George Turner ■ Review of 2016

2016: a year of fireworks (photo CC)

2016: a year of fireworks (photo CC)

2016 was the year when the world underwent profound political change. Most notably there were a series of political earthquakes in the US and Europe, with the election of Donald Trump and the decision of the UK to exit the European Union.

Going into 2017 these changes look likely to have a deep and lasting impact on tax policy and the distribution of wealth.

Many have interpreted both political events as being the outpourings of a frustrated public. Having suffered for decades under increasing economic inequality, diminishing opportunities and cut backs to public services, the ballot box was used as a blunt instrument of punishment on the elites, who seemed to offer nothing new.

The irony of course is that both political events appear to make it more likely that money will carry on flowing towards the wealthy, further increasing inequality. Tax policies will have a huge role to play in this.

In the US, the huge cash mountains piling up in the bank accounts of US corporations’ tax haven subsidiaries has been a problem that successive governments have failed to tackle. President elect Trump’s solution is to slash corporation tax; a huge giveaway for tax dodging corporations. His plans to cut rates on corporations, combined with a number of other tax cuts can only be achieved through vast cuts in public spending, according to the Brookings Institution.

In the UK, the government faces the threat of businesses deserting the island if the country leaves the European market. The UK government’s solution appears to be to turn the country into the world’s largest tax haven, with talk of a 10% corporate tax rate if the country fails to negotiate a trade deal with the European Union.

That said, this year did have some good news from the world of politics in terms of the fight against tax avoidance and tax evasion, with the European Union taking a much tougher stance on tax dodging firms. We saw the Commission hand down a landmark decision in the Apple tax case, which compels Ireland to take back €13bn in taxes from the company. This was after the Commission ruled that Apple had been granted a tax deal that broke EU law by the Irish government.

Ireland are appealing the decision (of course, who would want €13bn?) and now the fight moves to the European Court of Justice.

Other initiatives from the EU included the relaunch of the Common Corporate Consolidated Tax Base, an attempt to get some common rules on how companies are taxed in the European Union. The European Parliament also held a plenary session calling for more action from countries on corporate tax avoidance.

The more aggressive stance of the EU is interesting in the context of Brexit. Traditionally, the UK has been a wrecking ball in attempts to tighten up tax systems at a European Union level. With the UK drifting off into the Atlantic, perhaps there is a real opportunity for the EU to be a global leader.

However, to do that the bloc will have to overcome the tax haven aspirations of people like Viktor Orban, Prime Minister of Hungary. This year the Hungarian government announced it would become Central Europe’s tax haven, with a plan to cut corporation tax to just 9%.

In other global regions we saw some positive news. It was reported this year that a new pilot initiative to build capacities in African Tax authorities, Tax Inspectors Without Borders, has netted African countries an extra £200m. In South America, Ecuador has led calls to establish a global tax body to improve the co-ordination of global tax policies and prevent the creation of tax loopholes exploited by multinationals.

And – also on the good news side – Switzerland fell foul of the United Nations when, at the request of TJN and its partners in the human rights community, that country was criticised for the negative impacts that its tax and secrecy policies might have on the rights of women.

The offshore world is leaking

The global shocks were not limited to the political sphere. Journalists working with the International Consortium of Investigative Journalism managed to cook up their own global shock in the form of the Panama Papers.

The leak of documents from the law firm for kleptocrats, Mossack Fonseca, caused a global media storm. In all, 140 public officials from around the world were found to have links to secret offshore companies in the Panama Papers. The leaks also disclosed some of the wealth held by ‘friends’ of global leaders, such as the estimated $1bn held by a ‘friend’ of President Vladimir Putin.

The revelations caused the resignation of the Icelandic Prime Minister, and were hugely embarrassing for many governments around the world.

The world of sport had another scandal (not FIFA), ‘football leaks’. The European Investigative Collaborations group were given millions of documents relating to the offshore tax schemes pursued by some of the world’s richest footballers. One of the bigger revelations was that Cristiano Ronaldo had stashed over €60m in the Swiss bank account of an offshore company. That €60m also didn’t appear on his tax return.

Of course, this was not the only tax scandal to hit leading footballers this year. Ronaldo’s great rival Messi wasn’t to be outdone. In July he was given a 21-month prison sentence for evading €4m in taxes. However, he did not spend any time behind bars.

The Panama Papers themselves had a global impact, as they were released just weeks before the Global Anti-Corruption Summit in London.

Before the summit, Whitehall officials had been on a serious effort to manage expectations, telling TJN and other NGOs not to expect much with regard to concrete proposals. The end result was better than expected, with several large economies committing to setup registers of beneficial ownership for companies.

There were still large and notable gaps – the British Virgin Islands and the United States did not sign up to such measures. The summit also had no legal effect, a problem that came into focus at the end of the year when member states of the European Union backtracked on plans to introduce registers of beneficial ownership across the Union, despite the fact that the European Commission supported such proposals at the summit.

Corruption allegations a major headache for governments around the world

The news from Brussels is particularly disappointing given the fact that corruption as a political problem certainly did not go away in 2016. The 1MDB scandal in Malaysia is probably one of the largest corruption stories of the century, and has reverberated around the world, emerging in some surprising places, such as in the money used to finance Leonardo de Caprio’s film The Wolf of Wall Street.

But it was certainly not the only large corruption scandal to hit the headlines this year. Corruption allegations claimed the presidency of Park Guen-hye in South Korea. In Brazil President Dilma Rousseff was removed from office after being accused of manipulating government accounts ahead of an election. Her impeachment came at a time when the country was being immersed in a growing corruption scandal involving state owned oil company Petrobras. The scandal concerns the period before Rousseff took power, when she was chairwoman of the board of Petrobras. She denies she had any knowledge of the corruption at the company during her tenure.

Remarkably, corruption allegations have yet to claim the presidency of Jacob Zuma in South Africa, given the public uproar being generated by the ‘state capture’ scandal. This year even saw royalty prosecuted in Spain for tax evasion and other offences.

Whistle-blowers under fire

Although the various leaks of offshore data over the last few years have been generally hailed as having a hugely positive effect on global economic governance, the whistleblowers who leaked the data are not having such a great time.

This year saw the prosecution of Antoine Deltour, Eduard Perrin and Raphael Halet for their role in the Lux Leaks scandal. Antoine and Raphael were both handed suspended jail sentences, which they are appealing. Eduard Perrin was acquitted, but is currently facing a retrial.

Rudolph Elmer, who leaked documents from Swiss Bank Julius Baer several years ago, was convicted of offences relating to the forging of documents and given a hefty fine by the Swiss courts. However, the silver lining in the judgement was that the court held that he had not broken Swiss banking secrecy laws, as he worked for the Cayman Islands subsidiary of the Bank. This judgement severely curtailed the global legal ambitions of the Swiss banking industry who believed their draconian secrecy laws had global effect.

Changes at the TJN

This has truly been an eventful year for the TJN also, with some big changes happening in our organisation and international recognition of our global influence..

We have had a series of staff changes. John Christensen, who has been the chief executive of the organisation since the beginning has now become chairman of the board.

In his place, Alex Cobham has taken over the day-to-day running of TJN. You can read more about the changeover here.

We also said goodbye to Nicholas Shaxson temporarily. Nick has taken a sabbatical to work on a follow-up to Treasure Islands, but will be returning later in 2017.

This year saw the birth of TJN Japan, which is a hugely exciting development. Japan has for a long time been one of the more progressive countries in terms of tax avoidance. It is hoped that TJN Japan can help the country project these values in the many international fora in which Japan plays an important role.

Finally, this is the year we have seen one of our projects grow up and leave home. Three years ago we were awarded a grant from the Joseph Rowntree Charitable Trust to train journalists in financial analysis and how tax avoidance works.

That project, called the Illicit Finance Journalism Programme, led by Nick Mathiason, ably assisted by George Turner, has now become Finance Uncovered, which has raised the funds to launch as a standalone organisation from 2017. George will be remaining with TJN as Finance Uncovered sails to new and greater successes.

So still much to do, but here at the TJN we are confident that the tax justice movement is stronger than ever, and ready to take on whatever challenges 2017 sends our way.

We look forward to working with you in 2017.

With all our best wishes,

From all the team at the Tax Justice Network


This article has been updated to clarify the reasons behind Dilma Rousseff’s impeachment

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Comments • 7

  • Webster Sinkala
    January 3, 2017 - 8:39 am

    Many thanks to the publisher for this wonderful and on point 2016 review. I still believe there is an agent need to encourage and build the CBCR especially here in Africa and also facilitate the establishment of the UN global Tax Body as soon as possible.
    We also need to challenge Politicians and our Governments to be just and effective in both national and global Tax Matters and this also concerns the selfish elite multinationals whom we keep warning and fighting as if they are dull.
    I recommend the Panama Tax offensive issue not to die in silence but be used as a lesson to other selfish Tax Dodgers.

  • January 4, 2017 - 4:25 pm

    Dilma was not accused of corruption! A judicial investigation, with close ties with the opposition party PSDB and the US, has unveilled several corruption schemes involving large companies – mainly Petrobras, the national oil company, and large engeneering companies, and polititians of several parties.
    Dilma’s economic policies were not successful and Brazil suffered from internal and external crisis and was formally accused of doing some budget accounting maneuvers (something all her predecessors did, as well as her sucessor (who was clever enough to change the law in order to make clear that such maneuvers are not illegal).
    As of today, Dilma has not been accused of corrupton.

  • Joao
    January 4, 2017 - 7:18 pm

    Escribo en español por que no me salgo bien con el inglés.
    Me gustaría puntuar algo sobre la frase ” Corruption allegations claimed the presidency of Park Guen-hye in South Korea and President Dilma Rousseff in Brazil”, del apartado “Corruption topples leaders”.
    Lo que pasó en Brasil fue una farsa – creo que TJN podría haberlo mencionado de algún modo en el texto.
    En Brasil, han sacado del poder a una Presidente honesta (no hay conocimiento de ningún acto corrupto de Dilma – no hubo crimen cometido por Dilma). Lo hicieron para poner en el poder a los más denunciados por corrupción. Desgraciadamente no ha sido un “combate a la corrupción”, pero todo lo contrario, ha sido un “combate a los que combatían la corrupción”.
    Bajo la farsa de combatir la corrupción, hubo un GOLPE DE ESTADO.
    Para el caso brasileño, me parece estar mal afirmar que “Corruption topples leaders” – estaría más apropiado escribir “Honesty topples leaders” .
    Cordiales saludos,

  • January 5, 2017 - 4:55 pm

    Please join #IBarc and let’s clean the planet of dirty money and rehabilitate the corrupted banker to serve the true purpose of money in the universe. Thanks for being there.

  • Joao
    January 13, 2017 - 11:55 pm

    Sobre la frase “The scandal concerns the period before Rousseff took power, when she was chairwoman of the board of Petrobras.”
    Dilma asume la presidencia del Consejo de Administración de Petrobras a partir del 2003, pero la corrupción en Petrobras viene de antes de ese período.
    En 1997 el Presidente Fernando Henrique Cardoso aprobó una Ley que dispensaba Petrobras de cumplir la Ley de Licitaciones … donde dicen se abrió la puerta a la corrupción.
    En 1997 el periodista Paulo Francis ha muerto por ataque cardíaco en Nueva York cuando estaba bajo fuerte presión de condena judicial en aquel país por haber denunciado la corrupción en Petrobras.
    Solamente para comentar que la corrupción en Petrobras ya existía cuando Dilma asume el Consejo de Administración de la empresa.

  • Joao
    January 14, 2017 - 12:08 am

    Una corrección en lo que dije arriba: no fue Ley, fue Decreto del entonces Presidente Fernando Henrique Cardoso lo que ha retirado a Petrobras de la obligatoriedad de la Ley de Licitaciones. Puede leerse sobre eso en

    Además, Dilma ha dimitido a directores corruptos de Petrobras … y se sucedieron reacciones en contra de Dilma. Puede leerse sobre eso en

  • Joao
    January 17, 2017 - 12:06 pm

    Bueno, un último comentario sobre lo de “Dilma Rousseff was removed from office after being accused of manipulating government accounts ahead of an election”.
    La manipulación la han denominado “Pedaladas Fiscais”, y se refiere a créditos suplementarios en el presupuesto anual. Los créditos suplementarios en el presupuesto son una practica habitual en Brasil en todos los niveles de gobierno desde hace décadas, y siempre fueron legales, revisadas y validadas por los Tribunales de Cuentas. Tanto los Presidentes anteriores, como los gobernadores de las Provincias, lo hicieron y continúan haciéndolo (firmar complementaciones presupuestarias). Incluso el Presidente que tomó el poder en sucesión a Dilma – Temer – firmó Decretos de cumplimentación presupuestaria.

    Pasados dos días de sacaren a Dilma de la Presidencia, aprobaron que “Pedalada Fiscal” no es crimen. Puede leerse en

    O sea, no hubo acusación ni de crimen y ni de corrupción en la deposición de Dilma.

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