Thursday, December 27, 2012

Links Dec 27

Facebook paid £2.9m tax on £840m profits made outside US, figures show Guardian
Dec 23 - Facebook channelled the bulk of its profits through Ireland and on to the Cayman Islands. Facebook Ireland made "gross 2011 profits of £840m – or £3.1m per each of its 287 staff. Despite the high gross profit, Facebook Ireland was able to cut its tax bill to just €3.2m by using an accounting technique called the "Double Irish"."

Ireland, US Reach FATCA Deal Tax-News

Dec 27 - "The agreement provides that Irish financial institutions will report to the Irish Revenue Commissioners in respect of US account-holders. In exchange, US financial institutions will be required to report to the IRS in respect of any Irish-resident account-holders. This information will then be automatically exchanged by the two tax authorities on an annual basis."

Swiss Bankers Welcome Enhanced Due Diligence Measures Tax-News

Dec 27 - The Federal Department of Finance commented: “With the planned implementation of the revised recommendations of the Financial Action Task Force (FATF), serious tax offences will be qualified as predicate offences for money laundering in future. In the event that they suspect money laundering, financial intermediaries should also report these cases to the Money Laundering Reporting Office Switzerland.”

Greece: Tax evasion scrutinized Kathimerini

Dec 26 - "Greece’s two financial prosecutors are expected to confirm by the end of the week whether the latest version of the so-called Lagarde list of Greeks who had deposits at the Geneva branch of HSBC is the same as the one they had been investigating over the last few weeks."

See also:
Greece not doing enough to fight tax dodgers, say EU and IMF The Telegraph

Dec 24 - "Greece's drive to crack down on tax evasion risks "falling idle" and must be reinvigorated, a report by the European Union and International Monetary Fund said on Monday."

Kabul blames tax evasion on "foreign" firms Deutsche Welle

Dec 24 - "The Afghan finance ministry has accused some NATO-linked foreign companies of "running away" from paying taxes. This follows a claim by President Hamid Karzai that corruption is his country is "imposed" from outside."

How to derail the corporate tax evasion gravy train Digital Journal
Dec 25 - " The legislators have apparently taken the “Wild West/no laws” myth of online transactions much too literally and put tax evasion in the too hard basket."

Young Swiss market liberals hail Depardieu's tax move France 24

Dec 23 - "Members of the youth section of the Swiss Liberal Party (PLR) have written to French actor Gerard Depardieu inviting him to Switzerland if things don't work out in Belgium. Their letter, published in the Internet edition of the daily paper Le Matin, congratulated him for having fled increased taxes in France."

Ukraine reminds Santas about tax Reuters
Dec 26 - "Cash-strapped Ukraine on Wednesday reminded entertainers making money by posing as Did Moroz - the local version of Santa Claus - and his helpers to pay income tax."


Sunday, December 23, 2012

December Taxcast

In December’s Taxcast from the Tax Justice Network: Banks – too big to fail and now too big to prosecute? Thanks but no thanks to Starbucks cynical offer to pay some corporation tax after all, and we discuss a new system rating corporate tax responsibility for consumers that will be out in 2013. And – how we can reform our tax system to stop abuse.

Click on or see

Update: For latest and previous Taxcasts, see here.


Friday, December 21, 2012

Links Dec 21

Europe needs joint effort to tackle tax avoidance: EU Reuters
Dec 20 - On "an action plan detailed by EU taxation policy commissioner Algirdas Semeta on Thursday to deal with inventive and increasingly common tactics used by big companies and others to reduce their tax bills."

Netherlands To Support Tax Collection In Developing Countries Tax-News
Dec 19 - Very positive news - Dutch Minister for Foreign Trade and Development Cooperation Lilianne Ploumen has announced plans to assist developing countries in the collection of taxes. Further, existing tax treaties will be examined to assess the effects of the accords on tax revenues in developing countries.

Family trusts face greater scrutiny from banks when New Zealand's anti-money laundering law comes into force next June interest .co .nz
Dec 19 - "New Zealand's reputation has also taken a hit from a long list of New Zealand registered companies, often so-called offshore finance companies, committing crimes overseas."

CHART: The Global Corporate Tax Rate Plummeted In The Last Decade Think Progress
Dec 19 - Countering a conservative myth that corporations suffer from too-high taxes, a Deutsche Bank report illustrates how the global effective corporate tax rate has dropped significantly in the past decade.

Vietnam: Many foreign firms under tax evasion question vietnamnet
Dec 13 - Reporting on challenges faced by Vietnam with transfer pricing. Cites as one example: "Coming to Vietnam in 1993, Coca Cola has continuously invested in production expansion; its revenue growth is always strong, but the tax agency said they have not collected any coin of taxes from the company."

U.S.: 515 Groups Send Letters to White House & Congress Americans for Tax Fairness
Dec 20 - A letter sent to President Barack Obama and Capitol Hill in support of revenue-positive changes to the corporate tax code and to voice strong opposition to a territorial tax system.

In Russia, unheeded cries of corruption Reuters
Dec 18 - On challenges of journalists reporting on corruption in Russia. Cites President Barack Obama signing into law the so-called Magnitsky Act, which will deny visas to Russia officials thought to be connected with the violent death in jail of Sergei Magnitsky, a lawyer pursuing a state-level tax fraud.

UK: Revenue & Customs offers deal on tax avoidance sheltering £3.5bn Guardian
Dec 20 - "HM Revenue & Customs is to write to some of Britain's wealthiest bankers, hedge fund managers and celebrities offering a chance to settle income tax avoidance schemes estimated to have sheltered more than £3.5bn through film financing structures and other tax-motivated partnerships."

UBS Traders' 'Humongous' Libor-Fixing Boasts CNBC

Dec 19 - On the shocking content of emails and instant messaging by UBS traders involved in rigging Libor, released by The U.K.'s Financial Services Authority.

Tax avoidance could earn you a seat in the Lords Farmers Weekly
Dec 20 - An amusing account, by an English farmer, of a tax strategy structured via his "farming holding company "Carrbucks" registered in the little-known Caribbean atoll of "Amoral"".


Thursday, December 20, 2012

Links Dec 20

Failure to Count Uncounted
Dec 17 - Alex Cobham reports from the conference of the DFID-funded International Centre for Tax and Development in Cape Town. This "brings together researchers from around the world to work on various research themes – including tax havens and corporate tax shenanigans, and of course an effort to generate improved data… All the presentations are now available, including some intriguing insights into the difficulties faced by African revenue authorities. Too much is uncounted, here too."

Vale settles Brazil, Swiss tax cases, to take Q4 charge Reuters

Dec 19 - "Brazil's Vale SA, the world's second-largest mining company, settled tax disputes in Switzerland and Brazil  ... Vale agreed to pay 212 million Swiss francs ($232 million) to the Swiss federal government, and 663 million reais ($317 million) to the government of Brazil's Minas Gerais state."

Senegal sees 2013 mining revenue tax earnings at $30m mineweb
Dec 17 - Senegal is seeking to boost money it collects from the growing mining industry. The budget document handed to reporters at the 14 December National Assembly said “The mining sector makes a very weak contribution to the budget of the state”.

Zambia: State to Probe Siphoned K40 Trillion allAfrica
Dec 20 - "Government will institute investigations into reports that the country lost a shocking K40 trillion from 2000 to 2010 in tax evasion and corruption, mainly in the mining sector." See also: Clip Tax Evasion Now!

EU lets Catholic Church off its billion-euro tax bill The Independent
Dec 19 - "The Vatican has received a generous early Christmas present from European Union chiefs with the announcement that illegal tax exemption from 2006 to 2011, which saved the Catholic Church billions of euros, will not have to be paid back." Hat tip Offshore Watch.

Cayman Islands: Premier Is Named to Replace Ousted Predecessor New York Times
Dec 19 - "The governor of the Cayman Islands on Wednesday appointed Juliana O’Connor-Connolly as the new premier of the British territory. The former premier, W. McKeeva Bush, was ousted Tuesday by the Legislative Assembly, a week after his arrest in a corruption investigation." See our recent post Cayman Islands Premier arrested in corruption probe

"The Friends of bank secrecy" in retreat NZZ (In German)
Dec 19 - Following a meeting by Swiss President Eveline Widmer-Schlumpf with Luxembourg Prime Minister Jean-Claude Juncker and Finance Minister Luc Frieden, the report notes the initialling of a FATCA agreement with the U.S. by Switzerland, and Luxembourg's intent to enter FATCA negotiations in 2013. A spokeswoman for EU Tax Commissioner Algirdas Šemeta is reported as saying that since Switzerland is a close neighbor with a special access to the single market, one would expect Switzerland to show to the EU an "equivalent openness" as that shown to the U.S.

US charges three Swiss bankers in offshore account case Reuters
Dec 19 - "Three Swiss bankers accused of conspiring with American clients to hide more than $420 million from the tax-collecting U.S. Internal Revenue Service were indicted, the U.S. Attorney's Office in Manhattan said on Wednesday." The bank was not named.

Media shake heads and point fingers at UBS swissinfo
Dec 20 - "Thursday brought more bad press for Swiss bank UBS in the form of critical editorials as well as the news that two former traders were arrested in New York on Wednesday".  Zurich based Tages-Anzeiger pointed out, “Anybody curious to know where there is smoke or fire at the bank need only glance at the annual report – at the very back of which is a list of pending legal processes around the world.”

UBS Libor Scandal: Should Taxpayers Have to Pay for Bank Wrongdoing? U.S. PIRG
Dec 18 - Following news reports that UBS will soon reach a settlement with regulators over its role in the Libor scandal, U.S. PIRG is calling on the federal government to bar the bank from pushing hundreds of millions of dollars in costs onto taxpayers by writing off the settlement payment as a tax deduction. A 2012 report by U.S. PIRG on the tax deductibility of costs from corporate wrongdoing can be found here.

Did Obama and Cameron Require HSBC to Aid the Prosecution of Tax Frauds? Huffington Post
Dec 18 - William K. Black asks the question: "as part of the HSBC settlement, did Obama and Cameron's officials require HSBC to blow the whistle on tax frauds? Did they require HSBC to provide them with a full intelligence briefing on how the networks of tax evasion and tax havens function?"

Big Banks Flunk OCC Risk Tests American Banker
Dec 13 - "The Office of the Comptroller of the Currency recently graded the 19 largest national banks on five factors designed to gauge how well they are being run. The results are startling."

Corporate tax breaks in the mix The Hill

Dec 19 - Sarah Anderson of the Institute for Policy Studies reports, "Tax hikes for millionaires and Social Security cuts for grannies. Those two divisive issues have dominated media coverage of the “fiscal cliff” debate. But now President Obama is hinting that corporate tax breaks might be in the mix."

Malta Holding Companies Review 2012/13 Tax-News
Nov 20 - "Malta, like Cyprus, has been obliged to dismantle its old 'offshore' companies regime as a trade-off for joining the European Union." The piece notes: "with investment-friendly government policies and some interesting tax planning opportunities, Malta remains one of the most favourable places in the EU in which to locate an international holding company."


Seasons Greetings from TJN-USA

Regards and Season's Greetings.
Let's start by opening the presents.
Given your interest in tax justice issues, we at TJN-USA thought you might be interested in a totally free link to a 56 minute version of the award-winning Sundance documentary
"We're Not Broke" -- the leading film about corp tax dodging and the role of tax activism in the Occupy movement. 
After nearly a year of box office distribution, in the interests of having a wider impact, the film makers have generously offered to make the film freely available, to get as many people as possible at home and abroad to see it. 
SO HERE IT IS! Password: 56min2012
Please feel free to share widely with your friends and interested organizations. (We have found that the film works very well as an occasion for discussion and panels about tax fairness, and would be happy to share our knowledge of that, if it is iPod interest.)

NOW FOR THE BAD REASON -- and the reason why getting this film seen by as many 
people as possible right now may be so important.
Today's word from DC is this: in the urge to cut a fiscal cliff deal w the Republicans in Congress, Obama MAY WELL BE turning to his corporate cronies, and quietly negotiating a corp tax deal that will slash US nominal corp tax rates, or even move toward a territorial tax, plus permit Repatriation of accumulated offshore profits at ultra low rates. 
This would undoubtedly really  please big TNCs like Honeywell, JP Morgan,  Exelon, and GE. 
But it would be DISASTROUS for global and local tax justice, for many reasons. Notably: 
1. It would further discriminate against small biz, over half of whom are taxed as partnerships/ LLCs or Sub- S corps, and also don't make use of sophisticated structures like offshoring intellectual property or passive service companies. Indeed, their taxes will actually going up next year, because they are taxed at individual rates. 
2.  It would look the other way at the fact that one key source for the $1.6 trillion of corp profits now  parked offshore has been the highly dubious offshoring of IP to low tax jurisdiction like Bermuda and Ireland by firms like GE, Pfizer, Apple, and Google -- to the tune of $70 b per year of lost US tax revenue. 
This high- tech dodging, which has exploded in the last decade, is largely responsible for the fact that the US corp tax is at an all time low, in terms not only of EFFECTIVE average tax rates but also revenue generation. Since many states tie their corp income taxes to the federal system, this is also having a negative effect at that level. 
3. In terms of ending destructive global " tax competition" -- the destructive economic arms race that began in the 1980s, this is precisely the wrong move. Back in January, we saw Canada slash its federal corp tax rate to 15%; the UK soon followed with a cut to 21%. The EU's beleaguered economies are under pressure to follow suit. 
If the US  -- still by far the world's largest economy, with by far the most significant TNCs -- now joins the race, the prospects for ending this arms race -- let alone  reforms like country-by-county reporting, transfer pricing reform,  or global unitary taxation -- will be very dim indeed. 
4. In terms of the impact on developing countries, even big players like China and India have found it difficult to keep up with TNCs ability to move profits beyond the reach of taxes -- let alone poor countries, some of which are actually seeing companies demand NEGATIVE corp tax rates, after subsidies and forgiveness schemes are considered, in order to invest in them. The impending US corp tax gutting, widely described in the MSM as a " reform, " would only exacerbate this problem.  
In short:  i really hope that i am wrong. But it may well be the case that in the next few days and weeks, behind closed  doors, the Obama Administration caves in to the business lobby and "seals the deal" on the US fiscal cliff by giving away the store on all these corp tax issues that are really CENTRAL to our whole tax justice agenda. 
NOW, what can we do about it?  As usual, the first step is education. So watch the film, and then connect up with US tax activists like Citizens for Tax Justice, TJN-US, and Americans for Fair Taxes (/TaxFairness) that are leading the opposition on the ground in DC. 
Second, lets have a discussion about getting other grass roots organizations with an interest in these issues involved. 
Third, Of course those of us who are journalists or self styled pundits should be writing and tweeting and digging. THIS IS CLEARLY A SITUATION THAT NEEDS MORE PUBLIC AWARENESS -- as well as public hearings. 
Finally, here in the US, some may even want to call their Congressperson or Senator about this. 
Or organize the kind of mass protests that have proved so catalytic in the UK. 
ANY OTHER IDEAS?  This is an opportunity as well as an emergency. I know it is Christmas/ etc. but that's kind of a blessing. 
Yours in solidarity, 
Jim Henry


Wednesday, December 19, 2012

Links Dec 19

Uruguayan Congress approves deal to fight tax evasion Reuters
Dec 18 - On "an accord that will let Argentine tax inspectors dig up information on savers with Uruguayan bank accounts to crack down on evasion and money laundering ... The OECD had urged Uruguay to strike accords to share tax information with its biggest trading partners, among them Argentina and Brazil." However, note: "Tax agents will only be able to share information in specific cases where there is a strong likelihood of evasion." See our resource page on On Exchange of Information for Tax Purposes.

Is the Isle of Man negotiating the equivalent of a Liechtenstein Disclosure Facility? Tax Research UK
Dec 19 - The Isle of Man has now agreed to implement a FATCA style agreement with the UK. Jersey and Guernsey have not. What might explain the difference in approach?

Liechtenstein FMA Seeks Stronger Ties With Switzerland Tax-News

Dec 19 - "President of the Liechtenstein Financial Market Authority supervisory board Urs Roth-Cuony has urged both countries to work together to capitalize on their respective strengths with regard to financial services."

Luxembourg, US To Conclude FATCA In 2013 Tax-News

Dec 19 - "Luxembourg’s Finance Minister Luc Frieden has announced plans to begin negotiations shortly on an inter-governmental agreement between Luxembourg and the United States, implementing the Foreign Account Tax Compliance Act (FATCA) ... the finance ministry underscored that the inter-governmental agreement will serve to enable the country’s financial institutions to conform in all legal certainty to the new US legislation and to guarantee the competitiveness of the Luxembourg financial sector."

Questions and Answers on the Task Force for Greece Europa
Dec 17 - "As regards anti-money laundering the Greek Financial Intelligence Unit (FIU) has reported 418 cases of suspected tax evasion to the tax authorities and to the tax investigation service (SDOE). Since the beginning of 2012, 267 cases relating to confirmed tax evasion have been sent to the Prosecutor´s office and assets worth €60m have been frozen."

Spain frees wanted ex-HSBC employee swissinfo
Dec 18 - "Spain’s National Court has granted conditional freedom to a former HSBC bank employee who is wanted by Switzerland for stealing confidential data on thousands of customers with Swiss accounts ... Several Spanish political parties oppose Falciani's possible extradition, saying he is helping uncover tax fraud."

UBS fined $1.53 billion for interest rate rigging swissinfo

Dec 18 - "UBS has agreed to pay approximately SFr1.4 billion ($1.53 billion) in fines to United States, British and Swiss authorities to resolve Libor-related investigations ...The charge is the latest blow for UBS, which already suffered a $2.3-billion loss in a rogue trading scandal earlier this year. In 2009, it paid a $780 million fine to settle a US tax investigation after nearly collapsing a year earlier under the weight of sub-prime losses."

Swiss, facing EU tax pressure, ponder how to attract firms Reuters

Dec 19 - "Happy Taxation" is a 2011 book by Pascal Broulis, finance minister of the Swiss canton of Vaud and celebrant of the low taxes that distinguish Switzerland. But as times get tougher, discontent about Swiss tax breaks is mounting."

France's Hollande Wants Deeper Euro-Zone Integration Wall Street Journal

Dec 14 - "France would push for deeper euro-zone integration and would be willing to use enhanced cooperation if its European Union partners raised objections, President Francois Hollande said."

Afghanistan Seeks Taxes From Contractors to U.S. Wall Street Journal
Dec 17 - "Afghanistan has launched tax audits of major contractors to the U.S. military, government officials say, in a bid to shore up the country's finances as the international military presence winds down and reconstruction funds dry up."

U.S.: Sen. Levin wants corporate tax revenue in a fiscal cliff deal Washington Post
Dec 14 -  More on a story linked earlier. "Sen. Carl Levin ... argues that corporations, too, should be contributing net revenue to deficit reduction, rather than just finding savings through entitlement programs and the small businesses who pay their taxes through the individual tax code."


Tuesday, December 18, 2012

Links Dec 18

Conference: "Tackling Tax Havens and Illicit Financial Flows - How the EU and Nordic Countries can take the lead" Concord Denmark
High level conference on 28 January 2013, in Copenhagen. Participants include TJN Director John Christensen, EU Commissioner for taxation Algirdas Šemeta, and OECD Centre for Tax Policy and Administration Director Pascal Saint-Amans. Registration deadline is 23 January 2013 - check the link for programme and contacts.

Swiss Court Unable To Block Tax Deals Tax-News

Dec 17 - "The Swiss Federal Court in Lausanne has recently rejected an attempt to block entry into force of the bilateral withholding tax agreements concluded between Switzerland and Germany, the UK, and Austria."

Channel Islands Rebuff UK's FATCA-Style Plans Tax-News
Dec 17 - "Jersey and Guernsey have released a joint statement indicating that they will not sign an enhanced Tax Information Exchange Agreement with British authorities unless the UK's proposed Foreign Account Tax Compliance Act (FATCA)-style initiative targets global adoption." They claim to be 'clean' and 'transparent' then fight tooth and nail against key transparency schemes. Isle of Man looks a paragon by comparison (which isn't saying much).

New publication: Tax justice as an alternative to austerity of the debt ceiling and fiscal compact TJN Germany blog
Dec 17 - Paper by Nicola Liebert, following a conference jointly organized by the Friedrich Ebert Foundation, the Global Policy Forum Europe, MISEREOR and Terre des Hommes together with TJN Germany. See also: links from the TJN Germany blog.

The IMF’s New View on Financial Globalization: A Critical Assessment Boston University Pardee Center
In December 2012, the IMF issued a new “institutional view” on capital account liberalization and the management of capital flows between countries.  In this policy brief, Kevin P. Gallagher, one of the co-chairs of the Pardee Center Task Force on Regulating Global Capital Flows for Long-Run Development, offers his assessment of the IMF’s new position.

How Venezuela blacklisted itself as a tax haven Martin Hearson's blog
Dec 14 - On the European Commission proposing that EU Member States create a blacklist of countries that do not “apply minimum standards of good governance in tax matters. Points out the perils of blacklisting, and why an EU approach with only criteria rather than jurisdictions will be more effective. Cites Jason Sharman,'s paper “Dysfunctional policy transfer in national blacklists”

SFr39.5 million to be returned to Angola swissinfo

Dec 17 - "Switzerland has announced it will return $43 million (SFr39.5 million) in frozen assets to Angola. The money will be used to fund development projects that directly benefit the population of the southern African country ... The backdrop to the restitution are judicial proceedings in Geneva regarding alleged money laundering." The question, as always: how is it that the money was accepted into the Swiss bank accounts in the first place? At least, in a small way, the Swiss are acting; the UK, which is the world's greatest money laundering sink, refuses even to consider such gestures.

Unitary taxation one way to tackle multinationals The Australian Financial Review
Dec 10 - Cites TJN's Mark Zirnsak, on the Australian federal government's tax review panel, arguing for a switch to unitary taxation - as explained here.

Australian Taxation Office Reports On Tax Evasion Crackdown Tax-News

Dec 14 - In July-Septemnber 2012, two people have been prosecuted under Project Wickenby - a cross-agency task force set up in 2006 to prevent the promotion of and participation in the abusive use of "secrecy havens." To date, 28 people have been sentenced under the project. For more on Project Wickenby see here.

Cayman: Offshore Industry autonomy stressed Cayman News Service
Dec 14 - "In the wake of the premier’s arrest ... in connection a number of investigations, including financial irregularities, the body representing the Cayman Islands' financial industry has stressed the independence of the sector and its regulators from the government." Which highlights the fortress-like democratic disconnect between finance and the related populations.

Unfulfilled promise of the end of tax havens Carta Maior
(In Portuguese)
Dec 12 - Commenting on how, following the 2009 G20 statement that the era of tax havens is over, the problem is still rampant. Points out the asymmetry whereby nations such as the U.S. demand tax compliance by their own taxpayers, whilst providing tax haven and secrecy services from their own jurisdiction. Hat tip: Jorge Gaggero.

U.S.: Small Business Owners to Congress: "Need $1 Trillion? Look Offshore" Citizens for Tax Justice
Dec 14 - Reporting on 626 small business owners having signed a letter calling for corporate tax reform, sent by the American Sustainable Business Council, Business for Shared Prosperity, and the Main Street Alliance to Congress and President Obama.

The Second Great Betrayal: Obama and Cameron Decide that Banks are above the Law New Economic Perspectives
Dec 17 - William K. Black observes: "One of the “tells” that reveals how embarrassed Lanny Breuer (head of the Criminal Division) and Eric Holder (AG) are by the disgraceful refusal to prosecute HSBC and its officers for their tens of thousands of felonies are the false and misleading statements made by the Department of Justice (DOJ) about the settlement." See comment on Treasure Islands.

UK: Calls to reform HMRC’s ‘big business’ board The Bureau of Investigative Journalism

Dec 3 - "All four non-executive board members of HM Revenue & Customs (HMRC) have extensive links with big business, leading to wide-ranging calls for HMRC to make its key strategic body more representative of British commerce."


Illicit Financial Outflows Cost Developing World $859 Billion in 2010 - study

From Global Financial Integrity in Washington, D.C.:
Crime, corruption, and tax evasion cost the developing world $858.8 billion in 2010, just below the all-time high of $871.3 billion set in 2008—the year preceding the global financial crisis.  The findings are part of a new study released today by Global Financial Integrity (GFI), a Washington-based research and advocacy organization.

The report, “Illicit Financial Flows from Developing Countries: 2001-2010,” is GFI’s annual update on the amount of money flowing out of developing economies via crime, corruption and tax evasion, and it is the first of GFI’s reports to include data for the year 2010.
For this estimate, GFI have changed their methodology compared to previous reports.
Dr. Kar and Ms. Freitas’ research tracks the amount of illegal capital flowing out of 150 different developing countries over the 10-year period from 2001 through 2010, and it ranks the countries by magnitude of illicit outflows. According to the report, the 20 biggest exporters of illicit financial flows over the decade are:

China ....................... $274 billion average ($2.74 trillion cumulative)
Mexico ..................................... $47.6 billion avg. ($476 billion cum.)
Malaysia .................................. $28.5 billion avg. ($285 billion cum.)
Saudi Arabia ........................... $21.0 billion avg.  ($210 billion cum.)
Russia ....................................... $15.2 billion avg. ($152 billion cum.)
Philippines ............................... $13.8 billion avg. ($138 billion cum.)
Nigeria ...................................... $12.9 billion avg. ($129 billion cum.)
India ......................................... $12.3 billion avg. ($123 billion cum.)
Indonesia ................................. $10.9 billion avg. ($109 billion cum.)
United Arab Emirates .............. $10.7 billion avg. ($107 billion cum.)
Iraq ......................................... $10.6 billion avg. ($63.6 billion cum.)2
South Africa ........................... $8.39 billion avg. ($83.9 billion cum.)
Thailand ................................. $6.43 billion avg. ($64.3 billion cum.)
Costa Rica ............................... $6.37 billion avg. ($63.7 billion cum.)
Qatar ........................................ $5.61 billion avg. ($56.1 billion cum.)
Serbia ....................................... $5.14 billion avg. ($51.4 billion cum.)
Poland .................................... $4.08 billion avg. ($40.8 billion cum.)
Panama ................................... $3.99 billion avg. ($39.9 billion cum.)
Venezuela ................................ $3.79 billion avg. ($37.9 billion cum.)
Brunei ..................................... $3.70 billion avg. ($37.0 billion cum.)
For a complete ranking of average annual illicit financial outflows by country, please refer to Table 2 of the report’s appendix on page 36, or download the rankings by average annual illicit outflows here.
See the full report here.


Monday, December 17, 2012

Tax evasion protest in the Cayman Islands

This has just appeared in our email inbox, via Nicole Tichon, TJN-USA
"In the first protest against Cayman Island tax shelters the island has seen, on Thursday, December 13, over 100 Americans marched to the Ugland House, the location where some 18,000 corporations hide their tax dollars, to demand that corporations pay their fair share of taxes.  They held signs saying “Bring our tax dollars home” and “We want our money back” and sang a parody song to Harry Belafonte's "Day-O" with the refrain "Tax evaders time to bring the money home."  Four of them were dressed as billionaires, waving their money in the air in a theatrical show of corporate greed."

That is a remarkable and very welcome development. It is not a hospitable environment for such protests. More photos here.
The protesters are traveling with the weekly magazine The Nation, and the protest was organized by the activist group CODEPINK. This focus on tax shelters takes place at a time when US officials are engulfed in a tug-of-war over what budget cuts to make to avoid what they are calling the “fiscal cliff.” “The US deficit could be solved with the $150 billion a year that could be recovered from these offshore tax shelters,” says CODEPINK cofounder Jodie Evans. 

“The American people, exposed to the issue of tax cheaters during Romney’s presidential bid, believe that corporations should pay their fair share,” said CODEPINK cofounder Medea Benjamin. “That’s why we are here, in the Cayman Islands, to demand that corporations such as Exxon, McDonalds, and KBR bring the tax dollars home."

Contact: Medea Benjamin, medea @ Jodie Evans, 310-913-1431, Jodie @

For other protests in tax havens, see this, for example.


Links Dec 17

New website on human rights abuses linked to financial sector Centre of Concern
On the launch of rightingfinance by a task force of human rights organizations and networks - a website devoted to highlighting the globally growing concern about the impact of financial regulation on human rights.

Tax demo at Ugland House Cayman News Service
Nov 14 - Passengers travelling on a special cruise with The Nation demonstrate outside Ugland House, the home of legal offshore specialists Maples and Calder. See also CODEPINK press release Americans on Cayman Islands Protest US Corporate Tax Evaders.

Fortune 500 Corporations Holding $1.6 Trillion in Profits Offshore Citizens for Tax Justice
Dec 13 - "Among the Fortune 500 corporations, 290 have revealed that they, collectively, held nearly $1.6 trillion in profits outside the United States at the end of 2011. This is one indication of how much they might benefit from a so-called “territorial” tax system, which would permanently exempt these offshore profits from U.S. taxes." See also: New Report Shows Why Corporate Lobbyists' Proposals Should Not Be Part of Budget Deal.

Americans Support Tax Increase But Not Spending Cuts FiredogLake

Dec 13 - "According to a new Pew Research poll, raising taxes on those making over $250,000 a year is the most popular deficit reduction idea, while cutting eduction spending is the least popular."

The difference between the U.K. and the U.S. on financial regulation Treasure Islands
Dec 14 -  "Financial regulation in the United States has been godawful enough. But compared to Britain, it has always looked rather good ... "

UK: Prince Charles's £700m estate accused of tax avoidance Guardian
Dec 14 - "The duchy of Cornwall last year provided Charles with an income of £18m and HMRC's anti-avoidance group is now being asked to examine its non-payment of corporation tax following a potentially significant court ruling on its legal status. The issue has been raised by an accountant investigating the tax affairs of the duchy – an agricultural, commercial and residential landowner."

Panorama confronts the Barclay brothers with tax revelations Guardian
Dec 14 - Commenting on tonight's BBC Panorama programme "The Tax Haven Twins John Sweeney investigates the secretive world of the billionaire Barclay twins."


Swiss banker: "hello sir, are you declared or undeclared?"

We have already blogged on the logical contradictions at the heart of Switzerland's self-styled "white money" strategy, which is anything but. If the Swiss bankers genuinely want white money, they will fall in line with European efforts to promote widespread automatic information exchange. But instead they are doing their damnedest to sabotage it.

Now, from Bloomberg, it seems that even this feeble white-money strategy seems too stiff for some Swiss bankers.
"Swiss wealth managers are fighting against government proposals they say will scare off millionaire clients by forcing them to make declarations on the tax status of assets held in private bank accounts."
That story was on December 12th. Two days later, we see:
"Switzerland dropped a proposal that would have obliged the country’s banks to force wealthy clients to make declarations on the tax status of their assets. “There is no self-declaration obligation,” according to a statement today from the Swiss government, which will discuss revisions to its so-called white-money strategy on Dec. 19."
In the December 12th story a Swiss banker, Mr. Gregoire Bordier, produced a spectacular comment that reeks of the prejudices of a class of people who have for too many years seen themselves as above and beyond the rule of law.
"“This is not a question you ask your client: hello sir, are you declared or undeclared?” said Bordier, who is also managing partner at Bordier & Cie."
Just stop and think about the implications of what Bordier seems to be saying here. He is saying that these people are too civilised to participate in civilised society.

It is just too sordid, he seems to be saying, to ask someone whether they have been committing criminal acts; if our wealthy clients were actually required to obey the law, our superior class would have sunk down to the level of the Great Unwashed. Such a brazen act would undermine criminal client relationships. Heavens! This just isn't done in polite society.

To Bourdier's credit, he does then go on to highlight how feeble the self-declaration measure would be, referring to it as a 'petty diligence rule.'

In the same story we also have a very confused lawyer, Fabien Aepli of Eversheds in Geneva, with this statement:
“While banks shouldn’t abuse banking secrecy to help their clients avoid tax, that doesn’t mean they should become the agent of foreign fiscal authorities.”
Let's summarise Mr. Aelpi. "While banks shouldn't help clients engage in criminal tax evasion (as that is what we are talking here in the context of secrecy, not avoidance), that doesn't mean that banks shouldn't help their clients engage in criminal tax evasion." Swiss bankers, coherent to the last.

Memo to Swiss law makers: there is an easy way to adopt a genuine 'white money' strategy. You can do this 'self declaration' policy if it makes you feel better: it is at least a (smallish) step in the right direction. But why not make a proper start? Why not simply abolish banking secrecy? And get rid of  your spoiler 'Rubik" deals, adopt the transparency policy of automatic information exchange as your core ethic, engage with the EU and other regions and countries on providing the appropriate information they need -- and then see just how clever and 'competitive' your bankers really are.

And on that last subject of 'competitiveness', it is at least heartening to see a little gumption on the part of Swiss courts. Here is a little tale that may inflict further pain in Swiss banks' bloated rent-extraction machine, which can only be a good thing. More on that issue another day.


Sunday, December 16, 2012

Adopting a unitary approach to taxing multinationals - here and now

Guest blog, by Professor Sol Picciotto
The main response to my paper on unitary taxation published last week has been that it would take too long or be impossible to agree. Pascal St-Amans, the OECD’s head of tax said it would take 150 years, and even Margaret Hodge M.P., chair of the UK Public Accounts Committee (PAC) is quoted as saying that although it seemed like a `really good idea’, it would take `forever’.

Not so. The paper itself lays out a clear road-map, which includes steps which could be taken immediately to begin adoption of a unitary approach.

Unfortunately, some people have spent too long labouring in the salt mines of the OECD’s Transfer Pricing Guidelines: They need to get out and look at the real world. Only a few days after my report was published, Jesse Drucker reported for Bloomberg that Google avoided about $2b in taxes worldwide in 2011 by shifting about 80% of its total pre-tax profit, some $9.8b, to Bermuda.

The trouble is that the OECD approach starts from the wrong end. Its starting point is, for example, the accounts of Google UK, Amazon UK, and Starbucks UK. Not surprisingly, the declared taxable profits of these entities are low or zero, despite the enormous business they do here. Equally unsurprisingly, a large part of the enormous revenues generated by that business is channelled to companies such as Google Bermuda, Amazon Luxembourg, or Starbucks in The Netherlands. The OECD view is that these entities must be treated as if they were completely independent of their UK sisters - which is nonsensical.

A unitary approach would do what any sensible person would, as even the M.P.s on the PAC did, and compare the profits shown in the UK with the share of the companies’ worldwide business actually done in the UK. If they are seriously out of line, as they have been shown to be, the UK companies’ taxable profits should be adjusted accordingly. 
HMRC’s lawyers should show themselves to be as ingenious and determined in interpreting the law as those working for the tax-dodgers. They could challenge Amazon’s attribution of profits from UK sales to Luxembourg when they are plainly inextricably tied to Amazon’s UK distribution and sales support operations. They could apply the profit split method, accepted in the OECD Transfer Pricing Guidelines, to adjust the intra-firm accounts of Starbucks, instead of being bemused by chimerical `comparability’ claims for royalty rates and coffee bean prices. HMRC’s failure to require this has now been shown up by Starbucks’ own voluntary acceptance of such an adjustment, under public pressure of course.

The OECD Guidelines acknowledge that `transfer pricing is not an exact science but does require the exercise of judgment on the part of both the tax administration and taxpayer’. It seems that the companies’ judgment is a lot better than that of the tax authorities.

The international tax rules were first formulated a century ago. As my report shows, they aimed mainly at international lending (portfolio investment). In this context, the separate enterprise principle made sense, so it was adapted to apply also to foreign direct investment by multinational companies. But tax authorities well understood that multinationals could exploit the opportunities for profit-shifting. They used simple but effective counter-measures. The UK report to the League of Nations study of transfer pricing of 1932 stated that in 45% of cases the profits of local affiliates of multinationals had to be adjusted by reference to their percentage of turnover or another appropriate factor. This had a salutary effect, since `the fact that the revenue authorities have the alternative of basing profits on a percentage of turnover prevents the taxpayer taking up an unreasonable attitude’.

In the past few decades, international tax regulations have become extraordinarily complicated, and equally incredibly ineffective. Rewriting them will clearly need a fresh start, and that will indeed take time. But, as Pascal St-Amans well knows, the building blocks are already available. The European Union already has a draft Directive, approved by the European Parliament, under current consideration by the Council of Ministers. It could certainly be improved, but it is a step in the right direction. UK government support would give it a great boost, but until now it has expressed steady opposition, along with Luxembourg, Ireland and The Netherlands.

International agreement on an allocation formula would indeed take some time. But the US experience of formulary apportionment of state corporate taxes shows that such an agreement is not necessary. States must counter-balance their claims to tax with their desire to attract investment, and this produces an acceptable degree of convergence. The German report to the same League of Nations study in 1932 hoped that the experience gained by ad hoc adjustments of accounts by tax authorities would lay the basis for more general principles for profit apportionment. Eighty years later we are still waiting.
In the meantime, tax authorities could use the weapons already at their disposal much more vigorously. The meek attitude they have shown to multinationals is not all their fault: they may have fallen into line with the pro-big-business views of their bosses in the UK Treasury and most government ministers. Perhaps now that they all are beginning to understand that public opinion will no longer find this acceptable, they will see the need for a new approach.

Sol Picciotto


Friday, December 14, 2012

Links Dec 14

Analysis: EU Action plan to strengthen the fight against tax fraud and tax evasion Eurodad
Dec 13 - Analysis compiled by by Eurodad with input from CCFD-Terre Solidaire, SOMO, TJN Europe and Alliance Sud on the EC's Action Plan to strengthen the fight against tax fraud and tax evasion  released 6 December, and the two recommendations to member states on aggressive tax planning and regarding measures intended to encourage third countries to apply minimum standards of good governance in tax matters. 

Top Deutsche Bank Executives Caught Up in Tax Evasion Inquiry Dealb%k
Dec 13 - More on a story linked earlier. "After a raid at Deutsche Bank’s headquarters, the company disclosed Wednesday that two of its highest-ranking executives were a focus of a tax evasion investigation, dealing a fresh blow to the German institution’s already battered reputation."

See also:

Tax Evasion Probe - Why Deutsche Bank Will Emerge Unscathed Spiegel
Dec 13 - "German prosecutors are investigating Deutsche Bank CEO Jürgen Fitschen. But does this mean he will be forced to step down? Probably not. The bank has survived far worse episodes in the past. Fitschen's predecessor even went to trial and still kept his job."

Outrageous HSBC Settlement Proves the Drug War is a Joke Rolling Stone Taibblog
Dec 13 - More on the story blogged here. "When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC's Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn't protect the banking system, it does exactly the opposite."

Another Goldman Creature Given Vital Government Post Rolling Stone Taibblog
Dec 6 - "Big news yesterday in the United Kingdom, where the citizenry surveyed its domestic banking system and discovered that it couldn't find a single person trustworthy enough to put in the top job at the Bank of England. So they went to Canada and stole that country's central banker, Mark Carney, who just happens to be a former Goldman, Sachs executive."

Global income inequality by the numbers : in history and now The World Bank
Nov 6 - The paper presents an overview of calculations of global inequality, recently and over the long-run as well as main controversies and political and philosophical implications of the findings. See comment on the Oxfam blog From Poverty to Power.

Inequality and Budget Deficits: Why is Only the Latter an Emergency? Huffington Post

Nov 24 - "I just read two sweeping reports on the state of income inequality in the U.S. (the second link focuses on state-level inequality) and other advanced economies. Perhaps it's because I've been so ensconced in fiscal cliff discussions, but I was struck by how much more alarmed policy makers are by the budget deficit than by the inequality situation."

Small businesses scope offshore locales Reuters
Dec 13 - "American small business owners of all stripes - some relocating existing ventures and others starting new ones - are considering tax-friendly locales ranging from Bermuda to Belize."

The Sky's The Limit For Asia's Philanthropy Space, Says UBS Wealth Briefing
Dec 3 - "The UBS philanthropy and values based investing team has offices in the US, Switzerland, Hong Kong and Singapore, with satellites scattered around key hubs in the world. These satellites are set up where the bank is already present." Cites the World Wealth Report (conducted by Capgemini and Merrill Lynch Wealth Management, 2010), which "found that advice on financial planning and tax aspects of philanthropy were the most demanded service of philanthropic offerings." 


Google's tax tricks: new video commentary

This short video commentary nicely brings out the lunacy and artificiality at the heart of the corporate tax avoidance by Google, the third largest donor to President Obama's re-election efforts in 2012.

"Dutch Sandwich for them, sh*t sandwich for the taxpayer. And I am sick of it."

For a fuller explanation, read Jesse Drucker's original story, or, for more context, watch "We're Not Broke."


Thursday, December 13, 2012

Google boss Eric Schmidt takes a dim view of capitalism

Google boss Eric Schmidt says, when challenged on the firm's tax avoidance shenanigans:
"I am very proud of the structure that we set up. . . . It’s called capitalism."
Let's see, now.
  • Multinational tax avoidance via tax havens corrupts markets, tilting the playing field in their favour.
  • Tax avoidance helps multinationals out-compete their smaller, more locally based rivals on a factor - tax - that has nothing to do with genuine economic efficiency and productivity - and everything to do with extracting wealth from other taxpayers elsewhere, including their competitors.
  • Tax avoidance is effectively a way of extracting tax subsidies that aren't available to others.
  • As a result of the killing of smaller firms, competition is reduced in the market, and the big become bigger. Oligipolistic and monopolistic market power, and the economic rents that flow from them, increase. Consumers pay more.
  • As a result of all this, inequality is increased, which we now know poses long-term threats to economic stability.
  • Tax avoidance helps multinational firms free ride off societies, helping them take the tax-funded benefits from society then getting others elsewhere to pay for it.
  • Tax avoidance is particularly hard on developing countries, which don't have the skilled technicians able to counter the devious offshore arguments of the armies of tax advisers that multinationals employ.
  • Navigating the complex seas of tax avoidance costs a fortune in fees paid to these same highly educated tax advisers and lawyers and the whole private infrastructure of tax havens. This is a huge cost to society: efficiency goes out the window.
Eric Schmidt is proud of all of this. This is just capitalism, he says.

He must take an incredibly dim view of it. Or he is very confused about it all.

Or, most likely, both.

Schmidt may try to argue that the headline on this blog is misleading. Look at the logic of it, though, and it clearly isn't.

Update: more comments on this, in the same vein, here.


Links Dec 13

German-Swiss tax deal sinks at last-ditch meeting swissinfo
Dec 12 - Excellent news. "Representatives from both chambers of Germany’s parliament have failed to reach an agreement on a German-Swiss tax accord, effectively ending any chance of ratification after the opposition refused to review its position."

Deutsche Bank offices raided amid tax evasion inquiry Guardian

Dec 12 - "Deutsche Bank co-chief executive Jürgen Fitschen has been drawn into a widening tax evasion investigation related to carbon trading at Germany's biggest lender as hundreds of police and tax inspectors raided the bank's offices."

Luxembourg: Luc Frieden - A new era without secrecy Le Quotidien
(In French)
Dec 12 - Luxembourg's Minister of Finance says, with regard to Luxembourg's intent to sign an agreement with the U.S. on FATCA, that it will be difficult to avoid automatic exchange of information with European states if that is agreed to with the U.S.. Whilst stating that bank secrecy is over, Frieden asserts that Luxembourg should remain competitive on tax.

Support Argentina in the struggle against Vulture Funds Eurodad
Dec 12 - Diálogo 2000, member of Jubilee South Americas, has released the statement “The real debt is to the rights of the people of Argentina“ in defense of the rights and sovereignty of the people of Argentina in the face of recent vulture funds actions - they are asking for organizational endorsements.

Free Trade Agreement EU – Colombia & Peru: Deregulation, illicit financial flows and money laundering  SOMO
Dec 5 - New report, presented at the European Parliament, reveals that with the signature of the Free Trade Agreement (FTA) between the EU, Colombia and Peru, there is a great risk of increased economic instability, tax evasion and even laundering of drug money. See press release here. Hat tip: Markus Henn.

Pakistan politicians engulfed by tax evasion storm Guardian
Dec 12 - "Nearly 70% of Pakistan's politicians, including some of the country's wealthiest people, did not file tax returns last year, according to a report that shines a light on a longstanding problem that reaches to the top of society."

Swiss Hedge Funds Consider Relocating to Liechtenstein, PwC says Bloomberg
Dec 12 - Swiss hedge fund managers trying to sidestep tougher regulations. "Switzerland has amended legislation to mirror the EU’s Alternative Investment Fund Managers Directive, tightening risk, compliance and auditing standards and increasing fund transparency. Managers from countries that don’t pass equivalent laws won’t be able to market to EU investors." Hat tip: Offshore Alert.

U.S.: Emerging Fiscal Cliff Deal Spares Corporations, but Not the Safety Net The Nation
Dec 12 - "So step back and take the long view: Obama could easily end up agreeing to a deal that asks corporate America to contribute nothing—revenue-neutrality is the selling point of his corporate tax plan—and could even end up giving them extra benefits. Meanwhile, Americans who rely on the safety net would have to make substantial sacrifice, and moreso if they’re not wealthy."

See also:
Why Is Big Business Supporting Obama? The New Yorker

Dec 12 - On a letter to the President, from the Business Roundtable, on the Need to Avoid the Fiscal Cliff - "I can’t help it. When I see Fortune 500 titans like Rex Tillerson, the chief executive of ExxonMobil, calling for higher taxes on the rich, I suspect there’s something fishy happening ... "

Pennies over patriotism? Stars move to tax havens Almogordo News
Dec 13 - A rundown on some celebrity moves of residence to avoid tax.


Wednesday, December 12, 2012

Links Dec 12

Starbucks shows need for tax change Financial Times
Dec 11 - Following his recent column on how corporate tax should be fair and shared, John Kay observes that the hypothetical world which the arm’s length principle envisages is one which could not generate the profits which the principle attempts to tax. Concurs with TJN's new report by Sol Picciotto.

More UK aid channelled via investment funds in tax haven of Mauritius Guardian
Dec 11 - "Britain's aid budget for Africa is increasingly being channelled through public-private investment funds based in the offshore tax haven of Mauritius, despite [Prime Minister] David Cameron's recent commitment to tax justice for poor countries."

Panic in Jersey as they realise they’re far up the creek without a paddle in sight Tax Research UK

Dec 11 - On news of complete panic having broken out in the upper echelons of the Jersey government as a result of the decision by the Isle of Man to sign up to full information exchange with the UKSee also: New business for Island more crucial than ever.

French budget minister caught on tape discussing his secret Swiss account Mediapart
Dec 5 - An investigative report reveals that French Budget Minister Jérôme Cahuzac owned a Swiss bank account, undeclared to French tax authorities, for several years before transferring the funds to a Singapore account in 2010 via a complex offshore financial structure. Cahuzac last month announced his ministry was launching a crackdown on tax fraud. See also: French leaders support minister on UBS charges The Local

Liechtenstein, Austria Eye Swift Conclusion Of Tax Deal Tax-News
Dec 12 - "[T]here are growing concerns in Austria that Austrian citizens with undeclared and untaxed wealth in Switzerland will simply relocate their wealth to Liechtenstein ahead of the entry into force date of the Swiss tax treaty."

Italian tax police raid Facebook offices Australian Financial Review
Dec 9 - "Italian police on Friday raided the Milan offices of US social media giant Facebook over possible violations of tax laws, Italian media reported. Facebook Italia is based in Milan and is associated with Facebook Inc. in the United States and Facebook Ireland."

Global Corporate Taxation and Resources for Quality Public Services Education International
Nov 28 - A study commissioned by the Education International Research Institute on behalf of the Council of Global Unions. See the press release: Tax avoidance by multinationals: this shameful game must stop.

Territorial Tax System Reform and Corporate Financial Policies Social Science Research Network
Nov 30 - Examining the effect of a permanent change to a country income repatriation tax system on a set of corporate financial policies. A study on the 2009 switch by Japan and the UK from a worldwide system to a territorial system for the taxation of foreign earnings repatriated by their multinational firms. Hat tip: Joshua Simmons.

Britain could end these tax scams by hitting the big four Guardian

Dec 10 - "The spiders spinning the web of avoidance are the major accountancy firms who make billions from the public purse."

A government so quick to join the race to the bottom is no friend of tax reform Guardian
Dec 9 - "[Chancellor] George Osborne publicly disparages avoidance and abuses – but his relish at undercutting other countries' corporation tax rates is palpable."

Argentina and America – of Vulture Funds and Justice. Golem XIV
Nov 28 - "Vultures eat the dead. Vulture funds, however, eat the still living ... We should not allow nations to be sued. Such a simple decision would rid the world of Vulture Funds and close at least this one path to the world of vulture morality. It would also restore the incentive for bankers to alloy their greed for profits with a need for prudence – in this one area at least."

Standard Chartered’s Fine Tally Runs to $667 Million Wall Street Journal

Dec 10 - Here’s a rundown of which regulators are getting what from the $667 million in settlements from Standard Chartered's illegal schemes.

Offshoring goes onshore Harry Shearer Show
Dec 11 - Interview with TJN's Nicolas Shaxson, discussing recent news in corporate tax dodging, tax havenry, and Treasure Islands.

The IMF’s Half Step Project Syndicate
Dec 5 - "With much fanfare, the IMF recently embraced a new “institutional view” that seemingly endorses re-regulating global finance. While the Fund remains wedded to eventual financial liberalization, it now acknowledges that free movement of capital rests on a much weaker intellectual foundation than does the case for free trade."


How Too-Big-To-Jail HSBC wriggled out of money laundering indictments

From the Treasure Islands blog:

This is shocking, if not surprising. From the New York Times (via Naked Capitalism):
"State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.
Instead, HSBC announced on Tuesday that it had agreed to a record $1.92 billion settlement with authorities. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries."
The Times story spells it out:
"The case raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict."
Stop for a moment to ponder the implications of that. It does not get uglier: the criminalisation of finance, from the top down. More from Global Witness:
Regulators should hold senior bankers legally responsible for their banks’ money laundering performance. . . . in the most serious cases, senior bankers should face jail.
Although these are U.S.focused stories, a U.K. angle is warranted too. Further commentary from Rowan Bosworth-Davies:
"The anti money-laundering regime in the United Kingdom is broken beyond repair. How has this entirely criminal state of affairs been allowed to proliferate?. . . .

They have done this in the mistaken belief that by promoting a policy of 'Light Touch Regulation', vast amounts of foreign capital will be attracted to invest in the United Kingdom, as foreign institutions seek to relocate to the City of London to take advantage of what the politicians think of as the 'climate of enterprise' they have created."
Exactly as explained in Treasure Islands. And who has responsiblity for regulation here? He cites the UK's Home Affairs Committee, which says:
The FSA undertake three main types of work in regards to anti-money laundering controls—checking the anti-money laundering systems of authorised firms subject to the Money Laundering Regulations, casework (where something appears to have gone wrong in a firm) and thematic reviews of the industry. They are responsible for enforcing and prosecuting breaches of the regulations. Under the regulations, any firm which is based in the UK must ensure that they apply their UK Anti-Money Laundering standards throughout their non-EEA operations.
My emphasis added. The buck stops in Blighty, it seems. But that doesn't stop senior people in London trying to wriggle out of this. Lord Sassoon, commercial secretary of the Treasury, said:
The FSA is the regulator for financial institutions in the UK. HSBC’s operations in Mexico are not incorporated or authorised in the UK and are, therefore, not under the FSA’s supervisory jurisdiction.
Really? On the Home Affairs Committee's evidence, either Sassoon is ignorant or deliberately trying to mislead the public. Either way, he should resign or be summarily sacked. And Rowan's blog earlier unpacked Sassoon's nonsense further. Noting that the HSBC's head of compliance, David Bagley, resigned at the Senate committee hearing:
"Why is the Group Head of Group Compliance of the Holdings Company, based in the UK, falling on his sword? According to Lord Sassoon's statement, it was nothing to do with him."
Indeed. And it does not stop there. Rowan's blog continues:
What (Sassoon's) answer failed to identify and report was the small fact that HSBC Mexico, while it may not be incorporated in the UK, is a wholly-owned subsidiary of a UK registered HSBC entity. A quick study of HSBC Mexico's accounts reveals the following;
  • HSBC México, S. A. (the Bank or HSBC) is a subsidiary of Grupo Financiero HSBC, S. A. de C. V. (the Group), who owns 99.99% of its capital stock.  HSBC Latin America Holdings (UK) Limited (HSBC LAH) currently owns 99.99% of the Group’s capital stock. [TJN: also see 'about us" here.]
Neat little trick that: set up some dodgy little Mexican operation, but then tie it back into Head Office through a series of reversed inter-related company holdings.
HSBC Latin America Holdings (UK) Ltd has its address at 8 Canada Square, London, E14 5HQ, and on 5th April 2012, a gentleman called Sandy Flockhart  retired as an Executive Director of HSBC Holdings plc, with effect from 30 April 2012, after a career spanning 37 years. He will be retained on the Board as a non-executive Director in order for the Board to retain access to his extensive international experience. Sandy will also retain his positions as Chairman of HSBC Bank plc, the Group's principal UK and European subsidiary, as Chairman of HSBC Latin America Holdings (UK) Limited and as a Director of HSBC Bank Middle East Ltd.

Now, call me old fashioned, but a UK registered company that has as its Chief Executive a man who is still chairman of HSBC Bank plc, and which has its address in Canada Square, and which owns a Mexican bank 99.99%, might just possibly be thought to be subject to FSA oversight, and moral suasion.

In any event, any British bank or British-owned bank which operates abroad, is subject, regulatorily, to both UK regulatory oversight as well as local supervision.
The blog then goes on to explain how UK laws on money laundering have major extra territorial application, and then cites HSBC chief executive Stuart Gulliver who has said the bank accepted responsibility for its past mistakes.
"I don't think the word 'mistakes' hardly covers the entirety of what has been going on here. You don't just set up a dodgy bank in a criminal environment, hide it inside two separate controlling corporate entities, with separate directors, move vast sums of Mexican drug money around the world, and then try and fob this off as a 'mistake'. There was a clever commercial mind behind these structures and their holdings . . .
In summary, Rowan concludes:
Being fined by a regulatory body is an inadequate a sanction for complicity—however peripheral, and whether it is willful or negligent—in an international criminal network which causes many thousands of deaths each year.
In America they considered HSBC too big to jail because of fears of blowing up the financial system. In Tax Haven UK they considered HSBC too big to jail for simpler, more timeless reasons. Because, well, er . . . . we love the dirty money.