Wednesday, February 29, 2012

Guidelines for commenters

We welcomes comments and will publish reasonable or constructive comments that contribute to discussion, including those that strongly criticise the blog itself or comments posted to the blog.

We moderate comments and none will be posted before having been checked and approved by our editorial team. This might occasionally cause delay: please bear with us.

The editorial team applies the following guidelines:


We prefer commenters to identify themselves, but this is not required.

TJN’s blog attracts a wide readership. Comments which we deem needlessly offensive or containing inappropriate language, or considered by us to be just plain rude, might not be accepted for publication.

Personal attacks, either targeting the blogger or a commenter, will not be permitted.

Blogs are intended to inform or open a conversation. Comments that do not add to the conversation, or repeat a point previously made ad nauseam, or which go off on a totally different tangent, might not be accepted for publication.

Links are accepted when they are strictly relevant to the stream of the blog conversation. Links to commercial websites are generally not accepted. Spam is always deleted.

If a commenter is not happy with the decisions of the editorial team, s/he can raise a complaint with the TJN Board of Directors, which has the final say in the matter.

We reserve the right to block commenters who persistently abuse our good nature.

0 comments links to this post

Africa Tax Spotlight - 7th edition

The latest edition of Africa Tax Spotlight, writes Guest Editor Francis Mberere, includes feature articles on -

* the recent Oxfam report on mobilising domestic resources;

* the Mars Group's plans for strengthening democracy and accountability in Kenya;

* an exploration of the contradictory positions of Switzerland, a stable democracy which for many decades has provided a secure bolthole for dictators, kleptocrats and all sorts of bottom-feeders;

* an opinion piece on how strengthened tax regimes in a variety of African countries might yield long-term benefits to poorer households;

* an in-depth investigation into how development aid funding to Africa is routed through a variety of secrecy jurisdictions;

* a profile of the Southern and Eastern African Trade Information and Negotiation Institute (SEATINI);

* feedback from the following meetings:-

- a regional workshop on the financing of education in Bujumbura, Burundi, 11-15 July 2011;

- a roundtable discussion on harmful tax competition in East Africa, Nairobi, 27-28 July 2011;

- the first annual general meeting of TJN-Africa, Nairobi, 29 July 2011;

- a national conference on tax justice in Kenya, Nairobi, 23 August 2011.

You can download the 7th edition of Africa Tax Spotlight here.

0 comments links to this post

Links Feb 29

UK urged to support Zambia's tax-raising from multinationals Guardian
Feb 29 - Zambian NGO Centre for Trade Policy and Development (CTPD) has urged the UK to continue its support for Zambia's tax authority to ensure that more revenue is raised from mining companies and other multinationals.

CNBC’s New Documentary ‘Filthy Rich’ Task Force Blog
Feb 24 - On the CNBC documentary, “Filthy Rich“, that featured Task Force Coordinating Committee members Global Witness and Transparency International and Task Force Allied Organization SHERPA.

The EU tax gap – new evidence shows there is €1 trillion of lost revenue to target to save our futures from despair Tax Research UK
Feb 29 - New report prepared by Richard Murphy for Group of the Progressive Alliance of Socialists & Democrats in the European Parliament. The report suggests that the EU tax gap is €1 trillion of which more than €850 billion is evasion.

10 Years Later, Tax Evasion Threatens to Undermine the Euro Task Force Blog

Feb 28 - Commentary on "the 10th anniversary of Euro as the zone’s single currency ... There are many reasons why the Eurozone is facing crisis. Here at the Task Force, we find it important to focus on one major component: tax evasion."

Romania Gets Tough On Tax Evasion Tax-News

Feb 28 - "Following hot on the heels of a recent announcement by Romania’s new Prime Minister Mihai-Razvan Ungureanu of plans to clamp down on rampant tax evasion in the country, around 30 individuals have been arrested on suspicion of tax avoidance amounting to an estimated EUR20m (USD27m)." Hat tip: Offshore Watch.

France excludes Costa Rica from tax-haven list tico times

Feb 29 - "According to a note signed by French Ambassador to Costa Rica Fabrice Delloye, 'Costa Rica no longer appears on the French list of uncooperative states and territories on tax matters," which is a big step for government efforts to achieve international standards in tax transparency'". Costa Rica ranks 41st on TJN's Financial Secrecy Index.

Evade tax, go to jail - Joint Tax Board warns Nigerian Tribune
Feb 29 - "The era of tax evasion by individuals and corporate organisations in Nigeria would soon be over, as the Joint Tax Board (JTB) has rolled out various penalties ranging from fines to outright imprisonment of defaulters."

UK: George Osborne drafts new law on corporate tax dodgers Guardian
Feb 28 - "A new law against corporate tax dodging will be announced in George Osborne's budget next month in the chancellor's latest effort to crack down on corporate tax avoidance after the Treasury shut down two schemes this week that Barclays used to avoid at least £500m of tax ... Richard Murphy, of the Tax Justice Network, derided the idea as "window dressing".

See also:
Barclays have made the case for full country-by-country reporting Tax Research UK

Feb 29 - Commentary following an editorial in The Guardian that states "The Barclays tale cries out for a sweeping response. Not merely the specific legislation to claw back the lost cash which is now on the way, but also a firm obligation on every company to publish what tax it pays where, as well as a full-blooded general anti-avoidance law, and not merely the heavily qualified alternative that is in the works..."

I can live with being in at number 13 on the twitter financial ranking Tax Research UK
Feb 29 - Welcome news that Richard Murphy has been ranked number 13 on the list of top financial influencers in the UK. The list has been prepared by new Institute of Chartered Accountants in England and Wales Economia.

0 comments links to this post

Tuesday, February 28, 2012

Links Feb 28

Newsletter of Tax Justice Network - Latin America and Caribbean (In Spanish)
January 2012 edition. The home site for Red de Justicia Fiscal de América Latina y el Caribe can be accessed here.

Banks under seige swissinfo

Feb 10 - "Secrecy and profits take a beating from all sides." The report features TJN Director John Christensen.

Member states should demand more transparency not less Eurodad
Feb 22 - "EU Trade Ministers missed the opportunity to tackle tax dodging and corruption at EU’s Competitiveness Council on 20 February."

Tax Havens: The Netherlands, 20,000 mailbox companies, Facebook, Google and Bono FInFacts
Feb 27 - "The Netherlands competes with Ireland in offering corporate tax haven facilities." Hat tip: Offshore Watch.

UK: Barclays £500m tax loophole closed by Treasury in rare retrospective action Guardian
Feb 28 - "Legislation rushed through to close down two 'aggressive' tax avoidance schemes that high-street bank disclosed to HMRC".

See also:
Barclays tax could fund proper jobs for exploited youth Tax Research UK

Feb 28 - "The £500 million in avoided tax that Barclays will now have to pay could fund full-time jobs above the living wage for all the young people who have been working for free under a controversial government scheme".

Belgian development aid placed in tax havens rtbf (In French)
Feb 28 - "The Belgian Investment Company for Developing Countries (BIO SA), in which the Belgian state owns a 84%, has placed more than 150 million euros in investment funds located in the Bahamas, Guernsey and other tax havens." Hat tip: Mathilde Dupré.

0 comments links to this post

2012 Tax and Transparency Forum, London, 2nd May

International Tax Review has just launched the programme for what will undoubtedly be one of the major tax conferences of 2012. The list of speakers, see below, includes some very well known names from all sides of the debate. In the year when TJN celebrates its tenth anniversary, this conference is a sure indication of how far we've moved the tax justice agenda from the shadows to the centre of discussion.


Speakers:
Pascal Saint-Amans, Head of Tax Policy and Administration, OECD
Clare Short, Chair, Extractive Industries Transparency Initiative
Chris Lenon, Group Strategic Adviser, Tax Policy, Rio Tinto
Stephen Blythe, Tax Director, BP
Paul Morton, Head of Group Tax, Reed Elsevier
Richard Murphy, Director, Tax Research
David McNair, Principal Economic Justice Adviser, Christian Aid
Martin Hearson, Policy Adviser, ActionAid
John Christensen, Director, Tax Justice Network
Joseph Andrus, Head of Transfer Pricing Unit, OECD
"The financial crisis has changed everything. Now governments desperate for revenue are looking to close loopholes and claw back as much money as they can from taxpayers, through settlement or in court.

Meanwhile, the public mood has turned against avoidance as people take to the street to demand companies pay their fare share of tax. Development agencies such as Christian Aid and ActionAid, which have long argued that poor countries lose more through tax avoidance than they receive in aid, are pushing for country-by-country reporting, a standard which is soon to become a reality for companies in the extractive industries like BP and Rio Tinto.

The NGOs argue that tax is not simply a legal issue, it is a moral one, and it is not enough that taxpayers remain within the letter of the law, rather they must adhere to its spirit. Most multinationals remain sceptical about country-by-country reporting, but where it was once a niche issue demanded only by hardened activists calling in from the cold, now it is something companies cannot afford to ignore.

Tax transparency, country-by-country reporting, information exchange and transfer pricing rules are becoming increasingly important issues for taxpayers to consider in terms of their investors, their reputation and their exposure to risk. The issue will only continue to grow in importance in the coming years and, as such, it will become an increasing concern for companies looking more nervously at their bottom lines.

International Tax Review has decided to place itself ahead of the curve and is inviting taxpayers and advisers to join this crucial debate.

Our inaugural Tax & Transparency Forum brings together the biggest names and most prominent voices on both sides of the argument.

• As the new head of the OECD’s Centre for Tax Policy and Administration, Pascal Saint-Amans is arguably the most important figure in global tax affairs. Before taking up the job, he led the Global Forum on Transparency and Exchange of Information for Tax Purposes where he gained extensive experience in bringing together corporates, governments and NGOs to tackle tax haven secrecy.

Clare Short was a Member of Parliament for almost two decades, where she served as Secretary of State for International Development under Tony Blair, before resigning over the Iraq war. She now chairs the Extractive Industries Transparency Initiative, a position which places her at the cliff face of the work on country-by country reporting.

You will hear from both of these individuals alongside corporate taxpayers from Rio Tinto, BP and Reed Elsevier, leading tax advisers, NGOs and Richard Murphy, the accountant who invented country-bycountry reporting long before it became such a crucial topic of discussion at International Tax Review’s Tax & Transparency Forum.

Why attend?
• Find out how tax transparency will affect your bottom line and what it could mean for your
corporate reputation
• Understand how new reporting standards could mitigate risk and help your investors
• Get an update on the latest developments in country-by-country reporting, transfer pricing,
dispute resolution and disclosure facilities
• Hear from the OECD and authorities about what lies ahead
• Voice your opinions, engage in dialogue with NGOs and debate an issue that is becoming ever
more important for taxpayers

NOTE: This event is FREE to all development NGOs with an interest in tax justice. Register here."

0 comments links to this post

General Electric: Not Quite a Model Citizen


For Immediate Release: February 27, 2012
Contact: Anne Singer, 202-299-1066, ext. 27

General Electric Paid Only 2.3 Percent Federal Income Tax Rate Over the Past Decade,
Citizens for Tax Justice Analysis Finds; Actual Payments Were Probably Lower


Washington, DC – General Electric’s (GE) annual SEC 10-K filing for 2011 (filed February 24, 2012) reveals that the company paid at most 2.3 percent of its $81.2 billion in U.S. pretax profits in federal income taxes over the last 10 years.

Following revelations in March 2011 that GE paid no federal income taxes in 2010 and in fact enjoyed $3 billion in net tax benefits, GE told AFP (3/29/2011), “GE did not pay US federal taxes last year because we did not owe any.” But don’t worry, GE told Dow Jones Newswires (3/28/2011), “our 2011 tax rate is slated to return to more normal levels with GE Capital’s recovery.”

As it turns out, however, in 2011 GE’s effective federal income tax rate was only 11.3 percent, less than a third the official 35 percent corporate tax rate.

“I don’t think most Americans would consider 11.3 percent, not to mention GE’s long-term effective rate of 2.3 percent, to be ‘normal,’ ” said Bob McIntyre, director of Citizens for Tax Justice. “But for GE, taxes are something to be avoided rather than paid.”

Citizens for Tax Justice’s summary of GE’s federal income taxes over the past decade shows that:

■ From 2006 to 2011, GE’s net federal income taxes have been negative $2.7 billion, despite $39.2 billion in pretax U.S. profits over the six years.

■ Over the past decade, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 2.3 percent.

McIntyre noted that GE has yet to pay even that paltry 2.3 percent. In fact, at the end of 2011, GE reports that it has claimed $3.9 billion in cumulative income tax reductions on its tax returns over the years that it has not reported in its shareholder reports — because it expects the IRS will not approve these “uncertain” tax breaks, and GE will have to give the money back.

GE is one of 280 profitable Fortune 500 companies profiled in “Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010.” The report shows GE is one of 30 major U.S. corporations that paid zero – or less – in federal income taxes in the last three years. The full report, a joint project of Citizens for Tax Justice and the Institute on Taxation and Economic Policy, is at http://ctj.org/corporatetaxdodgers/. Page 24 of the report explains “uncertain” tax breaks.

###

Citizens for Tax Justice (CTJ), founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation (www.ctj.org).

Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a 501 (c)(3) non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP's mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy (www.itepnet.org).


0 comments links to this post

Swiss banker calls for automatic information exchange

Switzerland has been an intransigent fortress of financial secrecy for many decades. In the past couple of years, however, things have started to change a little.

The changes that allowing some encroachment on its banking secrecy are incremental, so far, though not insignificant. Quite a lot of it represents defensive tactics in the face of outside pressure on Swiss banks, in what has been described as a Swiss 'circle the wagons' approach to change, along endless delaying tactics, which have been quite effective in some cases.

Behind these incremental changes, however, the psychological sands are shifting in more fundamental ways. There is a growing acceptance in Switzerland that the world is changing profoundly, that there is far less tolerance for Swiss banking secrecy, and that there is no way back from here.

In this context, it is fascinating to see some new statements of Pierin Vincenz, the CEO of Raiffeisen Bank. We believe this is the first time a senior Swiss banker has called publicly for automatic tax information exchange. (Read an article in TagesAnzeiger, in German, here, and a further one here, with rough web translation here; hat tip to Mark Herkenrath.)

Reuters summarises his words:
"Pierin Vincenz, chief executive of Switzerland's third biggest bank Raiffeisen, said the country's strategy of seeking a separate tax deal with individual European partners could falter if it agrees to hand over large amounts of U.S. client data.

"If the Americans get thousands of client data, the Europeans will want that too," Vincenz told the Tages-Anzeiger newspaper in an interview.
Indeed - and European officials have been saying just that. For example, French MEP Catherine Trautmann argued this month that:
“the Union should follow the lead of the United States, which has forced Switzerland to transmit the bank data of presumed fraudsters”.
And Europolitics, reporting Trautmann's words, added:
"The Danish EU Presidency shares this view. In its recent note on the revision of EU rules on savings taxation ( Europolitics 4354), it points out that Berne has made a number of concessions to the US, including on grouped requests for information on presumed fraudsters. Copenhagen therefore considers that it is “important that all EU member states coordinate their positions so as to ensure that Switzerland treats its European partners at least as well if not better than the United States”."
Back to Vincenz, who got quite specific:
"We must finally show that Switzerland is serious with a 'clean money' strategy. And that will
in the end only be possible with an internationally supported strategy."
(In an op-ed in the most recent edition of the Swiss Sunday newspaper Sonntagszeitung, Vincenz apparently asked the Swiss government to immediately start negotiations with the EU about full automatic exchange of information in tax matters. We don't have the link, unfortunately.)

A common Swiss position these days is to argue that the solution is not information exchange but to apply withholding taxes to the appropriate accounts, while secrecy is preserved. Our response is: we do not object to the withholding taxes - but why preserve secrecy? Why not have both transparency and, if necessary, withholding taxes?

His words do signal a change in the mindset in Switzerland. In fact Tax Justice, as we noticed just yesterday, is breaking out all over the place.

Still, don't be fooled. These are at the end of the day words, not deeds. And there is still a very, very, very, very long way to go.

0 comments links to this post

Monday, February 27, 2012

Big UK business body opposes tax avoidance, offshore abuse

The tax justice agenda has come a very long way in a very short time. We're delighted to see some highly welcome statements, from the UK's Confederation of British Industry (CBI.) From The Independent:
The Confederation of British Industry (CBI) has backed new powers for the Government to stamp out aggressive corporate tax avoidance schemes, which the employers' organisation admits seriously damage the reputation of British industry.
Yes. And:
"John Cridland, the CBI's director general, said he accepted it was time for his organisation to push harder for businesses that aggressively avoid tax, even if they do so in a technically legal manner, to be brought to book.

"Traditionally there has been two categories: legitimate tax management, which HMRC accept is legal, and tax evasion that we don't support," he said. "If we're going to be honest in this public debate, there is a middle ground, there's a third category."
This is quite true. And Cridland is quoted in the Guardian:
"Business should not engage in abusive tax arrangements."
Phew. From the CBI, that's quite something:
"It's the first time we've said it this directly. It's quite a statement by the CBI."
We will presumably have very different opinions to them, when it comes to deciding where to draw the line. And one of the things they advocate is a General Anti Avoidance Rule (GAAR), which TJN Senior Adviser Richard Murphy is quoted in the same article as saying doesn't go nearly far enough. He calls the CBI's chosen approach "window dressing" - read his analysis here. It is an important one, and takes a lot of the shine off the latest surprising CBI statements.

Still, even if the CBI's chosen remedies are too timid by far, the words criticising offshore abuse are most welcome, and signal a profound shift in thinking that is going on in the UK. We like to think that we, along with others such as UK Uncut and Private Eye and several journalists, have done our bit to help shift the zeitgeist.

0 comments links to this post

A tax that can curb corruption

. . . and achieve many other things too.

From the UK's Daily Mail, on a particular part of the Berkshire countryside:
Locally, an acre of productive farmland can be purchased for about £7000. Working a farm in West Berkshire turns a decent profit, and is a perfectly good business proposition. But land speculators bank on far richer rewards. If they can get planning permission to turn this acre into residential land, its value will shoot up to over £700,000.
A huge market distortion here. And with it, of course, risks and temptations:
To bring about this increase, a planning inspector has to sign a piece of paper. In the case of Sandleford Park, about 100 acres are scheduled for development, so if the inspector signs on the dotted line the landowners will make a profit in the region of £70 million. The word for this dramatic price increase is “value uplift”.
And the sharks are circling:
"Land speculation in the UK is now a globalised business. From Russian gangsters, African dictators and tax dodging Greeks, hot money is flooding onto the UK property market, as overseas speculators seek a safe haven for their fortunes; so much so that over half of office property in the City of London is owned abroad."
That last half-sentence is a bit speculative: we can't know exactly who owns many of these properties because they are hidden behind companies from the BVI and other tax havens. But still, lots of foreigners do own this property. And of course the result is one set of shiny rules for the global rich, and another, shabbier set for ordinary British people:
"The relationship is entirely parasitical: these speculators benefit from the protection of British law, but contribute not a penny in taxes towards the costs of maintaining such excellence."
(Let's not forget that this is a right-wing newspaper, while reading this. And good on 'em for this article.)

But now here is the point:
The profit from building houses is different from the profit from land speculation, and is a legitimate reward for business and enterprise. . . . . By contrast, the land speculator makes hugely inflated profits, and does nothing beyond influencing the right people for his own ends.
The former (building houses) is value creation, while the latter is value extraction. Economic rents, is how some describe this. And economists from Adam Smith onwards have said that the correct response to economic rents is to tax them, hard. And now we turn to the Financial Times, and an article from Samuel Brittan, entitled Tax England’s green and pleasant land.

He is talking about a Land Value Tax (LVT). This is a tax levied not on the value of a building, say, but on the value of the land underlying that building. Those in expensive areas will pay higher land value taxes: if set up correctly, it is potentially a highly progressive tax.

In fact, we dedicated a whole edition of Tax Justice Focus to this issue, and it's an incredibly important one. We wholeheartedly support this tax, and urge others to spread the message and badger their political representatives on it - in the UK and anywhere else. But there's a proviso here - unlike some LVT fanatics, who see this as some kind of tax nirvana, we see LVT as just one important part of a healthy tax system. Indeed, as Brittan says:
"A land tax is one of those subjects – basic income is another – which divides commentators into a great majority who never mention it, and a minority who talk of nothing else. The result is to give supporters a cranky appearance, while the eyes of chancellors of either main party glaze over if you as much as mention the subject."
Those of you who follow such things will probably know what we are talking about. (We like to think that we fall into the all-too-small, but happy, middle.) But Brittan notes that the case for a land tax is "one of the oldest and least disputed propositions in economic thought." Absolutely. It's the landed classes who hate them - and their influence spreads far and wide.

That luxury Mayfair penthouse owned by a BVI trust - a Land Value Tax would hit it just as hard as any other property. If designed correctly, it is offshore-proof. Brittan continues:
"The basic point is that the supply of land, with rare exceptions such as reclamation in the Netherlands, is fixed. But because of its scarcity owners can command an income over and above the normal return to the enterprises placed upon it. . . . There is one way in which the supply of usable land can increase. That is when land, previously off limits, is newly released by local authorities for development."
Which is just as the Daily Mail describes (the article goes on to describe the "Valentine’s day massacre of Sandleford," where the developers got their hooks in and made "huge tax free fortunes from the violation of our countryside."

The consequent increase in value from changing land from one use to another is, as some LVTers put it, is created by “the community” - and therefore that community is entitled to a big share of the increase. Absolutely. And that share would come about through a land value tax. It could transform the relative values of different kinds of land uses and - among many other things - curb market distortions and stem this kind of temptation for corruption.

One last thing. Brittan says this:
"Gross UK trading profits of non-financial and non-oil corporations are running at over £200bn per year or about 20 per cent of gross domestic output. Some part of this – we do not know how much – is not true profit but the return on land."
Well, indeed, and that's important - but he is selling this short. The financial sector makes a huge share of its profits through land-related businesses such as residential mortgages - all of which depend on land values. Tax this stuff, and you get to take a lot of hot (and poisonous) air out of a socially useless part of the financial sector. Collectively, neither Britons (nor anyone else) are better off from selling ever costlier property to each other. The only long-term beneficiaries from the UK housing bubble are bankers.

So this is a tax whose time has come. Crucially, there is no intellectual argument against this tax that can withstand any scrutiny. What is preventing it being put in place is the pure political power of those who don't want to be taxed - (combined with the ignorance of voters and politicians).

From #Occupy to those worried about inner city poverty to the Daily Mail, this valuable land tax can, and must, be supported.

7 comments links to this post

Friday, February 24, 2012

Links Feb 24

London Conference on Somalia - Communique
Feb 23 - "We agreed on the importance of ... disrupting terrorist finances, and called on countries in the region to implement the Financial Action Task Force’s recommendations on combating money laundering and the financing of terrorism."

See also:
Solving the Pirate Problem: Let’s Start with the Banks Task Force Blog

Jun 17, 2011 - "It is only by cutting off finances that we can hope to effectively root out piracy ... the Financial Action Task Force (FATF) needs to 'get serious about including piracy within its mission of highlighting how money launderers and terrorists raise and move funds'".

And on why all this matters:

Humanitarian Aid and Security In Somalia: Separate, But Still Unequal? Refugees International
Feb 23 - "Yet we are all aware that humanitarianism does not take place in a vacuum. Unless and until a political solution is found to the problems in Somalia, the humanitarian crisis will be never-ending."

And interesting to consider:
“Somalia has slightly higher standards than Wyoming and Nevada.” (Corporate Secrecy Edition) naked capitalism
June 2011 - Opening with "We’ve taken an interest in tax havens thanks to Nicholas Shaxson’s book Treasure Islands, which is a must read", this illuminating piece on corporate secrecy cites Jason Sharman observing a comparison on the standards of Somalia and the U.S. in corporate transparency.

Sierra Leone launches online mining database to increase transparency Guardian

Feb 1 - "By collecting, recording and publishing data on the country's extractive industry, the government hopes to combat corruption and malpractice". Hat tip: Sandra Kidwingira.

India: Vodafone moves HC against transfer pricing issue Zee News
Feb 23 - "UK-based telecom operator Vodafone on Thursday said it has filed a writ petition in the Bombay High Court challenging a tax demand made by the Income Tax Department." Hat tip: Offshore Watch. See earlier blog on the Vodafone case here.

Swiss Rubik tax deals are effectively defunct, but zombie refuses to die EU Observer
Feb 24 - See new blog by TJN's Nick Shaxson, for EU Observer.

Swiss ‘clean money’ strategy is lipstick on a pig Task Force Blog
Feb 24 - Updated and expanded blog, posted earlier on TJN site.

A welcome step by Obama towards ending corporate tax haven abuse Tax Research UK
Feb 24 - See Richard Murphy's comments on: "As FinFacts has reported in Ireland: "The Obama Administration has proposed a minimum tax on profits of US companies in foreign jurisdictions that if implemented will reduce the attraction of Ireland’s low-tax foreign direct investment regime and imperil the tax haven activities of high profile companies such as Microsoft, Google and Facebook..."

UK: Life imitates art, as Berkshire countryside inspiring Watership Down is threatened by developing zealots Daily Mail

Feb 22 - "To avoid UK taxes on the profits they make, they vest their land ownership in tax haven based “shell” companies." ... [Land speculators] are making huge tax free fortunes from the violation of our countryside." Hat tip: Carol Wilcox.

0 comments links to this post

Thursday, February 23, 2012

Quote of the day - on being "anti-business"

This quote is admittedly from one of our indefatigable Senior Advisers - but still, it's a good one. In The Guardian, in the context of talk from politicians in the UK who are arguing that if you are against the City of London's ability to pursue business as usual, you are somehow 'anti-business.'
"Those campaigners like the Tax Justice Network – who believe that being pro-business means being pro-transparency and accountability, being pro-everyone paying their tax and being anti-market abuse measures like tax havens and opacity – will continue to pursue their arguments. Because they're the real pro-wealth creators and real pro-free marketeers, when free means people have the information they need to make proper decisions freely available to them."
- Richard Murphy

0 comments links to this post

Links Feb 23

99 to 1: How wealth Inequality is Wrecking the World and What we can Do About It Inequality.org
New book by Chuck Collins: "The focus of the worldwide Occupy protests is creating a world that works for 99% of people and businesses, not just the richest and most powerful 1%. But who are the 99%? Who are the 1%? How extensive and systemic is inequality in different areas of society? What are its causes and consequence? How is inequality changing in our world? And what can be done about it?"

Colombia, KRG, Peru: so where are those “published” Oil Contracts? OpenOil
Feb 21 - "There is an ever increasing level of interest in the debate around contract transparency in the global extractives industries, and a growing minority of jurisdictions which have agreed to publish contracts openly. However winning the argument is only the first chapter in the story as I discovered recently looking at Colombia, Peru and Iraqi Kurdistan. ..."

Greece: signs international tax agreement to tackle tax evasion OECD

Feb 22 - Greece has signed the Convention on Mutual Administrative Assistance in Tax Matters. See blog and TJN Briefing Paper on the Multilateral Convention here. Hat tip: Bruno Gurtner.

See also:
Greece is strengthening its tools against tax evasion Le Temps
(In French, subscription required)
Feb 23 - "The "task force" appointed by the commission to help estimated uncollected taxes to be 60 billion euros".

See also:
Greek accounts are being frozen in Swiss banks Handelszeitung (In German)

Feb 22 - On the story of a money laundering investigation involving Swiss bank accounts belonging to former banker and businessman Lavrentis Lavrentiadis, now under investigation for fraud.

Apple Reports High Rate but Saves Billions on Taxes Tax.com
Feb 13 - Marty Sullivan reports: "By taking advantage of lax U.S. transfer pricing rules, Apple Inc., the world's most valuable company, cut its federal tax bill by billions of dollars in 2011. Moreover, by taking advantage of flexible accounting rules, the company masked its tax avoidance by reporting a relatively high effective tax rate ..." See Nick Shaxson's earlier observation on Apple here.

Income tax department asks for review of Vodafone tax ruling India Today
Feb 18 - The income tax department has filed a in the Supreme court challenging the January ruling that Vodafone should not have to pay capital gains tx avoided through tx havens. See story blogged earlier: Vodafone defeats India in landmark $2.9bn tax case.

France and Germany push for coordination Europolitics

Feb 17 - "France and Germany plan to spell out, at the Ecofin Council on 21 February, the work they have already carried out to strengthen their bilateral cooperation on corporate taxation. Their goal is not to short-circuit the EU’s debate on introducing a common consolidated corporate tax base (CCCTB), but on the contrary to help take it forward by presenting certain technical solutions to the problems involved."

U.S.: What Is the Revenue-Maximizing Tax Rate? Social Science Research Network
Feb 20 - "Barack Obama has proposed raising taxes on the well-to-do, both for revenue and distributional reasons. This raises, anew, the question of what the revenue-maximizing top rate is. Conservatives continually assert that the United States is always on the wrong side of the "Laffer Curve," such that a tax rate reduction will increase revenues. A review of recent literature on this subject, however, indicates that the top tax rate could rise very substantially before a further increase would lead to lower revenues. Estimates suggest that this rate is at least 63 percent and probably much higher. "

Switzerland: Party ends for easy corporate tax relief swissinfo

Feb 20 - "The Federal Audit Office has denounced the generous tax breaks granted to companies up to 2007 under the pretext of aiding disadvantaged regions."

Switzerland Sets Tax, Secrecy Revamp Wall Street Journal
Feb 23 - On a story blogged here. "'The U.S. and the major European Union countries have made clear progress in recent weeks in regulating the exchange of [tax] information, and if Switzerland would give up its counterproductive resistance to such exchanges, it could help formulate future rules on cross-border banking business,' said EvB spokesman Andreas Missbach."

Cognitive dissonance: the Swiss want to clean up space Treasure Islands
Feb 19 - Nick Shaxson poses a question to people from Switzerland: “how do you reconcile the fact that Swiss people have a reputation for being among the world’s politest, tidiest, quietest, best-groomed, best-behaved and most apparently upstanding citizens – while at the same time their country has for decades had the reputation of being the gigantic sink for the world’s dirtiest loot?

0 comments links to this post

Communiqué on the Inauguration of the High Level Panel on Illicit Financial Flows from Africa



UNITED NATIONS

ECONOMIC COMMISSION FOR AFRICA


Communiqué on the Inauguration of the High Level Panel on Illicit Financial Flows from Africa

Date: 18th February 2012

Venue: Sandton Convention Centre, Johannesburg,

South Africa

The High Level Panel on Illicit Financial Flows from Africa, established by the United Nations Economic Commission for Africa (UNECA) was inaugurated on 18th February 2012 at the Sandton Convention Centre, Johannesburg, South Africa. The Panel is chaired by H.E. Mr. Thabo Mbeki, former president of South Africa, and composed of nine other members both from within and outside the continent. The Panel Members are as follows:

1. Chair: H.E. Mr. Thabo Mbeki, former President of South Africa;

2. Vice Chair: Mr. Abdoulie Janneh, Under-Secretary General and Executive Secretary of ECA;

Other Members:

3. Amb. Olusegun Apata- Chairman, Coca Cola Bottling Company, Nigerria;

4. Mr. Raymond Baker- Director, Global Financial Integrity, Washington DC;

5. Dr. Zeinab Bashir el Bakri-former Vice President of the African Development Bank, Tunisia;

6. Mr. Abdoulaye Bio-Tchane-former Minister of Finance and Economy of Benin;

7. H.E. Mrs. Ingrid Fiskaa- State Secretary for Environment and International Development, Norway;

8. Prof. El Hadi Makboul- Director, National Centre for the Study and Analysis of Population and Development (CENEAP), Algeria;

9. Barrister Akere Muna- President, Pan-African Lawyers Union, President, ECOSOC, Member, Eminent Persons Panel of the APRM, and Vice President, Transparency International;

10. Ms. Irene Ovonji-Odida- Human rights lawyer and activist for over 21 years and elected member of the East African Regional Parliament for five years.

The establishment of the High Level Panel (HLP) follows a resolution of the 4th Joint Annual Meetings of the ECA/AU Conference of Ministers of Finance, Planning and Economic Development in Africa in March 2011, which decided to address the debilitating problem of illicit financial outflows from Africa estimated at about $50 billion annually, in mandating the establishment of the Panel.

Illicit financial outflows constitute a major source of resource leakage from the continent draining foreign exchange reserves, reducing tax collection, dwindling investment inflows, and worsening poverty in Africa. The methods and channels of illicit financial outflows are many and varied including tax havens and secrecy jurisdictions, over-invoicing, under-pricing, and different money laundering strategies. This source of resource outflows is far bigger and higher in terms of scale and magnitude than the normal corruption channels, which are focused upon globally.

The panel will amongst others, determine the nature, pattern, scope and channels of illicit financial outflows from the continent; sensitize African governments, citizens, policy makers, political leaders and development partners to the problem; mobilize support for putting in place rules, regulations, and policies to curb illicit financial outflows; and influence national, regional and international policies and programmes on addressing the problem of illicit financial outflows from Africa.

The Panel at its first working session noted as follows:

§ Illicit financial flows are a major development challenge to Africa, which retards the progress of African countries;

§ There is need to upscale the policy research work on the subject matter especially from an African perspective;

§ Policy advocacy constitutes a major part of the work of the panel, which would prioritized in its work;

§ Coalition building and partnership from within and outside the continent is central to the success of the work of the Panel;

Decisions/Recommendations:

1. A communication strategy is to be developed by the Panel for the outreach and communication of its work;

2. A dedicated website on illicit financial outflows from Africa is to be established;

3. The Technical Committee based in ECA will undertake more technical work on the nature, scope, dimensions and impact on development of illicit financial flows from Africa and facilitate detailed documentation on the subject matter to be made available to the HLP;

4. The ECA is to report to the Conference of Ministers of Finance, Economic Development and Planning in March 2012 on the establishment of the Panel;

5. The HLP to meet in the next two months (Mid-April 2012) to review progress on technical work and the communication strategy of the Panel and also to meet in Mid-July 2012 to review the impact assessment study on illicit financial flows from Africa;

The Chair of the Panel, H.E. former President Thabo Mbeki thanked all members of the panel and affirmed their commitment and dedication in ensuring that the panel squarely addresses the problem of illicit financial flows from Africa.


0 comments links to this post

Wednesday, February 22, 2012

Swiss 'clean money' strategy is lipstick on a pig

From Reuters:
"Under a 'clean money' strategy, which Finance Minister Eveline Widmer-Schlumpf is expected to present to the cabinet on Wednesday, banks will be obliged to get foreign clients to declare they are compliant with their home tax regimes."
Let's be clear about what is going on here.

Some clients of Swiss banks have money parked there legitimately, with all relevant assets and income declared to their home authorities as appropriate. But lots of them have stashed their cash there to evade tax (and to do other nefarious things). So as regards the 'clean money' strategy, the relevant people are those who have already taken the formidable step of lying to their home tax authorities. This measure merely gets them to lie again - but this time, only to Swiss banks. Lying this time will be far easier: the Swiss banks, unlike their home tax authorities, have no incentive to police these 'declarations', and there will be no penalties (apart from being subjected to potentially irritating nudging and winking from the bankers).

This measure could perhaps make a very small difference, at the margins, but won't put the Swiss banks out of pocket much. By contrast, it hands the banks a major coup: business as usual, covered by a charade that allows them to say 'look how clean we are!'

Reuters has more:
The plan falls short of measures desired by left-wing Swiss politicians to require bank clients to prove taxes had been paid.
At least some people in Switzerland have noticed what a charade this is. Now if those plans of those on the left were ever to come to anything: well, then we would start to sit up and take serious notice.

Of course Swiss bankers have poured derision on this one proposal that would constitute a genuine move for transparency.
"As a bank ,if you have a client give you money you have to trust and believe them...You can't be responsible for whether clients have paid their taxes," said Thomas Sutter, spokesman for the Swiss Bankers' Association."
This is an insidious use of the word "trust" - just what one would expect from the Swiss Bankers' Association. A tax adviser commenting irreverently on the Reuters report told TJN:
"Ha ha ha ha useless. Force tax evading criminals to swear that they are not tax evaders - otherwise they won't get a choccy with their coffee during their next visit to the bank vault.

You couldn't write this fiction if you were Mickey Spillane."
To get a true understanding of what the Swiss are doing, read the first sentence of this. For non-English speakers, this is a fairly common term, and was used to powerful effect by Barack Obama in 2008, severely annoying Sarah Palin and other critics.

Update Feb 23: new analysis underlining further (and important) problems with self-declaration, here. (For those not familiar with these particular issues, take a look at Section 3.1 here.)

Also, the Swiss have just published their new financial centre strategy. Only the release is available in English.

2 comments links to this post

Monday, February 20, 2012

Rubik and tax efficiency

Reproduced here with kind permission. Read more about the Rubik deals here.

0 comments links to this post

Friday, February 17, 2012

Links Feb 17

Banks urged to report suspected tax crime Financial Times
Feb 16 - Article on events TJN blogged earlier: FATF makes big step on tax evasion, must do more. Note: "While western banks already have obligations to report money suspected to be the proceeds of crime, including that of tax crime, there could be a difference between having rules in place and rules being followed, said Robert Palmer of Global Witness".

Zambia to audit miners, believes up to $1 bln owed
Reuters
Feb 7 - "Top African copper producer Zambia plans to audit all its mining houses in a bid to dig for back taxes of up to $1 billion it estimates it is owed."

What Occupy Nigeria Looks Like Huffington Post

Feb 15 - Reporting on the growing impact of the Occupy movement. After the government eliminated fuel subsidies - "This robbed Nigerians of virtually the only benefit of the country's oil wealth, and after remaining quiet for so long, Nigerians took a hint from Occupy Wall Street and Arab Spring and engaged in nationwide resistance against the government's actions."

See also:
Famed Author Chinua Achebe On The Occupy Nigeria Strikes Sahara Reporters

Jan 12 - "Nigeria's unrest can be eased by better, less-corrupt leaders. ... Any involvement of ordinary Nigerians in a non-violent (peaceful), organized, protest for their rights and improvement in their living standards, in my opinion, as a writer, should be encouraged..."

Tax Havens: Ireland is Europe's top corporate tax haven Finfacts
Feb 16 - "Microsoft explained to the US Securities and Exchange Commission (SEC) last year that its declining effective tax rate ... resulted from using Ireland, Puerto Rico and Singapore as regional sales centres for routing profits, because of their low-tax regimes." Hat tip: Offshore Watch.

Ireland: US secrecy law to pile pressure on International Financial Services Centre Irish Times

Feb 17 - The US's FATCA law seems set to make new and expensive demands on the international financial system, where Ireland is a huge player. See info Ireland's in TJN's Financial Secrecy Index.

Indians have $622 billion in tax havens AsiaOne
Feb 17 - Reporting in the SIngapore press - "India's top cop has spoken ... the jurisdiction in criminal law is territorial and does not apply to other nations. 'Criminals use such principles to their advantage by often spreading the crime over at least two jurisdictions and investing in a third,' MrSingh said."

Amsterdam and Dublin tax havens for Facebook Radio Netherlands Worldwide
Feb 17 - "Social media leader Facebook has set up a complex structure of foreign subsidiaries, stretching from Amsterdam and Ireland to the Cayman Islands in the Caribbean in order to avoid paying millions in tax to the US. ... Facebook’s Amsterdam office bears all the hallmarks of an unused space – no one actually works there."

Rubik under fire from European Parliament Europolitics
Feb 15 - "Germany and the United Kingdom are still ambiguous about their real intentions. They seem to be resigned to safeguarding Swiss banking secrecy in the context of the Rubik agreements ... But in the joint declaration they signed with the United States, Italy and Spain on the American FATCA, London and Berlin commit to working at international level ... to ensure that the FATCA gives rise to a “common model for the automatic exchange of information” that would sound the death knell for banking secrecy." Hat tip: François Gobbe".

Sarkozy denies tax haven slur swissinfo

Feb 17 - "French President Nicolas Sarkozy has said 'under no circumstances' does he want to fall out with Switzerland, adding for good measure that he 'adores Roger Federer'."

0 comments links to this post

Thursday, February 16, 2012

ITEP debunks loopy Laffer. Again.

We have written several times about the claims of the messianical U.S. tax-cut economist Arthur Laffer, whose work is regularly lapped up by tax-cutting U.S. politicians (and by the editorial page of the Wall St. Journal) despite its having been debunked again and again. In short, the idea goes that if you cut taxes, you will stimulate so much economic activity that you will end up with more tax revenue at the end of the day. (If that sounds silly, that's because it is, especially in a large economy like that United States'.)

Martin Wolf looked at this way of thinking in the Financial Times a couple of years ago:
"The most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: “supply-side economics” [Laffer is, among other things, the founder of the Laffer Center for Supply Side Economics]. Supply-side economics liberated conservatives from any need to insist on fiscal rectitude and balanced budgets. Supply-side economics said that one could cut taxes and balance budgets, because incentive effects would generate new activity and so higher revenue.

The political genius of this idea is evident. Supply-side economics transformed Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?"
Indeed. Also take a look at our blog Laffer in la-la-land, pointing to an entertaining if depressing take-down of Laffer, for more fun.

Now Laffer's been peddling his snake oil in a new bottle recently: he has been looking at the evidence from high-tax states and low-tax states in the U.S., and saying that the low-tax states are the ones that have grown most, and the high-tax states have grown the least. And - what a surprise - Rupert Murdoch's Wall St. Journal has treated his study with awe.

The Institute for Taxation and Economic Policy (ITEP,) a partner of the indefatigable Citizens for Tax Justice, has just taken a look at Mr. Laffer's calculations and concluded that they are . . . absolute nonsense. The data, they reveal, point to exactly the opposite conclusion that Laffer has drawn. Here are their conclusions:
"The nine “high rate” states identified by Laffer have actually seen more economic growth per capita over the last decade than the nine states that fail to levy a broad-based personal income tax. Moreover, while the median family’s income, adjusted for inflation, has declined in most states over the last decade, those declines have been considerably smaller in “high rate” states than in those states lacking an income tax entirely. Finally, the average unemployment rate between 2001 and 2010 has been essentially identical across both types of states."
And there's a nice graph, too.
So how, exactly, did Laffer get it wrong? It's very simple, really. Laffer's findings were caused by population growth in the high-growth states, not by economic growth stimulated by tax cuts (and incidentally, that population growth had nothing to do with tax cuts either). And that's it, really. There are a few other factors, too: some of the states, for instance, were able to afford tax cuts because they had large natural resource windfalls.

ITEP concludes:
"Whether looking at income levels, unemployment rates, or economic output per person, states with “high rate” income taxes have economies that equal or surpass those in states lacking an income tax. The most commonly cited analysis purporting to show the opposite."
Read their report here. And it's accompanied by another one which provides a devastating take-down of Laffer's economic analysis methods.

Or take a look at this interview with Bruce Bartlett, who was one of the original champions or Ronald Reagan's supply-side economics, and who has now changed his mind rather dramatically. He is now an outcast among many of his former supporters.
"There is a disconnect between the facts of what taxes do, and the mythology. . . the tax debate is a code for an attitude towards the individual versus government . . . it is a signalling mechanism, which tells people 'you are one of us' "
Let's see if the Wall Street Journal finds space on its crowded pages for this one. We won't be holding our breath.

2 comments links to this post

Links Feb 16

Special report: For Iran oil trader, Western ties run deep Reuters
Feb 16 - Incisive report. "The firm, which is essentially the offshore arm of the National Iranian Oil Company (NIOC), dissolved its base on the Channel isle on January 8 with a "certificate of continuance" that indicated it would move to the tax haven of Labuan, an island off the coast of Malaysia." The article cites TJN's Financial Secrecy Index.

Europe puts Switzerland in its place – and the UK too Tax Research UK
Feb 16 - See comment by Richard Murphy on positive developments reported by Europolitics. "... the European Commission reiterated, on 15 February, that it is “more determined than ever to promote information exchange at the largest scale possible”.

A Hard Transformation for Swiss Banks Wall Street Journal
Feb 16 - "The latest U.S. crackdown on tax havens underlines the reality that the secretive Swiss bank model, which has existed for decades, is likely on its way out. Clients who are forced to declare their assets want good returns, rather than being content with simply shielding holdings from tax authorities."

India: Recover money from tax havens Gulf News
Feb 15 - This editorial states: "The fact that the amount of illegal funds ($500 billion or Dh1.83 trillion) stashed away by Indians in overseas tax havens is almost the same as the US's defence budget ($575 billion) puts the subject in the correct perspective."

India: Black money case: Switzerland says it is 'not tax haven' Economic Times
Feb 16 - ""Switzerland is not a tax haven," a statement from the Swiss embassy said here, denying "unsubstantiated media reports about Switzerland and Swiss banks". See TJN's view here.

Uruguay says moving forward in tax accord with Argentina Buenos Aires Herald
Feb 14 - Director of the OECD's Centre for Tax Policy and Administration, Pascal Saint-Amans, "praised the progress Uruguay has shown". The negotiation with Uruguay is for Double Taxation Agreement, which does not in fact represent progress - see TJN's Tax Treaties page. Hat tip: Markus Meinzer.

See also:
Pascal Saint-Amans finds his stride in Owens' Shoes International Tax Review

Feb 14 - Pascal Saint-Amans discusses his priorities on transparency, transfer pricing and tax avoidance. See recent TJN blog on this topic here.

EU gives hardly any credit to Greece on debt crisis The Hindu
Feb 15 - "The EU accuses us of tax dodging. But European nations continue to use Greek shipping companies that hide behind the flags of Panama or other such tax havens."

Italy: Prosecutor seeks tax trial for Berlusconi-sources Reuters

Feb 16 - "Prosecutors have asked a Rome court to put Silvio Berlusconi and his son on trial for tax evasion".

U.S.: Tim Geithner: We Need To Make Sure Corporations 'Pay Their Fair Share' Huffington Post
Feb 14 - U.S. Treasury Secretary Tim Geithner "is arguing that the current tax code is unfair and privileges some people and corporations over others."

UK: Department of Health apologises over tax deals 'misunderstanding' Guardian

Feb 16 - Reporting on payments to senior level government employees structured such that tax liability is reduced.

What libertarians are like, in pictures Treasure Islands
Feb 16 - Some observations with a definite sense of humour. Take a look.

Konrad Hummler, the tale of the fall Le Temps (In French, subscription required)
Feb 11 - On Swiss bank Wegelin, now defunct from the fallout of U.S. investigations. A curious detail - the bank ran a café on its premises with the name " 'Nonolet' as in the Latin aphorism 'pecunia non olet,' money has no smell". Hat tip: Bruno Gurtner.

0 comments links to this post