Tuesday, January 22, 2013

How multinationals help themselves and everyone else evade tax

Lee Sheppard of Tax Analysts is on blistering form, in a new article entitled Will U.S. Hypocrisy on Information Sharing Continue?
"Multinationals are an obstacle to the tax evasion discussion, not merely because they minimize their own taxes — which separate company accounting gives them license to do — but also because they lend legitimacy to tax havens and enablers.

Multinationals keep tax havens in the bank clearing system and keep enablers like Ireland and the Netherlands in the U.S. treaty system. For good measure, they resist information sharing because it would interfere with their ability to tell different stories to different governments."
In other words, by using tax havens for tax avoidance, they give these havens massive credibility and backing - and this enables havens to get on with the core business of assisting tax evasion and other crimes. (And for the record: a lot of the transfer pricing games that multinationals play constitute tax evasion, rather than avoidance, though much of it is in a grey area between the two.)

This is not exactly the main focus of Sheppard's article, which is subscription-only and covers a fascinating theme. We have been sent some of it, and will blog the rest of it if and when we get access to the full article.

An update: we now have the full article, but not yet the time to blog it properly. Still, here's another typically feisty snippet:
"The United States maintains the ancient British common law revenue rule, which says that one country will not assist another country in the en- forcement of its tax laws in the first country’s territory. The revenue rule originally allowed the British to function as pirates and Britain as a tax haven."
And she goes on to explain how the Revenue Rule is starting to break down . . .  


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