John Christensen ■ The Offshore Wrapper: a week in tax justice
“We were running a criminal enterprise, but we didn’t know,” is what reportedly Credit Suisse will soon admit in its long running dispute with the United States Justice Department over alleged involvement in assisting US citizens evade tax.
Previously, Brady Dougan, the American born Swiss bank’s CEO, apologised to US senators saying that it appeared only a small group of employees were breaking the law.
Dougan added that these rogue bankers went to great lengths to conceal their actions even from Credit Suisse management, breaking the giant bank’s industry-leading compliance policies.
So what are the facts?
The allegations involve Credit Suisse assisting wealthy US individuals to secretly move their cash to Switzerland where it could be hidden from the US tax authorities. Here are some of the facts behind this case:
• The allegations involve cases until 2009 but stretch back to the 1950s;
• There are 22,000 bank accounts held by US citizens at Credit Suisse in Switzerland, of which there are only 238 where the identities of the account owners are known to US authorities;
• The accounts hold an estimated $13.5 billion;
• Credit Suisse, say investigators, opened a branch in Zurich Airport to service this trade, where US tax evaders posing as tourists could deposit smuggled in cash;
• Credit Suisse reportedly even built a lift in its offices which had no buttons and was remote controlled to keep secret the location of the bankers assisting the trade;
• Members of the bank’s senior management have been implicated in the scheme by a Swiss trust company owner who has pleaded guilty to charges as part of this case.
So to recap, for a period of 50 years, a small group of rogue bankers reportedly opened a branch of Credit Suisse and apparently installed a remote controlled lift to their offices.
They smuggled $12bn in cash out of the United States illegally without a single manager finding out because the rogues had gone to “great lengths” to conceal their behaviour.
Who would deny Credit Suisse senior executives their bonus? Not us. No siree.
All equal before the law?
It is reported that the agreement being contemplated by the US and Credit Suisse will allow the bank to avoid criminal prosecution.
It is at times like this that all of us here at Wrapper Towers, (PO Box Ugland House) recall the words of IRS Special Agent Stephen Boyd.
Special Agent Boyd last year spoke after the conviction of a Wyoming man who pleaded guilty to evading $400,000 in taxes and was facing up to 5 years in jail.
“We all pay the price when others don’t pay their fair share of taxes,” Boyd said. “This is a reminder if you commit tax evasion, you will be held accountable, brought to justice and in the end pay a significantly higher price.”
Special Agent Boyd – we salute those words.
Call it wealth management, succession planning or whatever you wish. Phone up any self-respecting offshore banker and they will tell you that trusts are a great way to avoid paying inheritance tax.
Trusts are also used in a number of other tax avoidance schemes, like the notorious K2 used by English comedian Jimmy Carr.
There are also employee benefit trusts which allow high earners to avoid income tax, sometimes illegally.
The principle legal characteristic of the trust is that someone gives up control of their assets to the trustees which causes all sorts of legal complexities useful for tax avoidance purposes. If you don’t own something, how can you be taxed on it?
However a leading New Zealand businessman doesn’t seem to have grasped that particular part of the message.
Sir Owen Glenn is locked in a bitter dispute with his close friend and former financial adviser. The financial adviser, David Miller, set up a trust for Sir Owen in St Kitts. However Sir Owen claims that he was led to believe that he would still have ultimate decision making and control of the trust. Read the full story here.
Sir Owen, it should be noted was knighted in 2013 for services to philanthropy. This despite “irregular payments” reportedly made from a charitable foundation to his personal account. This is not perhaps the place to suggest that charity often begins at home.
Brazil World Cup coach scores own goal?
Congratulations to Offshore Alert who broke the story last week that the Brazil football coach Luis Scolari is under investigation by the Portuguese authorities for tax evasion and money laundering.
The story was revealed after Offshore Alert unearthed an application from the Portuguese government to a US court asking them to open the books of a Miami bank. The bank is said to be holding the accounts of Mr Scolari, his son, and associated businesses.
Portuguese investigators want to see the accounts so that they can confirm whether or not Mr Scolari is the beneficiary of €7.4m from image rights that was routed though companies in London, Netherlands, Bahamas and the British Virgin Islands. It is alleged that Scolari had not declared this money to the tax authorities.
If it is found to be his, the Brazil coach could be making a high profile transfer to a Portuguese jail.
Mr Scolari denies all wrongdoing and says: “If anything is wrong, it is not my fault”.
The whole process would of course be made a lot easier if the UK company was required to register its beneficial owner.
Diamonds are a tax avoiders best friend
A new report from the University of Manchester suggests that South Africa’s diamond mining industry has been subject to major tax avoidance.
The report has uncovered that on $1.73bn of production only $11m of royalties have been paid. The report says:
“At every step, from mine to ring finger, South Africa’s diamond industry is benefitting from royalty and export tax structures riddled with loopholes, short-changing citizens of one of the world’s premier sources of diamonds of tens of millions of dollars a year in revenue.”
The report points towards the monopoly position of De Beers who are able to effectively designate prices along different parts of the value chain, manipulating where profits appear.
The full report can be found here.
Mining for Gold
With shameless self-promotion the Wrapper would like to inform you that the Tax Justice Network has just released this short film covering our seminar held in Tanzania on transfer pricing.
Really it is not as dry as it sounds. The short video covers live case studies about one of the most important issues in multinational tax avoidance.
All of the presentations in the video are linked to background documents linked to our website. A valuable resource for anyone interested in this subject.
Mining for Gold was commissioned from film maker Zoe Young as part of TJN’s programme of mobilising for tax justice.
La victoria de Milei y su repercusión: December 2023 Spanish language tax justice podcast, Justicia ImPositiva
#56 Finance Climat: Le Monde ne peut continuer de payer pour les riches! The Tax Justice Network French podcast
Criminosos na Amazônia lavam dinheiro nos EUA: the Tax Justice Network Portuguese podcast #55
The People vs Microsoft: the Tax Justice Network podcast, the Taxcast
New Tax Justice Policy Tracker makes it easy to monitor progress towards a UN Tax Convention and beyond
20 años de la red de justicia fiscal: November 2023 Spanish language tax justice podcast, Justicia ImPositiva
Bahamas: Submission to the UN Independent Expert on the effects of foreign debt and human rights in support of the country visit to the Bahamas
7 November 2023
Submission to the UN Independent Expert on the effects of foreign debt and human rights’ call for inputs: “Fiscal legitimacy through human rights”
7 November 2023