that have no economic substance. The UK is estimated to be losing around £100 billion of tax revenues each year and a large part of this is due to the activities of the Big Four accountancy firms.

By any standards this is scandalous, especially during times of terrible hardship for many ordinary people, young and old. It would be reasonable to expect our governments to take action to protect society from these scammers, but no:

Despite judges outlawing their tax dodges, successive governments have failed to investigate the firms, or prosecute their partners. Instead, the partners of major accountancy firms are given peerages, knighthoods, public accolades and government consultancies, all funded by taxpayers. The same firms have colonised regulatory bodies, fund political parties and provide jobs for former and potential ministers. This penetration of the state has bought them political insurance and their anti-social practices continue to inflict enormous social damage.


Austin and Prem don't pull their punches, and rightly so. This blogger has worked in the tax planning division of a Big 4 firm and readily recognises the anti social culture they describe.

As always Austin and Prem marshall legions of damning facts and figures to support their arguments. Cumulatively the evidence is compelling: this isn't and never was an instance of a few bad apples - the rot runs deep, deep, deep, and very few tax planners dare break the omertà.

The Pin-stripe Mafia is now available in hardcopy from:
Association for Accountancy & Business Affairs
P.O. Box 5874, Basildon, Essex SS16 5FR, UK.

Price £8.95

ISBN 1-902384-12-1
ISBN 978-1-902384-12-2
EAN 9781902384122
Published in 2011

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Emergency Appeal: 50 per cent tax rate

Dear kind-hearted friends

AT THIS TIME OF INTERNATIONAL CRISIS...

...I am writing to ask you to please look into your heart to help those in need.

Banking executives in London are living at or just below the seven-figure salary level. And, as if that weren't bad enough, some of these unfortunates might be forced to pay tax at the 50 per cent rate if they are not able to take full advantage of offshore tax planning opportunities. Can you imagine the emotional suffering this is causing to these victims of the crisis?

But now, you can help! For only £1,200 a day (that's less than the cost of a decent bottle of claret) you can help a bank executive remain financially viable despite these hardships.

This contribution by no means solves the problem, but it's a start! £1,200 may not seem like a lot of money to you, but to a bank executive it could mean the difference between a yachting holiday in Saint Lucia or a weekend grouse shoot in the Scottish Highlands.

For you, twelve hundred pounds is nothing more than a mortgage payment or tax deductions for the month. But to a bank executive working in the City of London £1,200 will almost replace his per diem.

Even if you feel unable to commit to the whole amount, a commitment of less than £1,200 a day will enable your selected banker to buy that weekend retreat in Cornwall, trade in the year-old Ferrari for a new Bentley, or take advantage of the tax breaks offered by living part-time in Monaco.

HOW WILL I KNOW I'M HELPING?

Each month, you will receive a complete financial report on the executive you sponsor. Detailed information about his bonuses, stock options, and other investment holdings will be mailed to your home. Imagine the joy as you watch your executive's portfolio double or triple!

Furthermore, on signing up for this programme, you will receive a photo of the selected executive (unsigned-for a signed photo, please include an additional £350.00). Put the photo on your refrigerator to remind you of other peoples' suffering.

HOW WILL HE KNOW I'M HELPING?

Your selected City of London banker will be told that s/he has a SPECIAL FRIEND who just wants to help in a time of need. Although the recipient won't know your name, s/he will be able to make emergency calls to your home via a special operator just in case additional funds are needed for unexpected expenses.

YES, I WANT TO HELP!

I would like to sponsor a City of London banker. My preference is ticked below:

[ ] Chairman [ ] CEO [ ] Entire Board of Directors
[ ] I'll sponsor a bank director most in need. Please select one for me.

It's just that easy - so do it now!

Please charge the account listed below ___________ per day and send me a picture of the banker I have sponsored, along with a "Keep The City Strong; Sponsor a Banker: Ask Me How!" t-shirt, which will be mine to keep.

Circulate this to your friends so they can also share the joy of helping a banker maintain his dignity and lifestyle.

And many thanks for your generosity!

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Jersey: it never disappoints in its ability to disappoint

Tax-news reports:
"Jersey’s Comptroller of Taxes has remitted to EU member states a total of GBP4m in retention tax for the year 2010."
Let's see now. GBP 165bn just in bank deposits in Jersey, latest count. Let's say a 4 percent annual return on that: GBP 6.6 billion. Let's say 20 percent tax on that: GBP 1.3 billion.

Now there are all sorts of ifs and buts about this number, of course: not all of this is European money - p3 shows that at least half are from territories covered by the EU Savings Tax Directive - and much more. But still, a difference of not too far off five hundred to one suggests something is very, very wrong here. Tax-News continues:
The Comptroller of Taxes and the President of the Bankers’ Federation are both happy that the process of exchanging information and the payment of retention tax is continuing to work extremely well. Comptroller of Taxes, Malcolm Campbell, said: "I am extremely grateful once again for all the help received from paying agents, in particular banks, which bear the greatest burden as a result of these agreements."
It certainly does seem to be working well for some. And poor banks: what a burden.

Let's not forget the TaxAnalysts investigation, which is a little old now, but still nevertheless pertinent, as nothing very significant has changed with respect to Jersey's stance:
"At the end of 2006, there were $491.6 billion of assets in the Jersey financial sector beneficially owned by non-Jersey individuals who were likely to be illegally avoiding tax on those assets in their home jurisdictions."
As they like to say Stateside, go figure.

Update: Tax Research has covered this too, here, using some slightly more focused data and more coruscating criticism. But with a very similar conclusion.

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Piping Profits: Mapping the Extractive Industries corporations

Former Observer journalist Nick Mathiason has just written a major report with Publish What You Pay Norway, entitled Piping Profits with a descriptive subtitle that goes like this: Mapping the 6,038 subsidiaries owned by ten of the world’s most powerful Extractive Industry giants and the quest by Latin American journalists to find out more. Note that the subsidiaries contained here are the only ones deemed materially important: in all likelihood there are plenty more.

Most intriguing. Here are some key take-outs from the report:
  • Ten of the world’s most powerful Extractive Industry Giants with declared revenues of $1.8 trillion control 6,038 subsidiaries, with over a third (2,083) incorporated in Secrecy Jurisdictions.
  • The global Extractive Industry’s favourite place to incorporate by far is the US state of Delaware with 15.2% of all subsidiaries located there.
  • The second favourite Extractive Industry Company (EIC) Secrecy Jurisdiction is the Netherlands, where 358 subsidiaries belonging to EI giants are based [TJN: also note our earlier blogs on the Netherlands' NRC newspaper reporting, which identifies a lot of information about extractive industries companies].
  • Chevron is the most opaque EIC major in this study. 62 percent of its 77 subsidiaries are located in secrecy jurisdictions; ConocoPhillips is next, with 57 percent of its 536 subsidiaries incorporated in secrecy jurisdictions.
  • Over 56 percent of the 783 subsidiaries of three North American oil majors (Chevron, Conoco and Exxon) are incorporated in secrecy jurisdictions.
  • Glencore International AG is the most opaque mining company in the Piping Profits survey with 46% of its 46 subsidiaries incorporated in Secrecy Jurisdictions.
With lots more to note, such as a powerful Corporate Ownership organogram showing the pipe-like construction of Barrick Gold Corporation, the world’s biggest gold miner.

The project features Bolivian and Ecuadorian journalists and campaigners who set out to get key financial and operational question to test whether country-by-country reporting is needed.

The project creates a Web-based database which maps every subsidiary and its incorporation location owned by:
  • BP
  • Chevron
  • ConocoPhillips
  • ExxonMobil
  • Royal Dutch Shell
  • Anglo American
  • Barrick Gold Corp
  • BHP Billiton
  • Glencore and
  • Rio Tinto
This will be available soon to academics, campaigners, journalists and other interested parties.

The Guardian carries the story here, and notes that:
"The definition of a secrecy jurisdiction was based primarily on three sources: a list of offshore financial centres published by the International Monetary Fund; a list drawn up by the US tax collection body; and a secrecy index by the non-governmental organisation the Tax Justice Network."
Note also that our next Financial Secrecy Index will be coming out very soon.

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Open Corporates and Duedil - this looks fascinating

Chris Taggart, a commenter on the TJN blog, has pointed to a new site called Open Corporates, which I'm encountering for the first time. I put in 'Glencore' into the search box and was directed to several useful-looking sites, including a lively discussion by Nick Hildyard of the Corner House in London. They also reveal a number of Glencore companies around the world, including 16 in Bermuda and 20 in the UK. They say that:

"OpenCorporates aims to do a straightforward (though big) thing: have a URL for every company in the world."

That is quite a big thing; their home page says they currently have nearly 24 million corporations listed.

This looks like it is going to be a most useful resource.

Update: this site, Duedil was just recommended to us too. Also looks interesting.

The best way to look up UK company information, for free. Financial records, litigations, directorships, people search, stock information & more. On every company in the UK. Absolutely free.
7.9M Companies, 9M Directors and growing.

A correspondent said:

"Generates pretty amazing charts showing complex group structures."

We haven't tried it yet, but as mentioned, it does look useful.


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Monday, September 19, 2011

Jason Sharman: new book on money laundering

There are quite a lot of books on money laundering, but this one looks particularly interesting, by virtue of its being authored by Jason Sharman, who has done a lot of extremely useful work in this area. He has found, as has TJN, that the biggest culprits in terms of financial secrecy and other offshore shenanigans often tend to be found in big OECD countries.

A review of Sharman's book in The Economist highlighted his research, which updates earlier work.
As a test, he tried creating companies in various places without using a real (verified) ID. Of the 47 providers of registration services he approached in OECD countries, no fewer than 35 agreed to form shell companies without requiring proper documents. Some also helped to open bank accounts. Classic tax havens were on the whole much more rigorous.
The Economist review appears to be a little confused about what a tax haven is but it nevertheless highlights this crucially important point, which bears repeating, repeatedly.

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Major new book on Swiss trading companies

The Swiss-based Berne Declaration has published a major new work, Swiss Trading SA, on commodity trading, introduced with the dramatic words:
Of every three litres of oil sold on open markets, at least one comes from Switzerland. As regards coffee, the proportion is one coffee bean out of two; and with cereals it is one kilo out of three.
Almost none of this stuff actually passes through Switzerland, of course: it's just the country - notably around Geneva, and in the tiny canton of Zug near Zürich - where the world's big commodity traders, such as the secretive Vitol and Glencore, have taken up residence. The value of business has grown fifteen-fold since 1998, the report asserts. The release continues:
However, this fast-growing sector remains little known outside of insider circles. In its new and authoritative work Swiss Trading SA, available from September 19th, the Berne Declaration lifst the lid on these companies with massive turnovers which have chosen Switzerland as their domicile, in deep secrecy, turning this country into a veritable turntable for primary materials.

This explosive book, based on exclusive investigations and deep research, shows how these trading companies with few scruples profit from the grey zones in the Swiss system to extract colossal profits from countries which are rich in natural resources but which remain prisoners to an extreme, paradoxical poverty.
An extremely important addition to the literature on this important topic. It's currently only available in French and German. The French edition is from Editions d'en bas in Lausanne. We are told that an English translation is in the works, hopefully before the end of this year. An English press release is pasted below:

PRESS RELEASE FROM BERNE DECLARATION (BD)

Zurich, September 19, 2011

Commodities Trading: Book Examines Discreet and Booming Swiss Industry

Today marks the release of the controversial book “Rohstoff – Das gefährlichste Geschäft der Schweiz” (“Commodities: Switzerland’s Most Dangerous Business”). The fact-filled and groundbreaking analysis of the industry, as powerful as it is unknown, shows why resource-rich developing countries remain poor while Switzerland-based commodity companies rake in profits in the billions. And it illustrates the gray areas of a business model whose risks are becoming increasingly apparent.

Unnoticed by the public and politicians, Switzerland has become the world’s most important commodities hub. Trade in oil, gas, coal, metals and agricultural products – particularly via deals made in Geneva and Zug – has grown by an incredible 1,500 percent since 1998, according to BD investigations. The result: Seven of the twelve corporations with the highest turnover in Switzerland trade in, and/or mine, commodities. Switzerland has become a global commodity hub thanks to its mix of tax privileges, a strong financial sector, weak regulation and lax embargo policy.

The Swiss commodities business is dangerous for developing countries that are blessed with natural resources but that suffer from weak governance. The business is life-threatening for all those who must live amid the filth and toxins of the mines and facilities. Trading houses that often operate on the legal and political fringes are dangerous for Switzerland as well: Corruption, tax avoidance, speculation hysteria and human rights violations carry enormous reputational risk. After the fall of Swiss bank secrecy, they are the country’s next exposed flank.

Commodities traders often accept far higher risks than oil companies like BP or pure mining companies like BHP Billiton. They also increasingly build their own facilities, often in crisis or even conflict areas. The industry leaders’ increasing openness to risk was recently demonstrated in Libya, where Geneva-based Vitol, with an eye on forming new business relationships, delivered $500 million of fuel to the opposition on credit. And in newly-founded South Sudan, where transparency in the oil business is central for nation building and the peace process, Glencore sealed an obscure deal with the state oil company two days before the official declaration of independence.

The extensive misery of entire countries and the fairytale wealth of a few Swiss top traders are causally related. The book “Commodities: Switzerland’s Most Dangerous Business”, released today in German by Salis Verlag, shows how. The richly-illustrated reference work offers a portrait of the key firms and people behind the discreet deals, provides insight into the social and ecological consequences for the producing countries, analyzes the practices and repercussions of tax avoidance and speculation, and offers proposals for achieving more justice in a multi-billion-dollar business that affects everyone.

For more information (incl. free English book sample, full translation in planning) see here or contact:

Urs Rybi, BD Commodities Expert, +41 44 277 70 17, urs.rybi[at]evb.ch
Oliver Classen, BD Media Director, +41 44 277 70 06, oliver.classen[at]evb.ch

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Saturday, September 17, 2011

Quote of the day - Alcoa

This was recently quoted by Citizens for Tax Justice:Link
I never made an investment decision based on the tax code...If you are giving money away I will take it. If you want to give me inducements for something I am going to do anyway, I will take it. But good business people do not do things because of inducements.
Who was this screaming left-winger? None other than Paul O’Neill, former Alcoa executive and U.S. Treasury Secretary under George W. Bush.

Yes, the very same Paul O'Neill as this one.

He is quite the one-man contradiction.

For the record, it's almost exactly the same as what Warren Buffett said recently:
"I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain."
To be added to our quotations page.

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Friday, September 16, 2011

Links Sep 16

U.S. tax-evasion probe turns to Israeli banks Reuters
Sep 16 - "The U.S. pursuit of offshore tax evaders is widening to include Israel, where U.S. authorities are scrutinizing three of Israel's largest banks over suspicions their Swiss outposts helped American clients evade taxes."

Amnesty Program Yields Millions More in Back Taxes New York Times
Sep 15 - "More than 12,000 American taxpayers have voluntarily revealed their secret offshore bank accounts to the Internal Revenue Service as part of the government’s latest tax amnesty program ... The move will allow the United States Treasury to collect at least half a billion dollars in unpaid taxes."

Automatic Information Exchange or Banker’s Pet Scheme: Europe Remains Undecided Task Force Blog
Sep 14 - We've been blogging on the disgraceful bilateral UK-Swiss and German-Swiss tax deals. Here is a good overview of the status within Europe on "Rubik", the final withholding tax concept initially formulated by the Association of Foreign Banks in Switzerland (AFBS) and by Swiss banks to protect banking secrecy against the international moves towards automatic tax information exchange.

See also:

Swiss deals complicate EU tax negotiations
swissinfo
Sep 14 -
"In other words, if Germany and Britain accept the preservation of Swiss banking secrecy, there’s no reason for them to continue to put pressure on Luxembourg and Austria, inside the European Union, to replace the system of withholding tax with the automatic exchange of information between tax administrations."

Licence to loot Economist
Sep 17 - On secrecy of beneficial ownership. A "
high five" for Global Witness - this article will certainly boost awareness of the issue. The Economist has, however, failed to take the necessary next step to say that big OECD countries are themselves tax havens.

The $2 Billion UBS Incident: 'Rogue Trader' My Ass
Rolling Stone

Sep 15 - Commentary on the news of the
$2billion loss for UBS by a rogue trader -" 'rogue traders are treated like bad accidents and condemned everywhere from the front pages to Ewan McGregor films. But rogue companies are protected at every level of the regulatory structure and continually empowered by deregulatory legislation giving them access to our bank accounts." Hat tip Offshore Watch.

And see also, for an interesting take on banking culture:
Ex-UBS trader says Swiss bank was probably trying to cover up its losses ianfraser.org
Sep 15 - "Given its track record it’s safer and fairer to assume that UBS is a “rogue bank” than to describe whoever racked up these $2bn losses (and it may well not have been Adoboli) as a “'rogue trader'." Hat tip Offshore Watch

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