The Offshore Wrapper: a week in tax justice

Switzerland-India Dispute

Last week we reported that India is getting tough with Cyprus and Mauritius on tax. This week it is Switzerland’s turn to feel Indian ire.

India wants to receive more information about its citizens on a list of potential tax evaders which was leaked to the French Government in 2009. This showed the identities of people holding secret bank accounts in HSBC’s Geneva Branch.

A recent report from the French Parliament showed that €5bn in undeclared assets were in accounts on the list.

But Switzerland is not playing ball. It is refusing to comply with India’s requests for more information about its citizens on the HSBC list.

India is not happy, accusing Switzerland of failing to meet international standards to hand over information on cases where there is “incriminating evidence of tax evasion”.

India will also make the case to the OECD Forum that Switzerland does not have the right laws in place to facilitate information exchange.

This one could run.

Dutch One Man Band

One job per company and a lot of dodgy money: that is the effect of shell companies on the Dutch economy.

A report last year from the Dutch group SEO showed there are 12,000 international holdings companies in The Netherlands, of which 75% are

based in trust offices (in other words, brass plate companies). These holding companies create between 8,000-13,000 jobs for the Dutch economy.

The Dutch Central Bank subsequently launched an investigation into 10 trust offices. It found that only two were completely above board and there were serious failings at the others.

Failings included having little knowledge about the origins of some of the assets they managed.  See no evil . . .

Developing countries 100% ripped off by multinationals

A new report from Oxfam called “Business Amongst Friends” looks at how multinationals can extract profits out of Africa though transfer pricing and other methods.

Interestingly it quotes a yet to be published study from our friends Alex Cobham and Petr Jansky.

This looks at the economic activity of multinationals in African countries and tries to see how the tax receipts of these countries would change if the tax paid in those countries corresponded to the amount of activity in them.

The conclusion is that countries could double their tax revenues. The full sobering story is on the TJN website.

Ireland’s impact on the developing world

One place where Alex Cobham et al may want to look for developing countries’ missing billions is Ireland, home of the patron saint of tax dodging and development: Bono.

This tax haven’s finance ministry has launched a public consultation on how the country’s tax laws affect developing countries.

The submissions should make interesting reading . . .

Everyone’s a loser!

There has been increasing scrutiny over the last few weeks of an attempted mega merger between Pfizer and Astra Zeneca, fueled by Pfizer’s giant offshore cash pile.

As part of the deal Pfizer plans to move its tax residence to the UK. Great for the UK some might think, except that this won’t actually mean any staff moving to the UK.

In fact quite the opposite: the Brits have been increasingly concerned that this deal might lead to the cannibalisation of the UK’s advanced biotech industry.

Although the company will continue to be run from New York, the US is set to lose a vast amount of tax revenue as the company seeks to take advantage of the UK’s much lower corporate tax rate.

The UK also only taxes revenue generated in the country, which will allow Pfizer to cash in on the massive amount of cash it has stashed in tax havens.

More here on the TJN Website.