Thursday, October 31, 2013

Links Oct 31

Australians Back Tax Avoidance Crackdown Tax-News

Caymans-Australia Dispute Could Harm Tax Co-operation Tax-News

India to approach Australia on global black money expose Business Standard

German-Swiss tax deal could be revived, conservatives say Reuters

French investigate Swiss bank for former Budget Minister Cahuzac link swissinfo

J.P. Morgan's $5.1 Billion Settlement Is Tax Deductible TaxProf / The Wall Street Journal
Bank Could Save Nearly $1.5 Billion in Taxes. See also: Discussing the JP Morgan “Settlement” on Democracy Now naked capitalism. See also: Nobody Should Shed a Tear for JP Morgan Chase Rolling Stone / Taibblog

Tax evasion: Britain alone can't combat the phantom companies The Guardian

EU multinationals scamming Africa out of billions, Tanzanian MP says euobserver

Niger's bid for a better deal encounters obstacles Publish What You Pay

Tax Breaks for Corporate Wrongdoing, Part 1: The Federal Trade Comission Huffington Post

International Tax Evasion Crackdown: Slow, Tricky, And Only First Step in FATCA Legal Reform International Business Times

Treasury, IRS Issue, Preview Proposed FATCA Guidance Wall Street Journal

Tuesday Tax Tradeoff: Public Services for Americans OR Offshore Corporate Tax Dodging Americans for Tax Fairness


Consultation: The human rights impact of fiscal and tax policy

Received via email (hat tip: Nicole Tichon)
United Nations Special Rapporteur on extreme poverty and human rights
Consultation: The human rights impact of fiscal and tax policy
Deadline - 2 December 2013

Dear all,

In preparation for a forthcoming thematic report to the 26th session of the Human Rights Council (June 2014), the Special Rapporteur on extreme poverty and human rights, Magdalena Sepúlveda Carmona,  invites civil society organizations and National Human Rights Institutions to submit contributions on the human rights impact of fiscal and tax policy.

The report will apply human rights principles and standards to different practices for revenue-raising, taxation and expenditure, with the objective to: (1) identify current trends in fiscal and tax policy and their  impact on human rights, especially those of persons living in poverty; (2) highlight concerns raised by particular policies on taxation and spending, as well as good practices; (3) make concrete recommendations to States on how to ensure fiscal and tax policy is in accordance with human rights obligations.

The report will consider issues such as tax revenue and distribution, taxation of corporations and the financial sector, intergovernmental tax cooperation, tax evasion and illicit financial flows, austerity measures, and distribution of public expenditure.

The Special Rapporteur welcomes the submission of research studies or reports on this topic, particularly  those examining how fiscal and tax policies impact the human rights of persons living in poverty. In particular, answers to the questions below are sought in order to collect views of civil society on policies and practices in various countries.
For those interested in pursuing this, see the list of more detailed questions in the original questionnaire.

Update 2014: for information on tax justice and human rights see here.


Welcoming the UK's decision on corporate transparency

Nov 1: Updated with comments from the White House

TJN welcomes the moves on corporate transparency announced by UK Prime Minister David Cameron on corporate transparency, to be announced today. Most specifically, a press release from his offices has said he will state today that:
"This summer at the G8 we committed to . . . establish a central register of company beneficial ownership. And today I’m delighted to announce that not only is that register going to go ahead – but that it’s also going to be open to the public."
This is excellent news. It applies to the United Kingdom only, however: next step must be to start work on providing similar services in Britain's overseas territories and crown dependencies. And of course then there's the whole question of trusts: the dog that didn't bark here. That is the real UK offshore speciality. And then there's the slippery question of what kind of information is going to be in the public registry, as Tax Research asks.

But enough carping: this, as far as it goes, is extremely welcome, and something to build on.

Comments from some of our colleagues and partners follow.

Christian Aid:
Dr Rowan Williams, Chairman of Christian Aid, said: ‘This was a brave decision by the Prime Minister and his Business Secretary, who no doubt had to face down many vested interests determined to maintain the status quo. 'The challenge now will be to ensure that this policy is delivered effectively and that the poorest people in our world are among those who feel the benefits.'
Global Witness:
"Global Witness' investigations have shown how anonymous shell companies are the global getaway cars for crime, corruption and tax evasion. Full credit should go to the Prime Minister and the Business Secretary for acting to take away the keys,” said Gavin Hayman, director of campaigns at Global Witness.
The FACT coalition and TJN-USA:
Today's commitment from the Prime Minister of the United Kingdom to make a registry of the actual owners of corporations publicly available represents significant progress toward cracking down on anonymous companies polluting the globe.  Because the United States is a prime destination for setting up anonymous companies that are used to facilitate crime and move dirty money, members of the FACT (Financial Accountability and Corporate Transparency) Coalition urge the U.S. to follow through on its G8 commitment to collect information about the ultimate owners of companies.  The coalition encourages the U.S. to join the UK by pledging to make this information available to the public.
The White House / President Obama:
"Today at the OGP summit in London, the United States announced a new U.S. Open Government National Action Plan that includes six ambitious new commitments that will advance these efforts even further.  Those commitments include:
. . .
Increase Corporate Transparency:  Preventing criminal organizations from concealing the true ownership and control of businesses they operate is a critical element in safeguarding U.S. and international financial markets, addressing tax avoidance, and combatting corruption in the United States and abroad.  Today we committed to take further steps to enhance transparency of legal entities formed in the United States."
Update 2014: for information on the Mechanics of Secrecy see here.


Wednesday, October 30, 2013

Stash the Cash - a new way to hide your money

From the ONE campaign:

While we wouldn't necessarily have chosen a tropical island backdrop, given the propensity of large jurisdictions such as the United Kingdom and U.S. to offer secrecy services - this is still an excellent campaign.

Scroll briefly down to the section "100% satisfied customers" and then click on the links and follow the instructions, to take action to put pressure on governments to tackle 'phantom firms'.


Links Oct 30

90% of DR Congo’s logging revenues lost to tax avoidance in 2012 Global Witness

OECD Launches Transfer Pricing Public Consultation Agenda Tax-News

NZ Tax Department Backs OECD BEPS Plan Tax-News
See also our recent blog post How serious is the OECD about mending the system for taxing multinational corporations?

Africa: Moves to Tackle Africa's 'Resource Curse' Reach Turning Point allAfrica

Africa losing $50b annually in illicit financial outflows -AU New Vision

Uganda: URA to Crack Down Income Tax Dodgers allAfrica

Big companies and the rich deny Kenya Sh100b through tax evasion Standard Media

Some of us said the UK – Swiss tax deal was full of holes from the start and now we know that’s true Tax Research UK
See also: Margaret Hodge: HMRC will be £2.5bn light this year The Telegraph "Revenue bosses admit that tax deal with Switzerland will bring in far less than the £3bn expected."

UBS told to boost funds to cover legal bills swissinfo

HSBC exposed in massive data leak in Belgium ICIJ

Latest update: Release Of Offshore Records Draws Worldwide Response ICIJ

U.S. Treasury gives more detail on offshore anti-tax evasion law Reuters

Europe can set the standard on anti-money laundering euobserver

Money laundering taints wine trade South China Morning Post
"While vineyards in France are favoured investments for Chinese and Russian money launderers, it's only the tip of the iceberg in terms of trade-based 'dirty money' schemes."

The Chinese Are In Love With Bitcoin And It's Driving The Digital Currency's Prices Into The Stratosphere Business Insider

Opening of China Construction Bank's European headquarters spurs Luxembourg's yuan hub hopes South China Morning Post

TJN Germany Blog Links (In German)

UK: Eurobond tax scandal - Tax avoidance figure is just 'the tip of the iceberg’, Chair of Public Accounts Committee Margaret Hodge tells HMRC The Independent

The other energy scandal - power giants use loophole to cut their own tax bills The Independent

More companies registered in Bermuda than ever before Bermuda Sun

It’s Time to Give Up on Tax Reform Tax Analysts Blog


Monday, October 28, 2013

Links Oct 28

Tax Justice: A Human Rights Issue? L4BB
Conference at University of Johannesburg, 21 November 2013

Trusts: Hastings-Bass rule is back in force in Jersey STEP
"The rule ... has traditionally allowed trustees who have made a costly mistake to apply to a court to have their action voided. This allowed the adverse consequences ‒ usually tax-related ‒ to be nullified without the need for the trust beneficiaries to sue the trustees for negligence or breach of trust."

Belgium claims millions in tax over Swiss accounts Reuters

Latest update: Release Of Offshore Records Draws Worldwide Response ICIJ

Shining a Light on the Mysteries of State: The Origins of Fiscal Transparency in Western Europe IMF

Marty Sullivan figured out how the world’s biggest companies avoided billions in taxes. Here’s how he wants to stop them. The Washington Post

Bankers Or Bandits? New Rules On Tax Evasion Put Singapore Bankers In The Dock Forbes

Revenue collects €4.3m after French pass on tax details The Irish Times
Data from overseas investigations into offshore structures to be shared with Ireland.

Ireland’s most connected tax lobbyist says the “double Irish” will soon be history Quartz
See also: Man Making Ireland Tax Avoidance Hub Proves Local Hero Bloomberg

Believe it or not, France may be losing its appetite for taxes Quartz

U.S. sham corporations aid drug lords CNN
See also: A Look Behind the Shell Corporations Open Society Foundations, and their briefing paper Terrorism, Inc.: How Shell Companies Aid Terrorism, Crime, and Corruption

'We got away with murder': £2.2m avoidance boast of Gordon Ramsay's tax expert in leaked memo Daily Mail

UK: Sub-prime lender Swift Group used loophole to avoid paying £74m in tax The Independent
Special investigation reveals how a firm that was rebuked by regulators is able to boost its profits while its customers struggle to pay.


Friday, October 25, 2013

Links Oct 25

Beneficial Ownership Registries - Action Plans by Offshore Jurisdictions
Discussion at the upcoming Offshore Alert Conference in London, 14-15 November

U.S.: Tax Reform Details: An Example of Comprehensive Reform Citizens for Tax Justice

PricewaterhouseCoopers Report Quietly Confirms Low Effective Tax Rates for Corporations But Directs Attention to Irrelevant Figures Citizens for Tax Justice

Last rites of banking secrecy Business Recorder

Swiss tax info sharing move will benefit developing nations: World Bank The Hindu
See also: ‘Would work closely with India on tax transparency’ The Hindu

Ghana: Government Vows To Stop Vampires From Sucking The Nation Dry Peace FM

Athens will be ‘merciless’ on tax evaders, says Greek ‘taxman’ EurActiv

Tax Evasion in Senators' Viewfinder Libération (In French)
See also: French Fault Banks Over Tax Evasion The New York Times

Americans, Europeans, Tax Havens Own Slice of U.K. PLC The Wall Street Journal

The Isle of Man is amongst the wealthiest nations in the world – but they’re so secretive the data isn’t available to prove it Tax Research UK

Are Europe and US net debtors or creditors? TaxProf Blog

Here’s How Many Beanie Babies Ty Warner Had to Sell to Pay His Tax Evasion Fine Chicago Magazine

The film legend Sophia Loren cleared of tax evasion by Italian court The Independent


Thursday, October 24, 2013

Campaigners challenge UK's PM to keep promise to tackle company secrecy

We have long remarked on the importance that the United Kingdom and its web of satellite jurisdictions plays in promoting international financial secrecy. Now we have co-signed a letter issuing a challenge to the UK Government:
Campaigners challenge Cameron to keep promise to tackle company secrecy

24th October 2013
The UK government must use the Open Government Partnership summit in London next week to end the secrecy surrounding who really owns millions of UK companies, campaigners said today. Discussions are underway right now at the highest levels of government and campaigners are expecting a decision to be made by the end of this week.

At the G8 summit earlier this year, David Cameron promised "to push for more transparency on who owns companies". Failure to do so would be a massive missed opportunity to stop tax evasion, money laundering and other forms of crime and corruption, and would seriously undermine UK government claims to lead the world on government openness and accountability, according to a coalition of non-governmental organisations including the Tax Justice Network and the Financial Transparency Coalition.

Laura James, CEO of the Open Knowledge Foundation, said: “Increasing transparency around company ownership was a key commitment at the UK G8 and is part of the legacy on which this government will be judged. Cameron got a lot of credit for leading on this issue, which could make a massive difference in the fight against corruption and financial crime. Not announcing plans this week to mandate public registries of who really owns companies in the UK would be a missed opportunity and a failure of leadership.”

Campaigners warned that a private registry of ultimate or ‘beneficial’ company ownership that was only accessible to tax authorities and law enforcement agencies would incur the same costs as a public registry, but would bring none of the benefits. They argue that without broader scrutiny from the media, civil society, businesses and the public, errant companies would have much less incentive to change their behaviour.

Many companies have expressed their support for establishing a public registry - including over 20,000 business owners who signed an open letter organised by Avaaz earlier this year – as well as others via organisations such as the European Banking Federation and the Institute of Directors.

Chris Taggart, Co-Founder & CEO, OpenCorporates said: “This isn’t just about tackling crime and corruption, it's also about good business. Companies need to know who they are dealing with for markets to function effectively. In a globalised world, with transnational corporations increasingly dominant, ownership transparency is also critical for democracy. Only those with something to hide should oppose this reform.”

Joseph Stead, Senior Adviser on Economic Justice at Christian Aid said: “Phantom firms registered in developed countries, like the UK and its overseas territories, facilitate huge outflows of illicit money from developing countries.  Ending the secrecy will help stop the outflows and ensure developing countries have the resources to provide for essential public services such as health and education.”

Robert Palmer, Banks and Corruption Campaign Leader at Global Witness said: “Global Witness’ investigations have shown repeatedly how anonymous shell companies are the getaway cars for crime and corruption. A public register of who owns and controls companies would make it much harder for the British financial system to be abused in this way.”

Richard Murphy of Tax Research UK said: "This issue is vital to tax justice and to closing the tax gap in the UK. Over 300,000 companies quite literally disappear from official records each year because our tax and company authorities do not know how to contact them. Knowing who the real owners of these companies are will help ensure all businesses pay the tax they owe - which will benefit everyone."

/ Ends

Contact: Robert Palmer, Global Witness, 07545 645406; Rachel Baird, Christian Aid, 0207 523 2446; Chris Taggart, OpenCorporates, 0771 306 7285; Amy Barry, Open Knowledge Foundation, 07980 664397

Signatories: Christian Aid, Global Witness, Financial Transparency Coalition, OpenCorporates, Open Knowledge Foundation, Tax Justice Network, Tax Research LLP

Notes to editors: The annual summit for the Open Government Partnership will take place in London on 31st October to 1st November. More details at:
Update 2014: for information on the Mechanics of Secrecy see here.


Quote of the day: offshore entities were behind the crisis

From Gary Gensler of the U.S. Commodities and Futures Trade Commission (CFTC)
“It was financial institutions operating complicated swaps businesses in offshore entities that nearly toppled the U.S. economy” in 2008, Gensler said.
This is from a Bloomberg story looking at how banking lobbyists and lawyers have seized on a footnote in a policy statement by U.S. regulators, which they hope will provide them with an international offshore loophole to help them get around rules designed to increase transparency of swaps trade and to make the financial system safer.

We believe that Gensler, like TJN, takes an approrpriately broad view of what and where 'offshore' is, unencumbered by political correctness and fears of offending anyone. We believe he is speaking it like it is. And the number one offshore jurisdiction for U.S. financial regulators has been, for the past half century or so, the City of London.

On the broad subject of using the offshore system to get around derivatives regulations, we co-signed a letter in July to top officials in different countries, pressing for strong and appropriate regulation of global derivatives markets, and arguing against the creation of offshore escape routes from regulation. For more background in this general area, see here.

Update 2014: for information on Tax Havens & Financial Crisis see here.


Links Oct 24

Learn how to use the ICIJ Offshore Leaks database
Newly released video tutorial.

U.S.: Congress moves to stamp out money laundering, tax dodging and corruption Global Witness

Jersey, Guernsey and the Isle of Man have signed UK tax deals but the abuse goes on – and so does the campaign against them Tax Research UK

Liechtenstein Eyes Tax Amnesty In 2014 Tax-News
Tax haven tries to get its own taxpayers to regularise their hitherto undeclared and untaxed assets and income.

Former UBS banker accepts to face US court swissinfo

Denmark: Offshore accounts are “immoral”: tax minister The Copenhagen Post

Tax Evasion: Belgium Encourages It! La Libre (In French)
President of Belgian financial intelligence unit criticises lack of political will to curb money laundering and tax fraud.

Big companies push back against G20 tax avoidance plan Reuters
For information on directors' duties to avoid tax, see here and here.

U.S.: Think Tank’s Tax Plan: Heartburn for the Wealthy? The Wall Street Journal

UK: "Dangerous" offshore inheritance tax solution hits mainstream Investors Chronicle
Hat tip: Offshore Watch

JPMorgan Poised to Save $4bn in Tax Write-Offs on Mortgage Probe Settlement International Business Times

Tuesday Tax Tradeoff: Nutritious Meals for Seniors OR Subsidizing Corporate Wrongdoers Americans for Tax Fairness


Wednesday, October 23, 2013

Where does the burden of corporate taxes fall?

One in an occasional series. We hear again and again that we shouldn't tax corporations because, well, the burden of those taxes fall on people. Which is probably true, but of course that begs a big question: which people? The wealthy owners of capital, who are increasingly rent-seekers in the modern global economy? Or does that burden fall on labour?

Well, the effects are different in each country. But here's a new report from the U.S. nonpartisan Joint Committee on Taxation, via Prof. Allison Christians' Tax blog:
"In the short run the new method distributes 100 percent of both types of taxes to owners of capital. In the long run it distributes 75 percent of corporate income taxes and 95 percent of the taxes attributable to passthrough business income to owners of capital."
That's kind of the result you'd expect. But don't expect that to stop the corporate tax lobbyists.

Update: for more on corporate tax see here.


Links Oct 23


The October Taxcast: Swiss villagers, and the oil company with 60 sets of books

In the October 2013 Taxcast: Swiss villagers send some of profit shifting mining giant GlencoreXstrata's money to humanitarian projects, tax havens do some window dressing and HOW many sets of accounts does a multinational corporation really need to file its tax returns? The David and Goliath story of tax collection - even for the United States.

Featuring the Tax Justice Network's John Christensen and Tax Attorney and offshore expert Jack Blum, who notes:
"A well known international oil company that I had the  privilege of looking at several years ago had, as I was shocked to find, over 60 different sets of books: one for each jurisdiction that it was doing business in, and then on top of that a set of internal books  to allocate profits for bonus purposes and internal management purposes. And they were all different."
And much, much more.

Produced by @Naomi_Fowler for the Tax Justice Network.
Taxcast Home site:


Update: For latest and previous Taxcasts, see here.


Tuesday, October 22, 2013

Links Oct 22

Australia targets tax crime through global data-sharing initiative futureGov

Another U.S. Whistleblower Behind Bars? Investor Jailed After Exposing Corrupt Azerbaijani Oil Deal Democracy Now
An intricate story of corruption, murky geopolitical undertones, and money laundering through shell companies.

German prosecutors search UBS's local offices in tax probe Reuters

Swiss banker arrest may be tip of iceberg swissinfo

Swiss watchdog chides three banks over Tunisia accounts Reuters

Impact of Tax Abuses On Poverty and Human Rights allAfrica
See also recent blog post on tax abuses and human rights here.

Commonwealth tax conference opens in Kigali The New Times

New Mexican tax laws to help prevent tax evasion STEP
See Spanish version here.

With FATCA still facing opposition in some quarters, US Treasury seeks to counter ‘myths’ ACFCS

Cayman company manager produced sham share register to protect client with huge debts in U.S. Offshore Alert
On Cayman company shenanigans, see also: Accused controls tax haven companies Sydney Morning Herald

Russian Court Rules Not to Reopen Posthumous Magnitsky Case Ria Novosti

UK: HMRC ‘particularly feeble’ over failure to close loophole The Independent

U.S.: Time for corporate tax reform The Hill

Initiatives Seek To Protect Anonymity Of Leakers ICIJ

So How Big a Deal is the Pending “$13 Billion” JP Morgan Settlement? naked capitalism

Are Cryptocurrencies 'Super' Tax Havens? Social Science Research Network
Hat tip: TaxProf. See also: Cybercriminals launder money using in-game currencies Wired, and The Secrets of Online Money Laundering Mashable


Monday, October 21, 2013

Quote of the day - Britain's Fawlty Towers approach to tax havens

From Britain's Independent Newspaper, in a story from May, remarking on Britain's :
David Marchant, the owner and editor of OffshoreAlert, was scathing about the authorities' efforts to close down the saga. "David Cameron talks tough about clamping down on offshore tax. But he already has the framework for the Turks and Caicos Islands; he could literally take over these jurisdictions overnight. Only in Britain could this nonsense happen. People are infected with this peculiar Fawlty Towers way of conducting business. It's breathtaking."
Quite so. Britain has the authority to close down a huge part of the global offshore system of secrecy jurisdictions. More from us on this subject - a whole lot more - very soon.


Links Oct 21

Luxembourg seeks new financial model as it sheds secrecy The West Australian / AFP. Is it really shedding secrecy?  A familiar theme appears in the storyline.

Ireland's Empty Gesture on Curbing Offshore Tax Abuses Citizens for Tax Justice

Emerging Market Multinational Companies – Ready For Prime Time? Transparency International
New study Transparency in Corporate Reporting: Assessing Emerging Market Multinationals looks at what companies disclose publicly about the measures they have in place to fight corruption, and at companies’ openness about how they are structured and to what extent earnings and taxes in specific countries are made public.

Timely discussions on preventing tax evasion in South Korea Eurodad

Chile: Overseas trusts to face modified reporting standards STEP
See article in Spanish here.

Mauritius authorities tighten rules on Indian treaty relief STEP

Tanzania committee says billions lost to corporate tax evasion Thomson Reuters

Burundi: Tax in Africa - High On the Agenda in Burundi allAfrica

Kenya Revenue Authority plans to stop tax evaders from outside travel Business Daily Africa

It's time Europe walked the walk on money laundering EurActiv

Wall Street’s hot hire: anti-money laundering compliance officers Reuters

Cracking down on Phantom Firms: Beneficial Ownership Transparency ONE

Banks and tax evasion - Hervé lifting The Economist
"What Edward Snowden is to mass surveillance, Hervé Falciani is becoming to private banking."

Italian police arrest ‘fugitive’ Swiss banker swissinfo

New website to assist crime and corruption investigations ICIJ

Twitter the latest tech company looking to play tax avoidance shell game The Verge

UK: Tax Special Investigation: Firms running National Health Service care services avoiding millions in tax The Independent

The UK’s patent box rules for corporation tax violate EU law Tax Research UK

Belgium Told To Implement EU Tax Exemptions Tax-News

Malta trying to attract Chinese financial services Times of Malta
See also: Jersey strategically well positioned to maximise opportunities in mainland China Jersey Finance, and Former Shanghai Ghetto District Moves To Turn Itself Into China's Hedge Fund Hub Forbes

U.S.: Government Shutdown Ends with Deal Creating Yet Another Budget Panel Citizens for Tax Justice

Video: French Finance Minister Pierre Moscovici On Public Registries, Transparency Agenda FTC

Diego Maradona served with £33m tax bill by Italian authorities The Guardian

World Bank/IMF Annual Meetings: was anything actually achieved? Eurodad


Friday, October 18, 2013

Halifax Initiative launches new tax justice site

Our friends at the Halifax Initiative in Canada have just launched this new tax justice resources site.

Among other useful resources, you can download this paper on the vicious cycle of capital flight undermining investment and growth, leading to deeper debt which precipitates further capital flight.

Also take a look at Peter Gillespie's essay on the trouble with tax havens.


IMF: the international tax framework is broken. Listen up, OECD!

From the IMF's Fiscal Monitor, what looks to us like an indirect swipe at the OECD:
"Recognition that the international tax framework is broken is long overdue. Though the amount is hard to quantify, significant revenue can also be gained from reforming it. This is particularly important for developing countries, given their greater reliance on corporate taxation, with revenue from this taxation often coming from a handful of multinationals."
Which is just what we've been saying all along.
"Scope seems to exist in many advanced economies to raise more revenue from the top of the income distribution (and in some cases meet a nontrivial share of adjustment needs), if so desired. And there is a strong case in most countries, advanced or developing, for raising substantially more from property taxes (though this is best done when property markets are reasonably resilient).

In principle, taxes on wealth also offer significant revenue potential at relatively low efficiency costs.

Their past performance is far from encouraging, but this could change as increased public interest and stepped-up international cooperation build support and reduce evasion opportunities. Reforming international taxation will be harder, as it must go beyond the control of tax-minimizing tricks to address more fundamental aspects such as the allocation of tax bases across countries and finding better ways to realize mutual gains from closer cooperation in tax matters."
We don't agree with everything in this report, but this stuff is spot on. Hat tip: Astrid Wiesemann, via Markus Meinzer.

Update 2014: For resources and information on corporate tax, see here.


Links Oct 18

Switzerland: Stolen data tax aid rejected swissinfo
See also: Chocolates, Cheese, Cuckoo Clocks And The Coming Vote To Maintain Hypocrisy Jeffery Robinson's blog

US bankers attack London and China’s ‘lovefest’ Financial Times (Paywall)
See also: The risks for the City of becoming China's offshore centre BBC and Jersey Explores The Middle Kingdom Tax-News

Isle Of Man First To Sign UK FATCA-Style Agreement Tax-News

Italy economy minister says restarts Swiss tax talks Reuters
First, the UK admits its corrupt Swiss tax deal has failed. Now Italy wants to sign one!

UK: Despite the tough talk, this government is far too soft on tax evasion The Guardian
Just 1 prosecution in UK from Lagarde list of 6000 Brit tax evaders - not 1 hour in prison. But benefit fraud....

London luring foreign companies with low taxes IFC Review

U.S.: Levin-McCain Statement on Ireland’s Decision to Reform its Tax Rules
See also: Ireland supports country-by-country reporting in amongst its unsustainable international tax strategy Tax Research UK

Tax avoidance is not covered by international law TJN Germany Blog (In German)

Federal government blocked tax transparency TJN Germany Blog (In German)

Giant Companies Pinpricked by ‘Direct Democracy’ IPS
"A Swiss village has decided to reject tax money from the firm Glencore and to instead donate it to charities. Other towns may follow, sending a strong signal to the government to follow the U.S. and the EU and introduce transparency rules for the extractive industry."

Latest update - Release Of Offshore Records Brings Worldwide Response ICIJ

EU opens tax evasion probe over Gibraltar’s corporate taxation following Spanish complaint The Washington Post

Bahamas FM Encourages Entrepreneurship In Compliance Tax-News

Bank Frey ceases banking activities swissinfo
"The Zurich-based Bank Frey has called it quits, citing an inability to meet rising costs and obligations associated with the US tax evasion fight."

Survey highlights toll on bankers’ health swissinfo

Richard Branson denies being a tax exile The Guardian


New report: France loses 60-80 billion Euros annually to tax evasion

From a new report to France's National Assembly, following an international consultation that was broad enough to include both TJN and Swiss bank lobbyists. Tax News summarises:
"According to deputies Alain Bocquet and Nicolas Dupont-Aignan, tax evasion leads to an annual revenue shortfall for France estimated at between EUR60bn (USD81.4bn) and EUR80bn. This figure compares to the EUR53bn in total income anticipated from corporation tax (IS) this year."
With, among a multitude of other things, an image illustrating tax losses to U.S. multinationals operating in France:

Click to enlarge. By way of explanation, it cites a study estimating that:
"The five internet multinationals Google, Apple, Facebook, Amazon and Microsoft saw their taxes in France divided by 22: that is, 37.5 million Euros, versus 828.9 million Euros."
It correctly notes that these figures are not official and should be treated with some caution (after all, there are various possible ways to argue what a company's taxes 'should' be) but also argues, also correctly, that the study is illustrative of a very severe problem.
Why is the tax burden on households so high, the report's authors note, while "60 rogue states are trying to suck away the world's wealth"?

The report also provides a nice and simple transfer pricing picture, giving a general idea of how some of this tax escape is achieved:

Update 2014: for resources and information on Corporate Tax see here, and on Transfer Pricing see here.


Wednesday, October 16, 2013

Global wealth hits new all time high, inequality is a choice

From the Credit Suisse Global Wealth Report 2013:
"Global wealth has reached a new all-time high of USD 241 trillion, up 4.9% since last year and 68% since 2003, with the USA accounting for 72% of the latest increase. . . . we expect global wealth to rise by nearly 450% over the next five years."
Though we may have problems with Credit Suisse as one of the big enablers of global illicit and abusive financial flows, we know that this series and the researchers behind it are well regarded - though all such reports come with this big proviso.

A New York Times op-ed from Joseph Stiglitz provides some useful context, referencing work by Branko Milanovic of the World Bank:
"From 1988 to 2008, Mr. Milanovic found, people in the world’s top 1 percent saw their incomes increase by 60 percent, while those in the bottom 5 percent had no change in their income."
He notes that while inequality between countries has improved significantly since the 1980s, inequality within countries has worsened: the net result has been that:
"Overall equality across humanity, considered as individuals, has improved very little. (The Gini coefficient, a measurement of inequality, improved by just 1.4 points from 2002 to 2008.)" 
That is a fascinating article, worth reading in its entirety - but back to Credit Suisse, which provides a new global wealth pyramid:

whose topmost section is then broken down further:

And then with several unusual and interesting ways of looking at the data provided, such as this one:

The report contains many other interesting little snippets, such as this:
"Our analysis suggests that ten generations or more have to lapse before the wealth of an individual in North America is completely independent of the wealth of their ancestors."
Stiglitz explains - see the article - that there's nothing particularly inevitable about inequality: some countries have done quite a good job at fighting it.
"I see us entering a world divided not just between the haves and have-nots, but also between those countries that do nothing about it, and those that do."
Tax justice, anyone?

Update 2014: for resources and information on Inequality & Democracy see here.


Tuesday, October 15, 2013

UNCTAD investment report suggests “radical solutions” on tax including Unitary taxation

From the Financial Secrecy Media Monitor, a useful resource on tax havens or secrecy jurisdictions, a post looking at UNCTAD's World Investment Report 2013:
“…moves to combat tax avoidance through OFCs [Offshore Financial Centers] and SPEs [Special Purpose Entities] must go hand in hand with a discussion of corporate tax rate differentials between countries

“Such a discussion could also include transfer pricing mechanisms beyond OFCs and SPEs, including radical solutions to distribute tax revenues fairly across the operations of TNCs [Transnational corporations] based on real value added produced (e.g. based on a formula including sales, assets and employees, in a unitary approach).” (p18.)
Although this is just a tangential mention, and UNCTAD hasn't been a key player in this arena, we see this as one more example of the message slowly spreading. UNCTAD has occasionally worked on tax issues in the past - though the OECD doesn’t like it: a correspondent informs us that when UNCTAD did a report on transfer pricing in the 1990s, OECD officials went to Geneva expressly to warn them off 'their' patch.

More on this subject here.

Update: For more on corporate tax and transfer pricing see here.


NY Times on London: a tax haven with great theater, free museums and formidable dining

The New York Times has an excellent, shortish article about the UK housing market, entitled London’s Great Exodus. It's a piercing commentary on what it calls "this frankly demented situation" where the world's wealthy have turned London property, and particularly central London property, into "are a form of money . . . a global reserve currency."

Quite so. But there is commentary in there that is not only spot on, but close to our hearts:
"In 2011, at the height of the euro zone crisis, citizens of the two countries at the epicenter of the cataclysm — Greece and Italy — bought 400 million pounds’ worth of London bricks and mortar. The Italian and Greek rich, fearing the single currency would collapse, got their money out of euros and parked it someplace where government was relatively stable, and the tax regime was gentle — very, very gentle.
. . .
An astonishing £83 billion worth of properties were purchased in 2012 with no financing — all cash purchases. That’s $133 billion.
. . .
Considering that tax evasion in Italy and Greece was a significant contributory factor to their debt problems, it just seems grotesquely cynical to encourage this kind of behavior."
Absolutely. Our emphasis added. We're delighted that this message we've been banging on about for years is pushing its way steadily out into the mainstream. And the article spells it out clearly:
"The city is essentially a tax haven with great theater, free museums and formidable dining.  If you can demonstrate you have a residence in another country, you are taxed only on your British earnings. And the savings on property taxes are phenomenal. "
Quite so. This Vanity Fair article spells it out in great detail. And the UK is a tax haven for other reasons, beyond the ones spelled out here: see this, for instance.

There are some interesting other aspects to London property prices. There is the UK government's demented 'Help to Buy' programme to solve the problem of high UK house prices by stimulating demand - but that's another matter. Or there is the question of whether UK house prices overall are, in fact, already in a slump after all. Or the increasingly risky lending that seems to be going on. All fascinating discussions - but not our area.


Alliance Boots accused of dodging $1.8bn in tax

From Reuters:
A British charity and a labour union accused Europe's largest pharmacy chain, Alliance Boots, of avoiding over 1.1 billion pounds ($1.76 billion) in UK tax since 2008 and called on the government to change laws which allow such tax planning.
The report is available from War on Want, one of the co-authors, along with Change to Win and Unite.  This graph (click to enlarge) that is drawn from the report itself illustrates this particular variant of unproductive, inefficient, rent-seeking nonsense at the heart of the private equity model. What aggregate good does anything in that picture serve?

Private equity is capitalism at its least creative: hoovering up the vast amount of intellectual knowledge that has been created by vast amounts of state-funded education, free-riding on all that, then hoovering up tax subsidies, then leveraging it all up to create supposedly superior returns for investors. (See below about all of that.)

The report explains the brief history:
In 2007, Alliance Boots left the FTSE 100 by becoming a privately held firm in Europe’s largest ever leveraged buyout (LBO). The transaction was led by US private equity firm Kohlberg Kravis Roberts and Co. L.P. and the company’s Executive Chairman Stefano Pessina, a billionaire resident of Monaco. The LBO was financed largely with £9 billion in borrowings, more than 12 times the company’s EBITDA (earnings before interest, tax, depreciation and amortisation).

By taking on this level of debt, private equity-backed firms like Alliance Boots have the potential to erode the tax base in the country where they locate their borrowings. Profits are, in effect, shifted abroad.
. . .
In 2008, Alliance Boots relocated to the low-tax canton of Zug, Switzerland, even though the company generates no revenue there. Several Pessina and KKR-related entities with stakes in Alliance Boots operate in other tax havens such as Gibraltar, Luxembourg, and the Cayman Islands. The limited financial disclosure that these tax havens require makes
it difficult to determine beneficial ownership of companies that are related to, and in some cases, doing business with Alliance Boots, and how that impacts the tax payment by the company and its owners.
In his book The Great Tax Robbery, UK tax expert Richard Brooks described just how artificial this Swiss relocation was:
"When in 2012 I called on the Swiss company, Alliance Boots GmBH, at its 94 Baarerstrasse, Zug address, it turned out to be one of around fifty unrelated companies dealt with by a local business service company, the proprietors of which were not too pleased with the visit, and had no Boots personnel present.
. . .
Similar destruction of tax bills was reported in just about all the big private equity takeovers of the 2000s."
Even after all this, at least there are those superior returns to investors. That is worth something at least.

Or is it? Are those returns really superior?

The answer, it seems, is no! Not at all. Take a look at this, if you are still in any doubt, and weep for the financialised state of the United Kingdom - and many other countries.

Is there any economic justification for this tax-dodging, tax haven-diving private equity model nonsense?

Not that we can see. As that article noted about Mayfair, that Central London home of private equity firms:
"Mayfair would be far more economically productive if it were turned into a giant waste-disposal centre."
 This report makes a useful addition to the literature.

Update: for more on corporate tax see here.


Saturday, October 12, 2013

Links Oct 12

Swiss edge further away from bank secrecy with new tax steps Reuters
See also: Tax fraud cooperation deal up for signature swissinfo, and Finally more tax transparency for developing countries Alliance Sud (In German). See the announcement from the Swiss federal administration here (Hat tip: Bruno Gurtner)

Colombia minister says tax haven 'party over' with 33 pct charge Reuters
Colombia blacklists Isle of Man, Jersey, Cayman, BVI, Mauritius, but oddly not Switzerland

Users Can Now Search By Country In The ICIJ Offshore Leaks Database ICIJ

French Senate Waves Through Anti-Tax Evasion Bill Tax-News

French lawmakers to move against Luxembourg-based Amazon Financial Secrecy Media Monitor

Double-Irish Dutch Sandwiches - France is pushing for a Europe-wide Google tax Quartz
See also: ‘Dutch sandwich’ grows as Google shifts €8.8bn to Bermuda Financial Times and IMF explains “Double Irish Dutch Sandwich” tax avoidance Finfacts

Germany can't wait for Europe on tax avoidance crackdown Reuters

Ireland's low corporation tax under threat from Germany Ireland Independent

IFF only Africa could stop the foul flows; How western firms cheat poor countries The Observer

Tanzania: Tax Exemptions to Undergo Review allAfrica

Experts accuse expatriates in Nigeria of tax fraud The Guardian Nigeria

New Corporate Tax Shelter: A Merger Abroad DealB%K
See also: How Congress Can Fix the Problem of Tax-Dodging Corporate Mergers Citizens for Tax Justice

Stop the Presses: Apple Has Not Been Cleared on Tax Avoidance Charges Citizens for Tax Justice

SocGen CEO says tax havens' days are numbered Reuters
"TJN Director John Christensen said the idea that the days of tax havens were over at this stage "remains entirely wishful thinking"."

The world's wealthy: where on earth are the richest 1%? The Guardian
"A new report from Credit Suisse is not your usual 'rich list'. Amid a record high for average global wealth its figures reveal striking inequalities – such as 35% of Russia's riches in the hands of 110 people."

UK record challenges link between corporate tax cuts and jobs Reuters

Pope signals start of new war on Vatican corruption The Independent

Raiffeisen Bank's former CEO Stepic investigated in tax case Reuters

The world needs a rocket tax to solve the “Gravity” space junk problem Quartz


Friday, October 11, 2013

Open Corporates: What makes a good public register?

The website Open Corporates has an excellent post under the title What makes a good company register? Part 1: The public purpose.

The post, written back in April, begins by framing the questions
"Over the past six months, we’ve been asked again and again: What does a good company register look like – what should it do, what are some good examples, do we even need one?"
And it then goes back to first principles, to start to provide an answer. Which is fascinating:
"So, let’s start at the beginning.  Why have a company register in the first place? It’s not, contrary to what some may have you believe, to generate revenue (we’ll come onto that later), but because companies are artificial creations, created out of thin air, and given a distinct legal personality separate from that of their owners or managers.

Why does it need a legal personality? Well, if it didn’t it’s just a collection of people working together (in some countries this is a de facto partnership), personally liable for what they do, and jointly responsible for assets and liabilities. A company allows the creation of an imaginary legal construct, owned and controlled by others, and able to enter into contracts, raise money, have assets and liabilities, and employ people. [Like fiat money, it's one of those things we take for granted but is actually rather more conceptual than most people think.]

Until the middle of the 19th century these were very rare things indeed – in Britain, for example, until 1844 they had to be formed by an Act of Parliament or a Royal Charter. But the arrival of the railways, and the need to raise money for the people building them, helped create the push for the joint-stock enterprise, and not too long afterwards, the limited-liability joint-stock enterprise.

If you think creating a legal personality is strange, the idea of limited liability is even more so, as what it means is that when the liabilities (debts) of a entity exceed its assets (the money the shareholders have put in and anything that’s been accrued since then), then the people that bear the shortfall are not the shareholders or the managers (who benefited from the profits), but the suppliers (who don’t get paid), the customers (who don’t get the goods they’ve paid for), the employees (who don’t get wages), and wider society (lost tax, bailed-out pension funds, benefits, cleanup of polluted sites, etc).

So strange is this, that when it was suggested many were horrified, as it not only seems counter-intuitive, but fundamentally unfair, and also offer huge potential for fraud. Gilbert and Sullivan even wrote an opera about it.

Yet the belief was, that by allowing these to exist, there would be more innovation, more investment – in short society would benefit. But that last point is a critical one – the justification behind them is not for the benefit of companies, or their owners, but the benefit of wider society."
And that is, of course, a matter of great importance for tax justice activists - and pretty much anyone else, for that matter. And there's more:
Critical to this is the ability to take an informed decision about whether you want to do business with the company, work for it, or, in the case of the state, ensure that it does not engage in fraud or other criminal activities. As Robert Lowe, the Vice-President of the Board of Trade, said when introducing the 1856 Companies Act, it was essential to give “the greatest publicity to the affairs of such companies, that everyone may know on what grounds he is dealing”. Hence the need for a company register – a public repository for that information.
The blog goes on - and it's excellent - with a Samoa surprise at the end.

Recommended reading.

To be stored permanently our offshore history section, and in our mechanics of secrecy page too.


Thursday, October 10, 2013

Tax Foundation debunks its own anti-tax map

A nice little article in the U.S. magazine Slate, providing a map of the horrors of those U.S. states with the "worst" business tax climates.

As Slate notes:
"Another day, another weird map from a libertarian group that seems designed to debunk libertarianism. Last time it was strange assertions about freedom, today it's the Tax Foundation explaining why there are no successful businesses in California or New York."
The triumph of dogma over evidence remains, unfortunately, a hardy perennial.

Update: for more on corporate tax see here.


Wednesday, October 09, 2013

International Bar Association: tax abuses could violate human rights

INTERNATIONAL BAR ASSOCIATION HUMAN RIGHTS INSTITUTE [For immediate release: Tuesday, 08 October 2013] 

Facilitating tax abuses could constitute violation of international human rights concludes IBAHRI Task Force Report

Update: see our new Tax Abuse and Human Rights page.

A new International Bar Association’s Human Rights Institute (IBAHRI) Task Force report, finds that actions of states that encourage or facilitate tax abuses, or that deliberately frustrate the efforts of other states to counter tax abuses, could constitute a violation of their international human rights obligations, particularly with respect to economic, social and cultural rights (ESCR).The report, entitled, Tax Abuses, Poverty and Human Rights, was released today during the 2013 International Bar Association (IBA) Annual Conference, taking place in Boston, USA.
Prepared by the IBAHRI Task Force on Illicit Financial Flows, Poverty and Human Rights, the Report asserts that tax abuses (that is tax practises contrary to the letter or spirit of international and domestic tax laws and policies) have a significant negative impact on the realisation of human rights in developing countries. Profits flowing out of developing countries deprive governments of the resources to alleviate poverty and uphold international human rights standards, in particular ESCR.
Drawing on case studies from Brazil, Jersey and the SADC (Southern African Development Community) Region, Tax Abuses, Poverty and Human Rights addresses pertinent questions relating to where to draw the line between legitimate tax avoidance and immoral tax practises. The report highlights concern over the ‘morality’ of sophisticated tax planning strategies, whereby corporations and wealthy individuals end up paying little or no tax. 
Categories of tax behaviour repeatedly emphasised by stakeholders as potentially abusive include: transfer pricing and other cross-border intra-group transactions; the negotiation of tax holidays and incentives; the taxation of natural resources and the use of offshore accounts.
Thomas Pogge, Leitner Professor of Philosophy and International Affairs at Yale University, USA and Task Force Chair said, 
The fact that sophisticated tax planning strategies are technically legal is no longer a justification for their use. The impact of tax abuses, facilitated by secrecy jurisdictions, on global poverty is tremendous. The international community has not only a legal obligation but also a moral duty to ensure that states use the maximum resources available to fulfil the civil, political, economic and social rights of citizens.
The 264-page Report, based on extensive consultation over an 18-month period, highlights tax abuses as a pressing human rights issue and delivers recommendations for states, businesses and the legal profession. The Report urges:
  • States to implement international standards of transparency and information exchange in tax matters effectively
  • Businesses to undertake due diligence measures and impact assessment of all operations, including with respect to tax planning strategies; and
  • Lawyers to balance their obligations to defend clients’ interest with the responsibilities to uphold human rights in their practice, including with respect to tax planning strategies.
Speaking specifically on the role of lawyers to counter tax abuses, Sternford Moyo, IBAHRI Co-Chair and Task Force Member commented: 
The legal profession has an important role to play in confronting the negative effects of tax abuses on human rights. Lawyers have a duty to balance their obligation to their client’s interests with their obligations to uphold human rights and the rule of law.
Click here  to download the new report Tax abuses, Poverty and Human Rights

Update: for the Tax Justice Focus Human Rights edition, see here.