Sunday, January 31, 2010

Switzerland threatens Germany

No, not Switzerland's run-of-the-mill assault on Germany's taxpayers this time. Now Reuters is reporting:

"Top Swiss politicians, including President Doris Leuthard, and bankers warned Germany against acquiring the data."

The sheer nerve of these top politicians is breathtaking. This is data from a new informant, who is offering it for sale to Swiss authorities. This is not a completely straightforward case: there may be possible illegality involved in the obtaining data. Generally it is Germany's right-wingers such as the Free Democracts (FdP) who are advising against buying the data:

Otto Fricke, one of the Free Democrats’ finance policy experts, reminded the government of “the old saying – don’t do business with criminals”.

Members of the Green Party and Social Democrats, by contrast, urged the government to obtain the data on behalf of "honest taxpayers."

There are three reasons why Germany should obtain data. First, with German taxpayers having been roundly abused by the Swiss for decades, natural justice needs to tilt dramatically towards German taxpayers. Whose laws are being broken here?

Second, the mismatch in money involved - a tiny payment, for large direct tax revenues plus the chilling effect of the uncertainty for other tax evaders - is enormous. Third - well, the notion of dealing with tainted informants, in exchange for information to solve far bigger crimes, is firmly and honourably established in law - as is portrayed in any number of Hollywood films. Many convictions of mafia dons and other big-time criminals have been obtained this way. And there's plenty of precedent for exactly this kind of bank informant thing too.

Germany must obtain the data, without delay, and use it vigorously.


Saturday, January 30, 2010

OECD is interested in automatic info exchange

From the OECD:

The Committee is analysing ways to improve the exchange of information on an automatic basis.

We just blogged the OECD talking (timidly) about automatic exchange of information. So what's new in this?

What's new is that the above quotation, drawn from our quotations page, is almost exactly ten years old.

Ho hum. A late start is better than no start.


Friday, January 29, 2010

On the Union Banking Corporation

An intriguing tale from The Guardian, with Nazism and a slight whiff of offshore.


Keeping Foreign Corruption Out of the United States: Four Case Histories

One for the diary, from the excellent Permanent Subcommittee on Investigations in the U.S:

Keeping Foreign Corruption Out of the United States: Four Case Histories

Thursday, February 4, 2010
09:30 AM

Dirksen Senate Office Building, room 342

The Permanent Subcommittee on Investigations has scheduled a hearing, "Keeping Foreign Corruption Out of the United States: Four Case Histories," on Thursday, February 4, 2010, at 9:30 a.m., in Room 342 of the Dirksen Senate Office Building.

The Subcommittee hearing will examine how some politically powerful foreign officials, their relatives, or close associates – referred to in international agreements as “Politically Exposed Persons” or PEPs – have used the services of U.S. professionals and U.S. financial institutions to bring millions of dollars in suspect funds into the United States to advance their interests. Four case histories will illustrate how some PEPs have used U.S. lawyers, realtors, escrow agents, lobbyists, bankers, and others to circumvent U.S. anti-money laundering and anti-corruption safeguards. It will also look at how some U.S. professionals have actively helped PEPs avoid bank scrutiny or facilitated suspect transactions with no questions asked. The hearing will also examine whether U.S. policies and practices to combat foreign corruption and money laundering need strengthening. Witnesses will include government agencies, including the State Department, Immigration & Customs Enforcement (ICE), and Financial Crimes Enforcement Network (FinCEN), as well as lawyers, a realtor, and representatives of financial institutions.

A witness list will be available Tuesday, February 2, 2010."

Don't miss it!


Swiss bankers' ethical ratings tumble

The Swiss news organisation Swisster reports that:

"The 2009 ethical corporate ranking, published this week by Geneva-based Covalence, sees Credit Suisse and UBS drop down to the bottom quartile."

How they got high enough in the rankings to be in a position to fall is a mystery. Then again, look at the competitors on the ranking.


Bretton Woods: back to the future?

Gillian Tett in the Financial Times, on President Sarkozy's speech to Davos:

"Perhaps the most arresting “soundbite” was a call for a resurrection of the Bretton Woods global currency accord. “The prosperity of the postwar era owed much to Bretton Woods ... we need a new Bretton Woods,” Mr Sarkozy declared, in a speech that prompted a large part of the Davos audience to rise to their feet with wild applause. “We cannot preach free trade and also tolerate monetary dumping.”

It is amazing, isn't it, how ideas regarded as barking mad just a couple of years ago have become respectable. Even The Economist, that cheerleader for free financial markets, has mused in recent months about the future possibility of widespread capital controls and fixed exchange rates.

The "Bretton Woods" era for the quarter-odd century after the Second World War was the period when the world economy - both developed and developing countries, and in aggregate - grew faster and for longer than at any extended period of time since. And note that in those years capital flows were relatively tightly controlled (and, as an aside, tax rates were generally far higher in many countries.) We aren't necessarily saying that capital controls or high taxes caused these stellar growth rates, just that the conventional view of recent decades that anything that frees capital flows is automatically a good thing is clearly foolish. And in the past decade, plenty of academic evidence has emerged pointing to the dangers of willy-nilly-financial liberalisation.

Capital controls are not something that TJN specifically advocates - it's not a core issue for us. But we watch this new mood with great interest.


More signs of global traction for TJN's CbC standard

From The Guardian this morning:

"The Organisation for Economic Co-operation and Development, the Paris-based thinktank for the world's 30 richest nations, will publish guidelines that could force companies to reveal the profits they make and tax they pay in every country in which they operate. The development represents a major breakthrough for the British government after it backed concerted calls by non- governmental organisations to introduce the measure."

And it adds:

"Richard Murphy, joint founder of influential campaign group Tax Justice Network, said: "This is not binding and there will be resistance from business but country-by-country reporting is going to happen and the OECD is now putting pressure on the IASB to deliver this. We are moving in the right direction."

Murphy has a piece in Forbes today, exploring this issue further.

We already noted optimistic noises from the UK's Stephen Timms - though it is, of course, easy to make encouraging noises about future moves, when it will almost certainly be another government who will be implementing!

We also note what the OECD communique said:

"Participants decided to set up a Task Force on Tax and Development. This will convene in early 2010 as an informal group representative of all stakeholders, to develop clear and effective mechanisms for implementation and avoid duplication. The informal Task Force will begin by mapping out existing international efforts relating to tax and development."

One attendee of the OECD meeting in Paris (see previous blogs) sent us these comments (slightly abbreviated):
  • I miss some clear objectives about how the peer to peer review will integrate the Developing countries issues.
  • There is no clear sign that offshore centres will agree or have to be part of any multilateral process.
  • We don't know whether the civil society will be included in the PtP Review process.
  • Automatic Information Exchange is perhaps aimed at, but only as soon as the capacity in developing countries exists. This sounds to me like "you will have the right to go to the swimming pool as soon as you can swim."
More generally, I feel as if the tone of the discussion was making a gentle shift from an uncomfortable process about information exchange towards a very flat aid politics, ending up with some more computers sold to tax administrations in the south (« capacity building »).


Thursday, January 28, 2010

Timms: now consider "Automatic" and "CbC." And Justice.

Our last blog pointed to some comments by Stephen Timms, Britan's Financial Secretary to the Treasury, in Paris. Now here are some more specific comments of his, from his speech :

"This is about justice and fairness, as the NGOs have done such a good job of reminding us. But it is in the interests of developed countries too."

Quite so.

"I would like to see us take a hard look at automatic exchange of information and transparency over beneficial ownership. We need to build the evidence base for future action. We are still a long way from global automatic exchange of tax information, but that must be the destination we are heading towards."

Progress. We would like to think we've played an important role in it.

"The interest and controversy that Country-by-Country reporting has stirred up is not a bad gauge of how interesting this is as a tool. I now want to get beyond that debate and see whether this is a workable, useful tool for international transparency.

There should be transparency about where companies earn their profits and where they pay their tax. For people and companies to be part of the global economy they have to be willing to provide tax information.

Non-Governmental Organisations and Civil Society Groups are already demanding that multinationals report on a country by country basis. But there is no internationally recognised framework for them to follow.

That is why, at the Second Conference on the Fight against International Tax Fraud and Evasion in Berlin last June, I argued Country-by-Country Reporting was an issue international policy makers needed to consider. And then, following the Anglo French Summit last July, the British Prime Minister and French President called on the OECD to examine it.

I have read the OECD’s initial work, and I fully support the recommendation that we develop multinational guidelines in this area. I now call on the OECD to look at the feasibility of introducing multinational guidelines on Country-by-Country Reporting through a full and open consultation with Governments, multinationals and Civil Society partners. And I hope everyone here will support that call.

The framework would provide a consistent basis for all multinationals to follow, and establish international best practice.

I would stress that work to develop such guidelines should not impinge on the IASB’s current work on extractive industries, which the UK fully supports. I understand that a discussion paper is due to be published in February and I look forward very much to reading it.

I believe that through these combined approaches, we can make decisive progress."

Yes, we'd agree that there has been more progress. TJN, and particularly its senior adviser Richard Murphy, have played the central role in bringing this onto the global agenda.

But now, this next bit is where we beg to differ.

"The approach to transfer pricing guidelines is linked. The OECD has clear guidelines on a comprehensive transfer pricing system. We have internationally agreed rules on transfer pricing that determine which country can tax what profits where a group operates in more than one country.

They reflect international consensus, prevent double taxation that would inhibit and distort trade and, they are widely understood."

International consensus? Not so fast. TJN is gearing up for a major transfer pricing project in the not too distant future. Transfer pricing - this is a big one.

And we've got a couple of other cards up our sleeve. Watch this space.


Are things hotting up in Paris?

From our correspondent blogger Martin Hearson - at the OECD's headquarters in Paris

UK Treasury Secretary Stephen Timms and the OECD have confirmed that an internationally-agreed country-by-country reporting standard is expected by the end of this year. It will be part of the OECD Guidelines for Multinational Enterprises, a set of voluntary standards that are often ignored by business, but do have a non-binding dispute mechanism.

The discussion here, even among several multinational companies (when pressed) has moved on to what information should be included within a country-by-country reporting standard, and how it should be reported, not about if it should be done. A number of MNCs either already collect this information, or say it would be difficult but possible.

The UK has announced that by the end of 2010 it will sign a multilateral tax information exchange agreement with developing – mostly African – states. It is inviting other countries to join the same agreement, making it a many-to-many agreement, something we’ve called for as a first step.

Sitting alongside the Council of Europe-OECD convention on info exchange, it means there are two multilateral options for developing countries to exchange information – on request. The proof of the pudding will be whether OECD members and eventually secrecy jurisdictions join these agreements, and how much support is offered to developing countries to join.

Automatic is in! For the first time in a public forum, Jeffrey Owens said “Automatic versus on-request is a false debate. It’s not on-request OR automatic, but both. Which is best depends on the situation.”

Stephen Timms said, “we need more moves in the direction of automatic information exchange,” and said “the point was rightly made” that we also need to address beneficial ownership.

The President of Mexico’s tax administration said “we should all be moving towards automatic information exchange.” Of course, nothing so concrete yet, but this is a definite shift in what the OECD and UK are prepared to say publicly.

A tax and development task force is to be formed – this is the OECD’s headline. It will include ‘all stakeholders' and will start off by doing mapping work.

The OECD communiqué is here:

Stephen Timms’ speech is here:

Richard Murphy’s been live-blogging is here:


Panama: from black sheep to white list?

Panama, an especially murky tax haven, seems to think it is on track to be removed from the OECD's so-called "white list", as this Le Figaro story notes, quoting its new Economy Minister Alberto Vallarino.

"My government's priority, since starting work last July, is to put an end to this false reputation as a tax haven."

Yes, Mr. Vallarino, they all say that.

So you'll be getting rid of bearer shares, will you, where the principal owner is unknown? You'll be stamping out the crime-inducing practice of allowing Panama Foundations owning Panama Corporations, for unbreakable secrecy? You'll be wiping out the use of Panama shelf companies, which let you falsely backdate your ownership? There will be no more "Panama IBC and Bank Accounts?" You will put details of trusts and company accounts, and beneficial ownership, on public record, and prohibit company redomiciliation?

Curiously, in the Le Figaro interview, no mention is made of any of these things. What it says, instead, is that Panama will seek to get onto the OECD's whitewash, sorry, white list, by signing a mere 12 tax information exchange agreements with other jurisdictions -- agreements that are based on the appallingly lax "on request" standard of information exchange which is slightly, but not much more, better than nothing. As one top international tax expert put it, the OECD's information exchange / blacklist process has been a "sad joke."

Just as bad, Valarrino praises the whitewash Panama has received from the myopic Financial Action Task Force (FATF):

"We are very regarded by the FATF for our actions against money laundering. We have absolutely nothing to hide."

We do admire Mr. Vallarino -- though only for his chutzpah.


The Implied Tax Revenue Loss of Trade Mispricing

From the Financial Task Force blog:

"A new GFI report due out later this week, The Implied Tax Revenue Loss of Trade Mispricing, finds that developing countries are losing as much as $100 billion a year to just one form of tax evasion: trade mispricing.

'Furthermore, the report’s $100 billion figure is likely understated, as it only reflects tax revenue lost through trade mispricing occurring through re-invoicing. The report also only measures tax revenue lost on illicit money coming out of developing countries, it does not take into account money that is being held abroad.'"

Something to watch for. More details on magnitudes and measurements here.


Wednesday, January 27, 2010

Offshore insider to blow whistle, again

We've noticed this, from Offshore Alert, which runs well-attended annual conferences on offshore.

"Former offshore private banker Rudolf Elmer will 'tell-all' about his experiences as a Bank Julius Baer whistleblower in an appearance at this year's OffshoreAlert conference in May.

Elmer has agreed to talk openly and frankly about what he believes is the bank's complicity in global tax evasion by its clients and go into the reasons that made him offer client-records to the world's tax authorities."

As Elmer says:

"If I had not worked in eight well-known Offshore Financial Centers and finally in Africa, I would not have discovered the biggest predatory theft in history of humanity and its catastrophic consequences for the poorest people of the earth."

"The people of this world demand fair play in sport, why do they not demand this also from the financial institutions and multi-national conglomerates which maintain dubious companies in OFCs simply to evade or avoid paying their fair share of taxes in their homeland?"

One downside for the OffshoreAlert conferences, though - they cost a fortune.


A history of money laundering

Well, it's more than a history - it's a policy document too -- but anyone interested in money laundering would do well to read this recent publication from the Amsterdam-based Transnational Institute, entitled Countering Illicit and Unregulated Money Flows: Money Laundering, Tax Evasion and Financial Regulation. As it notes:

"Tackling tax evasion is still in its infancy, and there is a growing awareness that the AML regime is not working as well as intended.

Experts still ponder how to implement one that works. Tax havens and offshore financial centres (OFCs) were identified as facilitating these unregulated and illicit money flows. The 2007-2008 credit crisis made only too clear the major systemic risk for all global finance posed by the secrecy provided by tax havens and OFCs. They were used to circumvent prudential regulatory requirements for banks and other financial institutions and hide substantial risks from onshore regulators."

Those interested in this crucial issue would do well to read this.


On Google, France, banks, and Country by Country reporting

We are pleased to see an article in France's Le Monde newspaper which makes note of one of TJN's core issues:

"With the 'Google Affair' of January 7th, French people discovered, to their astonishment, that a super-rich multinational could, entirely legally, lighten its tax load by setting itself up in a country with low, even zero, taxes. A tax haven. It could undertake major commercial activity in France and derive great benefits from it, but pay the bulk of its taxes elsewhere, in Ireland where Google has its head office."

The article delves into the issue of transfer pricing - an issue of colossal importance where TJN is gearing up for a major project in due course - there's nothing especially new in Le Monde's analysis, but the focus is most welcome. It follows in the honourable footsteps of a major exploration of this subject in the context of the international banana trade, in Britain's The Guardian newspaper in November 2007, which you can find here.

Eva Joly, the crime-busting investigator who spearheaded the investigation into the gigantic, free-wheeling and significantly offshore Elf Affair from 1994, notes (loosely translated) that

"the awakening as to the importance of tax evasion by corporations is galloping ahead, judging by the mobilisation of non-governmental organisations" . . . . (Joly) compares the phenomenon to what happened to awareness of corruption in global commerce at the beginning of the 1990s: 'a battle that was misunderstood at the beginning, but which resulted in 1998 in an OECD convention requiring nation states to fight against corruption.' "

It is now considered astonishing, of course, that nobody thought seriously of this - trying hard to fight corruption -- before the 1990s. Offshore tax dodging, we hope, will head the same way - though the vested interests in this case are, to generalise, far bigger and more powerful than was the case with that ongoing struggle against narrowly-defined corruption.

And we like the end of this Le Monde article:

"According to Christian Chavagneux, co-author of the book "Les paradis fiscaux", one really effective measure would be to "require multinationals to publish, on a country by country basis, their turnover, their profits and their taxes. That way we could find out if their activities correspond to economic reality."

No economic sector is more important in the modern day than financial services. That is why it is essential to consider Country-by-Country reporting for banks, as a kind of Plimsoll Line to work out what they're up to. Read more on that here.

Click on our A-Z archive page to find the French version of our Country by Country reporting paper, and our German version.


The Billboard of (Tax) Justice hits British streets

A short guest post, from ActionAid.

The clock is ticking for over nine million people filing their tax returns this month and those missing the 31st January deadline will receive a £100 fine, but the world’s poorest people already face a much bigger penalty of their own.

This morning ActionAid’s Outlandish Revenue Service hit the streets of London with a giant mobile billboard (click to enlarge), reminding the government of the deadline they agreed at the G20 to help developing countries tackle tax dodging by the end of 2009.

Decisive action is well overdue, but let’s hope the government steps up with a couple of seriously sensible solutions at the OECD tomorrow.


Tax, Global Poverty and the City

Highlighting a training event in London, open to any and all Christian Aid supporters and those interested in tax justice.

Date: Saturday 20 March 2010
Time: (arrive at 10am) 10:30am – 4:30pm
Location: Christian Aid, 35 Lower Marsh, Waterloo, London, SE1 7RL
Cost: Free (lunch included)
Booking essential: Contact Campaigns on 020 7523 2264 or email

Who is this day for?
This training day is aimed at anyone who has either already campaigned on tax justice or would like to find out how to campaign for tax justice in 2010.

Keynote Address - Tax, Theology and the City
By William Morris, curate at St Martin's in the Fields, London and tax lawyer at a major multinational company in the City. William Morris will give a personal and theological reflection on how he reconciles the two parts of his working life. He will highlight his views on how the City perceive the concept of tax justice and will also challenge activists regarding what campaigning is effective within the City.

What is the context?
2009 saw tax rise high up the international political agenda as governments across the world realised the damage that tax dodging was causing to their economies. With a general election around the corner and further G20 meetings planned, 2010 is the year when we need to turn favourable political rhetoric on clamping down on tax dodging into firm action. Action that will help the 1.6 billion people still living in extreme poverty through ensuring that the US$160Bn currently lost through tax dodging is returned to the world poorest countries.

What will this day focus on?
  • The importance of tax in tackling global poverty and corruption
  • The impact our campaigning is having on political parties and the City
  • How the tax campaign will develop in 2010 and ways to be involved


US IRS moves to uncover tax shelters

From the New York Times:

"The Internal Revenue Service said on Tuesday that it would require large corporations to reveal basic information about their tax transactions, a surprise move intended to root out questionable or illegal tax shelters.

Under the plan, companies with assets of at least $10 million that also file broader disclosures with the Securities and Exchange Commission would be required each year to provide the I.R.S. with information about tax transactions that might be challenged by the agency."

Good stuff - and judging by the reaction from the pinstripe infrastructure, this one may have bite.

“This is a massive, very important shift,” said Robert Willens, an accounting and tax expert in New York. “Corporations have treated audits as a game of ‘come see what you can find, we’re not going to volunteer stuff,’ and now the balance of power will shift to the I.R.S.”

The Internal Revenue Service (IRS) spends a quarter of its time in routine corporate audits simply trying to ferret out issues, IRS Commissioner Doug Shulman said.

“That is inefficient and a terrible waste of time. . . The goal is simple: to cut down on the time it takes to find an issue and to complete an audit.”

Makes sense.


UK to Promise Tax Info Deal With Poor Countries

We just blogged the UK government's willingness to put forward TJN's proposal for County by Country reporting. Now, from Reuters:

"Britain will promise on Wednesday to set up an agreement with developing countries to combat tax evasion by the end of the year, a finance ministry spokesman said on Tuesday.

The proposal would provide a framework for developing countries, predominantly in Africa, to share information on possible tax evasion with Britain and each other without having to set up a series of bilateral agreements.

"The UK will commit to finalise a multilateral tax information exchange agreement by the end of the year with a variety of developing countries and will urge other developed nations to follow our lead," the spokesman said."

We await more details, but this looks like progress. Still, the model of Tax Information Exchange Agreements (TIEAs) as espoused by the OECD and endorsed by OECD countries are woefully inadequate. Read more here.

Update: more details on this here. Timms' words do endorse the OECD's shabby and unacceptable "on request" standard.

"The immediate priority is getting a multilateral agreement signed so that developing countries do have access on request to the kind of information that they need," Timms said.

Why can't he just leave those two words -- "on request" out? One could be forgiven for thinking someone is leaning on him, to protect secrecy.


An Anatomy of Economic Inequality in the UK

A new government-sponsored study from the London School of Economics, entitled An Anatomy of Economic Inequality in the UK, which The Guardian says is "more ambitious in scope than any other state-of-the-nation wealth assessment project ever undertaken," makes for sobering reading.

Perhaps its most startling conclusions are that the richest 10 percent of Britain's population is over 100 times as wealthy as the poorest 10% of society, and that inequality has reached its highest level since government began recording it. The UK also now has the seventh worst inequality in the OECD, ahead of only Mexico, Turkey, Portugal the United States, Poland and Italy.

Some people think that the great recession will have caused some kind of "reset" of the trend and that we will now start to see inequality falling, just as happened after the Great Depression. Not so: the key difference between then and now is that the Depression caused political revolutions around the world, with politicians succeeding in bringing Big Finance, and inequality, to heel. Now, despite the half-hearted and/or belated moves by Barack Obama, Gordon Brown and others, finance remains firmly in charge in politics, and as a result inequality will keep rising, ever further into the stratosphere.

Some say inequality doesn't matter: it's absolute levels of wealth and income that matter. On our quotations page we note the words of the great economist J.K. Galbraith, who correctly characterised this kind of thinking:

"It is the 'horse and sparrow' theory of income distribution and its taxation. If you feed a horse enough oats, some will pass through to the road for the sparrows."

How fortunate we sparrows are that the horse is so well fed. Gor bless yer, guvnor!

But it's not just contempt that is the problem with this world view. To understand why inequality really does matter, read our summary of another vast research project into inequality, here.


Tuesday, January 26, 2010

Tax evasion stifles poorest nations

As reported in The Guardian today:

"On Thursday in Paris, (UK) Treasury minister Stephen Timms will stand up at a meeting of finance and development ministers from around the world, to discuss a radical shake-up of the way multinational companies present their accounts.

Timms is due to give a presentation to the OECD conference entitled "Country-by-country reporting", setting out how a change in financial reporting standards for multinational companies could help developing countries tackle tax avoidance."

Rather than summarise, we simply urge you to read Martin Hearson's excellent article. And read more about Country by Country reporting here.


Monday, January 25, 2010

EU-ACP discussions alive to havens and CBC reporting

The European Union has a long history of special relationship with the formal grouping of 79 African, Caribbean and Pacific (ACP) countries since the Lomé convention of 1975. It focused on political dialogue, commercial relations and development cooperation within the multilateral framework.

A new framework agreement between the two groupings is due to be signed by March this year. We are pleased to note that a new report on the progress on the ACP negotiations has been produced by Eva Joly, and notes that

"The European Parliament calls on the Commission and ACP governments to include the fight against abuse of tax havens, tax evasion and illicit capital flight as a matter of priority in the Cotonou Agreement. An international binding mechanism would force "all transnational corporations to disclose automatically the profits made and the taxes paid in every ACP country where they operate". According to MEPs, effective and viable tax systems in the ACP countries could be a source of development funding, which could in the long term replace foreign aid dependency."

Bit by bit, more progress. A very, very long way to go.


Friday, January 22, 2010

Murphy in Forbes on Obama's bank attack

TJN senior adviser Richard Murphy is in Forbes magazine, writing about the new Obama attack on the bank Terminators.


Komisar Scoop, on form

Lucy Komisar, a New York-based investigative journalist, has a website worth watching - as we've mentioned on our links page ( and please let us know if you think there are important ones we've missed.)

Check out her latest, here, and scroll down her home page for more.


Angel Gurria: we want consultation on country-by-country reporting

The OECD's Global Forum on Development meets in Paris on 28th January to consider how tax contributes to development. Like us, they know that good tax policies play a crucial part in tackling poverty and promoting sustainable (which includes equitable) development.

One of the items on the agenda is our proposal for country-by-country reporting by multinational companies. This proposal, just by itself, is likely to release more tax revenues for developing countries that the combined aid budgets of the entire OECD community.

In a letter to OECD Secretary General Angel Gurria, no less than 34 civil society organisations call for the OECD to carry out a review of the feasibility and impact of country-by-country reporting. The French and U.K. governments have already called for such a study, and asked that the OECD report on it to the 2010 G-20 summit later this year in Canada.

What we say in our letter, however, is that it is essential that the OECD includes a full range of stakeholders in its consultations on country-by-country report, not least civil society, especially since the idea originated from a meeting of senior TJN advisers in Saint Helier, Jersey, in October 2002.

In another submission to the OECD in advance of the Global Forum next week, civil society organisations working on tax justice matters lay out their agenda for helping developing countries tackle poverty through mobilising their domestic resources. Our top priorities include country-by-country reporting; strengthening tax information exchange and making automatic exchange the appropriate global standard to aim for; researching the mechanisms and magnitudes of cross-border illicit flows and tax evasion; and, not least, promoting and strengthening a variety of global fora at which developing countries can meaningfully participate in the process of formulating appropriate measures for strengthening international tax cooperation.


Norway opens its books

The Extractive Industries Transparency Initiative (EITI), inaugurated amid great fanfare in 2003 by Britain's then Prime Minister Tony Blair in 2003, aims to work with governments in mineral-rich nations to publish financial and other data related to their minerals industry, as a step to improve transparency.

It is generally a good initiative, and a good idea, complementing work by others to achieve transparency through global-level initiatives, thought it does have some flaws (some of which we commented on in a Financial Times op-ed a while back). One of its greatest flaws has been that this has been seen as an initiative that corrupt and impoverished nations in Africa, Latin America and elsewhere should submit to this transparency initiative, but 'clean' governments in mostly white, rich nations were above that kind of thing.

It is a hypocrisy that has not been lost on the leaders of some of those countries being encouraged to join EITI, but now we are delighted to learn that Norway has broken the mould and decided to have the humility to submit its own oil sector to the EITI framework.

As the well-regarded industry newsletter Upstream notes:

"Norway this morning became the first western nation to publish a comprehensive report on payments made by oil companies to the government under the Extractive Industries Transparency Initiative (EITI)."

Well done, Norway - a little late, though. Now how about some of those other countries with, ahem, 'clean' oil sectors, following Norway's lead?

Anyone for Britain? Or the United States? Who knows, it might help us understand more about these secretive industries.

And let's not forget the bigger goal: country-by-country reporting, not just for extractive industries, but for all sectors.


GFI Launches "G20 Transparency" Campaign

A release from our colleagues at Global Financial Integrity in Washington. Please sign the petition - it takes a moment, no more.

WASHINGTON, DC - Global Financial Integrity (GFI) launched its "G20 Transparency" campaign today, an international grassroots sign-on drive to collect 100,000 signatures on a petition calling for greater transparency in the global financial system. The petition will be delivered to Canadian Prime Minister Stephen Harper prior to the G20 meeting in Toronto at the end of June.

The campaign kicked off with the debut of, a Web site devoted to the campaign where supporters may read and sign the petition, which will be available in Arabic, Chinese, French, Russian and Spanish. The Web site will also allow supporters to share the petition with others via peer-to-peer and social networking tools.

The petition states:

Research shows that each year $1 trillion in illicit money flows out of developing countries - roughly ten times the amount of official aid money that is received. The World Bank and others have cited these estimates repeatedly. Illicit money flows are facilitated by an opaque financial system comprised of tax havens and secrecy jurisdictions. Illicit capital outflows greatly exacerbate poverty and lead to the deaths of millions of people. Illicit financial flows constitute a human rights problem of huge proportions.

The world's largest economies - the G20 nations - will meet in Toronto on June 26-27, 2010. They have an unprecedented opportunity to institute changes that will create a transparent global financial system that is open, accountable, fair and beneficial for all.

"We intend to send a clear and resounding message that the world wants G20 leadership to recognize that human rights and international financial integrity are intimately linked," said GFI director Raymond Baker. "Where poverty is pervasive, civil, political, and economic rights often go unrealized. Today, large outflows of illicit money - many times larger than all development assistance - greatly aggravate poverty and oppression in many developing countries."

For more information go to or contact Clark Gascoigne at 202-293-0740 or


The Age of Greed: the video

Its a story that has all the elements of a great movie: greed, secrecy, crime, arrogant billionaires, government investigators, and even a witness who's in hiding. Watch it here:

"Tens of thousands of America's wealthiest citizens are using offshore secrecy jurisdictions to hide trillions of dollars and avoid paying their fair share of taxes" - Senator Norm Coleman

"Tax havens are engaged in economic warfare against the United States" - Senator Carl Levin


Obama takes on the bank terminators

We'll keep this post short, as we digest this latest news about Obama taking on the banks, putting new limits on their size and curbing their ability to make what he called "reckless investments." Initial gut feeling is good, with Paul Volcker, who has been robust on how to deal with the banks, standing next to Obama during his announcement, and the much-reviled Treasury Secretary Tim Geithner looking unhappy. The New York Times is calling this

"a shift in power within the administration away from those who had been seen as most sympathetic to Wall Street."

and we like the tone of Obama comments about bankers such as:

"If these folks want a fight, it's a fight I am ready to have."

In the Financial Times, Gillian Tett likens bankers to The Terminator in the Arnold Schwarzenegger film, who seem to have taken a mortal blow but keep coming back. But she sounds a note of caution, too, arguing that this blows a hole in months of painstaking work to achieve global co-ordination on regulation. Still, better to start later from a stronger platform than to start earlier from a shakier one. A last word to The Guardian:

"Make no mistake, this was a big moment. The argument every timid policy maker in Britain makes when confronted with the need for reform of the City is that there is no point in doing anything unless the Americans are on board."


Thursday, January 21, 2010

Letter from Chicago - yup, inequality matters

The New Yorker is running a fascinating piece about the crisis at the Chicago school of economics, built on efficient-markets hypothesis and rational-expectations theory, which is behind this whole recent mess. The news about Chicago's intellectual crisis isn't new, but this does have some great quotes. The blurb says:

"Earlier this year, Judge Richard A. Posner published “A Failure of Capitalism,” in which he argues that lax monetary policy and deregulation helped bring on the current economic slump. Posner has been a leading figure in the conservative Chicago School of economics for decades. In September, he came out as a Keynesian. As acts of betrayal go, this was roughly akin to Johnny Damon’s forsaking the Red Sox Nation and joining the Yankees.

But there's something else worth remarking:

"Raghuram Rajan, an Indian-born Chicago professor, is one of the few economists who warned about the dangers of the financial crisis. In 2005, he said that deregulation, trading in complex financial products, and the proliferation of bonuses for traders had greatly increased the risk of a blowup. In a new book he’s working on, “Fault Lines,” Rajan argues that the initial causes of the breakdown were stagnant wages and rising inequality. With the purchasing power of many middle-class households lagging behind the cost of living, there was an urgent demand for credit."

Inequality is not only undesirable in itself. It also helped cause the crisis, on this reading. Read more on the demand for credit here. Read more about inequality here.


Cadbury and Kraft's occupying army

We just blogged about the often value-destroying nature of mergers and acquisitions, related to the Kraft and Cadbury deal - but we had missed this story by Will Hutton and Philip Blond in the FT. Supporting our case, the story notes that:

"Recent academic work shows mega-mergers, which make up 43 per cent of all money spent on acquisitions, destroy value. In the US between 1980 and 2007 mega-mergers lost, in aggregate, $413.5bn. When a hostile bid was involved, overpayment led to a 14.9 per cent loss of value."

And on the Kraft-Cadbury, deal, the authors note that:

"After such acrimony Kraft will enter Cadbury like an occupying army intent on doing what it must to deleverage fast – the clash of values, people and strategy that is so destructive after hostile bids. The interest on the debt used to buy Cadbury will be set against profits in the UK or in whatever jurisdiction or manner Kraft decides to declare its new profit stream for tax efficiency. Another part of our tax base has disappeared, and the UK taxpayer will have partly paid for the privilege."

Great minds obviously think alike. Why so many other great minds haven't cottoned on to this is, like so much else about the offshore system, a mystery to us. Perhaps we ought to post all this kind of stuff onto this page (go on, take a look, and note the web address). They add:

"the deal is bad for Cadbury, competition, consumers, the tax base and future entrepreneurs. There are just two winners: bank advisers now £250m richer and Ms Rosenfeld – at least until the bid goes wrong."

What to do? Among other things:

"It is time for a wholesale review of corporate governance, shareholder responsibilities during takeovers, tax treatment of debt interest, the incentive structures in asset management and competition rules."

Yes! Wake-up is happening!


Jersey flies undone, again

Our attention has been drawn to the following notice put out by Jersey's Comptroller of Income Tax:

Foundations (Jersey) Law 200-

Advice for Jersey residents considering registering a ‘Foundation’

It is advisable that, if a Jersey resident is considering registering a Foundation or has any interest in a Foundation he or she should provide the Income Tax Office with full details as to the reason(s) for doing so and the purpose of the Foundation and seek pre-clearance from the Comptroller before going ahead.

Failure to do so will lead the Comptroller to take the view that creating a Foundation has as one of the purposes, or the main purpose, the avoidance of Jersey tax.

The Comptroller will counteract such avoidance under the provisions of Article 134A of the Income Tax (Jersey) Law 1961.

Comptroller of Taxes

12 December 2009

What can we say? Like so many other secrecy jurisdictions, Jersey plays with fire by offering tax evasion services to non-residents, but doesn't like it when its own residents start playing the same games. Hence their strong anti-avoidance provisions targeted at the local population. The Comptroller is merely stating the bleeding obvious when s/he suggests that the purpose, or main purpose, of creating a foundation in Jersey is tax avoidance. What other purpose might such a foundation serve?

As Tax research puts it:

So now we have incontrovertible proof: Jersey has deliberately created a structure for the use of those not resident in its jurisdiction which it knows has the sole or main purpose of tax avoidance (at best) . . . If you wanted proof that everything I and others have said here over many years is true – here it is.

Why doesn't the government of Jersey come up with new ideas for producing goods and services that might serve a useful purpose, instead of peddling such "innovations" as foundations and revocable trusts, which undermine human well-being and promote criminal activity?


Wednesday, January 20, 2010

Warren Buffett shows his true colours

Warren Buffett rose in many people's estimations in 2008 when he observed that

"In our office fifteen people cooperated in a survey out of eighteen: my total tax - payroll taxes plus income taxes - mine came to 17.7 percent - and the average for the office was 32.9%. There wasn't anyone in the office, from the receptionist up, who paid a lower tax rate. And I have no tax planning, I don't have an accountant, I don't have tax shelters. I just do what Congress tells me to do."

Well, now he's come out, in two different places simultaneously, in favour of tax abuse. First, in discussing a recent takeover deal involving Kraft and Cadbury, saying that Kraft used an “enormously tax-inefficient way” for the sale. As we noted in our short Dictionary of Offshore Obfuscation (see the bottom of this blog), "tax-efficient" means "efficient for me, but not for you." In other words, there's no overall efficiency gained, as a rule.

And this needs pointing out - a lot of mergers and acquisitions over the years have been driven very substantially, and sometimes entirely, by the logic of tax abuse. A predator sees a takeover target, and sees that it isn't being tax-abusive enough. So it takes over the target, in order to be able to play the tax-dodging game more effectively, such as by using that takeover target's particular geographical configuration to get into new kinds of tax gymnastics, in order to wring more money out of taxpayers (and what goes for tax, here, also applies to regulation in the financial sector.) This kind of thing is especially common in private equity deals.

Note that nobody's made a better, cheaper widget here - it's just about redistributing money, nearly always from the poor to the rich. And a good slice of the benefit ends up in the pockets of management - as noted in an example here.

It's hardly surprising that so many mergers and acquisitions destroy value, if the primary aim isn't to increase real productivity, but instead simply to play financial engineering. Buffett is simply talking his own book here.

And now we have Buffett coming out against a bank tax.

“I don’t see any reason why they should be paying a special tax,” said Buffett . . . Supporters of the plan to tax the banks “are trying to punish people,” he said. “I don’t see the rationale for it.”

Once again, Buffett is talking his own book. And guess what? He owns a chunk of banks Wells Fargo, and provided an equity injection for Goldman Sachs. As the usually well-informed Naked Capitalism notes:

"This little bit of lobbying via the media should end any delusions that Buffett is a friend of the little guy. But what is even more striking is his failure to mount a serious argument. . . . You can argue about the design of the tax, but there is nothing wrong with the logic."


Ghana - the next tax haven?

The Guardian is running this story. It speaks for itself.

"Ghana has had a stern warning from the Organisation for Economic Co-operation and Development to ensure that its emergence as a tax haven does not fuel corruption and crime in west Africa.

Ghana is becoming an offshore financial centre but Jeffrey Owens, head of the OECD's Tax Centre, said: "The last thing Africa needs is a tax haven in the centre of the African continent." Ghana wants to become a west African financial hub, taking advantage of its emergence as an oil producer. This year the first of Ghana's 3.2bn barrels will begin to flow from its waters.

The OECD is in talks with Ghana to guarantee the country "adheres to the highest standards and integrity". Owens said Ghanaian officials "are aware of the risks they are running". Barclays Bank has been advising Ghana's government on establishing its financial centre.

Wilson Prichard, a researcher at the Institute of Development Studies who has closely followed Ghana's development as an offshore centre, said: "Aside from the general social costs associated with the operation of tax havens globally, in the absence of a very strong regulatory framework and very strong standards of transparency there's a particularly high risk that a tax haven in west Africa, which is home to major oil wealth and high levels of corruption, could facilitate large-scale corruption and tax evasion, and pose a correspondingly large risk to good governance and economic growth in the region.""

Barclays, too, might like to consider, in the context of our recent blog, what corporate responsibility means. Shame on it. And well done the OECD for saying what needs to be said.


Hidden Treuhand, Trusts: time to "get it"

We just had a belated comment posted on a Guest Blog we hosted a while ago, about the Hidden Treuhand mechanism, similar and related to the material we've posted on trusts. The blog focused on Shelley Stark's book, Hidden Treuhand (pictured.) The comment noted:

"I read Ms. Stark's book shortly after it came out. It became abundantly clear to me that she answered how some of our elected or appointed officials were evading the conflict of interest laws or policies which require divesting oneself of financial relationships with certain corporate or investment entities depending on the area of influence or oversight the official has in their offical capacity.

The answer is they don't divest themselves. They hide themselves, their investments and their profits in these types of financial instruments. No wonder corruption and unethical behaviors are at an all time high both in government and industry.

And the most frustrating thing to me is that so many people I try to share this with just don't get it. They cannot afford not to "get it." This financial crime is affecting all of us profoundly, particularly those who work for a living and don't have international banking and lawyer resources at our fingertips."

Indeed. It all relates up to different areas we've been addressing: corporate responsibility, the integrity of markets, inequality, political accountability and so much more.


UK company law is terrorism's friend

Our senior adviser Prem Sikka has an excellent article in The Guardian newspaper with the above headline. It is full of insights, links and analysis about the permissive nature of British company law, including:

"The UK law also allows companies to become directors of other companies. These companies can be registered in secretive tax havens. Over the years, I have conducted many investigations into dubious corporate practices for newspapers, radio and television programmes and the trail always leads to tax havens, which hold no public information about the individuals behind those companies. The registered address is about the only publicly available information.
. . . .
The anonymously controlled companies registered in tax havens control and direct UK companies. The public has no idea who the real owners are and who they are really dealing with."

Better still, read the whole article.


Tax protestors, the IRS, and bogus theories

We recently got a round-robin email from someone who had been watching an independent film in which it was being argued that "the legitimacy of the IRS (the U.S. Internal Revenue Service, or tax authorities) to demand income tax is unproven under the U.S. Constitution, and interviewed people who said they "have not submitted tax returns for several years."

This follows news that the singer Billy Bragg (pictured) has decided not to pay tax, in protest at treatment of bankers and so on - though this is not to lump Bragg in closely with these other anti-tax protesters - he's clearly angered by a great injustice here and his protest has a logical coherence that the U.S. tax protesters don't have.

It's important to address theories and approaches like theirs, since a fair few number of people do seem to believe them.

First, a professor of tax law who responded to the email noted that:

"The gentleman has run into a rather widespread tax protest movement in the US which has no basis whatsoever in law. Many of those who follow the advice of the tax protesters have ended up in jail, and others have paid large penalties, and many of the protest promoters themselves have ended up in jail. In brief, the claim that the US government does not have the power to tax income under the US constitution is a cruel and stupid hoax."

Next, we should point out that a lot of these tax protestors are coming from viewpoint which holds that somehow tax is "theft" and therefore illegitimate. Well, in response to that, we can point you back in the direction of Martin O'Neill's piece in the latest edition of Tax Justice Focus, who notes the circular reasoning of those making these kinds of claims:

"If actually-existing property rights are constructed by the legal rules of property, including the rules of taxation, then one is making an error of reasoning in appealing to property rights in order to justify specific kinds of changes in, say, taxation rules.
. . .
Private property is a legal convention, defined in part by the tax system; therefore, the tax system cannot be evaluated by looking at its impact on private property, conceived as something that has independent existence and validity.”

Finally, an excellent source on this is Citizens for Tax Justice in Washington, who published a document last April looking (briefly) at this, entitled "Answers to Your Tax Day Questions." Note also the IRS link in the notes underneath, which provide a much fuller set of answers.

The relevant section from CTJ is cut and pasted below.

Part 5: Tax Protestor Arguments

1. Question: I heard that federal income taxes aren’t really legal. Is that true?

Answer: You heard that from a radical anti-tax activist who wants the courts to accept outrageous legal theories. Or worse, you heard that from someone who is trying to sell you a bogus tax scheme.

Two arguments about the legality of the federal income tax are raised by tax protestors. The first is that federal income taxes are unconstitutional because the 16th Amendment was not properly ratified, or because Ohio was not properly a state at the time of ratification. Ohio’s status as a state was confirmed in 1953 retroactive to 1803, and even without Ohio, enough states ratified the 16th Amendment. The second argument is that the 16th Amendment does not authorize a direct non-apportioned federal income tax on U.S. citizens, but the U.S. Supreme Court has explicitly held that it does.8

2. Question: Is it true that the Internal Revenue Service is not an agency of the United States, and may even be illegal?

Answer: Tax protestors argue that the IRS is illegal because it was created by an act of the Treasury Department rather than by Congress. However, Congress had expressly delegated to Treasury full authority to administer and enforce the internal revenue laws and to create an agency to enforce them.

3. Question: Isn’t filing an income tax return “voluntary” and doesn’t that mean I don’t have a legal obligation to file a return?

Answer: “Voluntary” refers to our system where taxpayers initially complete their returns and determine their tax, rather than having the government do it. Protestors often cite a Supreme Court decision stating “our system of taxation is based upon voluntary assessment and payment” and point to the IRS Form 1040 instructions that state that the tax system is voluntary. “Voluntary” here means self-assessed, it doesn’t mean optional. The requirement to file a return is squarely in the internal revenue law.9

4. Question: Are salary and wages “income”? I heard that compensation isn’t legally taxable.

Answer: The income tax code says that gross income is “all income, from whatever source derived.”10 Anyone who says that doesn’t include wages is wrong.11

5. Question: Do the tax protestors actually believe all the nonsense they’re promoting?

Answer: While some might be true believers, many so-called tax protestors do not believe any of it but are rather trying to sell you a bogus product.

They want taxpayers to buy their “Pay No Taxes” book12 or their “Tax Termination Package,”13 which are schemes that they claim will get you out of paying your income taxes. They are based on legal arguments that have never been held to be legitimate by a U.S. Court. They are, pure and simple, scams. The courts have not only rejected these arguments as “without merit,” they have imposed fines, penalties, and prison sentences for the promoters.14 Taxpayers should avoid these schemes.15


8 In United States v. Collins, 920 F.2d 619, 629 (10th Cir. 1990), cert. denied, 500 U.S. 920 (1991), the court cited to Brushaber v. Union Pac. R.R., 240 U.S. 1, 12-19 (1916), and noted that the U.S. Supreme Court has recognized that the “sixteenth amendment authorizes a direct nonapportioned tax upon United States citizens throughout the nation.” See also Internal Revenue Service Revenue Ruling 2005-19, 2005-1 C.B. 819.

9 Internal Revenue Code Section 6011. 26 U.S.C. 6011. See also Internal Revenue Service Revenue Ruling 2007-20, 2007-14 I.R.B. 863.

10 Internal Revenue Code Section 61. 26 U.S.C. 61.

11 Internal Revenue Service Revenue Ruling 2007-19, 2007-14 I.R.B. 843.

12 Alexander Hamilton, Pay No Taxes,

13 Offered for $39.95 at until stopped by a federal injunction.

14 There are other bogus income tax avoidance schemes, like the “Claiming the Slavery Reparation Tax Credit Guide” which tells African-American taxpayers (for a fee) how to claim a tax credit that has never existed. See Internal Revenue Service News Release IR-2002-08, Slavery Reparation Scams Surge, IRS Urges Taxpayers Not To File False Claims, January 24, 2002, available at

15 For information about tax protestor arguments in general, see Internal Revenue Service, “The Truth about Frivolous Tax Arguments,” February 9, 2009.,,id=159932,00.html#_Toc153765517

Just so you know.


Tuesday, January 19, 2010

On corporate responsibility, malaria, and tax

The Guardian has a headline today "Glaxo offers free access to potential malaria cures" and adds that Glaxo-SmithKline plans to publish details of 13,500 chemical compounds from its own library, with potential to act against the parasite that causes malaria in sub-Saharan Africa and kill at least one million children every year.

Malaria's no joke, as this blogger can testify, and while we cannot assess the substance of what's going on here, the sentiment seems right. Yet from our point of view, the key point is this paragraph:

"Andrew Witty, the British boss of Glaxo-SmithKline, will say in a major speech that multinational drug companies have to balance social responsibility alongside the need to make profits for their shareholders. There is, he will say, an "imperative to earn the trust of society, not just by meeting expectations but by exceeding them"."

GSK isn't the first company to embrace this notion, but a reminder is clearly needed here. This touches on one of the great questions at the heart of corporate capitalism itself. Do managers owe a narrow duty merely to shareholders, or to wider society as well? We've made our position pretty clear on this - it's the latter, of course. And with that duty comes a responsibility not to dodge tax.

TJN's director John Christensen once stood up at a conference at Chatham House in London that was discussing these matters, and mentioned the dreaded T-word. He said he had read through all the corporate responsibility statements, and never found the word "tax" in any meaningful context. Tax, he said, should be the first responsibility to be tackled from a corporate responsibility point of view; and noted that none of those present appeared to be taking account of this.

The reaction? Christensen remembers all too clearly what happened.

"When I sat down it felt like a 30 second silence. They looked at me as if I'd left a dog turd on the table."

One other thing that comes up, time and time again, is the hoary old notion that directors have a duty to shareholders to cut costs - and that means to cut the tax bill.

No, because this reflects a fundamental misunderstanding about what costs are.

Cost is a word that comes out of economics – cost applies to costs of production, the basis of capitalism. Competition forces directors to improve on price and quality, which is a good thing, and production has costs associated with it – labour inputs, material inputs, and so on. It is quite legitimate for directors to seek to drive down costs, to improve productivity, produce the output faster, and so on. That leads to better consumer benefit, and lower prices.

Now we turn to tax. You are taxed not on turnover, but on profit. On the profit and loss account, these production costs are contributors to the overall profits, but crucially tax comes after (or below) profits, which means it is correctly identified as a distribution out of profits.

Tax is a distribution to stakeholders - which includes society. So directors say "we are cutting our tax bill to cut our costs" is to exhibit a fundamental misunderstanding. They are trying to conflate distributions with costs, to confuse the public. Among other things, this confusion tends to contribute to directors' personal remuneration - which suits them. This doesn't make them any more right. Tax is a distribution, and company directors have a duty to the public, as well as to shareholders.

The time has now come to change the political culture. Some people are beginning to notice that tax is a central part of corporate responsibility, but the wake-up is proving far, far too slow and limited.

So while we're glad to see companies like GSK accepting the view that company management owes a duty to wider society, rather than just merely to shareholders, we want company managers to start acting bravely, and recognise that tax is front and centre of corporate responsibility.

Read more here.


Mauritius - a tax haven?

Mauritius' Vice Prime Minister is saying:

"We are not a tax haven."

Oh yes you are.

And guess what? We've heard it all before!


Billy Bragg in tax protests

From the BBC:

The singer and activist Billy Bragg has threatened not to pay his taxes in protest against the bonuses being paid out by Royal Bank of Scotland (RBS).

We're not generally fans of tax protests, even against injustice. But we do care a lot about injustice -- hence our name -- and Bragg certainly is protesting about injustice.

Read more about justice and injustice here.


Elmer's exposures: NYT story

Last year we hosted Swiss whistleblower Ruedi Elmer as a guest blogger, writing a piece somewhat more tolerant of secrecy jurisdictions than we normally are. Now the New York Times is carrying a long article about him, which is worth reading in its entirety but notes:

"He said that he would fly on Tuesday to Düsseldorf, Germany, where the tax authorities are putting him up in a five-star hotel as he prepares to divulge client secrets.

not only that, but

"Lawyers and Congressional investigators who have begun to review Mr. Elmer’s claims say that his internal bank and client documents provide fresh ammunition for American authorities as they take their crackdown on offshore tax evasion beyond UBS to clients of other banks.

Mr. Elmer has given documents to the I.R.S., a Senate subcommittee investigating tax evasion and investigators for Robert M. Morgenthau, then the Manhattan district attorney, his lawyer Jack Blum said. They cover more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 through 2002, Mr. Blum said."

(Blum is a senior adviser to TJN.)

Of course, the Swiss authorities aren't investigating the gigantic crimes that Elmer reportedly seems to have exposed - instead they are focusing their investigative skills on the minor question of whether or not bank data was stolen. It's a mismatch of priorities similar to the one so excruciatingly exposed by the investigator on an edition of the political-comedy programme The Daily Show recently, when a top Swiss diplomat, after foolishly agreeing to put a piece of litmus paper in his mouth to test his "neutrality", was asked whether it was really such a good idea to take a "neutral" position in the Second World War between the Nazi government and the victims of their aggression.

Elmer joins whistle-blowers including Bradley Birkenfeld, the former UBS private banker who disclosed the bank’s secrets; Heinrich Kieber, a former data clerk at the LGT Group, the Liechtenstein royal bank, and Christoph Meili, the UBS night guard who blew the whistle after discovering people in the bank shredding documents related, apparently to books from the German Reichsbank from the Second World War, among other things.

“It is a global problem, and I am only the messenger who provides the bad news, or even better, the truth,” Mr. Elmer, 54, wrote in a recent e-mail message. “Offshore tax evasion is the biggest theft among societies and neighbor states in this world.”

Christopher S. Rizek, a tax lawyer at Caplin & Drysdale in Washington who has represented scores of wealthy American clients of Swiss banks, said in the New York Times article that "his actions are “symptomatic of a generalized breakdown of bank secrecy.”

We wouldn't go nearly that far, but there can be no doubt that in these days of memory sticks and computer storage, it is easier for whistleblowers to get hold of, and expose, dirty secrets.