Welcome to our monthly podcast in French, Impôts et Justice Sociale with Idriss Linge of the Tax Justice Network. All our podcasts are unique productions in five different languages every month in English, Spanish, Arabic, French, Portuguese. They’re all available here and on most podcast apps. Here’s our latest episode:
Pour cette 42ème édition de votre Podcast en Français produit par Tax Justice Network, nous revenons sur la publication par l’OCDE et l’ATAF du rapport annuel sur la transparence fiscale en Afrique, en vous proposant de reécouter certains aspects spécifiques.. Selon la méthodologie de ce rapport, les pays africains continuent de fournir des efforts dans ce domaine et les choses évoluent. Mais de nombreux défis subsistent encore pour parvenir à un niveau pertinent de transparence dans le secteur de la fiscalité sur le continent. Nous revenons aussi sur un séminaire de formation mené en fin juillet 2022 par l’Organisation Africaine des Institutions Supérieures de Contrôle. Lesdits travaux étaient menés en préparation à la réalisation d’un audit général sur les Flux Financiers Illicites en Afrique. Nous avons discuté avec quelques responsables de cette organisation.
Et pour ceux qui ont l’application Stitcher et iTunes ect
Si vous souhaitez recevoir cette production ou être média partenaires ou simplement contribuer, vous pouvez nous écrire à l’adresse Impô[email protected]
The Tax Justice Network made an intervention at the European Parliament’s Expert meeting on the Unshell Directive on 12 July 2022. The intervention was presented by Moran Hariri, lead researcher indices at the Tax Justice Network, on the behalf of the organisation. The full text of the intervention is shared below.
First of all, we would like to thank you for the invitation to speak at this important meeting and present our views regarding the Unshell directive.
The massive media revelations such as Pandora Papers and OpenLux as well as significant academic literature have clearly demonstrated the way shell entities are widely used to shift and hide wealth and profits in the EU.
The proposed directive is thus an important step to tackle the existence of shell entities and we believe that the framework put in place by the Commission may tackle at least some of the tax abuse created by them.
Predominantly we commend the intention to create a central depository of shell entities for Member States to exchange information and the decision to apply the directive on a broad scope of legal vehicles rather than only on companies.
We also welcome the sanction of disallowing shell entities to use tax advantages derived from double tax agreements and relevant directives, as well as the right for other member states to tax the profits/assets.
However, we at the Tax Justice Network think that shell entities are often the main vehicle for creating complex ownership structures, which constitutes an even bigger problem the Commission should start addressing in this directive. Complex ownership chains may create risks related to three main issues: 1) hiding the ultimate beneficial owner for money laundering and other financial crimes; 2) avoiding tax; and 3) ensuring limited liability by isolating risks for assets within a group of entities.
There is already sufficient evidence which prove that complex chains of ownership are abused for illicit financial flows. In fact, the key method used to hide beneficial ownership involves the use of legal persons and arrangements to distance the ultimate beneficial owner from their assets.
While it’s absolutely free for an individual to set up a complex ownership chain, the real price is paid by authorities and the public at large. Authorities trying to verify beneficial ownership information or unfold a very complex tax planning, need to spend increasing resources in terms of staff, technology and time to do so.
In light of this view, there are several caveats we would like to point out, mainly regarding the ways to determine shell entities and the consequences of such determination.
We would also like to suggest several recommendations.
A.On how to determine what a shell entity is?
In our view, the current directive proposal is too easy to circumvent.
A few concrete observations:
1) The exclusion of an undertaking which has at least 5 full-time equivalent employees from the initial screen of the gateways test can be simply too easy to by-pass and should be deleted from article 6(2). This is because for undertakings which aim to launder money or to evade tax in large sums, employing 5 people is definitely worthwhile and it would be difficult for tax authorities to monitor this.
2) A similar issue exists in the minimum substance test where the undertaking needs to prove it has a sufficient number of employees who reside close to the entity. Not only does this criterion can be easily circumvented as I explained, but also the requirement to reside close to the entity do not consider the modern business reality of mobile workers, especially after the Pandemic.
3) It is not clear to us why in the first gateway test, the threshold for the revenues accruing passive income by the undertaking should be at least 75% while for the Common Reporting Standard, the threshold for defining a Passive Non-Financial Entity is more than 50%. Unless there is a justified reason to differentiate, we think the lower threshold should be applied for the Unshell directive as well.
4) The incentives and mechanisms for creating shell entities are broader than we currently understand and it’s time for authorities to ask for more information to be able to tackle them. So once a certain undertaking has been filtered through the gateway test and the burden was shifted for it to prove it has a minimum substance, the entity should also be required to disclose its structure, including its number of layers, as well as to justify the need for creating those layers. As a first step, this information will not be considered for the minimum substance test and will be only provided to authorities. At a later stage, however, ideally authorities will have enough data to develop more sophisticated criteria for determining what is a shell entity and to cross- check the information.
B. Regarding the consequences of shell entities that were eventually determined as such- our recommendations are the following:
1) The member state of the shell residence should not have a discretion to either deny its tax residence or to continue considering the shell entity as resident for tax purposes. Such discretion is likely to create a differentiation and attract more shell entities to countries that are inclined not to deny the tax residency of the entity.
2) The shell entity should be required to disclose its beneficial ownership chain upward until the ultimate beneficial owners and downwards until the assets held. Alternatively, the requirement for beneficial ownership registration for shell entities should be subject to a lower threshold than the AML definition of minimum 25% of ownership or control, so perhaps 10% or ideally even less.
3) The central depository of shell entities should – at least at a certain point of time- be open to the public. This way, it is likely to create more deterrence and to enable journalists and civil society organisations to hold governments and entities to account. To sum up, the Unshell directive has the potential to provide authorities with the right tools not only to tackle tax avoidance and evasion but also the greatest risks to society posed by complex ownership chains which are often comprised of shell entities. It would be a missed opportunity not to take these risks on board.
The EU adopted its first Anti-Money Laundering (AML) directive in 1991 but to this day colossal sums of illicit money continue to make their way through the EU’s financial system. The Pandora Papers last year exposed a slew of politicians, celebrities and criminals exploiting legal structures all around Europe that facilitate dodgy financial activity. Before that, the DanskeBank and CumEx scandals revealed widespread criminal and fraudulent activity hiding in plain sight across Europe. A new proposal put forward by the EU might just be the game-changer the EU needs – if not with some improvement.
Since 1991, the EU has passed a handful of additional directives to harmonise the legislation of member states and to raise the standards applicable to the financial sector and certain non-financial intermediaries, like lawyers and real estate agents. The goal was to define a common framework for rulemaking within the EU, which member states are then required to “transpose” into domestic law. Today every EU state has laws requiring “obliged” businesses to keep records for a minimum number of years, determine with “due diligence” who their clients are, and to report suspicious activity.
Yet, as recent scandals illustrate, there are still many loopholes in the EU’s system. Fragmented implementation across member states has undermined regulatory progress. Does it matter if suspicious transactions must be reported to authorities if there is no agreement on what “suspicious” means? Does it matter if banks or other businesses keep records and know their clients if authorities do not carry out inspections? Most crucially, how can investigations of international financial crimes be effective where necessary data is scattered across 27 member states without a proper coordination mechanism?
Rather than increasing pressure on small businesses, it is more and more clear that legislators should focus on big internationalised finance and intermediaries, who represent the highest risks to the stability of the financial system and the economy. We have witnessed in the past an undue pressure on developing countries to enforce Value Added Taxes on small businesses, focusing on small scale tax avoidance and implementation of such regressive taxes, instead of targeting high-end economic crimes. Surging civil society attention on ever-bigger financial crimes has come with detailed assessments of the failure of the current regulatory model. In response, the European Commission proposes a coordinating body for Financial Intelligence Units to better regulate the financial sector (COM(2021) 421 final, or the “Proposal”).
What does the European Commission propose?
The Commission proposes establishing a new institution at the EU level charged with coordinating member states’ Financial Intelligence Units in their supervision of the financial system. At its core, the initiative seeks to combine financial supervision and coordination functions at the EU level into a new institution with 250 staff and improved tools at its disposal. Currently, national Financial Intelligence Units are tasked with supervising financial activity and facilitating investigations via police authorities, but there is only weak and ad hoc coordination between member states. Some coordination is to some extent carried out by the European Banking Authority, but with reportedly low effectiveness. Beyond coordination, the proposed EU Authority would also have the power to directly supervise certain high risk financial institutions with activities in several member states.
It is also worth noting here what makes this proposal different in legal terms. The Commission’s proposal is a “regulation” that would be directly applicable to member states after being approved by the European Parliament and Council. This is different to EU “directives” which are only applicable to member states when they transpose and implement the directive under domestic law.
What are the most encouraging aspects of the proposed EU Authority?
Establishing the proposed EU authority will allow a more coherent understanding of practices and risks of the financial sector. The new authority would be able to gather and analyse data across the EU, prevent and investigate wrongdoing, and design more evidence-based policies to tackle money laundering and terrorist financing (AML/CTF).
This opportunity to develop financial data analysis is dependent on the new authority standardising the formats and channels of regulatory reporting. The authority is expected to implement a “single rulebook” for suspicious transaction reporting and oversee an EU-wide database on AML/CTF supervision.
The foreword of the regulation initiative points out another key advantage. The authority would assign resources (human and technical) to carry out coordination/analysis tasks, as with the current European Banking Authority but in addition, it would have the mandate to directly supervise obliged entities. Although the proposed supervision framework could be much improved, the new system for direct supervision would include broad investigative powers, monitoring and sanctions. This fills a regulatory gap at the EU level that has long left unchecked the instrumentalisation of the EU Single Market for illicit finances.
Furthermore, the authority would act as a supervisor of supervisors, adopting a system of peer reviews where intelligence units of various countries would periodically review the work and tools of Financial Intelligence Units in other member states, ensuring a level playing field. This mechanism of peer reviews has been adopted in multilateral forums such as the FATF and the OECD, with an arguable degree of success. The harmonisation of practices across the EU’s financial intelligence units will better ensure effective implementation of standard rules.
Are there any shortcomings?
The European Commission’s proposal defines criteria for determining which financial institutions (ie, obliged entities) will be directly supervised by the new authority for a period of three years. However, it leaves a lot to be desired. Under Articles 12-13 of the proposed regulation, only financial institutions that directly provide services in 10 or more member states, or those that are established in 7 or more member states, would be potentially subject to direct supervision. Multinationals may exploit these high thresholds, for example, by arranging their EU-wide activities through various offshore entities. Moreover, the thresholds means that none of the foreign-controlled groups of EU companies would fall within the realm of direct supervision of the proposed EU institution. The European Central Bank concurs that the proposed framework leaves the door open to regulatory arbitrage (page 3). In any case, the thresholds for direct supervision are so hard to meet, that the European Central Bank predicts that “only approximately 12 to 20 obliged entities will meet these criteria” (page 3).
Further, non-financial entities that are already obliged under AML/CTF legislation would not be subject to direct supervision. According to international standards (as defined by the Financial Action Task Force), various non-financial actors are subject to AML/CTF rules, such as auditors, accountants, casinos and lawyers. Yet the European Commission’s proposal would focus narrowly on financial institutions, while these other actors would not be subject to direct supervision, even in cases where a company operating across the EU represents a serious risk to the stability and reputation of the EU’s financial system. The proposal, however, considers indirect supervision via sectoral regulators in member states concerned. That is, the new EU authority would be able to address risks in the supervisory role of regulatory bodies for specific sectors (like professional associations for lawyers and accountants) by recommending changes to rules or practices. While this role is undoubtedly necessary, it might not be sufficient. Optimally, the proposal would provide for a wider scope for direct supervision, which includes financial and non-financial entities, and uses a comprehensive risk-based approach to determine which AML obliged entities should be supervised. Needless to say, non-financial professionals are often the gateway to secrecy, and financial institutions only come into play at a later stage, after the legal arrangements have been set up.
Specific characteristics of the new authority’s institutional design may also present certain risks. The new EU authority would include a General Board with representatives from the Financial Intelligence Units of each member state. This General Board is set to approve technical standards and their implementation, subject to a qualified majority vote. On the one hand, although the representatives must act exclusively “in the sole interest of the Union as a whole” (Proposal, Art.48),a group of member states might be in the position to effectively block new regulations (if the group consists of four or more representatives who account for more than 35 per cent of the EU population). On the other hand, there appears to be no requirement for unanimous decisions – something that limits regulatory initiatives in the European Council. In this sense, the delegation of regulatory power to the new EU institution may have a better chance at promoting harmonisation across the EU given the less room there is for notorious EU tax haven members to block regulation.
Another concern would be how the new EU authority is meant to be funded. It would be “funded partly from the EU budget and partly from fees levied from obliged entities that will be directly or indirectly supervised by the Authority” (Proposal, page 9).The proposal states that it is expected that three-quarters of the authority’s €45.6 million budget would come from such fees (ibid.). It is worth noting that the Proposal does not determine how and from whom these fees would be collected, and the European Central Bank considers that the scope of direct supervision is limited by “budgetary constraints” (page 3). The problem here is that the Commission is disregarding a superior solution for funding the new authority. The Commission’s own analyses estimate that an EU Financial Transaction Tax would yield about €57 billion (SWD(2013) 28, page 21). Not only would this revenue more than cover the budget of the new EU Authority, but the process of implementing an EU Financial Transaction Tax would directly allow the standardisation of transaction reporting formats and improve data collection. Thus, the financing of the new EU authority with a Financial Transaction Tax would help both fund and facilitate the analysis, coordination, and supervision tasks of the proposed EU authority. If these synergies between sound policy initiatives are not timely harnessed, we may end up with regulatory redundancies that increase costs to public and private actors alike.
In sum, what to expect going forward?
The Proposal sets forth an ambitious regulatory proposal, where a partly decentralized EU authority would take on new supervisory and coordination functions, to ensure the stability and coherence of the EU financial system. This authority would help implement higher standards in the internal market and prevent the instrumentalisation of certain EU member states for money laundering and terrorism financing. Certain characteristics of the Proposal could be improved to ensure greater effectiveness and resilience of the new EU Authority, particularly with regard to supervisory thresholds and the financing of the authority. In any case, if this regulation is finally adopted, it would surely help to consolidate and harmonise the prevention of financial crime across the EU. Potentially, the new law could then be amended to improve specific aspects.
The bill is currently awaiting committee decision at the EU Council and will likely be submitted to the EU Parliament for first reading by the end of 2022.
Welcome to our monthly podcast in Portuguese, É da sua conta (‘it’s your business’) produced and hosted by Grazielle David and Daniela Stefano. All our podcasts are unique productions in five different languages – English, Spanish, Arabic, French, Portuguese. They’re all available here. Here’s the latest episode, Registro global de ativos pode acabar com sigilo financeiro #39:
Todas as negociações globais por direitos que ocorrem na ONU esbarram no mesmo problema: quem vai pagar por isso? O movimento por justiça fiscal já encontrou o dinheiro – escondido em paraísos fiscais. Agora falta tributar e dividir. E a maneira mais justa para que isso ocorra é que as regras de tributação internacional sejam decididas por todos os países. No episódio #39 do É da Sua Conta você ouve os motivos que tornam uma Convenção Tributária nas Nações Unidas o lugar mais democrático e transparente para que essas negociações ocorram.
Você ouve no É da sua conta #39:
Como e por quem as decisões globais sobre tritubação estão sendo tomadas.
A importância da participação de todos os países nestas decisões.
Por que uma Convenção Tributária na ONU é a maneira mais rápida para tornar decisões mais justas.
O papel dos países do Sul Global para a implementação de uma Convenção Tributária na ONU.
Vantagens de uma Convenção Tributária na ONU: transparência nas negociações e recursos para cumprir objetivos do desenvolvimento sustentável.
Marcos Valadão, professor de direito tributário, membro do conselho do conselho diretor da Tax Initiave do South Centre e membro do subcomitê do comitê na área de preços de transferências na ONU.
REGRAS DE TRIBUTAÇÃO GLOBAL DEVEM SER DECIDIDAS NA ONU #39
Isso não quer dizer que os países em desenvolvimento sempre ganham nas Nações Unidas, mas significa que a balança é muito mais equilibrada do que, por exemplo, num organismo de negociação, como o G20, onde a grande maioria dos países do mundo não são nem convidados ou pior ainda – o G7, onde basicamente sete grandes economias tomam decisões globais.”
~ Tove Maria Ryding, Eurodadd
(A Convenção Tributária na ONU) se trata de um framework, no qual haveria um acordo entre todos os países de respeitar os direitos tributários uns dos outros. Isso passa, por exemplo, por não tomar medidas nacionais que prejudiquem os interesses tributários de outros países, além de cooperar na troca de informações em matéria tributária.”
~ Lays Ushirobyra, Global Alliance for Tax Justice
O equilíbrio dos direitos tributários entre países foi distorcido em favor dos países ricos e das grandes multinacionais. Tornou-se mais fácil para as empresas multinacionais escapar do pagamento de impostos e aumentar seus lucros e mais difícil para os governos de todo o mundo aumentar a receita tributária.”
~ Nick Shaxson, Tax Justice Network
Outra vantagem da convenção é que os países de baixa renda e em desenvolvimento podem propor regras globais mais simples do que as modelagens sofisticadas e complexas impostas agora pelos países desenvolvidos.”
Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app.
In this episode Taxcast host Naomi Fowler investigates the phenomenon of pop-up sweet shops on one of the world’s busiest shopping locations, Oxford Street in London and the missing millions in taxes owed there. The trail leads to the disgrace that is the UK’s company registration process, making the UK ‘Crime Central’ for any crook who comes along. And it’s not just the UK that’s exposing its citizens to unacceptable risks by enabling criminals, it’s hurting people across the world too.
Ray McCann, former tax inspector and past President of the Chartered Institute of Taxation
It is ridiculous that you have to take more identification to get a library card to borrow a book than you do to create a limited liability company, which potentially is a cost to the taxpayer if you go bust, it is bonkers and it should stop”
I came across a situation where for tax avoidance reasons, thousands of companies were being set up at the same time, with the same individual as the director. And in some cases there was 2000 companies being set up in the same day with the same individual as a director, and it wasn’t raising any flag. You hear it all the time, you know, ‘oh well, we’ll learn the lessons,’ but we never really seem to learn the lessons. The next scandal is a variation on a theme of the previous scandal.”
How did the UK end up at the centre of so many crimes? It’s incredibly easy – go online, go onto the Companies House website – that’s our company registry – pay 12 pounds and you too can have a shell company. I registered one myself – it took me less than 24 hours to receive the deeds showing I owned the company. I called it Crooked Crook Crook which I thought was pretty funny, but it turned out that actually I was being fairly unimaginative by the standards of international criminals.”
BBC coverage of pop-up sweet shops on Oxford Street
Time to Return Integrity to the UK Corporate Registry. Royal United Services Institute for Defence and Security Studies video featuring Oliver Bullough
Naomi: “I’m speaking to you from one of the world’s busiest shopping streets, Oxford Street in London. I’m outside one of MANY sweet shops – or candy stores, as they’re known in the States that have sprung up along here, there’s about 30 of them, it’s pretty bizarre actually! So, you may be wondering what do sweet shops have to do with tax justice and corruption? Oh everything! And it’s rotting away more than just teeth. It’s hurting people in other countries too.
Let’s rewind a little to where we are today and what’s going on with these pop-up sweet shops. So we had the 2008 financial crash – which nations never recovered from. There’s been the rise of online shopping and the Amazonisation of economies. The pandemic decimated high streets and shopping centres everywhere. Here in Britain we’ve been impacted by Brexit, and the invasion of Ukraine is only just starting to wreak havoc on economies. On major shopping streets like this one everywhere, businesses have been closing, and shop spaces becoming vacant. That means that the old-time easy money maker for owners of land and buildings in prime shopping sites has been slowing right down. Here’s one trader:
Trader: “it’s very very very different now, 88% down, so it’s a significant drop particularly on the week, at the weekend it builds a little bit but we are nowhere near what we would normally expect to see, this isn’t going away quickly.”
Naomi: “Now if you owned this land, or those buildings with empty shop spaces sitting unrented, you’d be looking to transfer the hit of having to pay business rates and taxes to someone else as fast as you could, right? And that’s where pop-ups like these sweet shops come in – presumably without too many questions being asked by letting agents. The borough of Westminster where I am here on Oxford Street collects the most business rates in the whole of the UK – £2.4 billion a year. But some of these shops aren’t paying their business rates. Here’s the director of revenues at Westminster Council Martin Hinckley speaking to the BBC recently:
“We’re often given shell company names or false information, the bottom line is to try and follow the money trail. The key will be when we can trace where the money’s going. The short fall doesn’t just affect Westminster, the vast majority of Westminster’s business rates is redistributed across the country so that’s millions that won’t get redistributed across the country.”
Naomi: “The local authority, Westminster council, is now chasing £7.9 million in unpaid business rates by 30 shops. The thing is, if you’re a crook who wants to make a killing on one of the world’s most lucrative shopping streets, it’s like taking candy off a baby. You can dodge all costs other businesses have to pay and in many cases, sell fake or unsafe stuff, all with total impunity. Here’s journalist and anti-corruption campaigner Oliver Bullough on this subject – we’ve interviewed him a few times on the Taxcast and he’s here on a video for the Royal United Services Institute for Defence and Security Studies:”
Oliver: “Money laundering regulations have got much tighter and now banks are obliged to be suspicious about the origin of the wealth of their clients. And that means their clients, the criminals have had to get much cleverer. How have they done that? They have aimed to put as much distance as they can between the crime they’ve committed and the money in the bank. And the way they do that is they own the money via a shell company. Now, I know what you’re thinking, because I know what most people think when the word ‘shell company’ is mentioned. Normally we think of a tax haven somewhere perhaps in the Caribbean, a sunny place for shady people. Over the years they were implicated in so many scandals, that they raised so many red flags for regulators that criminals started to shy away from them and instead they turned to the UK. So just how and why did specifically the UK end up at the centre of so many crimes? It’s incredibly easy – go online, go onto the Companies House website – that’s our company registry – pay 12 pounds and you too can have a shell company. I registered one myself – it took me less than 24 hours to receive the deeds showing I owned the company. I called it Crooked Crook Crook which I thought was pretty funny, but it turned out that actually I was being fairly unimaginative by the standards of international criminals. Once you have a company registered in whatever name you like, you can use it to hide your identity when you’re moving money around, no questions asked. So that’s the how and what about the why? Well despite the scandals of recent years British companies have a veneer of respectability and our company registry is very large, it has almost four million companies on it and half a million more are added every year so there is a very large crowd in which your company can hide while it’s engaging in criminal behaviour.”
Naomi: “Nice eh? So the UK is basically Crime Central for this stuff – it attracts people from all over the place because it’s got such a lax company registration regime. £12 to register a company online. That’s about $14. No id needed. No UK bank account needed. As you can imagine, there are plenty of scam stories. Here’s Graham Barrow of The Dark Money Files podcast who specialises in the UK’s Companies House registrations:”
Graham: “Well, it’s almost, it’s almost where do you start? Some of them are ridiculous. One of my favourites, the United States of America Corporation Limited and the United African States Corporation Limited, and they’ve all got like 10 trillion pounds of capital, which is just nonsense. We’ve got, there’s there’s Jesus, holy Christ as a director. Elvis Presley is a director. Beyonce was for a while the PSC of a company, I don’t think she knew that. So you name it, Companies House has probably got it.”
Naomi: “In case you’re wondering, PSC is a person of significant control.”
Graham: “We’ve been monitoring a network of companies that were being set up in, in empty shops. They’ve been using the names of real people and actually they were real people who, who have worked at one or another for just two companies and it’s about 1500 of these. So, so it’s absolutely clear that somebody has hacked into the HR files of these two companies, stolen all of the people’s details and then used them to create directors. Now what’s happening right now, because we monitor these things, is all of those companies are now filing court orders to remove them because although you can put them on with no checks whatsoever, to remove your name as a PSC or shareholder, you’ve got to go to court to have it taken off, which is about the most ludicrous thing you could think of is – yeah, well, we’ll let anybody go on without any checks, but you can’t come off it without proving that you shouldn’t be on there in the first place, it’s bonkers!”
Naomi: “Yep. It is. Here’s Ray McCann. He’s worked in tax since 1975.”
Ray: “I came across a situation where for tax avoidance reasons, thousands of companies were being set up at the same time, with the same individual as the director. And in some cases there was 2000 companies being set up in the same day with the same individual as a director, and it wasn’t raising any flag.”
Naomi: “Ray was a government tax inspector for many years, and he also worked for PwC, was former president of council of the chartered Institute of taxation, former chair of the professional standards committee. He’s worked in the UK, the United States, Germany and with the Australian and Canadian tax authorities.”
Ray: “If you think back historically why we have companies like that and limited liability companies in particular, you know, we were looking to boost trade in Victorian times and the limited liability was a good way of individuals getting involved in a venture, but at the same time being able to safeguard all of their assets so that in the event that the venture went wrong, they could limit their liability to what they had invested in and wouldn’t expose the whole of their wealth to risk. Almost anyone can set up a limited company and there’s not a huge amount of regulation as regards what that company can be used for once it’s actually set up. It strikes me that that is a complete own goal if the UK is lecturing the outside world about the importance of transparency and beneficial ownership registers and so on, for us to have a situation where a tax avoidance scheme on a large scale involving a huge amount of lost revenue can quite happily sail through Companies House and it doesn’t raise any kind of alert, and no one asks a question as to how is it that someone can set up a company or thousands of companies at the same time with the same director, who if I remember right was about 18!”
Naomi: “Ha! Here’s Graham Barrow again, of the Dark Money Files podcast:”
Graham: “Very often the damage it does it does in other countries, because other people in other places and particularly corrupt people really like UK companies because of this perception of being clean and transparent. So the damage it’s doing is partly arm’s length, not entirely but that damage at arm’s length is people living in other countries whose taxpayers money is being stolen from them, which should be paying for hospitals and schools and roads and education and transport – it’s being stolen from them, put through UK companies in huge quantities. You know, if you were setting up a criminal network, not that I would dream of doing that, but I could do a really good one! What you’d want to do is you want to involve as many different countries as possible. So, having a UK company that may be has, let’s say an American person with significant control, but actually their address that they’ve given, and I’ve seen this is, in Hungary. But the banking is in Slovakia and the directors are actually two limited companies who are based in the Marshall Islands. And so we haven’t got a clue who runs those companies, ‘cos you can’t find out, you’ve already got four or five different jurisdictions involved. Now, if you’re gonna take any action, you need to have cooperation between the law enforcement in those jurisdictions. Well, they ain’t ever going to cooperate. Your ability to actually attack that network is virtually zero because they’re non-cooperative countries and you know, you can do an RFI – request for information – to the Marshall Islands and you’ll get nothing – at the moment Hungary, probably not gonna be terribly cooperative with us in terms of law enforcement enquiries, and the US, I mean the PSC it could be completely fictitious anyway, it may not even exist, no one’s gonna check. So, you know, from a criminal point of view, it’s a perfect storm of loveliness. Some days I get really, really, really frustrated because you see, how are we ever gonna stop this? And actually the first and most important step is requiring full verification of people when they create a company, it’s just so stupidly obvious!”
Naomi: “Ha! It is! So Ray, back to you – what possible good reason could somebody have for setting up 2 or 3 or 4,000 companies at a time in their name, or indeed somebody else’s name, I mean there’s examples of people setting up companies calling themselves Mickey Mouse.”
Ray: “Well, I mean the short answer Naomi is there is no good reason. Uh, and if there is a good reason, no one’s ever given me that good reason. There’s lots of good reasons as to why, you know, a firm or an individual might want to set up, you know, one, two companies that are inactive at that point in time so that as a venture, you know, expands, they may use companies for that but I defy anyone to give a good reason as to why you would set up 2000 companies on the same day, with the same individual shown as director. It’s just up to no good and even if it is a proper legitimate venture, some quick questions from Companies House would actually flush out whether in fact there was something going on that should raise wider concern within HMRC.”
Naomi: “HMRC is the UK’s tax authority, Her Majesty’s Revenue and Customs. But there are rarely any questions asked. And there’s loads of juicy services being offered that are flourishing in that environment. Graham Barrow again:”
Graham: “There are, um, they’re called EMIs, electronic money institutions and they offer, they offer packages, there’s one, I’m not gonna name them for obvious reasons, but they have a thing called a non-resident package, so for the price of the company incorporation for anyone who doesn’t live in the UK, they will provide them with, uh, an electronic money institutions business banking. Now, you know, it’s kind of almost a given that that banking will not be UK banking. It’ll be ultimately, although it might have a UK IBAN number, bank, account number, but the location in the UK is purely electronic. It’s a virtual UK location. So we’re almost like we’re making this easy deliberately for people to launder money through the system!”
Naomi: “And it doesn’t have to be this way does it? If you look around at the systems in other countries for setting up companies, the US is also one of the world’s worst. But take a look at Germany for example – and they have a much stricter system. You need a notary for various filing activities..”
Graham: “In person, in person! Yeah!”
Naomi: “- you need to actually have a bank account in Germany to have a registered company in Germany (unlike the UK) – that’s something the UK government has resisted for a long time. So yeah, it doesn’t have to be this way does it?”
Graham: “No, and I, I bet it costs more than 12 pounds in Germany as well! One of the things that they like to announce is how easy it is to, to be entrepreneurial, but the trouble with that is at 12 pounds it just encourages everything from the loonies on one side to the really deeply troubling on the other, to incorporate just thousands of companies ‘cos it’s so damn cheap and all we ask is that you have an address in the UK to register a company yet we don’t ask for anything else. You don’t have to live here, work here, do any business here. We have hundreds of thousands of companies registered here in the UK that have no economic benefit to the country whatsoever, we don’t have banking, we don’t have trade, we don’t have employees. We don’t have anything other than names on a company it’s just stupid!”
Naomi: “So Ray, why wouldn’t the example that you give, like 2, 3, 4,000 companies registered by the same person in a day, why wouldn’t that raise red flags? What is wrong with the system that’s not sort of going, whoah, hang on a minute. let’s do some investigation!?”
Ray: “Well see, it’s an excellent question Naomi. And I think the straightforward answer to it is the system’s not configured to flag up something like that. Um, I mean it’s like the banks now, in secret will have their keys that, you know, if, if their customers do certain things that will flag up something in the bank and the bank will make a decision as to what it’s doing there, that might result in a report to the National Crime Agency. It might just be something that the bank manager will be asked just to query it. But as far as I could see Companies House wasn’t configured at all to identify situations where that type of thing happened. And I think any reasonable person would look at that type of situation and just think, why is that happening? Why are you setting up 2000 companies on the same day with the same individual as a director? And given that Companies House ultimately are the regulators of corporates in the UK then you would expect such a, a monitoring system to exist within companies house to identify potentially problematic transactions.”
Naomi: “Graham Barrow:”
Graham: “I think Companies House are caught between a rock and a hard place because they don’t have a mandate to do really proactive management of fake filings because their mandate comes from 1844 by and large when none of this was really thought about, but incidentally it cost a fiver in 1844 to create a company. So if it had gone up by inflation, it would be about 770 pounds now and not 12 pounds. And the reason it’s only 12 pounds is because the mandate actually says Companies House may only recoup the cost of the incorporation. So I actually know them really well at Companies House and their desire to do well is actually strong. They haven’t got financial or human resources to do anything about it. It is squarely in the lap of the government here. It is ridiculous that you have to take more identification to go and get a library card, to borrow a book than you do to create a limited liability company, which potentially is a cost to the taxpayer if you go bust, it is bonkers and it should stop and that’s a government issue.”
Naomi: “There’s been campaigning by anti-corruption people forever on these issues and the British government has claimed it’s going to tackle this many times, and so far it still hasn’t. Here’s Oliver Bullough again:”
Oliver: “We’re not giving our company registry the powers to police the registry. They don’t have a duty to check the information of companies that are already created, for example. Under the proposed reforms the registrar of companies will remain a librarian rather a detective which is what we really need and to be honest it isn’t really clear how determined the government actually is to clean up our company registry. Reforms cost money always but how much money would this actually cost? Let’s say instead of costing 12 pounds a year to register a company, it costs 20 pounds that would probably raise enough money for the Companies House to be able to check the information provided to it for every single company – it doesn’t seem very much of a price to pay.”
Naomi: “Graham Barrow would go higher, and compared to other countries, it’s still cheap:”
Graham: “If you buy a new car in the UK, it costs you 55 pound to register that new car. And it doesn’t appear to dissuade people from buying new cars very much. I would’ve thought if you charged a hundred pound to start a company, most people start companies because they think they’re going to be successful. You don’t start expecting to fail. And a hundred pound as a cost of actually getting off the ground doesn’t seem a lot to me. And that would then enable Companies House, it would fund Companies House to do proper due diligence on the people starting companies. I would go further and say that you actually have to have an official, a legal officer of the company in the country in which it’s registered. So there is an accountable person. If you get caught doing dodgy stuff, there is somebody gonna be accountable because I mean, there are thousands of companies I know that are registered to people who live currently in the Donesk region of Ukraine. Well obviously that’s not a place we’re gonna go to very quickly to say, ‘oi, you haven’t filed your accounts for the last two years.’ You know, it’s not gonna happen because it’s currently under the control of Russia. So what, what’s the point? Why do we allow this? And because if you don’t trade in the UK, you don’t have to file any accounts either. You can just be a non-trading UK company. We’ll never be any the wiser. So it’s just rubbish.”
Naomi: “Ray McCann again:”
Ray: “You hear it all the time, you know, oh well, we’ll learn the lessons, but we never really seem to learn the lessons. The next scandal is a variation on a theme of the previous scandal. If someone sets up a company, I don’t think it’s too onerous for them to answer a few extra questions as to why, why are you setting this company up and what is the purpose of it? When I was in the revenue at one time I was responsible for the clearance of mergers, demergers, all that kind of stuff. I actually wanted to introduce a clearance for the transfer of assets abroad legislation and I couldn’t get any traction on it at all. Couldn’t get anyone to agree that it was a good idea and it struck me that it was a fantastic idea, you know, if someone wants to put their money in Jersey then they write to revenue and say ‘I’m putting my money in Jersey’ and then the revenue know that they’re doing it, you know and the problem is it’s all secret.”
Naomi: “According to Graham Barrow, even just requiring a company being registered to have a UK bank account would be a massive leap forward:”
Graham: “I know we criticise ’em for lots of things, but I’ve worked at a lot of the banks and one thing actually they do take seriously is proper verification when you create the account. I reckon at least 10% of the companies formed every day and that means 3 or 400 companies every day are, are formed, they’re never gonna bank in the UK. That can be just anything that would be picked up if they were required to bank here in the UK and actually would probably stop the company formations dead in the water because there would be no point.”
Naomi: “I always find myself asking this question – when it comes to legislation and making the system more accountable, do politicians actually understand these issues? Are they just ignorant of how their own financial systems work or are they knowingly serving private interests and lobbyists who want a deliberately lax system?”
Ray: “I think it’s a combination of things. It’s all of that. Most Parliamentarians aren’t tax experts and you can forgive them for that but there should be some process whereby Parliament understands the laws that it makes. And, and it’s not just tax it’s, it’s other areas as well, but they’re under so much pressure in Parliament to get the Parliament schedule of bills and so on through Parliament that at the end of the day, you know, I, I just don’t think there’s any conceivable way that they could be completely briefed in terms of what the consequences of the legislation are gonna be. I think our parliamentary processes should be able to scrutinise the legislation in a way that, you know, they at least understand the consequences of it. Well, they should get the time. Because it’s too important.”
Naomi: “Graham – if you were Prime Minister, or Finance Minister, how would you fix this?”
Graham: (Laughs) “They’re never gonna let that happen! I mean, I would immediately introduce Companies House reforms that require at the very least insist on proper verification. You know, you’ve gotta prove who you are, who your shareholders are. You have to have a UK address. I would require a UK accountable person for every company that is formed here in the UK because we should get some economic advantage, we shouldn’t just be allowing anyone anywhere in the world, I mean, the number of Chinese companies that are using the UK to get, you know, to trade in NFTs and crypto and all sorts of stuff is just barmy. So we, of course, we need to encourage entrepreneur activity. We want people to start businesses like they’re good for the economy, but they should be businesses that are based here in the UK, provide UK employment, provide a benefit to the UK exchequer, provide benefit to the UK economy and we should start controlling that. There are people all over the world who, because it’s expensive to have a limited liability company in their country, incorporate a UK one instead. So we take the burden for other countries, you know, potential bankrupt companies because it’s cheaper to do it here than there?! I’m not being xenophobic here. I don’t care where you come from, but if you’re gonna create a UK company, it should benefit the UK economy. End of story.”
Naomi: “And do politicians understand in your view or do they just not get it?”
Graham: “Uh, they don’t get it. I was on a bus with some politicians a few weeks ago. I won’t name them, but we were doing a tour of London’s oligarchs with the wonderful Oliver Bullough and Oliver said ‘come and talk to these people about Companies House.’ And they didn’t even know that on most week days, 3000 companies were formed at Companies House. That was a shock to them. If you don’t know that that 750,000 companies are formed every year…they didn’t know that at least 20% of all companies formed in the UK have completely offshore directors and PSCs, they didn’t know that either. So if you have no comprehension of the scale of the problem, how are you ever going to be part of the solution?!”
Naomi: “We’ve got to carry on shouting it from the rooftops! I’ve been speaking with former
UK tax inspector Ray McCann and to Companies House sleuth Graham Barrow of The Dark Money Files podcast – check that out if you haven’t already heard it, it’s brilliant. That’s it for now from the Taxcast. Thanks for listening, bye for now.”
The Financial Action Task Force (FATF) is in the process of reforming Recommendation 25 on beneficial ownership transparency of trusts and other legal arrangements. The Tax Justice Network is publishing this report which explains the risks created by trusts and why these risks justify the call for increased transparency. The call for trust registration is supported by the findings from the 2022 edition of the Tax Justice Network’s Financial Secrecy Index which showed that more than 120 countries already require some type of trust registration, including 65 countries which require some type of beneficial ownership registration.
The Financial Action Task Force (FATF) is the inter-governmental body that establishes and assess compliance with Recommendations on anti-money laundering (AML) and the financing of terrorism. The organisation is in the process of reforming beneficial ownership transparency requirements. In March 2022, the FATF approved the reform of Recommendation 24 on beneficial ownership transparency for legal persons such as companies and foundations. The main improvement was the requirement for countries to set up beneficial ownership registries (or equally efficient alternative mechanisms). Although the FATF could have been much more ambitious in its reform – especially in terms of public access to beneficial ownership information or lowering thresholds used in the beneficial ownership definition – requiring a government authority to collect beneficial ownership data is a major achievement, especially for putting pressure on laggards including Switzerland and China. However, requiring beneficial ownership registration for legal persons is hardly “radical”. It’s quite mainstream actually. The Tax Justice Network found that by April 2020, more than 80 jurisdictions had already approved laws requiring beneficial ownership information to be filed with a government authority. By 2022, this number was closer to 90 jurisdictions including the recent approval of the Corporate Transparency Act in the US in early 2021.
In July 2022, the FATF started the process to reform Recommendation 25. It opened a consultation and published a white paper but gave little indication that “trust registration” will become part of Recommendation 25.
Secrecy risk 1: Trusts do not need to register to have legal validity
In many countries trusts don’t need to register with an authority to enjoy all the benefits conferred by the law. This means that governments do not know how many trusts exist in the world, how much they hold in assets or who is benefitting from them. Instead of this self-imposed secrecy on trusts, countries could follow the examples of Barbados (for purpose trusts), Czechia, France, Puerto Rico or St. Kitts where trusts must be registered to be legally valid.
Secrecy risk 2: Trusts can use murky roles and numerous parties to obfuscate control and benefit
The classic example of a trust, where a parent (settlor) transfers assets to their sibling or lawyer (trustee) to manage the assets in favour of their spouse and children (beneficiaries), has a clear and straightforward delineation of roles and relationships. Modern trusts, however, can utilise a wide variety of increasingly complex and murky roles and relationships so as to completely obfuscate who has control or benefit over the assets. The reality of modern trusts is far more complex and hazardous than the fictional example often touted.
Secrecy risk 3: Trusts are often used in complex structures that create hurdles for authorities
The combination of trusts and legal persons in complex chains can intensify secrecy. Even a two-layer chain involving one trust and one legal person can create impenetrable secrecy. The main problem occurs when countries’ beneficial ownership definitions are too limited to allow transparency on both layers in the chain.
Asset risk: Trusts shield assets against authorities and creditors
As the image below demonstrates, trusts can put assets in an apparent “ownerless limbo” where – on paper – no one owns the assets when it is convenient to not own the assets (eg when the personal creditors of the settlor, the trustee or the beneficiary come knocking). Of course, all parties can still conveniently use and enjoy the assets when no one is looking.
Trust registration around the globe
According to the 2022 edition of the Financial Secrecy Index, which assesses, among many things, legal and beneficial ownership registration for 141 jurisdictions, there are 121 countries that have some type of registration for “trusts”. By “trusts”, we include in our reference similar structures such as fideicomisos, fiducie, Treuhand or waqf. By “registration”, we refer to any situation in which a trust (or a trustee on behalf of the trust) must file information about the trust to a government authority (eg the tax administration, a trust registry or the land register).
Out of the 121 countries with some type of trust registration, 65 countries require (or plan to require) some type of beneficial ownership registration for trusts. This number includes:
All 27 EU countries. The 5th Anti-Money Laundering Directive requires EU countries to set up central beneficial ownership registries for trusts.
The US and four US territories (American Samoa, Guam, Puerto Rico and US Virgin Islands). The Corporate Transparency Act will apply to all US territories and, according to the proposed FinCen regulations (as of July 2022), “business trusts” (and other entities typically created by a filing with a secretary of state or similar office) will be covered by beneficial ownership registration.
11 countries in Latin America and the Caribbean: Antigua & Barbuda, Argentina, Brazil, Colombia, Costa Rica, Dominican Republic, Ecuador, Paraguay, Peru, St. Kitts and Uruguay.
9 jurisdictions in Europe: Andorra, Gibraltar, Iceland, Liechtenstein, Monaco, Montenegro, Norway, San Marino and the UK.
7 countries in Africa: Botswana, Morocco, Namibia, Rwanda, Seychelles, Tanzania and Tunisia.
5 countries in Asia (mostly in the Middle East): Lebanon, Qatar, Sri Lanka, Turkey and the UAE (for trusts created under the laws of the Abu Dhabi Global Market free zone).
1 country in Oceania: Nauru.
Public access
In order to facilitate access to information by all relevant stakeholders (including both local and foreign authorities, obliged entities such as banks in charge of customer due diligence, investors and businesspeople, journalists and civil society organisations), there should be public access to information on trusts. Public access is also the only way to hold authorities to account and to check the quality of the register.
Fortunately, countries in Europe and Latin America are going beyond the standards and are offering (or plan to offer) public, online access to beneficial ownership information:
12 of the 27 EU Members already offer, or plan to offer, public access to trusts’ beneficial ownership information: Austria, Bulgaria, Croatia, Czechia, Denmark, Estonia, Germany, Netherlands, Poland, Portugal, Slovenia, and Sweden.
The remaining 15 EU Members will have to ensure access to competent authorities, obliged entities and those with a legitimate interest. South Africa also offers access based on a legitimate interest.
3 more countries either plan to provide public access to beneficial ownership information on trusts (Norway) or already offer it for legal owners (Ecuador and Panama).
4 countries offer public online access to basic information on trusts: Dominican Republic, Oman, Seychelles and Singapore.
Best cases of public access
a. Denmark
Denmark offers free and public online access to information, allowing users to filter for only trusts in searches.
b. Ecuador
Ecuador allows users to search trust by name and tax identification number, including cancelled trusts. A wide range of details are available including settlors (constituyentes) and beneficiaries (beneficiarios)
c. Panama
Of all places, Panama allows free online searches for trusts that are involved in real estate (inmuebles). Users can search specifically for trusts (fideicomisos) involved in real estate, and can also searching by name of settlor (fideicomitente), trustee (fiduciario) or beneficiary (fideicomisario). Information sometimes includes a summary of trust’s purpose (eg guarantee) and the name of the settlor, trustee and beneficiaries. More impressively, in some cases a free online scan of the full public deed creating a trust (fideicomiso) or a private foundation (fundación de interés privado) is available.
Recommendations
Based on the Tax Justice Network’s previous recommendations on how to prevent trusts from being abused to avoid sanctions against oligarchs, we propose the following recommendations.
The Financial Action Task Force (FATF) should:
1. Require the “registry approach” for trusts under the Reform of Recommendation 25.
All countries should:
2. Require trusts to register to have legal validity.
3. Establish central registers to collect beneficial ownership information on all trusts that: (a) are created according to, or governed by local laws; (b) have any asset or operation in the country; or (c) have any party who is resident in the country.
4. All parties (settlors, trustees, protectors, beneficiaries, and any other individual with control or benefit) to a trust (including unit trusts used for investment funds) should always be required to be identified as beneficial owners before they are allowed to enjoy any power or control, or receive a distribution.
5. When a trust owns a company, all the parties to the trust should be considered the beneficial owners of the company (not just the trustee or “any person with control over the trust”)
6. When a party to the trust is a legal person (eg a company), all the beneficial owners of the company should be identified as beneficial owners of the trust, ideally without applying any threshold. Even if the beneficial ownership definition for companies usually applies thresholds, eg “anyone with more than 25 per cent of shares”, no thresholds should be applied when a company is a party to the trust.
7. Provide public access to information on trusts, just as is done with legal persons similar to trusts such as private foundations. Public access should ideally be online, free and in open data format.
Welcome to our Spanish language podcast and radio programme Justicia ImPositiva with Marcelo Justo and Marta Nuñez, free to download and broadcast on radio networks across Latin America and Spain. ¡Bienvenidos y bienvenidas a nuestro podcast y programa radiofónico! Escuche por su app de podcast favorita.
En este programa:
Los desafíos que enfrenta Gustavo Petro en Colombia. ¿Es posible el cambio estructural que necesita el país?
Y más sobre Colombia: ¿cómo impactará la economía mundial y la política interna en el intento de transformar el país? ¿Qué impacto tiene la victoria de Petro para el conjunto de la región?
Analizamos el doble fantasma de la hambruna y la inflación de los alimentos que amenaza a la humanidad.
Y el impacto que tienen las multinacionales y los multimillonarios en el sistema impositivo de los países en nuestro nuevo capítulo sobre qué son los paraísos fiscales.
INVITADOS:
Maria FernandaValdes de la Fundación Ebert, autora de Reducir la desigualdad “El Papel de la política tributaria”
Oscar Ugarteche Director del Observatorio Global Latinoamericano, OBELA, profesor de la Universidad Nacional Autonoma de Mexico, la UNAM y autor de Historia Critica del FMI
Martin Mangas, investigador Universidad Nacional General Sarmiento Argentina
~ Los desafíos que enfrenta Gustavo Petro en Colombia
Welcome to the 55th edition of our Arabic podcast/radio show Taxes Simply الجباية ببساطةcontributing to tax justice public debate around the world. It’s produced and presented by Walid Ben Rhouma and is available on most podcast apps. Any radio station is welcome to broadcast it for free and websites are also welcome to share it. You can follow the programme on Facebook, on Twitter and on our website.
في العدد (55) من الجباية ببساطة يناقش وليد بن رحومة إستضافة مصر للدورة السابعة والعشرين من مؤتمر الأطراف الموقعة على إتفاقية الأمم المتحدة الإطارية بشأن المناخ (COP 27) مع الباحثة والناشطة في مجال العدالة المناخية ٱمنة شرف، ومدى تأثير المؤتمر في إرساء مستقبل مناخي عادل في مصر والمنطقة العربية.
في أخبارنا المتفرقة تطرقنا لتخلف روسيا عن السداد لاول مرة منذ أكثر من قرن زيادة على الإحتجاجات من جرّاء غلاء المعيشة في عدد من دول المنطقة العربية والعالم.
~مؤتمر المناخ والعدالة المناخية في مصر
For this month’s episode #55 of the Taxes Simply podcast, we start with a round-up of the key economic events which occurred globally and in the Arab region in June 2022.
We then speak with Egyptian environmentalist activist and researcher Amena Sharaf, who discusses the upcoming UN Climate Change Conference (COP 27) which is set to take place in Egypt in November 2022. Walid and Sharaf discuss the agenda for the conference, the main challenges local and global challenges posited by climate change and how they can be mitigated, as well as how environmental justice relates to social justice at large.
Welcome to our monthly podcast in French, Impôts et Justice Sociale with Idriss Linge of the Tax Justice Network. All our podcasts are unique productions in five different languages every month in English, Spanish, Arabic, French, Portuguese. They’re all available here and on most podcast apps. Here’s our latest episode:
Dans cette 41ème édition de votre podcast en français sur la justice fiscale en Afrique et dans le monde produit par Tax Justice Network, nous abordons la question de la transparence dans la fiscalité en Afrique.
Selon le plus récent rapport 2022 de la transparence fiscale sur le continent produit par l’OCDE et l’ATAF, des améliorations sont perceptibles. Mais la société civile africaine rappelle qu’il y a encore beaucoup de choses à faire.
Aussi, la question de la transparence des contrats sur les ressources extractives continue de constituer un défi. Enfin, le podcast célèbre les années d’existence de l’organisation Inspecteur des Impôts Sans Frontières avec un rappel de l’histoire et des acquis par John Christensen un des grands acteurs du plaidoyer international pour la justice fiscale.
Et pour ceux qui ont l’application Stitcher et iTunes ect
Si vous souhaitez recevoir cette production ou être média partenaires ou simplement contribuer, vous pouvez nous écrire à l’adresse Impô[email protected]
Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app.
In this spisode we look at Amazon’s tax challenge:
Annual shareholder’s meetings used to be pretty staid and boring affairs. But, as inequality has boomed along with corporate profits, AGMs are becoming sites of protest. In this episode, Taxcast host Naomi Fowler speaks to Katie Hepworth of PIRC and Jason Ward of CICTAR about the recent challenge to Amazon on tax transparency from shareholders. How did the challenge unfold and what was the result? What does it tell us about progress on principles that are increasingly important to us as societies?
A transcript is available here (some is automated)
Amazon is just a perfect example of how the global tax system is utterly broken and in need of a massive overhaul. It’s a form of madness to be giving large government contracts to multinationals that don’t pay their taxes, it seems that that’s a very common sense provision that all governments at every level should be looking at.”
~ Jason Ward, CICTAR
Is transparent tax reporting inevitable? I think it is, I think where we’re at with tax reporting is where climate reporting was 10 years ago. And if we look at the history of climate reporting then we can see the importance of actually starting to target individual companies over tax disclosure and the way shareholder proposals at individual companies about their climate disclosure snowballed into regulatory reform for mandatory disclosure. The vote puts other companies on notice that investors expect greater transparency.”
Taxcast host, Naomi Fowler: “Here’s a question for you – how many shareholders meetings have you been to? Probably none, because most of us aren’t really knowingly shareholders. If we’re lucky enough to have some kind of pension we’re paying into we are shareholders, but we probably don’t know what we’re invested in. And while you might read all about high frequency trading and crazily fickle shareholders who only hold a share for a matter of seconds, pension funds, churches and unions tend to be a bit different. And they can wield quite a lot of clout, even for an Amazon or a Google. Because if they decide to offload their shares, it can be a big deal. So anyway, shareholder’s meetings used to be pretty staid and boring affairs. But, as inequality has boomed along with corporate profits, corporate AGMs are increasingly becoming sites of protest.
[Clips of protest]
This is Shell’s recent AGM – these protesters disrupted Shell’s meeting for 40 minutes demonstrating against mega profits from unbridled, state subsidised environmental destruction. Companies like Shell have seen those kinds of protests before. But you never particularly think of things like dreary old pension funds as fighting to reform the broken corporate tax system, do you? But they’re turning out to be a thorn in the side of big companies at their carefully managed AGMs. They might not be as noisy as those protestors, but these big companies want their AGMs to be shiny, seamless, polite choruses of agreement. The mainstream media may not be reporting on the clash of values going on at these AGMs, but a change in the consciousness of investors is happening, and it’s been happening for a while. And the Amazons of this world don’t like it one bit:”
Katie: “Amazon has taken advantage of the pandemic to move all of their AGM online. It is a wholly virtual AGM, despite a lot of the rest of society opening up, they have decided to keep the AGM entirely online rather than moving to an in-person or even hybrid approach to the AGM.”
Naomi: “This is Katie Hepworth of the organisation Pensions & Investment Research Consultants, or PIRC. It was founded by local government pension funds in the UK and supports institutional investors with responsible investment. It’s interesting, Katie, that Amazon has responded to the pandemic to take such good care of their shareholders when they certainly didn’t do that for their workers!”
Katie: “Yeah. And look throughout the process, they have just shown that they are afraid of oversight, all the way to the way in which they presented the vote at the AGM.”
Naomi: “Right, because at their recent AGM there was a proposal from shareholders to vote for much better tax transparency at Amazon!”
Katie: “Yeah, they elected not to publish the vote, during the AGM proper, and instead investors had to wait until, you know, 4:59pm the day before, you know, the Friday before the Memorial day long weekend. So this is a company that does not want to give its own investors the oversight of its operations.”
Naomi: “Yeah! But investors, pensions funds need to know a fair bit of information about what a company is actually up to in order to invest. They want to know, increasingly, whether the company is exploiting workers, polluting rivers, poisoning the planet. And now, after years of tax justice campaigning raising the issue of tax fairness, investors want to know whether the company is paying their fair share, and if they’re being secretive about their taxes. Because doing the wrong thing on tax can damage the reputation of a company, and as we’ve discovered this month, it can cost the company retrospectively. In France a judge recently approved a settlement that forces McDonalds to pay €1.2 billion in fines, penalties and back taxes. It’s France’s biggest ever corporate tax dodging settlement. And when the EU started investigating them, McDonald’s moved their tax base to London, where they’re also paying not very much in taxes. Now campaigners War on Want are calling on the UK tax authorities to investigate. Amazon’s also settled various tax claims – a €200 million tax claim in 2018 in France, and in 2017 €100 million to settle a tax dispute in Italy. Wouldn’t it just be easier to pay the damn tax?! But as you’ll see, many big companies will do what they can to wriggle out of doing the right thing, won’t they?! Let’s get back to Katie Hepworth of PIRC:”
Naomi: “Can you explain the process first of all? So as I understand it, there’s a meeting every year, an AGM where shareholders get to put forward resolutions and they get to vote on them. Um, so does that mean that you are Amazon shareholders or maybe shareholder activists? How does that work?”
Katie: “Yeah, so we’ve worked together with Amazon shareholders to file this shareholder proposal. Shareholders need to hold Amazon stocks for at least a year before they can file a shareholder proposal and they need to have held a minimum of 25,000 US dollars in order to file, and at that point they’re allowed to kind of put a proposal to the board of the company and have other shareholders vote on that.”
Naomi: “I see. So tell me about the proposal that was put forward by the shareholders that you worked on then to vote on. What was it asking for?”
Katie: “Yep. So we filed this proposal with two shareholders, the Missionary Oblates, which is a US based religious fund and Greater Manchester pension fund, one of the largest UK pension funds at the moment. And what we were asking for is that the board produce a tax transparency report in line with the GRI tax standard. Now, for those that haven’t heard about the tax standard and what it entails, the GRI is asking for companies to report against four separate indicators: the first is that they provide a governance report, so they talk about who in the company is responsible for tax planning, who is responsible for overseeing tax risk. It also asks companies to talk about their engagement with other stakeholders, and that includes tax authorities, but also NGOs and other civil society organisations about their tax practices. And finally, I think one of the most significant things for us is that the GRI tax standard asks that companies produce public country by country reporting of their financial and tax information. And so what it does is it asks companies to disaggregate this information by every single country that they operate in so that shareholders and other organisations can see, um, where companies are paying their tax or where they’re not paying their tax.”
Naomi: “Right, right, so it’s pretty full on tax transparency, isn’t it? And so Amazon didn’t like this resolution, they tried to appeal to the US regulator the SEC, that’s the Securities and Exchange Commission to stop this resolution being presented, they don’t want to publicly reveal their tax activities. So they tried to stop it even getting debated and voted on, and they tried to say that tax matters for the company, it’s an internal affair and they said that this tax information wasn’t useful or informative for shareholders and that they already declare lots of tax information that other corporations don’t, right?”
Katie: “Yeah, that’s correct. So they used what is a small provision in the securities and exchange commissions act to try and argue that shareholders shouldn’t be allowed to vote on this proposal and that’s an argument that shareholders should not be able to kind of vote or make proposals on issues that pertain to the every day business of the board and the management of the company. There is one exception to this where a proposal is about a significant social policy issue, there is an argument to be made that shareholders should be able to vote on this issue because it represents an unusual risk to the company, that should, you know, have additional oversight. In the past tax transparency resolutions have never passed a challenge at the SEC. This is what was historic about our resolution. And I think it reflects really the transformation of tax into a political issue globally.”
Naomi: “Yes, it’s really interesting that this time the regulator, the SEC decided to reject Amazon’s attempt to stop that resolution and let it be heard and go ahead for a vote at the AGM because they have previously declined all sorts of attempts at social policy-related resolutions at AGMs, so it is really interesting, that shift.”
Katie: “Yeah. I think it is, yeah, and I think it does show and one of the things that I think was really important to getting it over the line was the general support by the investment sector. So we circulated a letter in support of the shareholder proposal to the SEC, and that was signed by investors with 3.5 trillion in assets under management. Significantly, the shareholders that signed that letter are not just the usual suspects, it’s not who you would expect to be signing a tax letter.”
Naomi: “The churches, the unions…”
Katie: “It’s the churches, the unions, impact investors, ethical investors. We saw some of the largest asset owners and managers in the world sign onto this from the Norges bank, the Norwegian pension fund, other large pension funds, and including some American retail funds as well. So what it means is that this is an issue that’s now transcended ethical investment, and it is seen as a core sustainability and governance issue for funds.”
Naomi: “Here’s Jason Ward, of CICTAR, the Centre for International Tax Accountability and Research:”
Jason: “Obviously, yeah, it’s a hugely significant step for the SEC to approve this and to dismiss Amazon’s efforts to have it tossed out. This paves the way for us to continue to file this resolution again at Amazon next year and get an even higher vote and to continue to take this to other US tax dodging entities as well. It’s a really strong show of support for a first ever resolution of its kind and I think it’s an indication too that investors take this matter pretty seriously. I think in the past people thought that investors only point of view was maximising returns to shareholders and I think this shows that that’s significantly shifted, that there are serious risks involved to shareholders about aggressive tax strategies and that rules are changing dramatically and in flux. And Amazon for one has been at the focus of a lot of global attention. It’s a situation where both Presidents Trump and Biden specifically named the company as a tax dodger and, you know, along with dozens of other world leaders kind of pointing to Amazon as a specific example of an incredible tax dodger, so hugely significant. I think also the other thing that is not a tax perspective, but what the GRI and public country by country reporting does is – investors are completely in the dark in terms of information about any US multinational because essentially you can find out how much tax they paid in the US, but the rest of the world is a lump sum figure and is completely useless. And that’s not just true for taxes, it’s true for revenues, for profits, and for payroll figures, lots of different basic financial information that investors have no clue about without this type of reporting. So we’re obviously driving this because we care about them paying a fair share in paying taxes, but there’s lots of other reasons why investors kind of need this level of transparency to make informed decisions about which companies they wanna own and whether or not Amazon’s business strategy or any other company’s business strategy is appropriate. Not just ethical, but you know, where are they losing money? Where are they making money? Nobody knows because it’s not reported.”
Naomi: “Yeah. I mean, it seems the height of arrogance really to actually face off against your own investors and say, no, no, you don’t need to know this information. We have it, we know it, but you don’t need to know it, when you actually think about what they’re doing, that is really pretty outrageous. If I was an investor or you know, a shareholder in Amazon not be pretty annoyed!”
Katie: “Yeah, the company already has this information and it already makes this information available to the tax authority, so really all we’re asking them to do is to make it public. There is no additional work for them in making this information public. (12:10) We are seeing a lot of companies already start to report this information so we have leading companies that have voluntarily adopted the standard – companies like Shell, companies like Randstad, a labour high provider, Orsted, none of them have actually suffered commercially from providing this additional oversight of their operations and, you know, really it has allowed for a greater engagement and a discussion of what they’re doing.”
Naomi: “Right. How was the AGM itself, how was that?”
Katie: “So each filer got two minutes to present their proposal as a pre-record, and each of the proposals were put up one after the other. Technically according to the agenda, there was a space for questions at the end of those proposals. However, Amazon did not take questions and instead directed shareholders to their notice of meeting rather than taking questions on the proposals themselves. So again, this is just showing that Amazon is not making itself available to shareholders, it is not willing to meet with shareholders and it is just kind of repeating a practice that it’s done for years on the issue of tax and also worker’s rights issues.”
Naomi: “Right – let’s hear that actual proposal which was made at the online AGM:
Father Shamus Finn: “My fellow shareholders members of the board and Mr. Chairman, my name is Father Shamus Finn, and I’m here this morning to represent the missionary Oblates of Mary Immaculate and the OIP trust with the Greater Manchester pension fund have presented resolution number 12, with the support of investors with 3.5 trillion dollars in assets. In the 21st century, the issues of transparency, accountability, and accuracy in regular reporting by public corporations has attracted new levels of scrutiny by those who rely on this information as they decide what companies to include in their portfolios. The stability and security of the global financial system is dependent on the legal standards and rules that have been established in numerous jurisdictions and adapted by organisations all over the world. As the world continues to face serious challenges, such as pandemics and social environmental catastrophes, confidence in many longstanding institutions that we have relied on, including those that operate in the financial sector is at its lowest in generations. Marshalling the commitments and the resources to respond to these challenges is everyone’s responsibility, including public corporations like our company Amazon. The resolution that we have presented is grounded on legal, moral, and ethical foundations that were designed to promote and protect the common good, serve to foster prosperity and support the well-ordered functioning of societies for centuries. Responsible and sustainable corporations should want to have a reputation for doing their fair share to make such a vision a reality. Instead, Amazon has been named as one of the handful of companies who have worked to stymie efforts to reform the global tax regulatory system. Tax avoidance negatively impacts communities, increases risks to investors. Issuing the kind of report that our resolution is requesting will be a good way to demonstrate the resolve of our company to join with other leading companies and work with investors to deliver a global economy that works for all. Thank you.”
Naomi: “There you go, that doesn’t sound like something to get so very upset over or try to stop even being heard, but then we’re reasonable people who think that companies should behave decently when it comes to tax, and a whole load of other things. I’m going to ask you about the result of the shareholder’s vote on this, but before that, just for some context and comparison, back in 2014 I reported on the Taxcast on Google’s annual shareholder meeting and a proposal that was made back then on ethical tax principles. I’ll play you a bit from the proposal itself and then the reaction from one of the shareholders to that proposal which is quite interesting, let’s just have a listen:”
Clip of proposing shareholder: “We think tax avoidance threatens future innovation and growth, and more. Ultimately corporate tax avoidance is a threat to government and to the rule of law. And no investor or company can really succeed very long without a functioning government and legal system. As fiduciaries and long term investors we need resilient economies and societies that can stand up to the inevitable shocks that the future will bring. So we think Google’s board should ask itself what is the end game here? How long can our company and our economy survive if corporations continue a race to the bottom on tax? So today your shareholders are asking you to set a higher standard. Thank you.” (Applause)
Disgruntled shareholder responding: “The proposal to pay more taxes is outrageous. Why did you allow that to go through? What a stupid idea! Why doesn’t Google fight at the SEC to throw these crappy proposals out?!”
Naomi: “Ha, he’s not happy is he?! And just note that he’s asking there why Google didn’t try to get the SEC to stop that proposal even being heard, as Amazon just tried to do, and failed! Let’s hear the details of how that vote back in 2014 went from Adam Kanzer of Domini Social Investments who was involved, who I spoke to at the time:”
Adam Kanzer: “Well…this is possibly the lowest vote I’ve ever received on a shareholder proposal. First off it’s important to understand the structure of the voting. So the three top executives hold an additional class of shares that grants them 10 votes for every share. So normal shareholders get one vote per share, they get ten votes per share. So, they control more than 60% of the vote. And in some cases depending on how many shareholders actually vote it could be upwards of 70% of the vote. So I didn’t expect to get a very high vote and I know this is a new issue for a lot of investors. And I think also you know a lot of investors have this knee jerk reaction when you raise the question of corporate tax. The assumption is that tax minimisation is in shareholders’ best interests and why would I encourage a company to pay more in tax? That being said, the vote was even lower than I expected, so we get a 1% vote – if you kick out the management controlled shares, it only rises to 4%. Still extremely low but a very high percentage of abstentions, so close to 20% of shareholders abstained, which to me means that there’s a lot of large institutional investors out there that are on the fence about this issue, that don’t have a policy and did not want to go so far as to vote with management or to vote against, you know, they really couldn’t quite work it out yet. So, I’m not that surprised that the vote was very low and I’m heartened by the fact that there were so many investors that chose to abstain.”
Naomi: “OK, so that was 2014. So, Katie, what was the result of the vote at Amazon’s AGM in 2022, once Amazon did finally release that information to shareholders?”
Katie: “So look, we got a huge vote at the AGM, so one in five independent shareholders voted for the tax transparency proposal, which is a huge number for a first time proposal.”
Naomi: “So, the final vote tally was 17.5%. But bear in mind Amazon CEO Jeff Bezos and other directors collectively own 13% of the company and they’ll always vote with the management, right, so if you take their shareholdings out of the picture, it’s a better reflection of what the independent shareholders are really thinking about tax. And that vote tally is 21%.”
Katie: “Yeah. I think it’s important to note that 20% of the vote or one in five shareholders is usually enough to get companies to start taking an issue seriously, and you would expect at that point that companies would actually start to look at an issue, start to meet with shareholders, to understand what the issue is that shareholders are raising with the board and what steps the company can take to address the concerns of shareholders. Shareholder proposals are not binding in a sense so what it is about doing is influencing the company and we often see companies start to move at that point.”
Naomi: “So a better result than you’d expected. Amazon and many companies need more pushing, so how else can we push them to do what we want on tax justice? Jason, let’s talk about procurement:”
Jason: “Yeah. So, Amazon, it’s government contracting business is growing incredibly fast, particularly in the last couple of years, and driven in part by the pandemic which accelerated the process, right? Every government everywhere around the world is moving to cloud based platforms and Amazon web services is the number one global provider of those services. So everybody knows Amazon as being their retail company and you can get your package shipped to you super quickly, but really that business is a very low margin business, they don’t make a lot of money on that. It’s a huge business, it’s a growing business, but historically there’s not a large profit margin in there. On the cloud computing side they make tonnes of money. It’s highly, highly, highly profitable. And it’s the public sector in large part that’s driving that that profit in those margins. So absolutely it’s a form of madness to be kind of giving large government contracts to multinationals that don’t pay their taxes, it seems that that’s a very common sense provision that all governments at every level should be looking at, and there are probably alternative companies that you could use, but if you’re gonna go with an Amazon why not make it a condition of their contract, that they publish country by country reporting as a simple condition? It’s not excluding them from getting the contract, it’s saying, we’ll give you this contract, but under these conditions. This type of business is happening at every level of government so for example, in the United States, you know, you have school boards, school districts that are contracting with Amazon, local cities, counties, states, and this is true globally. There’s no reason why any, at any level, they can’t make that same requirement. And if a company like Amazon doesn’t wanna abide by that, thankfully there are competitors who can provide those services.”
Naomi: “Right, right, it’s a really difficult one that, I know there’s been work ongoing for years to try to bring in those type of conditions on bidding for public contracts, but is it over optimistic in your view for me to say that tax transparency feels inevitable? You know, corporations could be dragged kicking and screaming, or they can just see the way the water’s flowing and kind of jump in. Am I being over optimistic in your view?”
Jason: “Uh, no, I don’t think you’re being, I think that we will see people taking the lead and we do have examples of that already, right? A company like Vodafone, who’s still dodging its taxes, but has championed transparency. And Randstad, which is the world’s largest temporary worker labour hire multinational, they do public country by country reporting and it shows you that they’re shifting their profits to places like Luxembourg and Singapore, and Vodafone not that different, but hey, it’s a very positive step for them to be kind of transparent about what they’re doing and it’s up to others to decide what consequences, for governments to decide whether that’s a company that they should be contracting, or with consumers to decide whether that’s behaviour that they wanna support. But right now governments don’t have that information available to them unless the company makes it public because they can’t make a procurement decision based on information that the tax office is required by law to keep secret. So the only way we can inform contracting and public opinion is to make that information public because one part of the government can’t share it with the other, because it’s illegal for them to do that at this point in time. We have just had an election in Australia and under the new government they have committed to public country by country reporting for all multinationals. And there are specific provisions that they sort of took to the election around contracting as well so we’re optimistic of getting some reform here, and obviously the European Union did push forward a very weak form of country by country reporting, which is just European member states and its problematic blacklist of tax haven countries. But nonetheless, there is a growing global trend to require mandatory tax transparency proposals. And just to add to that as well, I think that this effort is really helping to shift the dialogue in the United States in particular as well around the SEC rule making process and the financial accounting standards board who are actively looking at requirements for country by country reporting, not on a voluntary basis, but mandatory. And we have, you know, legislation that has passed the US House of Representatives in support of full public country by country reporting and so the fact that some of the world’s largest investors are now out there in favour of it helps to push those conversations further along as well.”
Naomi: “Right. And also there is this question about reputation, I mean, I probably wouldn’t be going around, if I was a shareholder of anything, which I’m not, but if I was, I probably wouldn’t be going around telling people, ‘hey, I’m a shareholder with Amazon’ because there is massive kind of reputational risk and a kind of increasing shame attached to connection with a company that is not being transparent, not treating its workers well, and pretty much riding rough shod over all sorts of principles that we think increasingly as societies are important to us.”
Katie: “Yeah, on that point what we found was a number of tax aware investors and a number of the investors that have really led the push globally, not just on tax disclosure, but also on tax avoidance as an investment issue and the importance of fair taxation and responsible taxation, did not hold Amazon, so they’d already divested from Amazon on the basis of their labour practices, on the basis of their tax practices and on their human rights practices. And so we do see that there is a reputational risk associated with these companies, and that really to bring about change and to bring about greater legitimacy and restore faith, not just in these companies, but the overall tax system, we really need this kind of reporting. I just wanna go back a step as well, to your original question around is this kind of reporting inevitable? And I think it is, I think where we’re at with tax reporting is where climate reporting was 10 years ago. And if we look at the history of climate reporting, um, then we can see the importance of actually starting to target individual companies over tax disclosure and the way shareholder proposals at individual companies about their climate disclosure snowballed into regulatory reform for mandatory disclosure. I think what we’re seeing now is that different countries are exploring mandatory disclosure, but they’re often faced with a lot of lobbying by the same corporations that wanna keep their reporting secret. And if we can take away the legitimacy of this kind of lobbying and of a failure to disclose on tax, then we might be able to see some of that mandatory legislation being kind of rolled out in multiple jurisdictions and see cross sector transformation.”
Jason: “I think Amazon is also, I mean, it’s just a perfect example of how the global tax system is utterly broken and in need of a massive overhaul, right? This is a company that was taken to court by the IRS, the Internal Revenue Service, the tax authority in the United States and by the European Union. And in both cases, the case of them avoiding taxes via subsidiaries in Luxembourg was absolutely clear, but the courts ruled in favour of the company and under existing laws the courts determined that that behaviour was legitimate. And I think, you know, any bystander looking at this should come to the conclusion that that should not be legal, acceptable behaviour and I think, you know, obviously transparency doesn’t stop the abuse, but it’s on the pathway there to changing corporate behaviour.”
Naomi: “Well it shines a light on it doesn’t it? What’s next?”
Katie: “Look, I think the vote puts other companies on notice that investors expect greater transparency. We’re now exploring where else we can follow similar proposals so obviously tech companies with their history of tax dodging and poor disclosure are really high up on the list for us. In addition to that, we are also engaging with companies across a range of sectors around their tax practices. These are in, we’re looking at companies in sectors that have a reliance on public contracts, because we do believe that there is a responsibility of companies that rely on government revenue for their contracts to disclose where and how they’re paying their taxes, looking at infrastructure utilities and the care sector as our core sector, in addition to filing more shareholder proposals over the fall and spring seasons.”
Naomi: “So, watch out for more shareholder proposals, coming to an AGM near you. My thanks to Katie Hepworth of Pensions and Investment Research Consultants, and to Jason Ward of the Centre for International Tax Accountability and Research. Check out the show notes for some further reading on this. You’ve been listening to the Taxcast from the Tax Justice Network. We’ll be back with you next month, bye for now.”
Welcome to our monthly podcast in Portuguese, É da sua conta (‘it’s your business’) produced and hosted by Grazielle David and Daniela Stefano. All our podcasts are unique productions in five different languages – English, Spanish, Arabic, French, Portuguese. They’re all available here. Here’s the latest episode, Registro global de ativos pode acabar com sigilo financeiro #38:
De um lado 33 milhões de brasileiros passando fome. Do outro, pelo menos 558 bilhões de dólares de brasileiros no exterior. De um lado, a população de rua aumenta. Do outro, super ricos com medo da violência. Mas “a violência só existe porque o sigilo financeiro existe antes”, afirma Márcio Calvet Neves, do Instituto de Justiça Fiscal no episódio #38 do É da Sua Conta, que traz a possibilidade de solução para estes problemas: o registro global de ativos.
Se ativos financeiros, e também outras formas de acumular riqueza, como joias, obras de arte, pianos e relógios caros, criptomoedas, obras de arte virtual, patentes e softwares de empresas fizerem parte de um registro global, em que todas as pessoas “de carne e osso” estejam ali identificadas, seria possível saber quanto de riqueza existe, quem são seus proprietários e, consequentemente, criar um imposto sobre esses bens, para que assim aqueles que possuem mais, contribuam com mais. A boa notícia é que um registro global de ativos é viável e possível. Saiba como nesta edição do É da Sua Conta.
Você ouve no É da sua conta #38:
A relação entre desigualdades e sigilo financeiro.
Como funciona o mercado de obras de artes virtuais.
Como ampliar registros de bens já existentes para incluir ativos financeiros.
Como saber quem são donos de criptomoedas, obras de arte e ouro.
A implementação de um registro global de ativos, do nacional para o regional e do regional para o global.
O que precisa ser feito para identificar beneficiários finais.
Os resultados do registro global de ativos: melhor arrecadação tributária e distribuição de riquezas.
A tecnologia das criptomoedas dos block chains, dos NFTs ainda é muito jovem e como ela mexe diretamente com dinheiro, atraiu muita especulação desenfreada.” (Luciano de Maria, programador e entusiasta de criptomoedas)
Ao se determinar de quem é a riqueza, os países que teriam acesso a esse registro global de ativos teriam instrumentos para fazer uma política fiscal mais eficiente, pra reduzir a desigualdade social e tributar quem realmente tem capacidade contributiva para pagar o tributo onde este deve ser pago..” ( Márcio Calvet Neves, Instituto de Justiça Fiscal)
Se possuir algumas barras de ouro, um quadro caro, um apartamento, uma conta bancária, um piano muito caro, uma carteira de ações, tudo seria registado no registo global de bens; e seria acessível, no mínimo, às suas autoridades fiscais e policiais para ter a certeza de que a pessoa paga seus impostos.” (Nick Shaxson, Tax Justice Network)
É muito positivo usar intermediários pra reportar e implementar esses marcos de devida diligência, identificar por exemplo se a carteira está no nome de uma empresa, que seja necessário registrar também o proprietário final dessa empresa.” (Florencia Lorenzo, Tax Justice Network)
Há um processo: ao construir um banco de dados sobre o que já existe e expandir gradativamente, conectando os registros entre países e regiões , finalmente, chegaremos a esse objetivo de um registro global de ativos..” (Gabriel Zucman, ICRICT)
Se a gente conseguir as informações de beneficiários finais, será uma vitória mundial contra os evasores” (Marcio Verdi, CIAT)
~ Registro global de ativos pode acabar com sigilo financeiro #38
Participam desse episódio
Gabriel Zucman – membro da Comissão Independente para Reforma da Tributação Corporativa Internacional (ICRICT), professor da Universidade da California Berkley e diretor do Observatório Tributário da União Europeia
Welcome to our Spanish language podcast and radio programme Justicia ImPositiva with Marcelo Justo and Marta Nuñez, free to download and broadcast on radio networks across Latin America and Spain. ¡Bienvenidos y bienvenidas a nuestro podcast y programa radiofónico! Escuche por su app de podcast favorita.
En este programa con Marcelo Justo y Marta Nuñez:
Más secretos del índice de secreto financiero global de la Tax Justice Network.
Las multinacionales y las pequeñas y medianas empresas en nuestro cuarto capítulo sobre qué son los paraísos fiscales. El ejemplo de Colombia.
Los bancos, grandes ganadores de estos años de pandemia en América Latina
Y el impacto social y la emigración en Ecuador, un país devorado por un sector financiero que hoy gobierna el país.
Invitados:
Ryan Gurule de FACT (Coalición estadounidense por la Transparencia Financiera y Corporativa)
Guillermo Oglietti, investigador del Centro Estratégico Latinoamericano de Geopolítico (CELAG) y co-autor del libro “La mano visible de la banca invisible”
Welcome to the 54th edition of our Arabic podcast/radio show Taxes Simply الجباية ببساطةcontributing to tax justice public debate around the world. It’s produced and presented by Walid Ben Rhouma and is available on most podcast apps. Any radio station is welcome to broadcast it for free and websites are also welcome to share it. You can follow the programme on Facebook, on Twitter and on our website.
في العدد #54 من الجباية ببساطة سلطنا الضوء على نتائج مؤشر السرية المالية لسنة 2022 الذي تصدره شبكة العدالة الضريبية وإحتلت فيه الولايات المتحدة الأمريكية المركز الأول قبل أن نتطرق في حوارنا مع الصحفي التونسي عبد السلام الهيرشي لبحث استقصائي حول البنوك في تونس تحت عنوان “كارتيل البنوك في تونس: أثرياء الحرب في زمن البؤس”
For this month’s episode #54 of “Taxes simply”, we explore the latest results for the Financial Secrecy Index, which saw the US ranked first for offering financial secrecy to the criminal and corrupt. We then speak with Tunisian journalist Abd El Salam El Herchi, who recently published an investigative piece on the banking cartel in Tunisia and the corruption involved in establishing this cartel. We discuss the repercussions and the consequences for the Tunisian economy and the Tunisian people.
Welcome to our monthly podcast in French, Impôts et Justice Sociale with Idriss Linge of the Tax Justice Network. All our podcasts are unique productions in five different languages every month in English, Spanish, Arabic, French, Portuguese. They’re all available here and on most podcast apps. Here’s our latest episode:
Le mois de mai 2022 a été marqué par la publication par Tax Justice Network de l’édition 2022 de l’Indice d’Opacité Financière. L’événement est intervenu en même temps, que l’appel lancé à Dakar au Sénégal le 17 mai 2022, par les ministres africains de l’économie pour un système fiscal international sous l’égide des Nations Unies. Pour la quarantième édition de votre podcast en français produit par Tax Justice Network, nous revenons sur le lancement en Afrique de l’indice d’Opacité Financière. Avec nos partenaires du CRADEC, nous avons échangé sur des questions comme l’échange automatique d’information, la propriété effective et le reporting financier des entreprises pays par pays. Les participants au regard des résultats présentés, ont soutenu l’idée de soutenir un système fiscal international sous le prisme d’une convention des Nations Unies.
Interviennent dans ce podcast :
Jean Mballa Mballa, Directer Exécutif du CRADEC
Eric Etoga, Chercheur Dynamique Mondiale des jeunes
Honorable Jean-Marie Pong Moni, Sénateur du Cameroun
~ Lancement en Afrique du l’Indice d’Opacité Financière 2022 : L’urgence d’un système fiscal international sous l’égide des Nations Unis #40
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Si vous souhaitez recevoir cette production ou être média partenaires ou simplement contribuer, vous pouvez nous écrire à l’adresse Impô[email protected]
Os Estados Unidos estão no topo do Índice de Sigilo Financeiro 2022 da Tax Justice Network. Isso significa que além de favorecer a corrupção, os EUA têm grande responsabilidade no saque das riquezas dos países, na redução da capacidade de arrecadar impostos e na desestabilização de mercados no mundo todo.
De acordo com este ranking, há o dobro de riqueza escondida em paraísos fiscais do que dinheiro circulando nas economias, entre pessoas e empresas. Mas, ha nouma boa notícia Índice: apesar das sabotagens de cinco dos países que compõem o G7, as reformas nas regras da transparência adotadas em mais de 100 países estão reduzindo o mercado para aqueles que buscam esconder suas fortunas. Os achados do Índice de Sigilo Financeiro 2022 e soluções apontadas por esse relatório da Tax Justice Network estão na edição #37 do É da Sua Conta.
Você ouve no É da sua conta #37:
Top 10 dos países que mais fornecem sigilo financeiro no mundo.
O que levou os EUA à essa vergonhosa liderança e o que precisa ser feito para o país diminuir a oferta de esconderijo para indivíduos ricos, de acordo co organizações que atuam por justiça fiscal.
EUA, Reino Unido, Alemanha, Itália e Japão: o mau exemplo das grandes economias como facilitadoras de sigilo financeiro.
A razão da melhora da posição das Ilhas Cayman, ainda que continue entre os 20 que mais oferecem serviços secretos.
Emirados Árabes Unidos, Singapura e Hong Kong: a tendência de indivíduos ricos em buscar autocracias para esconder suas fortunas.
Angola e Brasil: como estão no ranking e o que precisa ser feito para reduzirem a oferta de sigilo.
Call to action: registro global público dos proprietários “de carne e osso” e de bens e ativos e transferência das decisões sobre tributação internacional para a ONU.
“Os EUA são a única grande economia que ainda não adotou os padrões internacionais de transparência de informações.” ~ Florencia Lorenzo, Tax Justice Network
“A indústria de investimento privado dos EUA está perto dos USD 11 trilhões, o que ultrapassa qualquer mercado semelhante no mundo. É por isso que as reformas que os EUA precisam fazer para a transparência desse mercado são tão vitais.” ~ Ryan Gurule, FACT Coalition
“Mesmo nos países ricos dos paraísos fiscais, a maioria das pessoas são também vítimas das suas próprias elites corruptas. Portanto, é melhor ver este equilíbrio de forças como sendo entre uma pequena elite transnacional corrupta, por um lado, e os 99% de pessoas comuns em todos os países, ricas ou pobres, por outro lado.” ~ Nick Shaxson, Tax Justice Network
“Vemos os serviços de sigilo irem cada vez mais para esse tipo de jurisdição (autocrática), o que é um sinal positivo na medida em que reflete uma espécie de marginalização dos fluxos financeiros ilícitos. Já não é algo que se possa fazer através de Londres ou Delaware.” ~ Alex Cobham, Tax Justice Network
“(Levar a discussão para a ONU) permitiria a todos os países participar de forma igualitária, o que atualmente não é uma realidade com as regras tributárias globais sendo feitas na OCDE sem a participação de mais de um terço dos países do mundo.” ~ Lays Ushirobira, Global Alliance for Tax Justice
African Ministers call for UN tax convention to protect against financial secrecy supplied by the richest nations, as Africa improves in the Financial Secrecy Index 2022 – Tax Justice Network, Tax Justice Network Africa, Centre Régional Africain Pour le Développement Endogène et Communautaire
Yaoundé – Cameroon, 27th May 2022. Africa loses about US$ 90 billion per year in illicit financial flows, robbing the continent of resources to finance investment and development. Financial secrecy allows individuals to hide and move money out of the continent and the Financial Secrecy Index 2022, published by the Tax Justice Network, shows that the largest enablers of financial secrecy are some of the richest nations in the world, including the USA and Switzerland.
African leaders do not have an equal footing in setting international tax rules, which have been determined for over a century by a group of rich countries under the Organisation for Economic Co-operation and Development. This is why African Ministers of Finance, Planning and Economic Development adopted a resolution last week calling on the United Nations to begin negotiations on an international convention on tax matters.
The Financial Secrecy Index finds that all but 4 of the 18 countries assessed in the region – Rwanda, South Africa, Seychelles and Ghana – have made progress in improving financial transparency at home. None of the countries in the region is in the top 30 of financial secrecy suppliers in the world. On the contrary, several countries, such as Kenya and Nigeria, are in the top 20 of those that have improved their laws against the use of secretive financial practices by non-residents.
Half of the African countries assessed have also made significant progress in requiring disclosure of beneficial ownership of companies and more than half now have beneficial ownership laws in place. In addition, the capacity of tax administrations has improved or remained at the same level for all jurisdictions, and there are being great strides to improve international cooperation to prevent money laundering. Two countries – Ghana and Liberia – showed a worrying shift in the index, but this is mainly because they now offer more financial services to non-residents and not because they have introduced more secrecy services.
All African countries must take domestic action to prevent enabling illicit financial flows needed to finance sustainable development by improving corporate transparency obligations. This includes quick wins, like making all extractive industries contracts, tax rulings, and beneficial ownership information public. And requiring country by country reporting of multinational companies that are headquartered domestically and requiring subsidiaries of multinationals operating domestically to report on a country by country basis locally.
Most importantly, the index also reveals that Africa must continue its efforts to protect itself from its international partners. Five G7 countries alone – the US, UK, Japan, Germany and Italy – are responsible for cutting global progress against financial secrecy by more than half. African leaders must also continue to keep a close eye on Asian economic partners, including Singapore, Hong Kong, the United Arab Emirates and China, which have maintained or jumped up the rankings, both because of the increase in financial services they offer to non-residents and their financial and legal systems that enable financial secrecy.
The Financial Secrecy Index 2022 shows again that international tax rules cannot be set by the OECD, which members are some of the greatest enablers of financial secrecy. African leaders are right to call for a UN convention on tax to curb illicit financial flows and recover stolen assets. An inclusive, global approach to setting international tax rules is the only way Africa can stop its plunder from tax abuse.
Alvin Mosioma, Executive Director Tax Justice Network Africa:
“The results of this year’s Financial Secrecy Index highlight the problem of having the very same countries that are the leaders in the provision of financial secrecy be the very same countries that are spearheading the discussions on global tax reform. The Tax Justice Network Africa reiterates its support for the call by African governments for a tax convention that supports an intergovernmental tax body. Indeed, such a body is necessary to enable African countries to participate in global discussions on tax on an equal footing as all other countries.”
Alex Cobham, chief executive Tax Justice Network:
“The current international tax architecture is a disaster. It gives rise directly to needless inequalities between countries and within countries, denying everyone the chance for better lives. Lower income countries lose by far the largest share of their current tax revenues to cross-border tax abuse – the equivalent of nearly half their public health budgets. But lower income countries are also excluded from international cooperation and rule-setting. The Financial Secrecy Index 2022 shows the countries most responsible for enabling illicit flows, are the same countries setting the rules. The powerful joint call from African finance ministers brings the world a step closer to the international tax reforms that are desperately needed. It is crucial now that policymakers in other regions make their views clear, and that the United Nations accepts this mandate and begins negotiations urgently.”
Jean Mballa Mballa, Executive Director of CRADEC (African Regional Centre for Endogenous and Community Development):
“As a civil society active in the fight against illicit financial flows and tax justice, we are satisfied with Cameroon’s progress. We are particularly pleased by the efforts made with the ownership registration, the framework for more efficient tax administration, as well as the good behavior in international cooperation. However, we are still concerned about the management of transparency with respect to legal entities. Finally, we invite the authorities to be more vigilant, in view of the evolution of China, the country’s leading commercial partner, whose responsibility as well as that of two main jurisdictions affiliated to it (Hong Kong and Singapore) has increased sharply, with regard to the facilitation of financial secrecy.”
About the Financial Secrecy Index
The Financial Secrecy Index is produced biennially by the Tax Justice Network. It ranks each country based on how intensely the country’s financial and legal system allows individuals to hide and launder money extracted from around the world. The index grades each country’s financial and legal system with a secrecy score out of 100 where a score of 0 is full transparency and a score of 100 is full secrecy. The country’s secrecy score is then combined with the volume of financial services the country provides to non-residents to determine how much financial secrecy is supplied to the world by the country. The Financial Secrecy Index 2022 assesses 141 jurisdictions.
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African finance ministers have adopted a resolution calling for a United Nations convention to stop tax abuse earlier this week as some of the richest nations, including the US and Switzerland, continue to be the biggest suppliers of financial secrecy according to the Financial Secrecy Index 2022, published this week by the Tax Justice Network.
African countries lose about $90 billion in illicit financial flows each year. This underlines how inadequate rich-countries’ efforts are through the Organisation for Economic Co-operation and Development to redesign the rigged financial system. The Financial Secrecy Index 2022 reveals that five G7 countries alone—the US, UK, Japan, Germany and Italy—are responsible for cutting global progress against financial secrecy by more than half.
In the meantime, African economies are dealing with the Covid-19 pandemic’s impact, exacerbated by Russia’s invasion of Ukraine. Here in Malawi, the price of bread has more than doubled, now costing over half the minimum daily wage. This is why African leaders this week called for a United Nations Convention on Tax to curb illicit financial flows and recover lost assets, where financial secrecy is an accomplice lurking in the shadows.
The Conference of Ministers […] Calls upon the United Nations to begin negotiations under its auspices on an international convention on tax matters, with the participation of all States members and relevant stakeholders, aimed at eliminating base erosion, profit shifting, tax evasion, including of capital gains tax, and other tax abuses.
UN Economic and Social Council, Committee of Experts’ Resolutions for consideration by the Conference of Ministers, endorsed 17 May 2022
The African Union and UN Economic Commission for Africa triggered the global adoption of a target to curb illicit flows in 2015. This was through the High-level Panel on Illicit Financial Flows from Africa, led by former South African president Thabo Mbeki. This paved the way for concerted campaigning by African policy makers, parliamentarians and activists. And the resolution is a testament to their perseverance.
Financial secrecy at large
Financial secrecy is slowly shrinking the world over, despite some of the richest countries subverting progress. Total financial secrecy dropped by 2 per cent in 2022. This follows a 7 per cent reduction in 2020, according to the Financial Secrecy Index 2022. This is because of better international cooperation and more and more countries requiring beneficial ownership disclosure.
Yet the Financial Secrecy Index 2022 remains a warning of the divisive deficiencies in the global financial system. Every country loses. But the impact is hardest for lower income countries (or historically plundered states, as economic anthropologist Jason Hickel has called them).
In the wake of the Pandora Papers—the largest journalistic investigation of the biggest leak exposing the offshore world of finance—journalists Simon Allison and Sipho Kings asked:
What if, instead of giving money to the developing world, rich countries stopped money from leaving the developing world in the first place?
In the index, countries are assessed on how intensely its financial and legal system allows individuals to hide and launder money. The lower the marks of the secrecy score out of 100 the better. In the index, 100 is full secrecy and 0 is full transparency. The Financial Secrecy Index 2022 analyses financial and legal systems of 141 jurisdictions across four categories. These are: knowledge of beneficial ownership, the transparency requirements for legal entities, the integrity of tax and financial regulation, and international standards and cooperation.
The secrecy score is not just a report card, it’s a problem-solving manual. It shows policymakers the laws and loopholes to amend to become more transparent. But it’s not just how secretive a country is that matters, the index combines the secrecy score with the global scale weight. This is the volume of financial services countries provide to residents of other countries. Services like opening a bank account or setting up a company. The combination of the secrecy score and global scale weight into the FSI value paints a picture of how much offshore financial activity is put at risk by a country’s laws.
Africa in the Financial Secrecy Index 2022
Since the 2020 edition of the Financial Secrecy Index, all but four African countries—Rwanda, South Africa, Seychelles and Ghana—have made some progress improving financial secrecy at home. Two countries —Ghana and Liberia—made worryingly large leaps up the index, mainly because they now offer more financial services to non-residents.
Over the last two years, African countries have made steady progress in improving international cooperation on anti-money laundering efforts, information exchange and judicial cooperation. Several tax administrations are improving the way they operate. Half of the African countries also made great leaps in requiring the disclosure of beneficial owners of companies. More than half now have beneficial ownership laws for companies, requiring the real flesh and blood owners to be identified. Yet in most countries limited partnerships remain black boxes, making it possible for the real owners to avoid scrutiny.
All African countries have an alarmingly high secrecy score of over 90 points out of 100 when it comes to the transparency requirements for companies. This is an area with quick wins to stop the bleed. Jurisdictions should require companies to make public up-to-date beneficial and legal ownership information, publish all extractive industries contracts and tax rulings, and let the public have free access to the annual accounts that companies file.
No African jurisdiction requires multinational companies to publish public country by country reports. These reports shed light on where a multinational company books their profits and pays taxes, aiding tax collectors to make sure they are paying their fair share. Yet South Africa and Nigeria are home to some of Africa’s largest multinationals that should require their multinationals to publish these reports.
Taking on financial secrecy inclusively
This week has been monumental with African leaders calling for a UN tax convention because countries, like Malawi, have very little say over the current international tax regime. It has remained substantively unchanged since the early twentieth century. The rule-setter the OECD, has brought 140 countries together in its so-called “Inclusive Framework”, promising an “equal footing” in determining international tax rules. Even the African Tax Administration Forum criticised the pressure African countries were put under in the recent process to develop new tax rules for taxing the digital economy. The Professor of Law Yariv Brauner at the University of Florida has rightly described the forum as a “(not so) Inclusive Framework”, and the emerging reforms it is pushing appear massively favourable to rich countries.
Instead of the OECD’s piecemeal approach, a United Nations Framework Convention on Tax, just as the African finance ministers articulated, and a truly representative convening body, where the Malawian and other African governments have a say, are essential to fundamentally change the way all governments can tackle tax abuse. Financing our responses to the Covid-19 pandemic and its aftermath depend upon it.
Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app.
Which nations are the world’s biggest financial secrecy offenders? And what does it tell us about the world, about politics and about democracy? How high does your country rank in facilitating global corruption?
Allowing anonymous wealth is undermining for all of us. I think we’re going to see a bit of a separation and we’ll see who really needs the secrecy regardless of the reputational damage and who has some kind of slightly more genuine commitment to responsible financial services practice.”
~ Alex Cobham
Right now the US is itself a tax haven, it’s one of the biggest secrecy jurisdictions in the world. These results confirm that, and it’s no longer time for the US to pretend that it can enact and create a less corrupt global environment and foster democracy without looking internally and cleaning up its own house and catching up with global norms. It’s time to walk the talk.”
~ Ryan Gurule
The Taxcast, May 2022 summary on the Financial Secrecy Index 2022 results:
Naomi: “We’re hearing a lot from world leaders about sanctions against Russian oligarchs at the moment. We know financial secrecy is what the powerful, the corrupt, and criminals really love. With financial secrecy they can undermine the democratic will of any country’s government. They can drain the tax revenues that stop the rest of us living secure and happy lives. So which nations are the world’s worst offenders when it comes to financial secrecy? I’m going to tell you, because this month the Tax Justice Network’s released the latest results of the Financial Secrecy Index. Our specialist team ranks countries every two years on how secretive their financial and legal systems are. Then, they combine that with how big a financial secrecy global player they are – in other words, how much damage they’re doing in the world.
So, this isn’t a list of the world’s most secretive jurisdictions, as is sometimes misreported. It’s a list of countries ranked according to the level of secrecy services a country offers customers, combined withits size as a global player. I’ll give you an example – the very beautiful Maldives is a highly secretive jurisdiction – but it’s a really small player globally doesn’t have a significant impact on global financial secrecy – so it’s not at the top of the index. So it’s logical isn’t it, that the bigger a financial secrecy supplier a nation is, the more responsibility they have to reduce their secrecy services because they’re doing more damage. So…this is a ranking you don’t want to be at the top of. So, here’s the top ten – our 2022 roll call of shame…
At number 1 is the United States, with the worst rating ever recorded by the Financial Secrecy Index.
Number 2 is Switzerland
Joining the top 3 for the first time is Singapore
Number 4, Hong Kong
Number 5, Luxembourg
At number 6 is Japan, which increased its supply of financial secrecy to the world by 10%
Germany’s shot up to number 7 from 14th place last time, it’s increased its secrecy supply by a third, a very bad result for them – so much for all that cheap talk on sanctions on oligarchs!
And at number 8, the United Arab Emirates – at least they don’t pretend to care about oligarchs!
At number 9, the British Virgin Islands, a British Overseas Territory
And number 10, Guernsey, a British Crown Dependency
[Clip of the British national anthem and the Sex Pistols ‘God Save the Queen’]
And yes, don’t be fooled by the United Kingdom not being in the top ten. This time the UK is at the number 13 spot. BUT as is ALWAYS the case, I’m ashamed as a British person to tell you that when you combine Britain with all its satellite havens around the world, it is still the world’s worst offender. We’re gonna talk about Britain later, and of course the shockingly bad result for the United States and how other G7 states – Japan, Germany and Italy are holding back progress. By the way, when it comes to China it’s zoomed up to number 11 in the index. And what China does is extremely impactful on for example, Africa, since China is their biggest trading partner. Anyway, there are 141 countries assessed in the index, so there’s plenty more fascinating stuff there. I asked head of the Tax Justice Network Alex Cobham for his reaction to the 2022 Financial Secrecy results:”
Alex: “I guess the least surprising thing was the US actually getting to the top, as the biggest global threat, but the kind of the backsliding of the G7 was a bit unexpected. I hadn’t thought we’d see that across that set of the most powerful countries. But the biggest surprise was Cayman. Cayman has dropped from the top, out of the top 10, and surprising because of the reason for it, you know, they’ve, they’ve spent so long, I think Cayman Finance has put more money and more time than anyone in the world into criticising the index. And the index rightly judges them as highly secretive – to be fair, they have genuinely improved, this year their secrecy score is down from 76 to 72, mainly because the UK required it to join the UN conventions on terrorist financing and the convention against corruption. But the reason the rank has dropped so sharply is because all of this time they’ve been refusing to publish the information about their share of international financial services exports, and now they’ve finally done it and it’s revealed that, that their global role is actually much smaller than we, and pretty much everybody else had always estimated from the data that they do actually allow to become public. Now, what that means is that they must have known all of this time that their ranking in the index was seriously over inflated. And I suppose they took the decision that they’d rather look like they were the really really bad guys than actually come clean and tell people that they’re not quite such a big player in global finance as they were allowing people to think. So that’s, that’s the big surprise. Of course, you know, the UK and its set of dependent territories remains the biggest overall problem despite Cayman’s improvement.”
Naomi: “That’s interesting. I mean, when it comes to the G7 nations the Financial Secrecy Index points the finger really really strongly at the US, the UK, Japan, Germany and Italy and you know, they have been shouting the loudest about sanctions on Russian oligarchs yet we now know through the Financial Secrecy Index results that they’re responsible for cutting back progress on financial transparency that would have allowed sanctions to happen, I mean – complete hypocrisy, so I mean what’s going on with that?!”
Alex: “It’s kind of fascinating, isn’t it? Um, you know, these, this set of countries are not the most secretive jurisdictions in the world, not by a long shot, but they are big players. And so their secrecy matters, they have a big share of global financial services and so when they are more secretive it poses a bigger risk to everyone else. As you say, what’s happened this year is that the progress that would have been made if the G7 had just stood still has been cut by more than half because actually they’ve gone backwards. Then, uh, Canada, France, um, to round out the G7, um, actually both getting, getting slightly better, so well done them, showing it can be done, including within the EU, but it takes a bit of commitment. So it’s a slightly depressing picture. You know, these are the countries, as you say, in, in this moment of Russia’s invasion of Ukraine that are looking to make sanctions effective and they need to be looking at themselves and saying the way that we deny progress on financial transparency, doesn’t just deny the ability of other countries to tax fairly and to act against corruption, it also denies our own ability to impose effective sanctions if we want to. You have to hope that if there’s a silver lining to any of that, it’s a recognition including among these most powerful countries that allowing anonymous wealth is undermining for all of us, and we just have to finally push through and deliver on the beneficial ownership transparency, knowing who is behind companies, trusts, foundations, partnerships, and bank accounts so that we can all be broadly confident that uh, you know, that law and order is applied across the board and that the system works and that we can tax progressively.”
Naomi: “Yeah. And another trend, I mean tell me if I’m right or not in suspecting that when it comes to autocratic states there’s sort of a rise in the use of those states for financial secrecy, and surely oligarchs worldwide will be observing all this talk about sanctions against prominent Russians, now we’ve seen in this index, very interestingly rise of the United Arab Emirates. Um, Singapore has risen a lot too, which I know it’s, uh, a democracy, but it’s, uh, also described by many as a thinly veiled autocracy, Hong Kong also. Could this be a future trend in your view and what would that mean?”
Alex: “I think it’s definitely crystallising as a trend and remembering that the index is in a sense backward looking because it takes a long time to, to bring together the data, the trends we’re actually seeing this year, aren’t yet reflected in the index and so it’s already going to go further than, than what we are, what we’re seeing in the index now. And I think the way you frame it is, is spot on. We are seeing a shift, which I think we can probably think is broadly positive, but with some caution, it’s a shift away from the secrecy jurisdictions, the tax havens that have sold themselves as offering good governance, tax neutral investment platforms for the concerned international investor, right? Where the key thing in a sense is that you are saying, you know, ‘if you have a dispute, our legal systems are absolutely straight and you’ll be appropriately protected. Your property rights will be protected. Now you may be doing all sorts of bad things elsewhere, but not to worry. we will look after you.’ What we’re seeing now, as you say, is a shift towards a set of jurisdictions that really don’t make those claims about good governance, or at least not with any seriousness because you know, the common thread, Hong Kong, Singapore, the United Arab Emirates is a pretty much complete disregard for human rights. Um, they may still claim that they’ve got systems in place to protect investors, but not as human beings, only as you know, the sources of money. And I think the fact that we are seeing that shift, we’re seeing secrecy services increasingly going to that sort of jurisdiction is a positive sign in that it, it reflects a kind of marginalisation of illicit financial flows. It’s no longer something that you can just do through London or Delaware. And you know, this is good business practice and everyone says, oh, that’s, that’s probably okay. Increasingly we’re seeing people, you know, not least Russian oligarchs in effect being openly in defiance of the application of, of laws or sanctions that others try to put on them, and going to these places where most other people are denied full human rights, as a choice. So this is not something you could defend as, as good governance or investment practice or anything else. This is clearly nothing more than an attempt to defy others making their own laws effective on you. And you are so keen to do that, that you are willing to hold your nose about whatever other practices that jurisdiction has. So I don’t think you could say, you know, this is anything like the end of the road, but I think we’ll look back in a few years and this might seem like a bit of a turning point when that kind of good governance investor protection argument for secrecy jurisdictions was finally nailed. And it became clear that, you know, this is about hiding, and cheating, and dodging, and abusing, and nothing else. And if you want to do it well, you do it over there. And the rest of us will make our own judgements about you, but let nobody pretend this is good investor behaviour or anything of the sort.”
Naomi:“That’s really interesting. Um, and I mean, we shouldn’t be that surprised because in the end, you know, tax havens and secrecy jurisdictions are fundamentally anti-democratic. But the G7’s gonna have to up its game, you know, a lot. And that’s what we are are getting strong and clear from the secrecy index, isn’t it? I mean, together they’ve increased their supplies of financial secrecy – Italy and Germany by a third, Japan by 10%, the UK by 2%, the US, well that’s the worst rating ever recorded since the ranking began in 2009!”
Alex: “Yeah. Look, it’s, you know, it’s an interesting time to see whether, or the extent to which the, the financial sector broadly defined takes heed of what’s going on. So, you know, I was looking at earlier this year, thinking about the British Virgin Islands. So here’s a jurisdiction, a UK, uh, dependency under investigation by the UK – and that takes a lot, you know, for the depth of its corruption – and the question you’re asking yourself is like, this is a major provider of anonymous companies used by investors of some description all around the world and a certain number of major multinationals and financial services firms too. Are those firms those kind of mainstream, responsible financial actors, are they gonna stay in the BVI or are they gonna say no? And you know, and now that the UK has confirmed in its findings the depth of the corruption, what’s their decision? Do you say, ‘okay, we, we can’t be there. It’s just, it’s so obvious that we are just there to cheat people and, and, you know, there can’t be any kind of good governance argument or anything.’ Or do you say ‘we don’t care. We need the secrecy, we need the ability to cheat, so we’re gonna stay anyway and we’ll take a bit of a reputational hit’ but now there’s a lot more of the financial services actors around the world finding that they’re in places that are really increasingly gonna be seen, or are seen as kind of beyond the pale. So what do you do? I think we’re gonna see a bit of a separation and, you know, it’s, I guess the, the tide going out to some extent, we’ll see who’s naked, you know, we’ll see who really needs the secrecy regardless of the reputational damage and who has some kind of slightly more genuine commitment to responsible financial services practice.”
Naomi: “Yes, the secrecy space is being squeezed, and the index team did identify a 5% global reduction in financial secrecy, although the increases in the G7 nations I mentioned really cuts that progress right back. But let’s look at the number one global offender, the United States. Wow! After all the Biden administration has said about tackling tax havens and about sanctioning oligarchs! I mean, they’ve increased their financial secrecy supply to the world by almost a third, the largest supply ever recorded by the index! That’s despite some fantastic anti-corruption coalitions in the States and achievements like the passing of the Corporate Transparency Act, finally passed after so many years. I spoke to Ryan Gurule of the FACT Coalition in the United States about the result for his country:”
Ryan: “I think that there are a lot of different factors that contribute to the score. The score itself is not surprising. Um, there are a couple of different factors that contribute to it and things that we’d seen as well. Um, first and foremost, uh, the US is behind in implementing transparency based reforms. And we know this, um, in fact, the US, which kind of kicked off the whole global transparency movement with FATCA, which is the US foreign account transparency mechanism in which US financial accounts held offshore are reported back to the US. That system is not reciprocal at all.”
Naomi: “He means that while the US insists on other countries sharing information on their citizens abroad, it doesn’t return the favour. So, information on the citizens of the world’s activities in the US remain locked in secrecy. Yes, really!”
Ryan: “And in the meantime, after the US kind of created that system, uh, it failed to engage with the world in making a more reciprocal information exchange system in tax. And it failed to keep up in other transparency reforms related to beneficial ownership of entities, real estate, private investment funds, and regulating the enablers that help potentially corrupt actors access the extremely enticing US financial system. And it’s enticing for a variety of reasons. The US financial system has very strong legal protection and it offers anonymity and complete secrecy.
I think it’s a bit of a wake up call, especially in light of what’s happening in the world right now. We’ve seen Russia invade Ukraine, we’re talking about an authoritarian nation invading a democratic country. And what we’re seeing when the United States is leading a global response in sanctioning the oligarchs that are part of Putin’s cadre, it’s difficult to do that if you don’t know where those oligarchs are keeping their money and, and hiding it. And from that perspective, I think that the Western countries are recognising that they’ve been playing a significant role in entrenching and empowering those regimes by allowing kleptocrats to pilfer from their own country and move that money back to secure, secretive Western jurisdictions, like US markets that are very attractive, and to do so on a completely anonymous basis and that has only entrenched their power at home, emboldened their actions and is resulting in a lot of the conflict that we’re seeing. So I think that wake up call, along with this score will be a real call to act.”
Naomi: “There are chinks of light though despite this disastrous scoring for the US which may not come into view until the next Financial Secrecy Index in 2024, I mean you’ve had the Corporate Transparency Act finally passed after so many years of trying. Once that’s fully implemented there should be some serious progress that should filter into the next results?”
Ryan: “Yeah, the United States has begun to act and the Corporate Transparency Act was passed in January of 2021. And for the first time that will require the disclosure of beneficial ownership of most legal entities in the United States, corporations, limited liability companies, we expect it to cover every limited partnership but we are waiting on finalised regs to confirm as much. However, there are a couple of things that are holding that up, especially as it relates to this score. For one thing that bill hasn’t been implemented, the Corporate Transparency Act passed in January 2021, but there’s a tremendous amount of regulatory work to stand up the rules around that statute and the framework itself, as well as to stand up the infrastructure from a tech and digital information perspective to make sure that the law works as intended but at the same time, the US regulatory agency responsible for setting those rules up and that infrastructure up is horribly underfunded. And they’re being pulled in a lot of different directions. And that’s the Financial Crimes Enforcement Network at the Treasury Department, or FINCEN. They’ve been called into action in connection with the aggression towards Ukraine in helping coordinate international sanctions, including to discover who actually owns these entities. But it would be a lot easier to do that if these structural reforms had been in place a long time ago.
The last thing I’ll say is the president, he has emphasised these things. Uh, he’s actually identified a lot of core tenants that would both address the financial secrecy index score, but more importantly, actually create a more transparent regulatory environment in the US that would not only help to enforce sanctions, but also to help prevent the need for sanctions in the future, because it would undermine the abuse of Western financial systems by kleptocrats. Those reforms include standing up and implementing the Corporate Transparency Act, bringing greater transparency to US real estate markets on a nationwide permanent basis with respect to commercial and residential real estate, regulating the enablers who bring and shelter assets within our financial system, bringing transparency to private investment funds, an $11 trillion industry in the United States that has no ‘know your customer’ or beneficial ownership rules, which is shocking, that would be the third largest economy in the world, and it’s a black hole of secrecy and finally, covering other areas that have been developing and that are of concern, including relating to luxury assets, bringing transparency to art antiquities and digital assets, making sure that those, you know, emerging categories of harms from a money laundering perspective are pulled into the traditional, anti money laundering frameworks. We don’t need to reinvent the wheel. We just need to make sure that they’re covered. You know, right now the US is itself a tax haven, it’s one of the biggest secrecy jurisdictions in the world. These results confirm that, and it’s no longer time for the US to pretend that it can enact and create a less corrupt global environment and foster democracy without looking internally and cleaning up its own house and catching up with global norms..and, uh, making sure that it’s rhetoric is more than just talk. It’s time to walk the walk.”
Naomi: “Ryan Gurule of the FACT Coalition. Ok, let’s talk about the UK. As I’ve said, combined with all its satellite havens it’s still the worst offender even though taken alone it’s ranked number 13. Unlike the United States, there aren’t encouraging signs at all. Alex Cobham again of the Tax Justice Network:”
Alex: “Ah, you can, you can say that Britain is eating itself, you know, it’s slightly sad. You know, we’re sitting here as as two Brits and, you know, on the one hand look, I think the world is increasingly aware that the UK is the biggest driver of financial secrecy, of tax havenry. The UK is the UK. And I think, let’s come back at the next index and see where the UK is. The UK government at present is absolutely not committed to transparency in almost any dimension, whether that’s freedom of information requests from journalists or the public, or it’s transparency about public procurement and public contracts, or indeed a great many other things, including financial secrecy. They haven’t delivered, in fact they’ve, u-turned on a set of commitments that the predecessor, but still Conservative government made including around country by country reporting, and the UK’s corruption is becoming both more pervasive and more visible, which is what you’d expect with a country that sits at the centre of this spider’s web of secrecy. We know financial secrecy corrodes, and it corrodes in the secrecy jurisdiction as much as it does damage to others. The UK is responsible for very serious revenue losses for other countries, but it also suffers very serious revenue losses itself. It is increasingly finding it difficult to make progressive taxation effective because the tolerance of anonymous wealth and opaque corporate accounting is so high and it’s so embedded politically that we don’t regulate this stuff properly. And even if we pass the laws, we don’t enforce them. The cost now to the British society is becoming increasingly clear. There will be a moment in UK politics when people say ‘we have to try something else.”
Naomi: “Yeah. Yeah. I mean, it’s like a lost a lost nation at the moment, a pariah nation even, and there’s this ongoing race to the bottom going on between New York and London, which is, also you can throw into the mix, but speaking about how to tackle long term these problems, I mean the Tax Justice Network and, and other anti-corruption campaigners want a Global Asset Registry and a United Nations Tax Convention. I know these are big subjects, but, can you briefly explain how the global asset registry would work practically?”
Alex: “Sure. So, you know, we already have registries of a lot of assets, you know, so a lot of countries have a land registry that records, depending, either the legal owner or ideally the ultimate warm blooded beneficial owner. And then a lot of countries have that for companies and an increasing number of countries have that for trusts and foundations as well. Then if you look at kind of high value assets like yachts and private aircraft, you often have registers sometimes international of who the owners are. And then even thinking about works of art in some cases and other assets we see similar types of registers. Now, not all of them are perfect. Not all of them identify the beneficial owner or don’t do it entirely effectively, but there’s a lot of information there. Most of it public, some of it held privately that could be joined up. And that’s really what a global asset registry is. The idea that you could actually put together the company ownership register for all jurisdictions, and then the same for other types of assets, other types of legal vehicles. And you’d end up with an overall structure that let’s say law enforcement would be able – imagine, for example, that you wanted to sanction some very rich oligarch or, you know, some major criminal, you could look through the global asset registry and effectively see every element of their ownership, every structure and every ultimate asset, and that would allow you equally to do things like taxing wealth effectively, if you wanted to. Not all of the information would be in public domain, as it’s not now, some of it would be private, so I don’t think anyone’s saying we should have information about people’s financial accounts in the public domain, but where you’ve created a legal vehicle to do business, then that’s, I think generally held should be, should be a factor of public information. So you’d have both public and private elements, and it would basically be a tool for different types of, uh, law enforcement, but also civil society, journalists, and so on, for all of us to understand really the distribution of wealth in our countries and internationally. And if we wanted to decide to tax it, um, or at least if we’re not gonna tax it, to make that decision actively and with the power to do so and be choosing democratically not to, if that’s a choice that’s made. So it’s really about empowering people both to make sure that laws and taxes are applied fairly, but also to allow us to curtail inequalities.”
Naomi: “OK. And the UN Tax Convention? So important to enshrine tax rights in a legally enforceable way to protect citizens. That’s another longer term thing we’d like to see happen right?”
Alex: “Yeah. I mean, look, I’m not so sure it’s long term anymore. I think we’ve had a shift. There’s been a sense that you know, the OECD has actually had 10 years on corporate tax and it’s failed, you know, nobody, including the bigger OECD members, nobody is happy with what the OECD’s put on the table after 10 years of trying. That’s on the corporate tax side. Meanwhile, on the transparency side, you know, we have the Financial Action Task Force whose former long standing head has just come out and, you know, really ripped them apart and highlighted just how much they have failed to achieve things like beneficial ownership transparency among more than a, you know, a handful of members and how actually there’s a small group of major members who really control it, and stop it delivering high standards for everyone. We know the UN tax committee already has kind of delivered on digital taxation in a way that the OECD is failing. It’s kind of obvious that this stuff should be done at the UN.
My feeling is we might see negotiations on a convention begin within a year. It really feels, you know, we could be that close and there’s still a long way to go even if we get started. But I think there’s just this general sense that the architecture doesn’t work. It doesn’t work for lower income countries, in fact, it never has done, but even for OECD members, I think there’s a frustration that they’re not getting the kind of effective, uh, changes that they need. And something like the, you know, the failure of the G7 to be able to make sanctions effective in the case of Russia because of their own failure to be transparent, I think is shifting the dial on what might be acceptable as, as global standards. So, I feel pretty positive at the minute. I think it’s not such a long term ambition after all.”
Naomi: “And very interestingly, just in a short time since I spoke to Alex, the African Union has just passed a resolution calling on the UN for a tax convention. Alex, I’m cheered to see that the financial secrecy index 2022 finds that global financial secrecy actually shrank by 5%, so it is going down. But, once you factor in the G7 countries I mentioned earlier, they increased their secrecy services by so much it whittled that global percentage down to 2%. But there is an ongoing reduction, which is encouraging, even though in the last index it was down by 7%. I know that enforcement is a whole other question, but the secrecy space is being squeezed and it’s a very important ongoing shift right?”
Alex: “Yeah, absolutely. You could say the continuing improvement in global transparency is really a reflection of the kind of the normalisation of the tax justice policy platform. There is much more automatic exchange of information about financial accounts, there is much more transparency of beneficial ownership, and there is continuing progress towards country by country reporting being transparent, there’s a lot of progress being made. So we should feel pretty positive stuff is being delivered in legislation, but it’s also being delivered in practice. The fact that the G7 as a group is dragging the needle back the wrong way is a definite cause for concern. But that global trajectory is positive. And it feels like the momentum will continue.”
Naomi: “So, I’ve given you just some of the highlights here, there’s so much more to discover. There are 141 countries in the index, find out about your country on fsi.taxjustice.net. That’s it for now from the Taxcast. Thanks for listening, we’ll be back next month. Bye for now.”
Welcome to our Spanish language podcast and radio programme Justicia ImPositiva with Marcelo Justo and Marta Nuñez, free to download and broadcast on radio networks across Latin America and Spain. ¡Bienvenidos y bienvenidas a nuestro podcast y programa radiofónico! Escuche por su app de podcast favorita.
En este programa:
Estados Unidos se convierte en el primer proveedor de secreto financiero a nivel global.
EL camino a la Transparencia financiera para América Latina
En nuestro tercer capitulo de qué son los paraísos fiscales, sus grandes protagonistas, las miultinacionales.
Y ¿por qué Londres es el mayordomo mundial del dinero sucio?
Welcome to our monthly podcast in French, Impôts et Justice Sociale with Idriss Linge of the Tax Justice Network. All our podcasts are unique productions in five different languages every month in English, Spanish, Arabic, French, Portuguese. They’re all available here and on most podcast apps. Here’s our latest episode:
Pour cette 39ème édition de votre podcast francophone produit par the Tax Justice Network, nous partageons avec vous une partie des échanges qui ont eu lieu lors de la diffusion par TaxEd Alliance des notes d’informations sur l’état de la mobilisation des ressources fiscales au profit de l’éducation. Deux pays africains ont fait partie de l’analyse de référence, à savoir le Sénégal et la Zambie. Nous vous proposons de suivre la réaction d’un membre du Forum Civil, une organisation leader de la société civile sénégalaise.
Dans cette édition, nous revenons aussi sur l’indice d’opacité financière qui est en cours de finalisation, avec un jeu de question réponses, pour comprendre comment le lire. Aussi, nous parlons de l’accord fiscal international de l’OCDE, dont la mise en œuvre est menacée par de nombreux points de désaccord.
Pour écouter le lancement officiel des notes d’information de TaxEd Alliance, cliquer ici.
~ Financement de l’Education: Quel justice fiscale pour l’Afrique? #39
Vous pouvez suivre le Podcast sur:
Le télécharger pour l’écouter hors connexion sous le sous ce lien.
Et pour ceux qui ont l’application Stitcher et iTunes ect
Si vous souhaitez recevoir cette production ou être média partenaires ou simplement contribuer, vous pouvez nous écrire à l’adresse Impô[email protected]
Welcome to the 53rd edition of our Arabic podcast/radio show Taxes Simply الجباية ببساطةcontributing to tax justice public debate around the world. It’s produced and presented by Walid Ben Rhouma and is available on most podcast apps. Any radio station is welcome to broadcast it for free and websites are also welcome to share it. You can follow the programme on Facebook, on Twitter and on our website.
الإعلان عن إفلاس لبنان: أين الحقيقة؟
في العدد #53 من الجباية ببساطة نستضيف الخبير في التنمية الإقتصادية هاني السلموني لتحليل خبر إفلاس لبنان بعد إعلانه من طرف نائب رئيس الوزراء اللبناني سعادة الشامي قبل نفيه من رئيس الوزراء نجيب الميقاتي الذي صنفته مجلة فوربس مع شقيقه طه كواحد من أكبر اثرياء المنطقة العربية في مفارقة صارخة مع تدهور الوضع الإقتصادي اللبناني.
هل يمكن للحكومة اللبنانية التوصل الي حلول لتفادي الافلاس؟ وهل يساهم الإتفاق مع صندوق النقد الدولي حول برنامج تمويل جديد في إخراج لبنان من ازمتها؟
أسئلة نطرحها على ضريفنا د. هاني السلموني.
In episode #53 of “Taxes simply” we provide a recap of the key economic events globally and in the Arab region in April 2022. We then speak with Dr. Hany El Salamony, an expert in economic development who discusses the latest developments in Lebanon and the news of the country going bankrupt, while the country’s Prime Minister is named one of wealthiest Arabs on the Forbes list for the richest Arabs in 2022. Can the Lebanese government find a way to avoid going bankrupt? Can the agreement with the IMF for a new loan help mitigate Lebanon’s crisis? These are some of the questions we’ll discuss with our guest.
Sobe o preço do barril de petróleo, sobem os custos de produção e os preços de quase tudo para os consumidores finais, trabalhadores e trabalhadoras. O É da sua conta #36 é sobre essa maldição e como se livrar dela.
Cloviomar Cararine e Juliane Furno explicam como acontece a formação do preço do petróleo e de seus derivados no Brasil e no mundo, o peso da pandemia de covid-19 e da guerra na Ucrânia nessa dinâmica, como as empresas petroleiras se beneficiam desse cenário e os impactos sobre a inflação. Suzana Ruiz e Juliane apontam também as medidas de justiça fiscal que podem ser tomadas para minimizar esse problema global.
Ouça no É da sua conta #36
A inflação dos derivados de petróleo no Brasil e por que o petróleo produzido pela Petrobras acompanha o valor do produto no mercado internacional.
Os fatores que influenciam a formação do preço do barril de petróleo no mundo.
Empresas de energia e do setor petrolífero recebem subsídios governamentais. Isso é necessário?
É possível reduzir a dependência do petróleo, a exemplo de países que já fizeram a transição para fontes de energias renováveis?
Taxação de lucros extraordinários das empresas petroleiras como medida complementar para combater os efeitos da inflação dos derivados do petróleo.
Call to action: justiça fiscal como forma de combater os efeitos da inflação, reduzir desigualdades e fazer a humanidade se livrar da maldição do petróleo.
O combusivel está subindo adoidado. No dia 8 de abril o álcool estava R$ 4,60. No dia 11 custava R$4,80 e no dia 14 já estava 5,10 em alguns postos.”
~ Umberto Stefano, aposentado
A população brasileira hoje paga por um preço de um produto que ela produz e que vem reduzindo seu custo de produção, mas não conseguimos absorver esse ganho, que se reflete no aumento no lucro das empresas de petróleo e no pagamento de dividendos a seus acionistas.”
~ Cloviomar Cararine, economista do Dieese
Hoje em dia o fenômeno da financeirização impacta muito a precificação do barril de petróleo no mercado internacional. Nesse sistema há comercialização futura de barris de petróleo com um tempo bastante alargado. As expectativas sobre a produção futura e a especulação [sobre a variação de preços do barril] têm o poder de determinar o preço no presente.”
~ Juliane Furno, economista-chefe do Instituto para Reforma das Relações entre Estado e Empresa
Podemos aplicar uma taxa adcional a empresas energéticas que tiveram um crescimento muito alto e inesperado de seus resultados empresariais por causa da guerra na Ucrânia. Esses recursos podem ser usados para baixar as contas de energia ou investir em programas sociais —uma espécie de renda básica universal — para famílias que mais sofrem com os atuais efeitos inflacionários.”
~ Susana Ruiz, coordenadora de justiça fiscal da Oxfam Internacional
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