Welcome to the 52nd 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.
قرض صندق النقد لمصر: هل من بديل؟ في هذا العدد (#52) من الجباية ببساطة حاورنا الباحث الأقتصادي المصري وائل جمال حول القرض الجديد لمصر من صندوق النقد الدولي ومدى ارتباطه بتراجع قيمة الجنيه، زيادة على تبعاته الاقتصادية والاجتماعية ودوره في الإصلاح الشامل الذي تسوّق له الحكومة المصرية. نسلط الضوء في هذا العدد على مدى صحة إعلان إفلاس الدولة والبنك المركزي في لبنان.
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 38ème épisode de votre podcast en français sur la justice sociale et la justice fiscale proposé par Tax Justice Network, nous parlerons des prix de transfert avec un expert d’Alliance Sud. Nous abordons aussi la formulation par la société civile internationale d’une proposition de système fiscal global plus égalitaire et qui se mettrait en place dans le cadre des Nations Unies.
« Notre proposition formule un mécanisme visant à remplacer le système des prix de transfert. La proposition de l’OCDE prévoit aussi un taux d’imposition minimal de 15%. Mais parce qu’il y a beaucoup de manquements dans l’accord, il y a de fortes chances que les multinationales continuent de payer moins que les 15% d’imposition minimale. Le deuxième défi que nous avons avec l’accord, c’est que nous ne pensons pas qu’elle soit équitable. Il y a des parties de l’accord qui constitue des biais au profit des intérêts des pays les plus riches, au détriment des pays pauvres », nous a expliqué Tove Maria Ryding, coordinatrice des questions fiscales chez Eurodad, et auteure de la proposition.
Ont participé à ce programme
Dominik Gross : Analyste des Politiques sur la Finance Internationale et la Fiscalité, Alliance Sud
Tove Maria Ryding : Responsable des Politiques et du Plaidoyer pour la Justice Fiscale, Eurodad
~ Prix des transferts, Accord Fiscal International: Pourquoi les choses doivent changer pour l’Afrique? #38
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]
Sanções a oligarcas exigem fim de sigilo fiscal #35
Tão logo a guerra na Ucrânia começou, os governos dos Estados Unidos e da União Europeia se mobilizaram e criaram sanções econômicas e financeiras contra a Rússia, inclusive mirando oligarcas e super-ricos do país. Foram decisões-relâmpago diante de uma situação excepcional de guerra.Mas enquanto o sigilo financeiro existir, será muito difícil de rastrear bens e ativos dos superricos russos ou de qualquer outra parte do mundo.
O É da sua conta #35 mostra como é possível por um fim no sigilo financeiro e, com isso, combater a corrupção global, abuso fiscal e fluxos financeiros ilícitos. Esses crimes causam enormes danos para populações no mundo inteiro há muito tempo, e não são cometidos apenas por oligarcas russos.
Ouça no É da sua conta #35
População civil é sempre a maior vítima das guerras: 20 anos após acordo de paz, Angola ainda sofre com as feridas da guerra civil
Quais os efeitos de sanções econômicas para a promoção da paz em tempos de guerras
Sanções contra a Rússia não são suficientes enquanto paraísos fiscais e sigilo fiscal não são atingidos.
Quando independente, Angola era o terceiro país mais desenvolvido da África. Agora, 20 anos depois da guerra, ainda estamos pagando a dívida para reconstruir o país.”
~ Celso Malavoloneque (ex-Unicef Angola)
As sanções à Rússia são bem vindas, mas não são suficientes. Sem mais transparência financeira, quando a gente não abre o segredo dos paraísos fiscais, faltam recursos para achar riqueza escondida, e os oligarcas russos podem transferir seu dinheiro para outros paraísos fiscais com menos transparência.”
~ Matti Kohonen (Coalização Global por Transparência Financeira)
[Com as sanções] Se busca arruinar os adversários econômicos, ou seja, estimular de alguma maneira uma agitação de natureza social, influenciar o poder e decisões políticas no país, que vai se ver pressionado a cessar o conflito bélico.”
~ Thauan Santos (Escola de Guerra Naval)
O importante agora é pressionar para fechar as brechas. Por exemplo, poderia insistir-se que o proprietário final de ativos deva ser inscrito num registo público, quer seja ou não proprietário direto ou indireto através de uma empresa de fachada num paraíso fiscal. O não cumprimento acarreta penalidades fiscais.”
~ Nick Shaxson (Tax Justice Network)
~ Sanções a oligarcas exigem fim de sigilo fiscal #35
On 22 March 2022, the BBC and the Guardian published a story about Alisher Usmanov, a Russian mining and telecoms oligarch, who is a former major shareholder of Arsenal football club and was once said to be the UK’s richest person. He is now a subject of sanctions against key associates of Russian president Vladimir Putin. But there seems to be a problem with applying sanctions to him involving trusts. A spokesman for Usmanov told The Guardian:
“…most of the billionaire’s UK properties, as well as his yacht, had been ‘long ago transferred into irrevocable trusts’. He added: ‘From that point on, Mr Usmanov did not own them, nor was he able to manage them or deal with their sale, but could only use them on a rental basis. Mr Usmanov withdrew from the beneficiaries of the trusts, donating his beneficial rights to his family.'”
This is the equivalent of crooks swimming across a river marking a country’s border, then thumbing their noses at the police fuming impotently on the other side. You may want to sanction Usmanov, the spokesman seemed to be taunting, but you won’t get his assets!
At first glance, this might seem like an open and shut case: he has wriggled free of sanctions. But is this really true?
In trusts we trust?
As we have explained on several occasions, a trust creates two key problems for the forces of law and order. One is secrecy. The other is that they can shield assets – like Russian oligarchs’ luxury apartments, yachts and so on – from the rule of law. In this case, from essential sanctions.
These two problems stem from the nature of the trust. In essence, a trust is a three-way arrangement. A settlor (for example, in this case Alisher Usmanov) places assets into a trust, which is a legal arrangement for deciding who will have rights of those assets. These assets are then managed by a trustee (typically a lawyer, close friend or family member) in favour of beneficiaries, who are often family members of the settlor. The assets now sit inside a new legal arrangement, very convenient to all those directly concerned.
The core problem is that if the settlor – Usmanov – has actually given the assets away, then you might conclude that he doesn’t own the assets any more, so sanctions applied to him will no longer affect those assets. That is why, to repeat, the spokesman said:
“From that point on, Mr Usmanov did not own them, nor was he able to manage them or deal with their sale, but could only use them on a rental basis.”
That could be seen as lawyerly language intended to distance Usmanov from the assets, to ensure that sanctions against him will not be able to reach his assets. In reality, settlors could routinely find ways to control or benefit from assets that they have placed into trusts, even if they don’t technically legally own them. A lot of what goes on is something of a façade.
The implications of this are, of course, immense. If people can use trusts to keep their assets inside this legal fortress enabling them to escape the law, then they are effectively above the law.
Fortunately, however, it is quite possible to penetrate trusts and get at the assets inside them. You just need the right political will. International initiatives have so far been underwhelming but now, with Russia’s invasion of Ukraine, there is a new urgency to get things rights.
Transparency on trust won’t cut it if sanctions remain near-sighted
Before we can delve into the weaknesses and at times complete absence of trust transparency measures among some of the world’s major economies, we must first make a point so obvious one would think is does not need to be spelled out – but here we are: transparency on trusts will only help implement sanctions if sanctions are designed to utilise that transparency. Having full transparency on the true beneficial owners of assets is wasted if sanctions are written to be “near-sighted”, that is, if they only target the legal owners of assets or the trustees of trusts and do not look too closely beyond this initial layer.
In the UK, according to the UK Financial sanctions general guidance, sanctions apply to designated entities, as well as to assets or entities “owned or controlled directly or indirectly” by sanctioned individuals. According to the law (as amended), “owned or controlled directly or indirectly” refers to an individual owning more than 50 per cent of shares or voting rights, with a right to appoint or remove the majority of the board or to achieve the results of the sanctioned individual’s wishes (see section 7, as expanded by Schedule 1 on joint interests, joint arrangements, etc). In addition, based on the amended The Russia (Sanctions) (EU Exit) Regulations 2019 law, sanctions should also apply to entities that have sanctioned individuals serving as directors, trustees or equivalent roles (see section 6.4.d of the law).
Now, if we thought that the widely used definition of a beneficial owner as “25 per cent or control via other means” was too easy to circumvent because it’s too high, how could anyone expect sanctions won’t be avoided if the threshold is set to 50 per cent? Given that the UK already utilises the “25 per cent” threshold for in its beneficial ownership laws, the UK’s rules on sanctions bewilderingly lets off the hook a cohort of beneficial owners it recognises elsewhere.
To make sure sanctions on an asset held by a trust can’t be circumvented, authorities should look carefully whenever a sanctioned individual indirectly owns, controls or benefits from the asset by being a party in any form to the trust, not just when the individual is a trustee. The same should apply where a sanctioned individual has any share, interest, voting right or exposure (not just “more than 50 per cent”) in an entity owning an asset. In these cases, authorities should investigate whether this indirect ownership or control (eg owning merely 10 per cent of the entity holding an asset) was a scheme to circumvent the sanction, and if so consider the sanctioned individual to be the owner of the asset.
With this point made, we can now return to the issue of trust transparency.
Europe’s half-measures leaves full measure of secrecy
Under the currently applicable EU anti-money laundering directive (known as AMLD 5), trusts must register their beneficial owners whenever they are administered in the EU, acquire real estate or establish business relations. However, this already leaves a lot to be desired. For example, access to beneficial ownership information on trusts is based on having a legitimate interest (whereas a much stronger requirement could be to insist on public access also for the beneficial owners of legal arrangements and not only companies and other legal persons).
Sanctioned oligarchs under AMLD 5 may have to register their trusts if they purchase new real estate (say today), but not if they already held the real estate before the rules came into effect. Moreover, based on the Directive’s loopholes, there is no requirement to register a trust created according to the laws of an EU country if the trustee and the new real estate are outside of the EU. This leaves a lot of wiggle room for sanctioned oligarchs to escape disclosing information on the real estate they own. In 2022, the EU will be discussing a package to reform beneficial ownership requirements in relation to anti-money laundering (the EU AML Package), but as explained here, it fails to bring effective solutions to the secrecy risks, especially related to trusts.
In the context of Brexit, the UK implemented some measures on trust registration based on the EU AMLD 5, but it has not been fully compliant with the EU Directive. On the one hand, in compliance with the AMLD 5, the UK requires beneficial ownership registration for any trust which acquires real estate or establishes business relations in the UK. However, unlike the AMLD 5 which also requires beneficial ownership registration whenever a trustee is based in the EU, rules for beneficial ownership of “UK trusts” are extremely complex. They depend on the residence of the majority of trustees, or the residence of the trustee and the settlor, on the trust being subject to UK taxes and on the trust not falling within any of a list of exceptions. Sanctioned oligarchs in the UK can thus find even more wiggle room via the UK’s legal system.
Adding on another helping of secrecy, when it comes to real estate held by trusts, the UK Land Registry only discloses the name of the trustee (eg John) as the legal owner of the given property without warning that John is a trustee. In other words, by looking at the Land Registry’s records, it’s impossible to distinguish between a John who is the real beneficial owner of a house versus a John who is a mere trustee, holding a house under his name but in relation to an unknown trust with unknown beneficiaries and unknown beneficial owners.
UK’s transparency act finally arrives, but loopholes persist
In March 2022, following the Russian invasion of Ukraine, the UK approved the Economic Crime (Transparency and Enforcement) Act 2022, which finally requires foreign entities that hold UK real estate to register their beneficial owners. This new law, while a transparency upgrade, still falls shorts of the more effective proposals we published to enforce sanctions against individuals. It also suffers from the typical loopholes of beneficial ownership registration (high thresholds, lack of verification, etc)The new law only requires foreign entities (that is, legal persons, but not trusts) which acquire real estate (retroactively since 1999) to disclose their beneficial owners.
This means when it comes to the ownership of real estate, the UK requires under its transposition of the AMLD 5 that trusts, starting from October 2020, register their beneficial owners when they acquire new real estate . In addition, the UK now also requires under the new Economic Crime Act 2022 that foreign entities which acquired real estate since 1999 to register their beneficial owners, but not trusts. This leaves a gap for trusts that already held real estate before the UK implemented the AMLD5 in 2020. Meaning, any trust that held a piece of real estate in the UK for more than two years is, unless covered by any other registration provision (eg subject to a UK tax), left untouched by the two laws. Given the widespread use of trusts as a secrecy weapon of first choice for tax evaders, money launders and criminals, leaving trusts out of the scope of the Economic Crime (Transparency and Enforcement) Act 2022 is like leaving oil out of the scope of an oil spill cleanup.
On the bright side, the new law has some provisions on situations where the beneficial owner of the foreign entity is a trustee. However, these provisions also suffer from loopholes. First, a trustee who is a beneficial owner must provide either information about the trust or (and this is a big or) “so much of that information as the overseas entity has been able to obtain” (Section 4.3). In other words, providing information about the trust may become voluntary by claiming it wasn’t possible to obtain information.
Second, the information about the trust that has to be provided (if obtained) doesn’t need to include information on all the trust parties, particularly not the “protector”(ie the person who may control the trustee or have effective control over the trust). The new law mentions the trustee, beneficiaries, settlors and “interested persons” which includes someone who has “rights in respect of the removal or appointment of trustees or the exercise by the trustee of their functions” (Schedule 1, Part 5). Generally, appointing or removing a trustee or influencing how the trustee exercises their functions are some of the ways protectors exercise control over the trustee or the trust. However, by leaving the protector role out of the new UK law, a sophisticated lawyer can write a trust deed where rights are divided among a trust’s protectors so that none of them falls within the definition of “interested person”. This allows the protectors to avoid detection and registration while continuing to exercise control over the trust. In contrast, the FATF Recommendations and the AMLD articles on trust beneficial ownership specifically cover the protector and any other individual with effective control over the trust, helping avoid this situation.
To understand the importance of identifying the protector, consider that in the infamous UK case against Russian former billionaire Pugachev about his discretionary trusts, Pugachev had held the role of “protector”. Based on the new law (and assuming the assets were held by a foreign entity which in turn were owned by a trust), Pugachev would only have been identified if his rights over the trust were arranged in a way that could be covered by the definition of an “interested person”.
A third and final transparency shortcoming with the information provided by the trustee is the complete absence of any requirements or commitment to make the information on the trust available to the public, either directly via the trust or via a central government register (Section 22).
US and Australia missing in action on trusts
Unfortunately, the problem of trusts is not limited to the UK. As explained here, the 2021 US beneficial ownership law applies only to companies and similar entities, but not to all (and likely not to most) trusts. Likewise, the US’s geographic targeting orders (GTOs) which require disclosure of beneficial ownership information of those who acquire real estate in certain US districts cover only legal persons but not trusts.
Australia is another country of concern. A recent study commissioned by the Australian Tax Administration observed among others:
“The interactions between the trust and tax laws are being manipulated which could contribute to the sheltering of significant amounts of tax. At conservative levels this amount is estimated to be between $672m and $1.2b per annum; Chains of trusts and interlinking trusts are common which may reflect a deliberate intent to create a degree of opacity with relation to trust income…
Trusts provide flexibility in terms of structuring businesses and tax affairs when compared to establishing companies or partnerships; Trusts are viewed as useful vehicles for asset protection and estate planning since legal ownership and beneficial ownership are separated; Most if not all high net worth and wealthy groups utilise multiple trusts and companies within their structures. In many cases it was suggested that one of the aims is to reduce the effective tax rate”
Nevertheless, as explained by the Financial Secrecy Index, Australia requires no registration of trusts in all cases, let alone beneficial ownership registration.
As we have often explained (eg here), the extreme flexibility and secrecy made possible by some trusts, and their ability to shield people’s identity and assets from the rule of law, mean that trusts have been used in all manner of abuses, such as allowing perpetrators to escape requirements to indemnify victims of sexual abuse, murder and embezzlement and to shield assets from creditors in bankruptcy. What is surprising is that countries are still doing (almost) nothing about it.
How to fix the system
Trusts create two main risks to society. First, as explained above, they enjoy a much larger degree of secrecy compared to companies and other legal persons. Second, even with full transparency, trusts are able to shield assets from the rest of society based on the “ownerless limbo”, where every party to the trust can claim not to own the trust’s assets, while still being able to use and enjoy them in secret. The settlor can claim, “I no longer own the asset, it now belongs to the trust/trustee.” The trustee would respond, “I just offer my name to hold trust assets, but they don’t belong to me. I only administer the assets in favour of beneficiaries.” And the beneficiaries would answer, “We aren’t the owners of the assets yet. We’re waiting until the trustee distributes the assets to us, if ever”].
The solution to address these risks isn’t rocket science: it’s the same policy measures we’ve been advocating for years. We repeat them here:
Measures to address trusts’ secrecy:
1. Trusts should be required to be “incorporated” or registered in order to have legal validity, just like companies or private foundations (which have the same structure and functions as trusts). Without this requirement, any laws governments try to enforce on trusts become purely optional for the wealthy. Governments cannot enforce the law on trusts they don’t know exist. Only the trusts that voluntarily step out of the shadows will be subject to the rule of law.
2. Beneficial ownership registration should apply to any trust that: (a) is created according to local laws, (b) has local assets, eg real estate, (c) has local operations, eg is a party to any contract with resident, or (c) has a resident party, eg settlor, trustee, protector, beneficiary or any other individual.
3. Unregistered trusts and those which failed to register their beneficial owners should be considered invalid and barred from opening bank accounts, transferring money, holding assets, entering into contracts, etc. For instance, if a beneficiary fails to register the trust, any trust distribution in favour of the beneficiary should be considered illegal or unjustified enrichment. A trust that claims not to know its beneficial owners because of a complex ownership structure, should be considered “unregistered” and subject to the corresponding sanctions.
4. All parties to the trust should be registered as beneficial owners. If any of these parties, eg the beneficiary, is a legal person or another trust, then all the beneficial owners of that legal person or trust should also be identified without applying any thresholds. This is critical because individuals could otherwise set up companies as parties to the trust to avoid registration by having an ownership in the company below the applicable threshold (eg 25 per cent).
5. Discretionary trusts (where the trustee decides which beneficiary gets a distribution, when, and how much) should be prohibited because they are more secretive and harmful than bearer shares, which most countries have now already prohibited. With bearer shares issued by companies, the owner of the company is whoever physically holds the bearer share (a paper certificate) at any given time. With discretionary trusts, the beneficiary is whoever the trustee decides to give a distribution to at any given time. This is more problematic than bearer shares because bearer shares, by existing on paper, at least allow ownership to be fixed in reality – to whoever or whatever holds the papers.
In contrast, with discretionary trusts, asset distribution sits entirely in the trustee’s mind. Who is or is not a beneficiary to a trust can change at the whim of thought. Even a team of mind readers working 24/7 would be useless for enforcement if anybody and everybody may or may not be a beneficiary at any given time. Prohibiting discretionary trusts doesn’t mean that non-discretionary trusts cannot be changed to add or remove beneficiaries. It only means that instead of “changing” beneficiaries based on a trustee’s discretion, trust beneficiaries would have to be amended the same way a company changes its shareholders. By filing a return, registering the new beneficiary and removing the old ones.
6. There should be public access to information registered on trusts’ existence and their beneficial owners, just as is practiced for companies and foundations, for instance, in the EU.
Measures to address the asset protection shield:
7. Neutralise the “ownerless limbo”. Trust assets should always be considered to belong to a trust party, either the settlor or the beneficiary: trust assets should be considered as owned by the settlor (and reachable by the settlor’s creditors) until beneficiaries are entitled to a distribution or effectively receive a distribution (in which case, the assets would belong to the beneficiary).
8. Pre-existing assets, eg real estate held by unregistered trusts should first be taxed and eventually confiscated, if the trust or trustee fail to disclose all of the trust’s beneficial owners.
9. Ownership registration should be considered to have a “constitutive effect”, meaning that rights exist since and during registration. If a trustee appears as the owner of a house but fails to disclose the existence of the trust and instead gives the impression to be the real owner of the house, then any of the trustee’s creditors would be able to access the asset as if the trustee were its true and unique owner. The eventual disclosure of the trust would be irrelevant and useless. At the same time, authorities should conduct “unexplained wealth” checks to prove whether the trustee could have legally acquired that asset in the first place based on their declared income, and ,if failing the check, confiscate the asset. These measures would produce a number of consequences to deter assets held by trusts from being misleadingly registered by trustees as their personal assets with no connection to a trust. Once authorities find out (eg based on a leak or an investigation) that a trustee failed to disclose their status as a trustee and subsequently the trust’s existence, they authorities would confiscate the asset as a penalty. Prior to authorities finding out about the failure to disclose, the trustee would be considered by law as the sole and real owner of the asset, enabling them to use the asset as they wish with no accountability to the settlor and beneficiaries, as well as making asset liable to any personal creditors.
Authorities should run wealth checks immediately on owners of assets, starting with mansions and luxury real estate, to make sure their alleged owners can justify how they acquired them.
10. Similar to the anti-fraud action, any measure to transfer assets, remove or add parties to a trust (eg beneficiaries) should be invalidated, even retroactively, if proven not to have economic sense and have a possible relationship to escaping the law (eg avoiding a sanction). In other words, if a sanctioned individual removed him/herself from the list of beneficiaries, protectors or trustees only to escape sanctions that were imposed, this measure should be invalidated and the individual should still be considered a party to the trust, unless such measure took place more than two years before the imposition of sanctions. Likewise, transfers of assets or replacing parties to the trust with other family members or unrelated third parties should be invalidated, unless they took place more than two years before the sanction.
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.
With Russia’s brutal invasion of Ukraine, even the most hardcore ‘let the planet burn’ believers can no longer deny that fossil fuel dependency is a national and an international security issue. We know the resource curse goes hand in hand with corruption. Is this a time like no other for the world to finally see that the key to it all is financial secrecy?
“You cannot have unquestioning acceptance of the wealthy AND democracy. You can’t treat everyone the same before the law AND give rich people anything they want, because rich people want to have immunity from the law. Do you want democracy, or do you want to be a Butler?”
Many nations around the world are in denial about why sanctions they’re now imposing on super-wealthy Russians who got rich from their close connections to the Kremlin – aren’t really going to work. The inconvenient truth is that the global financial secrecy we’ve been banging on about for all these years is designed to serve the very wealthy, at great cost to almost everyone else – us! And without major transparency changes and investment in law enforcement, sanctions are easily circumvented. Because the interests of the very rich and powerful have shaped our economies and our policies across the world. And as all the Tax Justice Network’s Financial Secrecy Indexes consistently show, Britain is the world’s worst offender when you combine it with its satellite havens. Taxcast host and producer Naomi Fowler spoke with journalist and anti-corruption campaigner Oliver Bullough about his excellent new book ‘Butler to the World: how Britain became the servant of tycoons, tax dodgers, kleptocrats and criminals.’ It could hardly be more relevant to these times:
Naomi: “Your book is connecting all the dots on what’s happening now with Russia and Ukraine, you know, we’ve got the resource curse and the finance curse hand in hand with Butler Britain, all roads leading to financial secrecy and all the things we’ve all been campaigning about for all these years. Our country has just bowed down to it all, so I mean, even if people don’t care how much the British Butlering hurts people in other countries, they’ve gotta start understanding now, right, how it rots everything and hurts all of us, I mean, when it comes to Butler Britain, the concept of Britain being a Butler to the world, I thought it was such a good way to understand and kind of look at ourselves in the mirror and realise that there’s a subservience going on. We are kind of world beating, which we love to talk about, but actually we’re world beating at being completely servile to corrupt money. If you were to summarise the situation that’s happening right now with Ukraine and Russia, how would you summarise the lessons that we could learn when it comes to the finance curse and our complicity in what’s been building up for all these years?”
Oliver: “At the moment, quite naturally, there are a lot of comparisons between what Putin is doing in invading Ukraine and Hitler invading Poland in 1939, and I think a lot of people looking at that think, well there’s nothing we can do because we are not going to go to war with someone with nuclear weapons. But the Kremlin is very different to a traditional dictatorship because of the way that the vast majority of the wealth owned by the Kremlin elite is outside Russia. They have offshored their wealth to a vast degree, and that is our fault. You know, I mean, Gabriel Zucman has estimated that up to 60% of the Russian elites wealth is outside Russia, and that is because they don’t trust each other any more than they trust us. Right? You know, that system of offshore finance and offshore structures, we in Britain invented that’s the invention of the City of London. So we are responsible for sorting that out. We broke it, we need to fix it. And we’re not just responsible for creating the whole system, but we are also specifically responsible for having welcomed Russian oligarch’s wealth to our country. We have allowed them to fight their court cases in our courts. We’ve allowed them to use our lawyers to muzzle journalists. We’ve allowed them to buy our football clubs and to live in our Capital, to educate their children here and so on, you know, we have a responsibility to the Ukrainians to sort this out. And, you know, I think there are obviously lots of things we need to do for the Ukrainians on a day to day basis. But I think the real important service we can do for the Ukrainians and for everyone is to recognise that the money that is coming here and the people for whom we are acting as butlers, that is dirty money. And those are dirty people. And we shouldn’t welcome them here just because they’re rich, and we shouldn’t only tackle their wealth because they’ve invaded Ukraine. We should be doing it anyway. You don’t investigate organised crime only when a gang war breaks out, you investigate it all the time because it’s criminal activity. And I think that is what we’ve got desperately wrong. And I hope if something beneficial comes from this appalling tragedy, it could be that Britain starts to recognise the costs of the butler business and starts getting out of it.”
Naomi: “Oh, I really hope so. And you write about what comes up time and time again is the justifications of the unjustifiable is, ‘oh, everybody else is doing it so if we don’t do it, someone else will do it. And we’ll stop when everyone else agrees to stop.’ And democracies really must unify and develop a response to the challenge of dirty money and transnational kleptocracy because if we don’t wage war on financial secrecy, it’s gonna eat us all!”
Oliver: “Yeah, I agree. You cannot simultaneously have a total unquestioning acceptance of the wealthy from wherever they are, and democracy. You can’t treat everyone the same before the law and give rich people anything they want. Because rich people want to have immunity from the law. When you get down to it, you have to choose one or the other, do you want democracy, or do you want to be a Butler? You know, I mean, I, throughout the book and I try to keep the book light, cos this is a, you know, it’s a depressing subject, obviously it is and so I try and keep the book light and funny and I found, you know, when I was thinking about butlers, obviously I was thinking about the Jeeves and Wooster stories. And actually I found the Jeeves stories a surprisingly good source of parallels for what Britain gets up to. You know, if you strip away the PG Woodhouse jokes from the Jeeves stories, they’re pretty dark. You know, Jeeves is an astonishingly intelligent, resourceful man who could do or make a success of almost anything. And yet he chooses to deploy his talents to help half wits to get out of scrapes of their own making. And some of the ways he chooses to do that are right out of Ukraine or Russia, I mean, you know, bribing police officers, assaulting police officers, running an illegal bookmaking operation. And there’s a sort of very odd lack of solidarity in Jeeves’s world and PG Woodhouse recognised this, I mean, he’s very funny and he has this very entertaining story when a group of revolutionaries come to lunch in Bertie’s flat and one of the revolutionaries accuses Jeeves of being an outdated lackey of the ruling class and Jeeve’s response is ‘very good, sir.’ And you just know that’s essentially what the response of Boris Johnson’s government is to being accused of being a lacky of the Russian ruling class. ‘Very good, very good. What can we do, you know, for you now?’ It’s just very disappointing that more politicians have haven’t realised the damage that we as a country are causing by this unquestioning acceptance of really dirty wealth.”
Naomi: “It’s difficult to challenge British people’s ideas about what Britain actually is and even to challenge what other people around the world think Britain is because..you know, cricket and fair play, the rule of law. It’s very difficult to challenge that and for people to accept it, it endures, this myth that we’ve told about ourselves all this time.”
Oliver: “I agree. I think it’s really fascinating. I begin the book with the Suez crisis. It’s an incredibly consequential moment, the Suez crisis, it’s the moment when the British empire loses really, the doom of the British empire at that point is written. This is the moment when the offshore dollar market was born, and London’s future as an offshore centre is essentially set in train. We didn’t really want Egypt. We just wanted the canal, but we had to, you know, had to in inverted commas, rule Egypt ‘cause we wanted the canal and Egyptian nationalists drove out the British, defeated the British empire, and this new sort of Egyptian nationalism is born. And you know, we left as bullies and we came back as butlers and that’s the transformation of Britain, right? You know, the biggest bully on the block is the empire, the biggest empire in the world goes bankrupt, but they’ve still got all the skills. They still know how to be a bully, they just can’t afford it anymore. So if someone else wants to be a bully, we can just sidle into the room, cough discreetly and say, ‘I’ve, you know, got some ideas for you, sir, here’s what you can do. And you wanna hide your wealth, you wanna protect your reputation, here’s what you can do.’ And, and so that’s the story of the butlering issue really.”
Naomi: “Yes. And one of the best insights into the rot really is your chapter on Scottish Limited Partnerships – I mean, it sounds like a dry subject but it really shows what a huge open door there is in Britain to corrupt money. It’s one of many shocking stories in your book. We spoke years ago on the Taxcast about limited partnerships, the Scottish Wild West – and what have we done about it? Nothing. In fact we’ve made it even worse! It’s one of the most depressing stories in the book.”
Oliver: “Yeah, I think – and there are many stories that shocked me in that book when I researched them but I think the one that shocked me the most was the story of the Scottish limited partnerships. The damage done by SLPs to Moldova in 2014, you know, what, a seventh of the entire country’s economy vanished in the click of a finger, hidden behind the cover of Scottish limited partnerships, is devastating and you know, it was an unanswerable case that this needed reform, if only the Scottish limited partnership, rather than the whole sink that is Company’s House. But instead of reforming the Scottish limited partnership, the Treasury said ‘we need to be more concerned about the competitiveness of the City of London.’ And instead of that, they produced a new kind of limited partnership, the private fund limited partnership, which is even less regulated than this already disastrous corporate structure that had moved a billion dollars out of Moldova, and hundreds of billions through the banks in the Baltic states, you know, the favoured money laundering vehicle for an entire generation of ex-Soviet crooks. And how much was it going to save, you know, the City of London – you know what? On a really generous estimate, a six figure sum, you know, across the whole of the city over many years, you know, each investment fund, maybe 10 grand, maybe. For a big investment fund, we’re talking about a rounding error, but for the Treasury, they were so desperately worried about, you know, the bad publicity around limited partnerships driving investment funds to Luxembourg or Delaware or wherever that, that they had to accommodate this desire. And this concern about competitiveness in the City of London, it has allowed us to overlook the devastating damage that these hidden financial flows hidden by British law, like with SLPs or British companies, the devastating damage this has done to places like Moldova, Russia, Ukraine, we’re talking about at the moment or more broadly, you know, Angola, Nigeria, Tanzania, you, you name it. And it’s really seems to have come to a head in public debate because of the Ukraine crisis. And I really hope that this causes the government to, to look around and wonder about what it’s doing, but I haven’t seen any sign yet that politicians or the government in particular has really appreciated what the big challenges are.”
Naomi: “No, and I mean, the prime minister has just said, ‘no country is doing more than the UK to tackle this issue.’ I can really relate to what you write in the book when you say, um, in earlier times, you know, you did all this work on exposing fraudsters and you kind of thought that, well, you know, once we expose these loopholes, they’ll be closed because it’s obvious that it’s, it’s outrageous. And the Scottish limited partnerships is a really good example, it would’ve been easy to fix that. And I mean, I saw that Daria Kaleniuk of the Anti Corruption Action Centre in Ukraine was trying to hold the British Prime Minister to account saying, you know, all that money, all our money went to London. And I dug out an interview I did with her back in 2014 after the fall of Yanukovich and she said, ‘Europe must change. They’ve got to stop taking our money.’ And it just encapsulates what Butler Britain really is all about. I mean, the lax law enforcement, the lack of any action, uh, it is just absolutely part and parcel of the shame that we feel, all these years trying to do something. And it’s just really frustrating.”
Oliver: “Yeah, I mean, Daria Kaleniuk is, as you know, one of the bravest and most imaginative and resourceful people in the world really, who’s done an astonishing amount to drive through a reform agenda in Ukraine, it often feels like it’s her and like three mates against the entire oligarch class and yet, you know, okay, they haven’t won, but they’ve done a lot. They’ve achieved a lot, but you know, in 2014, the last time we really said we were gonna help Ukraine, you know, this was our moment to help Ukraine. They had a Ukraine forum in London to say, how can we help Ukraine? And Daria was there and was name checked by Theresa May, who was then Home Secretary to say, you know, ‘she’s here representing civil society, we promise Daria we are gonna really help you this time, you know, this time’s gonna be different.’ Nothing happened. You know, Unexplained Wealth Orders were passed and yet the National Crime Agency wasn’t given the resources it needed to make use of them. You know, it’s like every time there’s a crisis, the government passes a new law and that’s it. it’s like producing a new weapon and putting it down and then not paying any soldiers to use it. It’s just infuriating. You can’t battle oligarch’s wealth on the cheap. You need to battle it as fiercely as they’re going to defend it because you know, it it’s existential for them. I don’t see any sign that, that the government has appreciated what needs doing, and it’s incredibly frustrating.”
Naomi: “It is frustrating. And you just kind of feel like grabbing people around the throat and kind of saying ‘you fools!’, you know. And you write about Dimitri Firtash, one of the super rich people that’s, uh, it’s just the most incredible story that you describe about how quickly somebody like that can rise..you know, be shaking the hands of royalty and getting invited to Parliament and all the rest of it. The doors are just completely open and buy passports, buy politics, uh, buy the law…”
Oliver: “ – Buy a tube station, in his case, he bought an actual tube station. I mean, that’s, that was amazing, right? I mean, you know, Dimitri Firtash, for listeners who don’t know him, was Gazprom’s, the Russian gas company’s, Putin’s favourite companies- he was their partner in Ukraine. He was the man who sold Russian gas in Ukraine, who was in charge of the transit trade, which was, you know, the big earner for Ukrainian politicians. And if you controlled the gas transit trade in Ukraine, that was it – you controlled Ukraine to a large extent. And he was Putin’s man in Ukraine. And he made this absolute fortune. They took on the post revolutionary government after 2004 and destroyed it. They destroyed the orange revolution coalition and Firtash made an absolute fortune with his share and he brought it to London and he bought himself a mansion. And he bought himself a place on the Guild of Benefactors of Cambridge University. He got to meet as a result, Prince Philip. He opened trading on the London stock exchange. He met John Bercow, the speaker of the House of Parliament and the Ministry of Defence sold him a tube station. And it’s just, and, and that was in what, eight years. You know, in 2006, when Global Witness tried to write about him, they couldn’t even find a photograph. All this time, while the British establishment was welcoming him, selling him anything he wanted, the Americans were calmly and patiently looking into the origins of his fortune, investigating him, and just days after the sale was finalised of the old Brompton Road tube station, they indicted him on an FBI arrest warrant and ever since he’s been battling extradition to the US. And I’m not saying America is perfect, obviously America has plenty of problems with illicit wealth, but just the difference in the law enforcement response to, you know, oligarchs is just shown so clearly in the fact that as far as I know, no one in this country checked the origin of his wealth. After he was arrested in Vienna on the FBI arrest warrant, British politicians said, oh no, we didn’t know, there were no concerns over his, the origin of his fortune. It’s just simply not true that there were no suspicions raised by the Americans about the origin of his fortune. It’s just that we much prefer taking the cash to doing the work and that’s Butler Britain right there, really.”
Naomi: ”Yes, and the hypocrisy is so breathtaking. On the one hand in the EU we’re seeing this outpouring of help for Ukrainians running from the war – at least 10 million are now displaced, roughly 3 million of them are in surrounding countries. Contrast that with the mean-ness of Britain – yes, we’ll take Ukrainian and Russian corrupt money and enable the crooks that have fed in to this mess, but we’re going to make it really hard for you Ukrainians to shelter from the storm. But if you’re rich, well, then there’s total freedom of movement with golden visa schemes, passports for sale, it’s an open door policy, no questions asked. Russians have donated millions to the governing Conservative party, they’re the second biggest donors after the City of London. And now they’re shouting about how they’re taking tough action…
Oliver: “Yeah, I mean I think one of the more dispiriting headline catching gimmicks that the government has come out with in, in response to the current Ukraine crisis is the banning of golden visas. Now don’t get me wrong, I’m all in favour of getting rid of golden visas, but the idea that this is going to take on and tackle the Russian oligarchs on its own is ludicrous. You know, before 2015, there were no checks of any kind on the money that was used to buy golden visas, it could come from any financial institution anywhere in the world. And once it was here, it was here, you bought your visa and that was it. And since when they brought in checks – well, they didn’t bring in checks but you had to pay the money from a UK financial institution, the number of visas being sold really, you know, dropped quite sharply. Simultaneously Malta started selling passports and everything, so there were alternatives, but all of those people who bought their visas before 2015, you know, it takes five years of residency to get indefinite leave, to remain. And then one year of indefinite leave to remain to become a citizen. So that’s six years and that all happened seven years ago. So all of those people are now citizens. So what has this achieved? You are shutting the stable door after the horse has, you know, gone and bought itself a house in Surrey. It’s just infuriating. And there seems to be still a willingness to just splash these gimmicks on the BBC website or on the newspapers without interrogating whether they’re actually going to achieve anything because you don’t get rid of dirty money or oligarchs by changing the immigration system seven years after the oligarchs have already got here, obviously. I’m hopeful that more people will start recognising that the money is already here, that the money is inherently corrupting and that, you know, we need to properly deploy an army of investigators and law enforcement agents to go back over the previous transactions and look at them and see whether the money should have been here in the first place, because yes, it’s important to stop more coming, but that’s not enough, you know, we need to go back and do the work that we didn’t do in the past. It’s gonna be really hard. You know, these people employ, you know, seriously good lawyers, but it’s not impossible. It’s only difficult cause we choose not to do it. We really need to take the threat to the integrity of our society caused by our elite essentially becoming butlers to crooks really seriously.”
Naomi: “Yeah. I can never decide whether politicians who make these silly statements actually understand that what they’re saying is just complete bullshit about tackling it or whether they just perfectly well know, and it’s probably a combination of both, but I, I know that you wrote about appearing in Parliament to give evidence to a Select Committee and the first question was, well, how big is the scale of money being laundered through Britain? And it, it is just where do you start?!“
Oliver: “Well, it was worse, it was worse. It was, the question came from Pritti Patel, who’s currently the Home Secretary and she asked how much Russian money is there. And what does that question even mean? Sort of, you know, if, if money came 20 years ago and it’s been here for 20 years, is, is that naturalised yet? If, if Russian money’s came, come via, you know, a shadow trade at Deutsche Bank, um, you know, is that Russian money? if it’s come via Cyprus, is that Russian money? It’s like, you know, if it’s been washed around the world a couple of times and come in via a, you know, a, a, a shell company in the British Virgin Islands, is that Russian money? You know, if the Russian in question is, is a naturalised British, is it still Russian money? You know, this idea that, that, you know, Russian money is like the red army, you know, and it crosses your border and you can say, ‘well, there you go. There’s a hundred thousand red army soldiers, you can count them!’ As if, as if that’s how money works, it’s so sort of illiterate and..you are right. I mean, do politicians just not understand? And I think that probably they don’t. I’m generally, and I, I often get criticised for this, but I genuinely don’t think anyone is a, like a Bond villain sitting on a swivel chair cackling to themselves about ruining the world. Most people want to make the world a better place, and often they just don’t appreciate that what they’re doing has tremendously harmful effects for other people. So, I don’t think that – genuinely, I don’t think that the treasury officials who, you know, decided not to do anything about Scottish limited partnerships, I don’t think they meant to do harm to Moldova. I just don’t think they knew or cared. And I, so I firmly believe that if we can explain the damage that, you know, what Nick Shaxson calls the finance curse does and, you know, and what I write about is, you know, the butler to the world problem, that by earning this money we are causing a greater amount of damage overseas, I’m really hopeful that we can turn politicians away from it and towards a more constructive way of earning a living. Maybe I’m naive.”
Naomi: “Yeah. Well, I, I like your optimism. And in, in, in so many ways, you, you have to think like that, otherwise you’d go and live in a cave somewhere and, you know, completely disconnect from the world. But it seems so bloody obvious to me that the very wealthy that put assets in their own name, they call the ‘stupid rich’ right? And I mean, it’s just so obvious that if you allow anonymous ownership, then you are opening the doors wide to corruption, why is it so difficult to understand?!”
Oliver: “It’s really interesting..trying to find positive arguments in favour of anonymous ownership, I always find it interesting.”
Naomi: “It is, it is. You, you write quite a lot and it’s really shocking and shameful actually. is how terrible our regulatory bodies are. There’s something like 26 regulatory bodies..completely under resourced. And I think they have 4 million pounds a year for one particular agency, and they tried to prosecute a case and they had to pay out one and a half million in just in one case. Anyone that you ask around the world who’s got anything to do with regulation and compliance, enforcement just laughs at how pathetic our enforcement is, even of the decent rules that we actually do have!”
Oliver: “Yeah, a hundred billion pounds is estimated to be laundered through the City of London every year. So clearly something isn’t working, right. That’s a lot of money –“
Naomi: “And that’s a conservative estimate.”
Oliver: “Yeah, that’s a conservative estimate, but that’s the National Crime Agency’s own estimate. And I looked at, you know, the, the list of regulators of whom there are 26 or whatever 27, I think there might be now, I think they added one and the situation with accountancy is even worse. You know, you have eight different regulators, which, you know, accountants can pick and choose between if they want to. And they don’t have to sign up with any of them, but they can pick and choose between them. And those organisations are dependent for their existence on the fees that accountants pay to be regulated. So if an accountancy company doesn’t like how it’s regulated, they can just go somewhere else, which is a bit like having a referee and a football match who is dependent for his wages on how strict he is to the players. So if he’s too strict, they’re not gonna pay him anymore. So obviously he’s not going to be strict. Why would you be, um, you know, your job is dependent on not being, and that’s extraordinary. I mean, and that’s just the anti-money laundering and regulatory aspect. I mean then you have, you know, the National Crime Agency, which was set up to be our version of the FBI and yet is desperately underfunded. You know, they have this incredible quote from Lynn Owens, the head of the NCA to Parliament’s Intelligence and Security committee in this report published in 2020 when asked why they didn’t go after more oligarchs and she said, ‘because we are bluntly concerned about the impact on our budget’ and, well, I mean, that is not the sign of a law enforcement agency, which is confident about what it’s doing. They shouldn’t be worried about that, that’s absurd. You know, and as you say, they tried to bring this case, the unexplained wealth order against the daughter and grandson of the former president of Khazakstan, and ended up with 1.5 million pounds in costs, which totally ruined the entire strategy. It’s just extraordinary the extent to which sort of behind the facade of everything looking fine with the FATF, Financial Action Task Force, giving Britain a glowing report of how well it’s doing, behind the facade there’s just nothing.
Naomi: “Yeah. And I mean, I think there’s more trained accountants per head of population in the UK than anywhere else in the world, and no wonder, it’s not a surprise, is it?! And I mean the Tax Justice Network and others, Thomas Piketty and Gabriel Zucman and people like that have been pressuring for a global asset registry for a long time. I’ve been reading recently you can own shares through shell companies, so obviously we’re gonna need a public shareholder registry. Um, we’ve got to end secret ownership everywhere, end trust secrecy except under very specific circumstances, you know, I mean, here’s, here’s one – how about as emergency measures, we freeze all anonymously owned assets wherever possible, and we only unfreeze them when we have full information on the ownership? And obviously, resource law enforcement properly, reform the libel laws and gotta get private money out of financing, political parties as well, I mean, that’s my list!”
Oliver: “Yes, we need all of those things and more. Essentially, people who are wealthy enough to have assets in more than one country have advantages that the rest of us don’t have, that’s the core mismatch. So in order to combat that we need to reassert national sovereignty over wealth. We cannot go on as we are. We hear a lot from some politicians, particularly of the right who claim to oppose globalisation and say,’ we need to take back control’. But what they’re talking about is taking back control from immigrants, they’re not talking about taking back control from wealth. But I do think that there is among, you know, a lot of ordinary people, a recognition that something is wrong, you know, that governments don’t have the control that governments should have. And the reason for that is because as you say, money can just flee, you know, anonymously owned assets can just undermine sovereignty. So yes, transparency in ownerships, you can see who owns what in your country, absolutely take back control over ownership, you know, proper law enforcement, take back control over the law. Absolutely. You know, those things are crucial. And those two things alone would have a massive effect on the way that oligarchs from everywhere are able to evade, you know, paying for the crimes they commit. And the reason they can do that is because Britain has been Butler to the world and has helped them do so. So if we got out of the Butlering business, it would do a massive amount of good in terms of just stopping this from happening in the first place. Yeah, it wouldn’t be everything right, and there are lots of places that would need to be dissuaded from following in our footsteps but, you know it would be a good start.”
Naomi: “Do you think that there’s an opportunity now because of what’s happening with Ukraine and Russia, they say decades can happen in a few days that something good could come this terrible tragedy that’s happening? I find it difficult to look people like Daria Kaleniuk of the anti-corruption action centre in the eye. Uh, you know, I, I feel really ashamed of my own country and that’s, that’s a horrible thing.”
Oliver: “I, I hope that seeing the astonishing damage that kleptocracy does as a system of government to the Russians, to the Ukrainians, to the Georgians, to lots of people, I hope that this gets us out of the Butlering game. Um, you know, I don’t think we can expect that to happen overnight, but, you know, Daria said to me a few years ago when I asked her how she didn’t lose faith and lose hope in battling corruption, considering how hard it was in Ukraine. She said, she doesn’t think about conquering corruption. She thinks, she says, well, we’re at 5% now, what can I do to get us to 6? And then she gets to six, then, you know, that’s a win. She marks that up as a win. And I think that’s the way to look at it. There is a huge amount of Britain’s ruling class that have made a very good living out of being butlers and they’re not going to take easily to me, or anyone telling them that they should stop. So we need to not lose focus. Then I think we’ll get there.”
Oliver Bullough’s book ‘Butler to the World: how Britain became the servant of tycoons, tax dodgers, kleptocrats and criminals’ is published by Profile Books. (If you’re in the US you’ll have to wait until June 2022.)
This report contains the Tax Justice Network’s proposed amendments to improve the EU’s draft Anti-Money Laundering (AML) Package with regard to beneficial ownership registration.
Introduction
On 20 July 2021, the European Commission presented a package of legislative proposals to strengthen the EU’s rules to tackle money laundering and to counter the financing of terrorism (AML/CFT)↪NOTEThe package includes, among others, a proposal for a regulation on AML/CFT and a proposal for a new AML Directive (AMLD 6) which would replace the current applicable AMLD 5. The package is now being discussed, so here are the Tax Justice Network’s proposals on how to improve the current draft Regulation and Directive.
Our comments concern:
The definition of a beneficial owner (BO);
The scope of legal vehicles subject to registration;
The conditions that should trigger beneficial ownership registration;
The details to be registered on each BO;
Access to information;
How to verify information
Sanctions for non-compliance
Miscellaneous issues (trustees, nominees)
This report offers a brief point-by-point explanation of what should be improved, and why. This blog offers the summary of each proposal. The following extract from the report shows the table with the Tax Justice Network’s proposed amendments (in bold) both for a partial improvement (left column) and towards the most transparent scenario (right column). For the full list of proposed amendments, refer to the report.
Partial improvement
Most transparent scenario
Proposal for a REGULATION– Art. 2 Definitions For the purpose of this Article, ‘control through an ownership interest’ shall mean an ownership of 25[as low as possible, eg 1% or 5%]plus one of the shares or voting rights or other ownership interest in the corporate entity, including through bearer shareholdings, on every level of ownership. [Optional: the percentage may be lowered depending on the risk of the corporate entity, eg participation by a PEP or involvement in the Extractive Sector]
Proposal for a REGULATION– Art. 2 Definitions For the purpose of this Article, ‘control through an ownership interest’ shall mean an ownership of at least25% plus one of the shares or voting rights or other ownership interest in the corporate entity, including through bearer shareholdings, on every level of ownership, including being party to a contract or financial instrument related to the shares, votes, assets or income of the corporate entity.
Summary of proposals
1) The beneficial owner (BO) definition
It may not be clear who owns an asset. The legal owner of a yacht, for instance, may be a company based in a tax haven. Yet we want to know who the true owner is. This can be tricky to nail down, so the EU package needs clear and effective definitions. The beneficial ownership definition should refer to any natural person (ie a human) with direct or indirect ownership of, control of, or benefit from a legal vehicle, without thresholds. Control should include any means of control or influence to appoint at least one director or manager or make any relevant decision on assets or activities of the legal vehicle, and should extend to anyone having a power of attorney to manage the entity or its assets (eg a bank account) or being a party to a contract (eg rights to all of a companies’ profits) or financial instrument (eg a call or a put option, futures, convertible stock, etc.) related to shares, votes, income, assets or benefits of a legal vehicle.
2) Scope of entities
All legal vehicles should be covered, without exceptions. If thresholds are kept (against our recommendations), then lower thresholds should apply to listed companies and investment funds and special provisions should apply for state-owned enterprises.
3) Conditions that trigger beneficial ownership registration
Legal vehicles should be required to register their beneficial owners whenever they are incorporated or governed according to domestic laws, or when they hold assets or operations in an EU country, or when they have a participant (eg beneficial owner, shareholder, director, settlor, etc) who is resident in an EU country. Just as is already practiced with most legal persons (eg companies), trusts and similar legal arrangements should be required to “incorporate” or register in order to obtain legal validity.
4) Details to be registered for each beneficial owner
In addition to all current details to be registered, the full ownership structure should be registered and beneficial owners should disclose their citizenship, place of birth, any additional residency or citizenship, whether they hold a status of politically exposed person (PEP) in any country, and the value of each transaction (eg acquisition of shares) to become a beneficial owner, or in the case of free transactions (eg a donation), the reason for the transaction and relationship to the former owner of the interests or votes.
5) Access to beneficial ownership information
Legal and beneficial ownership data should be available to the public for free. Ownership registries should be available online in open data format.
6) Verification of beneficial ownership information and red flagging
Beneficial ownership registries should conduct automated analysis to check for consistency with other databases (eg to confirm that all registered beneficial owners are living persons). The online registry should introduce red flagging based on outliers and suspicious characteristics (eg a single person as a beneficial owner of thousands of companies).
7) Sanctions for non-compliance
In addition to any criminal and/or monetary sanctions, administrative sanctions should be applied to remove non-complying legal vehicles from the registry and to revoke any rights from non-complying beneficial owners (eg votes or dividends).
8) Miscellaneous: preventing registrations of no beneficial owner, trustees and nominees
There should be no situation where a legal vehicle does not have beneficial owners (such entities should not be allowed to register, and thus should not have legal validity). Either: at least one beneficial owner will always be identified (eg if the beneficial ownership definition has no thresholds) or, if thresholds are applied, then the top 10 shareholders should be identified up to a natural person. Nominee shareholders should be prohibited. When a trustee owns or holds an asset, eg in the real estate register, there should be an indication that this is just a trustee plus a disclosure of the trust and the trust’s beneficial owners (all settlors, trustees, protectors, beneficiaries and any other person with control over the trust).
The report also offers proposals on how to amend the draft EU Directive to ensure consistency between the EU Regulation and the EU Directive.
We’ve just submitted to a World Bank consultation on what it is calling its ‘Business Enabling Environment Project’ (BEEP) – which turns out to be an attempt to reheat the Doing Business Indicators before they are even cold in the grave. This ideologically motivated ranking had been used to push country after country to cut tax and regulation for business, regardless of the context or the cost. And it had also become a poison within the Bank itself.
It was just September last year when the World Bank published the legal investigation of the corruption of Doing Business (DB), and the welcome and long overdue decision to abolish what had been the Bank’s flagship publication.
But such was the degree of manipulation, and the (absolute) seniority of the Bank staff involved, that I wrote then: “The bigger question is how, if it is even possible, the Bank can eliminate the apparent corruption of the institution that the [legal] review documents.”
To be asked in March 2022 to review a proposed replacement for DB smacks of indecent haste, at the very least. The actual proposal turns out to give every reason for concern. Here’s our submission.
BEE worried
The Tax Justice Network is disturbed to see this project being floated. It is difficult to understand the rationale for the World Bank to pursue a ‘Business Enabling Environment Project’ (BEEP), and we have correspondingly few comments to make on the specific proposal.
There is, in the pre-concept note, no apparent attempt to justify this focus for the World Bank’s significant resources and its very substantial soft and hard conditionality power over country policy space. There is no rationale given to prioritise an environment that enables business – as opposed, to, for example, an environment that enables the reduction of inequality; an environment conducive to decent work conditions; an environment that enables the full achievement of human rights; or an environment that enables biodiversity and the necessary mitigation of the climate crisis.
The full extent of the argument appears to be that offered in figure 1, in which an arrow labelled ‘Private sector development’ passes through points marked ‘Growth’, ‘Equality of opportunity’ and ‘Sustainability’. We are unaware of any causal relationships of this sort, and the paper does not propose their existence.
Source: World Bank pre-concept note, Feb.22
Absent a rationale related to the World Bank’s stated aim of ending poverty, the clear concern is that this initiative might reflect a desire to retain the policy influence and financial return that were unfortunately associated with the discredited Doing Business (DB), or continuing adherence to its equally discredited ideological basis. But like many, we would have hoped that the corruption of the World Bank as an institution that was associated with the DB, and the continuing reputational damage, would have guarded against such a revival.
We will not offer a full review, nor close to it, but take the Tax Justice Network’s own primary area of focus as an example of the revised approach.
Tax little and low
The relevant section of the pre-concept note begins by recognising the central role of tax in development, but is then explicit that it will seek to retain its predecessor’s anti-tax (and pro-inequality, anti-public services) ideology. On this basis, it includes a measure of tax ‘burden’, based on the predecessor’s use of PwC’s ‘total tax contribution’ – a deliberately misleading measure designed to grossly inflate the apparent tax paid by companies. (As straightforward alternatives, the ICTD/UNU-WIDER Government Revenue Dataset provides detailed data on the actual, aggregate contributions to tax of companies in each country; while researchers associated with the Tax Justice Network have generated consistent series of effective tax rates for multinationals that could be used to compare jurisdictional success in enforcing compliance.)
This ‘burden’ measure is combined in the pre-concept note with measures of the ‘quality’ of tax regulations, and of the ‘services provided’ by tax authorities. Under ‘quality’, for example, and intended to reflect ‘complexity of record keeping and filing’, we find for example one indicator on “the number of documents that are required by law to be filed with CIT returns, other than the financial accounts that businesses normally maintain (balance sheets, profit, and loss account)”.
Many countries sensibly require additional information to be filed with their CIT returns. To give just two examples for multinational companies, this often includes a list of subsidiaries (crucial to confirm transfer pricing claims) and under an OECD standard, no less, country by country reporting (including via local filing where necessary). The apparent intention to incentivise the removal of such standard requirements is fully aligned with the regulatory race to the bottom that DB accelerated – but scarcely consistent with claims of a more nuanced approach in BEEP.
No element of the tax approach is consistent with the initial recognition of the contribution that tax can, and must, make to society. We summarise these as the 4 Rs of tax: revenue, redistribution, repricing (of public goods and bads such as tobacco consumption and carbon emissions) and political representation (because tax plays an important role in driving the accountability that underpins the social contract).
Delivered together, an effective tax system is thereby central to the progressive achievement of human rights through an accountable state. The BEEP vision of tax, in contrast, is one in which the least trouble (for companies), lowest quantum tax is once again seen as best.
Narrow and ideological
Measures of tax that were intended to support development would look very different indeed. Tax system effectiveness might be considered, including simple measures such as the tax/GDP ratio already established in the UN Sustainable Development Goals, along with estimates of losses due to tax abuse such as those published in the annual State of Tax Justice reports. The contribution of jurisdictions to cross-border tax abuse and other illicit financial flows suffered worldwide is tracked in detail in the many indicators of our Financial Secrecy Index and Corporate Tax Haven Index.
Even from the narrowest perspective of business ‘enabling’, the proposed indicators fail to address the potential of tax. Countries at all per capita income levels are struggling with the willingness and ability of multinational companies to abuse taxes, with an estimated minimum cost worldwide of some US$312 billion annually (per State of Tax Justice). Aside from the revenue damage, this wedge also represents the unfair advantage gained over domestic, standalone businesses that are broadly tax compliant.
The failure to prevent tax abuse by the largest, international companies thereby undermines fair market competition. In the extreme, this can exacerbate the phenomenon of the ‘missing middle’, hollowing out the firm size distribution and leaving only disproportionate numbers of smaller firms, often informal, and dominant multinationals. This can also impose further tax losses, since economic activity is now overly concentrated in two groups that are poorly tax compliant on average, and likely a loss of employment and economic dynamism.
Unlike the DB, the BEEP pre-concept note does explicitly recognise that there may be trade-offs, and even discusses this in the context of taxation. Specifically, it notes: “BEE acknowledges that some business regulations (e.g., certain regulations related to taxation) may add to the regulatory burden faced by individual firms but recognizes the positive impact that they may have on the economy. BEE will attempt to address this trade-off when deciding on the scoring methodology.”
In line with this, there are some elements that seek to recognise the value of effective government to individual businesses, such as efficient online registration; but little that recognises that there might be broader social value. Some of the most extreme elements of DB have been tempered – it appears, for example, that better labour protections might be rewarded rather than penalised – but the narrow focus dominates. None of the tax indicators, for example, reward the kind of transparency measures that can strengthen public accountability – most obviously, public country by country reporting for multinationals (even in the aggregate), to put their tax behaviour on a level playing field with that of domestic firms filing public accounts.
The narrow focus of the tax indicator bodes ill for the entire project. The BEEP may be somewhat better dressed but it appears to remain fundamentally consistent with the DB’s aim to accelerate the race to the bottom on tax and regulation.
In the absence of any clear rationale for the BEEP to exist, or any evidence base for how the particular measures would deliver broad, social benefits, there seems to be no case for further resources to be dedicated to this effort – especially in the case of an institution whose stated aim is to fight poverty.
Postscript. The day after the deadline for submissions, the World Bank’s Independent Evaluation Group released its long-trailed evaluation of the now-defunct Doing Business. Focused on the quality of evidence and the use of the tool itself, the assessment is excoriating, in the most polite way possible:
“[Doing Business] reports have made many claims for the benefits of measured country reforms that go beyond rigorous or replicated evidence. By favoring supportive evidence and by not establishing strong criteria for filtering evidence, the reports open the door for critics of their objectivity and accuracy, posing a reputational risk to the World Bank Group and potentially misleading clients and stakeholders.”
This should be a time for the Bank to take a pause, and consider its role in this space – not rush in with a half-baked substitute for the corrupt DB.
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.
¿Qué es un paraíso fiscal?, primer capítulo de nuestra serie mensual para explicar qué son los paraísos fiscales y cómo distorsionan el desarrollo económico, social y humano a nivel global.
La política tributaria y previsional de Chile con el nuevo gobierno de Gabriel Boric
¿Puede sobrevivir el acuerdo de Argentina con el Fondo Monetario Internacional?
y vemos también lo que está pasando en Costa Rica con el Fondo Monetario Internacional en medio de una pandemia que no ha terminado y de la invasión rusa a Ucrania.
Invitados:
Nicholas Shaxson de Tax Justice Network, periodista e autor de “Las islas del Tesoro”
Edmund Fitzegerald, experto en finanzas de la Universidad de Oxford y miembro de ICRICT, la Comisión Independiente para la Reforma del Impuesto Corporativo Internacional
Ricardo Martner de la Comisión Independiente para la Reforma del Impuesto Corporativo InternacionalICRICT
Noemi Brenta, investigadora del Conicet, el Consejo Nacional de Investigaciones Científicas y Técnicas, y autora de Historia de las relaciones entre Argentina y el FMI
The idea for a UN convention on tax issues is developing what may prove to be an unstoppable momentum.
The Africa Group at the United Nations led the calls in 2019. The UN Secretary-General’s ‘Financing for Development in the Era of COVID-19’ initiative in 2020 identified a UN tax convention among the options for heads of state (at one stage, making it a central recommendation). The same year its position as one of the central policy demands of the tax justice movement was also underlined in the first, annual State of Tax Justice report published by the Global Alliance for Tax Justice, Public Services International and Tax Justice Network.
Then in 2021, the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (the UN FACTI Panel) made a UN tax convention one of the key recommendations of its final report. The World Economic Forum too, through its Global Futures Council (to which I’ve contributed), has joined the call. In November, the South Centre – the intergovernmental organisation of lower-income countries – published a briefing by Abdul Chowdhary and our senior adviser Prof Sol Picciotto, detailing a proposal for a framework UN convention on tax.
And now our great allies at Eurodad, supported by the Global Alliance for Tax Justice, have produced a full draft for a UN tax convention.
The Parties to this Convention, Conscious of the vital importance of fair, equitable, progressive, transparent and effective tax systems and related domestic resource mobilization for the prospect of States to achieve sustainable development and fulfil international goals, obligations and commitments, including those relating to human rights, environmental protection, equality and the Sustainable Development Goals… Determined to scale up international tax cooperation and strengthen efforts to combat tax-related illicit financial flows, including international tax avoidance and evasion… Have agreed as follows:
– EURODAD/GATJ, 2022, ‘PROPOSAL FOR A UN CONVENTION ON TAX’.
It includes a full range of articles covering everything from the comprehensive standards for the ABC of transparency, through to the establishment of negotiations under UN auspices for the taxation of multinational companies. Please do read it here and share your thoughts and comments.
It could hardly be clearer that these reforms of the international governance of tax and financial regulation are long overdue. On corporate tax, the OECD reforms started in January 2019 from the recognition that the arm’s length principle was unfit for purpose, that global taxing rights were unfairly distributed between countries, and that a minimum effective tax rate was needed to end the race to the bottom. The process is still dragging on, despite a 2020 date for delivery, but it is clear that the arm’s length principle will remain in place for almost all profits, that the distribution of taxing rights will become if anything more unfair, and that the minimum tax rate is not only very low but may also be ineffective.
The difficulties of applying sanctions in light of Russia’s invasion of Ukraine, meanwhile, has highlighted the abject failure of current standards of financial transparency including the identification of the ultimate beneficial owners of companies and all other legal vehicles. Here the OECD-linked FATF has failed to create effective standards or to apply them fairly to major OECD members in particular.
Over the coming months, the Tax Justice Network will be convening a series of policy discussions around these issues. With partners and policymakers from around the world, we will aim to shed further light on these questions, to draw together more detailed analysis of the solutions and to build the momentum for the necessary changes. (Get in touch if you’d like to be involved!)
For now, we commend the great work of Eurodad in compiling this impressive draft UN tax convention, and look forward to the coming dialogue.
Welcome to the 51st 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 هذا العدد الواحد والخمسين )#51( من الجباية ببساطة نستضيف الباحثة في الشأن العمراني شيماء الشرقاوي للحديث عن تعديلات قانون الايجار القديم والذي يحدد العلاقة بين الملاك المستأجرين، وبمثابة قنبلة موقوتة تهدد الحق في السكن لملايين المصريين. في أخبارنا المتفرقة نعود على تداعيات الحرب الروسية الاوكرانية على الاقتصاد العالمي والمنطقة العربية زيادة على تسريب وثائق “كريدي سويس”.
Now would be a good time to fundamentally shift the narrative in mainstream thinking on advancing women’s and girls’ rights; to drill down to the economic roots of human rights failures. Year-on-year hardwired economic policies harm women and girls in their failure to address inequalities. The scale of the challenges requires, and must be underpinned by, sustainable solutions – not pledges, philanthropy and donations.
Progressive tax and a seismic shift in the way sovereign taxing rights are allocated provide a sustainable means of halting and reversing over time harm to women’s well-being and development.
Our State of Tax Justice Report 2021 estimated annual tax losses of US $483 billion worldwide. The report reveals “multinational corporations are shifting US$1.19 trillion worth of profit into tax havens a year, causing governments around the world to lose US$312 billion a year in direct tax revenue.” At the same time US$171 billion a year is lost to offshore tax evasion related to financial wealth. And this is just the tip of the iceberg.
International Women’s Day is a good time to demand rights for women and girls. For governments – the primary duty bearers for advancing human rights – and for international finance, it is time, again, to have a reckoning of national and global economic, social and cultural policies failing to advance the rights of women and girls or, that perpetuate the long established structural and systematic inequalities and discrimination.
This year the United Nations CSW (Commission on the Status of Women) has set its priority theme as:
“Achieving gender equality and the empowerment of all women and girls in the context of climate change, environmental and disaster risk reduction policies and programmes.”
The Commission, scheduled for 14 –25 March, will also review an earlier focus on Women’s economic empowerment in the changing world of work.
The climate crisis presents a present day and existential risk for all people and our planet – women and girls experience keenly when homes, livelihoods, infrastructure are destroyed or damaged by either gradual attrition or by catastrophic events. Add to this the burden of care work which falls so often to women and girls, their rights become a zero-sum game – benefits for economies dramatic. In fact, worse than zero, in their subsidising of economies women and girls are ‘disadvantaged by loss to education and by loss of earning opportunities.
“Perform 76.2 per cent of the total amount of unpaid care work, 3.2 times more time than men…Estimates based on time-use survey data in 64 countries (representing 66.9 per cent of the world’s working-age population) show that 16.4 billion hours are spent in unpaid care work every day. This is equivalent to 2.0 billion people working 8 hours per day with no remuneration. Were such services to be valued on the basis of an hourly minimum wage, they would amount to 9 per cent of global GDP, which corresponds to US$11 trillion (purchasing power parity 2011)”.
At the same time the Intergovernmental Panel on Climate Change (IPCC), the United Nations body for assessing the science related to climate change, points to approximately 3.3 to 3.6 billion people living “in contexts that are highly vulnerable to climate change.”
Recovering the lost tax revenue reported above would be transformative; not just because of the scale, but the opportunities for governments to address the impact of the climate crisis and the burden of care from women and girls.
Global feminists through the auspices of the Women and Gender Constituency and Women Rights Caucus ↪NOTEThe Women and Gender Constituency is one of the nine stakeholder groups of the United Nations Framework Convention on Climate Change (UNFCCC), consisting currently of 33 women’s and environmental civil society organizations and a network of more than 600 individuals and feminist organizations or movements focusing on gender equality and women’s human rights to achieve climate justice., have linked the IPCC report with their demands for UN CSW. These demands highlight the need to address the failures of COP26 and importance of revenue for financing climate transition. The demands are powerful and emphatic and make clear the threat to women and girls is unfathomable.
The need for a just climate transition, and for women’s economic empowerment, must be driven by fair and inclusive rules on the redistribution of resources. Therefore, tax justice advocates add to their call for gender justice the creation of a UN tax convention and an intergovernmental tax body under the United Nations.
The tragedy that’s unfolding now with Russia and Ukraine is the consequence of the resource curse and the finance curse, hand in hand with ‘Butler Britain’ and other tax havens and secrecy jurisdictions.
All roads lead back to global financial secrecy and all the things we at the Tax Justice Network have been campaigning about for so many years. War can be a time when decades can happen in a few days. It is now clear that the economic costs of handling all that dirty money hurts every country involved. It’s hurting Russia and Russia’s majority populations, because it has helped Vladimir Putin turn Russia into a kleptocratic, mafia-infested gangster state. It’s hurting Ukraine, for reasons we all know. And it’s hurting countries like Britain, handlers of corrupt Russian loot, not least by corrupting its politics – and its national security.
Among the world’s people who understand corruption better than anyone else in the world are Russians and Ukrainians. For them, corruption has had clear and terrible consequences. In Britain it has taken much longer for the effects to be felt. It’s surely no coincidence that Ukraine was the world’s first country to introduce a public registry of the real owners of companies. They wanted to do what they could to make it harder for another Yanukovich to steal and loot again with the same impunity. But they also needed other countries to step up and take action, not only to protect them, but to stop the poison from running through the veins of other nations too. (You can read our 10 measures to expose sanctioned Russian oligarchs’ hidden assets here).
Back in 2014 I interviewed the incredible Daria Kaleniuk of Ukraine’s Anti-Corruption Action Centre on the Taxcast, the Tax Justice Network podcast. It wasn’t long after the fall of the outrageously corrupt Yanukovich. You may have seen her on television recently, as she harangued an uncomfortable looking British Prime Minister on the Polish/Ukrainian border about all the Russian oligarchic money that has been welcomed in London, and the abject failures of the British to seize corrupt money.
During his time in power, Yanukovich and his associates used offshore services and shell companies prolifically – at least $70 billion flowed out within a few years and by the time he fell, only half a million dollars was left in the state coffers. Ukrainians famously raided his opulent palace and work by the Ukrainian investigative journalist, Sergii Leshchenko and the Ukrainian Anti-Corruption Action Centre revealed that the palace compound had been one-third owned by an anonymous UK shell company and two-thirds owned by an Austrian bank. In other words, the ownership structure of the palace hid the identity of the true owner.
What Daria Kaleniuk told me when we spoke on the Taxcast back in 2014 is sadly as crucial now as it was then to get through to voters, to citizens and their politicians in tax haven/financial secrecy nations such as the UK. I wonder if the war currently raging means we might really start to listen. I asked her how she and other Ukrainians felt about the fact that so much of the Ukrainian people’s money ended up in the City of London.
“We see that when Europe wants us to change and asks that we have to change, Europe has to change itself as well. It’s not enough to only change Ukraine. If they want to prevent corrupt capital to flow into the EU they can do this, and there are anti money laundering directives that are just not implemented well in Europe because it’s profitable to get this cash and it looks like for the benefit of developed countries to receive the proceeds of corruption while they appear not be corrupt themselves, and I think it’s not right. We are surprised that there is not the political will to pass the law on beneficial ownership…including trusts. We can’t understand why these countries don’t want to create a really powerful anti-corruption tool especially when we know..these jurisdictions were used to launder billions from the developing country of Ukraine.”
She speaks of the critical need to include trusts and foundations in public beneficial ownership registries – because if we don’t, she says, ‘all the money will flow to trusts,’ making the job of those such as the Anti-Corruption Action Centre even harder when trying to protect the public interest of Ukrainians.
As she also says, “I believe beneficial ownership law…will be a really long and hard fight but we have to win it because we’ve paid too high a price.”
Now governments appear to be scrambling to cut off dirty money flows, which they’ve been warned about for so long. But when the British Prime Minister says ‘no country is doing more than the UK to tackle this issue,’ it is false. His own political party is hopelessly compromised, financed heavily by Russians who bought British passports, as well as by the City of London which has resisted anti-corruption measures for decades (along with lawyers, accountants, high net worth wealth managers, gallery owners, estate agents, luxury goods sellers, company formation agents, private equity investors, private schools, and the like.) UK laws have helped oligarchs go after British journalists, rather than the other way around (do read this link, it’s pretty terrifying, even if there is a presumably Ukraine-related bright spot).
The solutions remain the same as we have been advocating for years. Those very wealthy people who put assets in their own names are known as ‘the stupid rich’ in some circles. If what is now happening in Ukraine doesn’t alert us to the dangers of secret ownership and financial secrecy, perhaps nothing ever will.
Now is the time to properly resource our law enforcement and equip them for the battle ahead, in the interests of all people bar the crooked elites – in Russia, in Ukraine, in Britain, and anywhere else.
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 37ème édition de votre podcast en français sur la Justice Fiscale et la Justice Sociale produit par Tax Justice Network, nous partageons avec vous un entretien que nous avons eu avec Jean Mballa, Directeur Exécutif du CRADEC et défenseur pour un meilleur système fiscal en Afrique. Selon lui, les notions de Redéfinition des prix, de Représentation dans les discussions fiscales, mais aussi une meilleure Répartition des Revenus collectés, sont la clé pour un financement efficace de l’adaptation aux changements climatiques dont les conséquences sont prévues pour être catastrophiques en Afrique.
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]
SOMOS TODES UBERIZADES [O podcast É da sua conta respeita e defende a diversidade, por isso optamos por destacar em nosso título a linguagem neutra.]
Quando a gente trabalha [formalmente] numa empresa, sabemos que tem descanso, convênio, refeição. [Dirigindo carros para empresas de aplicativo] tentei estabelecer meta para descansar um dia por semana, mas não tinha como.” A frase de Paulo Rogério Cândido poderia ser a de milhões de trabalhadores e trabalhadoras que, em busca de uma renda, recorrem a empresas de aplicativos digitais que fazem intermediação de serviços em troca de uma relação de trabalho com ausência de direitos e dignidade.
Mas a precarização atinge toda a classe trabalhadora. No episódio #34 do É da Sua Conta, Luci Praun explica o conceito de uberização, que está relacionado com o objetivo das grandes empresas de lucrar cada vez mais às custas das nossas horas trabalhadas. Quais são os efeitos para o mercado de trabalho, para a economia e a para nossa saúde? Como esse modelo de negócio impacta na tributação?
Mas há uma saída: a Espanha e a União Europeia estão implementando regulação para minimizar a uberização, explica Clemente Ganz Lucio. E enquanto a mudança para toda a classe trabalhadora não chega ao Brasil, iniciativas como cooperativas de trabalhadores e trabalhadoras que operam o próprio aplicativo de viagens, como a que Paulo Rogério ajudou a construir são provas de que é possível parar a engrenagem da precarização.
Você ouve no É da sua conta #34
O que é uberização e quais são seus efeitos para a vida, a economia e o mercado de trabalho
Como a Espanha está devolvendo direitos trabalhistas
As táticas de empresas de tecnologias digitais, como a Uber, para pagar menos impostos
Como uma coperativa de motoristas em Araraquara, interior de São Paulo, está devolvendo direitos e dignidade à trabalhadoras e trabahadores
Progress can seem slow where the battle for rights and accountability is concerned. But, for some years now, tax justice advocates have been pushing to advance formal legal recognition that abusive tax practices harm citizens and entrench inequalities by holding governments to account before international human rights bodies. This week marks one of those accountability moments.
The United Nations has issued a reminder that states, as duty bearers, have a responsibility to advance children’s rights. Activities such as profit shifting, offshoring wealth and hiding assets undermine public services. In so doing, these activities impede children’s access to good health care, clean water and sanitation, education for all and decent homes. Moreover, governments that enact policies that facilitate international tax abuse represent a danger to children’s rights in other countries.
The UN Committee on the Rights of the Child has published its Concluding Observations on two periodic reports of the Netherlands. The Committee recommended in their report that the country:
“… incorporate a child rights-based approach into the State budgeting process and conduct independent and participatory impact assessments of its tax and financial policies to ensure that they do not contribute to tax abuse by national companies operating outside the State party that lead to a negative impact on the availability of resources for the realisation of children’s rights in the countries in which they are operating”. (9c Allocation of Resources, CRC/C/NLD/CO/5-6).
Tax abuse has damaging impacts overseas
The scale of tax abuse across the globe is eyewatering. For example, the ‘contribution’ the Netherlands makes to the global tally of lost revenue amounts to $28 billion each year. Netherlands is one of the four ‘Axis of Avoidance’ jurisdictions – the others are Luxembourg, Switzerland, and the UK and its Overseas Territories and Crown Dependencies – which are collectively responsible for over half of global abuse annually. Not only that, in 2021, we reported that OECD countries and their dependencies are responsible for 92 per cent of the $170.7 billion the world loses to offshore wealth tax evasion every year; in other words, over $157 billion a year.
The GRADE data showed that if there was an increase in government revenue equivalent to the amount of revenue lost to global tax abuse, for countries where there is data available, the additional number of people accessing their fundamental human rights, including child rights, every year would be as follows:
Sanitation – 34 million people
Drinking water – 17 million people
Projecting over ten years (as tax abuse often takes place over decades):
Reduction in infant and maternal mortality – 600,000 children and 73,000 mothers.
These figures show that the links of causality between cross-border tax abuses and rights violations are tangible and devastating. If children do not have access to their fundamental rights, many do not survive. Moreover, they are disproportionately impacted by these systemic injustices.
The Committee on the Rights of the Child’s decision to hold the Netherlands to account builds on a growing body of jurisprudence highlighting the role abusive tax practices – and the government policies that facilitate them – play in causing human rights deprivations. In 2020, following a submission by the Tax Justice Network and a coalition of allies, the same body called on another notorious tax haven – Ireland – to account for its role in enabling such practices.
Other UN human rights oversight bodies, including the Committee on the Elimination of Discrimination Against Women and the Committee on Economic Social and Cultural Rights, have previously demanded that countries like the United Kingdom and Switzerland do the same.
In a world where many of the most powerful governments are resistant to addressing tax abuse as a human rights issue, the United Nations treaty bodies provide a critical legal mechanism through which we can hold states to account. More than ever, we need these avenues to advance jurisprudence, deliver accountability, and raise greater awareness of why progressive, impact-assessed tax regimes and financial transparency are necessary to advance child rights.
The Concluding Observations issued by the Committee on the Rights of the Child to the Netherlands represent a small but highly significant step in advancing these concerns.
“Tax avoidance is, at heart, a children’s rights issue,” explained Alexandra Dufresne, Director of the International NGO Law and Policy Project at ZHAW School of Management and Law, who led in producing the submission. “States with weak tax and financial transparency laws profit from facilitating the hiding of money that could otherwise have been spent on schools, health clinics, roads, law enforcement, housing, electricity, high-speed internet and community development. In other words, they externalize the costs of their decisions on to other people’s children – often children an ocean away whom citizens in these states can neither see nor hear.”
For some years now we’ve heard the same message, widely reported in Swiss media, and often abroad: that Switzerland used to be a nasty tax haven, but now it’s cleaned up.
Our Financial Secrecy Index, where Switzerland ranks as the world’s third biggest supplier of financial secrecy, shows how even the laws and rules on Swiss books – let alone enforcement of those laws – are still rigged in favour of the world’s ne’er-do-wells. Switzerland also ranks 5th on our Corporate Tax Haven Index, a ranking of countries most complicit in multinational corporations’ tax abuse in particular. The impact of Swiss ‘success’ in these areas amounts to, TJN estimates, tax losses suffered by other countries of some US$21 billion a year, or enough to fully vaccinate more than a billion people against COVID.
The miscreants include a Yemeni spy chief implicated in torture; the sons of an Azerbaijani strongman who rules a private fiefdom; a human trafficker in the Philippines; a Hong Kong stock exchange boss jailed for bribery, a billionaire who ordered the murder of his Lebanese pop star girlfriend, and corrupt politicians and executives from Egypt to Venezuela to the Vatican to Ukraine.
And, of course, plenty more.
The Swiss laws might look good, to the casual observer. But practically, despite the worldwide rise of automatic exchange of information (AEOI)↪NOTEAutomatic exchange of information is a data sharing practice that prevents corporations and individuals from abusing bank accounts they hold abroad to hide the true value of their wealth and pay less tax than they should at home. Under automatic exchange of information, a country takes the information it has on the financial activity of individuals and businesses who are operating within its borders but are resident in, aka permanently living in or headquartered in, another country and shares that information with that country. The allows countries to know the true value of their residents’ wealth and make sure they pay the right amount of tax. Learn more. in the past decade or so, where governments are supposed to exchange relevant financial information with their peers (to help them enforce criminal and tax laws), Switzerland has carefully carved out exceptions to help their bankers – and the world’s criminal classes.
For example, Article 47 in the Federal act on banks and art. 127 Direct Federal Tax Act have not changed, despite the global rise of AEOI. Lower-income countries in particular are penalised by the exceptions and loopholes Switzerland has inserted. For instance, as Dominik Gross of Alliance Sud in Switzerland described it:
“Switzerland has an AEOI agreement with Nigeria. But if an oil trader from Nigeria works with a Swiss law firm that operates a shell company for him in Panama, there is no exchange of information between Nigeria and Switzerland because the law firm is the owner of the account.”
An undercover journalist posing as an African investor was told by the bank that secretive numbered accounts existed but were being phased out, and instead was steered towards setting up a trust, a vehicle that has long been a bugbear of transparency campaigners. And OCCRP pointed out:
“a new draft law that would allow Swiss bankers to create trusts in Switzerland for the first time.”
It is also worth highlighting, in particular, that Art. 47 is a very strong Anti-Whistleblower legislation, imposing a prison sentence of up to three years on banks and their employees if they disclose client data to unauthorised third parties. And this has chilled democratic debate in Switzerland. As OCCRP stated:
“Journalists and experts say Switzerland’s draconian banking secrecy laws effectively silence insiders or journalists who may want to expose wrongdoing within a Swiss bank. A Swiss media group was unable to participate in the Suisse Secrets investigation due to the risk of criminal prosecution.”
As with all tax havens, the deference to criminals and the wealthy makes for a topsy-turvy world. You might have thought that larger customers would be subject to more intensive checks on the source of their larger funds, but of course it’s the other way around. As OCCRP reported:
“Due diligence of customers and accounts –– say at a level of $1 million –– are very thorough,” said a former senior executive. “But when it comes to high net-worth accounts, bosses encourage everyone to look the other way and managers get intimidated about their bonuses and job security. In addition, very big accounts are kept so secret that only a few senior executives might know who owns them.”
As we have often said before, this calls into question a number of research reports into these issues, where researchers painstakingly contact representatives in tax havens, asking to set up shady offshore services, and some tax havens obtain good marks – because such approaches are often turned away – in turn because they appear to be from the ‘little fish’. Once you’re in the system, once you’re a big fish, and trusted (consider how insidious the use of the word ‘trust’ is there,) to do the right thing by the bank, the rules and laws that apply to the rest fall away.
The rise in anger across western societies is fueled by exactly this sort of thing. It is an inequality problem, a national security problem, a corruption problem, a market-rigging problem, and perhaps above all, a democracy problem.
There are, as with previous leaks, so many potential take aways here. Professor Sol Picciotto, who has followed these issues for many years, said of the Financial Action Task Force (FATF) that is supposed to be cracking down on these problems:
“I think it’s time we targeted the FATF for having failed to focus on the central issues, such as transparency of beneficial ownership, and the abuse of devices such as trusts, hiding behind the enormous apparatus of AML “regulation” which has clearly only papered over the evident faults of the system.
It should now be entirely feasible to create a digitalised system of asset ownership that would both safeguard genuine privacy and allow access to information for appropriate agencies. This would cost a fraction of what is spent today on defective and pointless KYC requirements that oblige ordinary people to produce evidence such as utility bills to open a small bank account.”
James Henry, a Tax Justice Network senior adviser, said:
“After all we’ve learned from 50 years of investigations and “the banality of exposes,” a formal International Financial Crimes Court, with subpoena and investigatory power, may be long overdue. For in many ways these institutions are facilitating the kind of resulting human rights violations that the ICC, at its best, is supposed to prosecute.”
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 we bring you the story of a pensioner robbed of his dream retirement who shares his story with us of his fight for justice in multiple jurisidctions. Tax havens and secrecy jurisdictions don’t just hurt us because they’re places of impunity for the rich and for criminals. Quite ordinary people can get caught up in them too. And when things go bad, you may not get the help from regulators and law enforcement that you hope for. It is imperative that you are absolutely sure your Independent Financial Advisor is a fit and proper person.
Produced and hosted by Naomi Fowler of the Tax Justice Network
Stolen Dreams #119
Taxcast special feature summary:
We know that so-called ‘blue collar crime’ tends to get all the attention. But white collar crime is seen as somehow more acceptable, less serious – they’re men in suits after all (- well, they’re usually men!) In this Taxcast episode, we hear the experiences of one pensioner’s fight for justice, in multiple jurisdictions. Since there are various legal proceedings in process, and still to take place, we’re going to call him our pensioner. Here’s some of that story which he shares with us on the Taxcast:
Pensioner: “I was in the fortunate position of being able to retire relatively early and it had always been a long term ambition of ours to try and live permanently in the sunshine somewhere. We had always put in motion the process of emigrating to the States, we’d already bought a plot in Southwest Florida. So that was where it all started, and then talked to my UK accountant and said you know, what do I do now about pensions? And they said, well, you know, there are such things as these QROPS.”
(QROPS is a special pension arrangement. It stands for Qualifying Recognised Overseas Pension Scheme.)
Pensioner: “Basically it’s available to any overseas citizens who have worked and lived and have earned a pension in the UK, who then when they go back to their motherland, can transfer their UK pension into one of these QROPS. So, one of the things that came to light in the early stages when we were going through the process with an American lawyer to get our green card sorted, was we needed to be careful that we didn’t get caught in the trap of being taxed in two separate jurisdictions. They were specialist immigration lawyers, he said, I do know that there are other Brits who have taken out QROPS because there’s a double taxation treaty between the UK and the US with Malta. So he said, we’ve got quite a few of our green card holders who have got pensions based in Malta because of this double taxation treaty and he said you know, it seems to work fairly well.”
Naomi: “If you’re getting a sinking feeling at this point, as our pensioner says, hindsight is a great thing.”
Pensioner: “So on the back of that, I did some Google research and this was in the early days of Malta having been granted status by HMRC”
Naomi: “HMRC is Her Majesty’s Revenue and Customs, the British tax authorities.”
Pensioner: “and I think I’m right in saying that my pension provider was one of the first, or if not, the very first to be granted a licence by the MFSA to operate or administer a QROPS.”
Naomi: “The MFSA is the Malta Financial Services Authority. Remember that, it’ll come up later. Did you know at the time when you started this whole business, did you know much about Malta as a jurisdiction?”
Pensioner: “No. Well, no. I mean, the, the ironic part is that when the subsidiary company was granted the MFSA licence, the MD of the parent company said, ‘anybody that decides to come with us can rest assured that as Malta is a full member of the EU, they will be fully protected by EU law and consumer protection, and I thought, yeah, you know, safe as houses, aren’t we?!”
Naomi: “Very reassuring!”
Pensioner: “Yes! Because this was a new venture in Malta, they had set up a contract with the Maltese shell companies to have all the administration of the Maltese pension provider supplied by one of their subsidiary companies in the UK. They were a UK FCA-regulated company, so that bit you know, stacked up,except that, of course, when it all started to go belly up, it transpired that this service administrative company was not FCA-regulated at all. It was registered in the UK, but was un-regulated.”
Naomi: “The FCA is the UK Financial Conduct Authority, the regulator for financial services. So, we’ve got two jurisdictions so far – Malta and the UK. Now enter Stage Right – the Independent Financial Advisor, the IFA:”
Pensioner: “I then obviously looked to see, try and find a pension advisor who was specialised in QROPS. Um, this name came up, did my research on that. He’d said at the outset that he was CII-qualified and he was FCA regulated, He claimed that had G60 advanced pension transfer qualifications, and the MD of the parent company in the UK, he’d been on various pension advisory boards, his CV you know, gold-plated in theory, as were the people involved in his Maltese company, you’ve got a former ambassador, who was a lawyer and specialised in financial services, so I, like the hundreds of others who eventually got sucked in, thought, well, this is the way to go. So anyway, the money got transferred and we moved to the States and so a policy was opened by my trustee company in Malta with one of the big insurers in the Isle of Man, all of whom assured me that they had done due diligence on my advisor. On paper, everything looked hunkydory.”
Naomi: “So, now we’ve got Malta, the UK and the British Crown Dependency of the Isle of Man. And of course, the IFA, the Independent Financial Advisor:”
Pensioner: “My IFA assured me that the list of investments that he was going to put in my portfolio were all low risk, which I said, well, you know, I worked really hard to accumulate it, so I don’t want to be speculating, so low risk is absolutely fine. He said, no, no, I assure you that everything will be low risk and this, that and the other.”
Naomi: “So, our pensioner retires, and he starts living the dream in Florida. But only a year later the first ‘low risk’ investment in which his pension was invested went belly-up – that’s now subject to legal proceedings involving the UK’s Serious Fraud Office. That was soon followed by more of these supposedly ‘low risk’ investments going bad.”
Pensioner: “Then there was another one and then another one and another one, and I started to ask my highly qualified IFA, you know, what was going on? And he said ah, don’t worry about it. He said, all these are sound, it’s just they’ve got cashflow problems – all sounded plausible, you know. And he said, you know, some of the funds are regulated by the Isle of Man FSA and so I said, okay. Anyway, I, I just had a gut feeling then that all was not as it should be and I started to ask pointed questions of my IFA and he was being ever more devious in the replies I was getting. Out of the blue he said, I am resigning as your IFA and I wish you luck, but I will not now enter into any further correspondence with you. And at this stage, you know, I was relying on him for information as to what was going on with the suspended funds. Well, I obviously went back to my QROPS provider in Malta and said, you know, what is going on? And I also, at the same time sent an email to the admin provider in the UK because at that stage they were still contracted to provide all the administration for the QROPS in Malta. So they both acknowledged and said, ‘oh, you know, we’re sorry to hear this, leave it with us.’ And I did leave it with them and they’re still dealing with it!”
Naomi: “Our pensioner turned detective. He discovered that his IFA – Independent Financial Advisor had been suspended by the Chartered Insurance Institute for quite some time.”
Pensioner: “And the FCA meantime had also confirmed that the IFA had never been regulated by them either as an individual, the various companies which he had set up in various jurisdictions, none of which were regulated anywhere, some of which weren’t even registered, he’d just made up a company name and given an address in Italy, and it then transpired much further down the line that all these addresses that he’d given were just accommodation addresses. Um, but anyway, hindsight’s a wonderful gift, isn’t it?!”
Naomi: “It is indeed. Scammers do use accommodation addresses, they open letterbox companies in the UK, they trade on Britain’s supposed respectability and trustworthiness! We’ve reported before on the Taxcast about the kind of ‘wild west’ of Scottish and English limited partnerships. And then Companies House, the UK companies registry is an open joke.”
Pensioner: “So, I mean, this guy’s been operating for a long, long time and has scammed millions and millions and millions in fees and conditions and god knows what, facilitated and enabled by the insurers and indeed by HMRC because, you know, I’ve been backwards and forwards with HMRC for goodness knows how long saying, how can you allow these registered companies to still be operating when the UK Treasury last summer put Malta on its red list as being a jurisdiction which needs treating with great care? ‘Nothing to do with us!’”
Naomi: “Our pensioner didn’t take all this sitting down:”
Pensioner: “So I then contacted a law firm in the UK because that stage all the administration was still being carried out by the unregulated company in the UK. They, in fairness, were very, very diligent, which is how so much of this information I think I’ve already shared with you came to light about the use of 14 different addresses, the fact that he was never, ever regulated in the UK. He denied that he’d lived in the UK, but in fact, he was on the electoral register. Um, they used trace agents, you know, the whole nine yards. And of course, as each day went by, it became more and more obvious that I was a victim of a huge scam.”
Naomi: “Just as it looked like he was getting somewhere, possibly the worst news of all came from our pensioner’s lawyers:”
Pensioner: “My UK lawyer said, ‘look, although this contract between the QROPS in Malta and the administrative company in the UK says that the contract had been drawn up in accordance with English law, the reality is that – and they took advice from a barrister – because the trustees were based in Malta, the jurisdiction lay in Malta. So it was at that stage that I then appointed the lawyer in Malta to represent me, who has been an absolute star, I have to say, and then he submitted judicial papers as they call it in Malta to the courts to start a litigation case against the QROPS provider in Malta. And he said, I’ll tell you now, this will drag on for years, it will end up eventually in the European courts, because he said, everybody here is a friend of a friend of a friend, they have got their friends in all the places where they need them to be, to ensure that what happens in Malta, stays in Malta.”
Naomi: “That is exactly the situation in other small island jurisdictions that we’ve come across where the conflicts of interest are ridiculous, it’s the same thing that you’ve experienced, so it’s really interesting.”
Pensioner: “Yeah, and it’s the same in the Isle of Man. Because the insurers are based in the Isle of Man I’ve submitted complaints to the Isle of Man constabulary, the Isle of Man FSA, the Isle of Man financial ombudsman service. And it’s the same with the FCA. They all say, well, no, no, I hear what you’re saying, but the jurisdiction is in Malta, so they know what’s going on, but they just don’t want it to stick with them do they? It’s the classic ‘we’ll pass the parcel until the music stops, and hope it doesn’t stop with us!’”
Naomi: “So, I mean, you’ve got a lot of evidence which you’ve collected. There’s a lot of litigation and a lot of processes that you’ve gone through. You’ve tried to pursue justice with HRMC, Her Majesty’s Revenue and Customs, the Financial Action Task Force, Malta’s Financial Services Authority, the Financial Conduct Authority, you’ve been to your Member of Parliament, you’ve been to the police, how would you describe the process of trying to get some kind of justice or some kind of accountability?
Pensioner: “Um, character building!”
Naomi: “And then, our pensioner unexpectedly discovered he wasn’t alone.”
Pensioner: “We had an email from the QROPS provider in Malta, where inadvertently, they had put 30-plus people in copy rather than putting us all in blind copy, which was an update from the liquidators of one of the Isle of Man failed funds basically telling us, you know, good luck with this, you’re gonna get, you know, half or nothing! I assumed I was no longer the only one who’d been caught up in this, but the provider obviously was desperate not to let it out that there were between 60 and 70 members of just this one QROPS provider who had been advised by this now absconded IFA.”
Naomi: “So you, you got in touch with each other because you realised there were other victims in the, the email chain?”
Pensioner: “Yes, once this infamous email was shared amongst us, myself, and one other sort of have started basically an action group, for want of a better term. And I got in touch with them and said look, I’ve, you know, had lawyers in the UK on it since 2017, a lawyer in Malta on it. We’re just part of an absolute huge scam in many, many different jurisdictions. And we’ve been sharing…”
Naomi: “Horror stories?”
Pensioner: “Oh, yeah, horror stories is the right way to describe it!”
Naomi: “Can I ask you, I mean, you don’t have to answer this at all, but can you give an idea of what you’ve lost personally?”
Pensioner: “Personally, well, over a million, well, over a million. I hope to goodness, in one respect, you know, I am one of the biggest losers. Fortunately it hasn’t brought us to our knees. I mean, we’ve had to move back to the UK, but I mean, I haven’t lost everything.”
Naomi: “Do you know, I mean, you’ve been in touch with some of the people that were involved in the same scam that you were, do you know any of their stories?”
Pensioner: “Oh, heartbreaking. I, I, I mean, there’s one lady who was a nurse and is still working as a nurse in the States and she said ‘I can’t afford to envisage taking out legal action against them because of the legal fees involved.’ And I mean, that is heartbreaking. There is somebody who died destitute in Spain because he had been scammed out of everything, his house had been repossessed and he died just days before the bank was gonna take the keys from him. I’ve shared that with the MFSA and with the police and everybody in Malta saying, you know, how can you allow this to happen and not take action? And the reality is because so many of those people involved are high up in government circles, have been former MPs, are former ambassadors and so on, and they’re all just looking after themselves. Truly scandalous.”
Naomi: “So in terms of, I mean, in one sense you could look at this as a story about Malta being a really bad and unsafe jurisdiction to do business. However, you could also say, this is also a story about lack of enforcement in many jurisdictions, so you’re talking about the Isle of Man, you’re talking about the UK where the company was registered there and actually, that wasn’t safe either. So this is not just a story about ‘don’t put your money in Malta’!”
Pensioner: “No, oh no, no! And it’s basically stick it under your mattress and look after yourself, because all these people that are meant to be batting for you aren’t interested, or are incapable, or dare I even suggest it, perhaps facilitating because of the benefits they receive. I mean, certainly that’s the case in Malta, and I’m increasingly convinced the same as in the Isle of Man, because you’ve got exactly the same scenario – small island, heavily reliant on financial services, they all know each other, all the auditors will know each other, all the insurers will know each other. And when I’ve got literally thousands and thousands and thousands of pages of documents, how any of them can sleep straight in bed at night, I have no idea.”
Naomi: “I don’t know either, and here’s a question for you – how would you sum up – what is the Malta Financial Services Authority for?”
Pensioner: “Um, to cover the tracks of the criminals who are operating there!“
Naomi: “I thought you might say something like that! And the conflicts of interest run beyond a small island culture where everyone knows everyone – in the Isle of Man for quite some time the insurance industry regulator also had a remit to promote the industry! That would cast some doubt on the proper assessment of new applicants wanting to do business there. Now, I know there are good people who work hard for regulators and they try to do the best they can – but we see time and time again that regulators are understaffed, underinvested in, and they often have no teeth. So far, neither the regulators nor law enforcement in the Isle of Man, in Malta or in the UK have dealt effectively with the criminality involved in our pensioner’s case:”
Pensioner: “I’ve identified 50+ breaches in law – one of which clearly states that where, um, you can show that the regulated body has wilfully neglected to protect your interests they are obliged to reimburse you for the losses you have incurred. You know, it’s there in black and white. All the MFSA has done so far, they’ve concentrated on the regulatory breaches. They’ve ignored all the criminal breaches because of course, if they actually go that way then of course it opens up a huge, huge can of worms. And one of the other big things that’s been relevant to our scheme is that they have refused to confirm whether they have indemnity insurance, and the MFSA have not confirmed whether they have or haven’t. And I fear the fact that nobody is saying so is that perhaps they have, but the insurers are saying well, you know, we’re not gonna pay out on this because you’ve been naughty boys, haven’t you?!”
Naomi: “Yeah. Yeah. That’s very likely!”
Pensioner: “Well, I would think it’s very, very, very likely!”
Naomi: “Our pensioner had early hopes that the Maltese Police might investigate the criminal aspects of his case. After a long wait, his lawyer had a go:”
Pensioner: “They said that they’ve been investigating, you know, and they clearly hadn’t. He said, well, you know, it’s up to you because if you don’t fulfill on the report that you said you were going to make, then I’m gonna just take it to the European court of law because my client’s human rights to justice are being denied. Within an hour, he had an email back from the Assistant Commissioner who is in charge of financial crime saying you will hear shortly from superintendent so-and-so, on progress that we are making. We are still waiting. I think this will be the end of Malta as a jurisdiction for pensioners because none of the insurers will now touch it with a barge pole, they won’t be able to get insurance for their indemnity liabilities.”
Naomi: “What would you say to anybody, you know, to, I don’t know, to yourself back then, when you were looking at pension options?”
Pensioner: “If I knew then what I know now, I would’ve just left my pension with the company. Um, the, the, yeah.”
Naomi: “What do you think has happened to your money, and to the money of the other people who have been involved in this scam?”
Pensioner: “Somebody somewhere is living off it very, very nicely, one of whom, no doubt is my now absconded fraudster IFA and his family.”
Naomi: “They’re probably living in Florida!”
Pensioner: “Well, they quite probably are, you know, they may even have bought the house that we had to sell! You know, the IFA, his company, or his final company was registered in Panama, so he was having his fees paid into a Barclay’s account in the Isle of Man, who no doubt have been sending the money to, you know, Panama or Cayman islands or whatever. And the Isle of Man have said, well, there’s no reason for us to investigate because there’s no evidence of criminal activity. And I said, well, excuse me, I think there is because you know, that money has been paid by Isle of Man-registered and regulated insurer’s, money taken from our portfolios and you’ve been paying fees and commissions. And I mean, my fees for transferring into the policy initially were over 43,000 pounds. And then he’s had commissions from all these high risk bonds and God knows what, it’s staggering.”
Naomi: “It is staggering.”
Pensioner: “I’ve gone back to the head of the economic crime unit in the Isle of Man, I said, you’ve got to review this now because you can’t now say this is just a regulatory matter. This is a criminal matter. I’ve spent more than £70,000 on legal fees so far, on top of the money I’ve lost. And this is why I’m doing so much myself, because if I’d been trying to pay lawyers to do it, you know, I’d want millions to gather the information and the evidence that I’ve got. But anyway, I’m not giving up!”
That’s part of our pensioner’s story, for which we thank him for sharing with us on the Taxcast. We wish his group of pensioners good luck in their ongoing battles for justice. We’ve seen so many times that on the surface so many jurisdictions look good. They’ve got coats of arms, official bodies with crests above their names, shiny office blocks, oak panelled meeting rooms, and glossy brochures. But when things go wrong, you really can’t be sure they’ll help you…
Tax collectors around the world are too often unacknowledged and unseen heroes. Many of them face huge challenges as a result of trying to do their job honestly, and in the best interests of their countries and their people.
We are very saddened at the Tax Justice Network to hear of the murder of tax collector Mr Alinafe Bonongwe, who worked for the Malawi Revenue Authority.
From our understanding of this terrible loss, Mr Bonongwe was very effective in fighting against the smuggling of goods and tax evasion at a border post where he was based. He is described by those who worked with him and knew him as ‘a warrior for justice’ and he has by no means been the only tax official to have been threatened. He was subjected to a social media campaign which attempted to smear his reputation, presumably aiming to have him removed from his position. This didn’t succeed, and unfortunately the next step seems to have been to murder Mr Bonongwe. Murder is a terrible thing no matter who is the target, but no one should be killed for doing their job well and honestly.
Here is a tribute to Mr Bonongwe from the State President His Excellency Dr. Lazarus McCarthy Chakwera:
Fellow Malawian Gerald Chavez Kampanikiza, reporting on this crime, says:
This should be awake call to Malawi government to look into issues of security for MRA senior officers both domestic and customs. Here are the people working daily collecting revenue for the country and salary for president, vice president, state house officials, ministers and all civil servants but surprisingly security is not given to them.”
The Tax Justice Network calls on all governments to do everything they can to protect their tax collectors and ensure they are safe to carry out their jobs fairly and in the public interest.
Around the world, tax collectors are undervalued, taken for granted, and often poorly paid. That must change. When a society loses good people like Mr Bonongwe, it becomes crystal clear how much they are the life blood of our nations. We offer our condolences to Mr Bonongwe’s family and to the Malawian people. May this warrior for justice rest in power. As the Malawi Revenue Authority says, ‘The fight will continue. You have not died in vain. Forever in our hearts.’
While beneficial ownership registration is increasingly becoming mainstream, a major concern prevails: complex ownership chains. More than 80 jurisdictions had laws as of April 2020 requiring the disclosure to a government authority the identity of the beneficial owners↪NOTEA beneficial owner is the real person, made of flesh and blood, who ultimately owns, controls or receives profits from a company or legal vehicle, even when the company legally belongs, on paper, to another person or entity, like an accountant or a shell company. Learn more. of companies and other legal vehicles, meaning the natural persons who ultimately own or control them. In 2021, the Financial Action Task Force (FATF) in charge of making global anti-money laundering recommendations started a consultation on the reform of Recommendation 24 on beneficial ownership transparency of legal persons. If approved, the new Recommendation 24 will require countries to establish beneficial ownership registries. However, unless complexity is addressed, those seeking to circumvent the rule of law will still be able to twist and turn their way out of transparency.
Ever since Global Witness analysed the UK’s beneficial ownership register, the world became aware of the challenges of ensuring that beneficial ownership registers have accurate data, rather than unintentional or deliberate mistakes or false information. The Tax Justice Network has been promoting beneficial ownership verification by proposing a wide range of measures, setting up a multi-stakeholder group to promote verification pilots as well as curating best cases from all over the world.
Although verification usually involves carrying out cross-checks, red-flagging and other advanced techniques once a beneficial owner has been registered, a country’s legal framework could be reformed to intrinsically facilitate verification to prevent secrecy from the get-go. This could be achieved by better regulating complex ownership structures. Individuals and companies are legally able to set up any type of structure they want, from a simple one where the only shareholder of the company is at the same time its beneficial owner to a very complex structure involving many layers spread across several secrecy jurisdictions↪NOTEA secrecy jurisdiction is a tax haven that specialises in enabling individuals to hide their wealth and financial affairs from the rule of law, not just for the purpose of underpaying tax but for other financial crimes like money laundering and funding terrorist groups. Learn more.. While it’s absolutely free for an honest individual (or criminal) to set up a complex ownership chain (except for some legal or incorporation fees), the real price is paid by authorities. Investigators or any authority trying to verify beneficial ownership information will need to spend increasing resources in terms of staff, technology and time to be able to determine the identity of the beneficial owner who ultimately owns or controls the entity with a very complex structure. In many cases, if the complex structure features an entity from a secrecy jurisdiction, a trust or a company with bearer shares it may be impossible to find out who the beneficial owner is.
In order to understand complex structures and to develop ways to regulate them, in October of 2020 the Tax Justice Network together with other allies organised a closed roundtable with experts from international organisations, country authorities, civil society organisations, journalists, the private sector and academia.
The roundtable discussed several issues, including examples of complexity in relation to transparency and tax abuse, methods to study and determine complexity (eg the Tax Justice Network’s analysis of the number of layers of UK companies) , legitimate needs for transparency and potential measures to address complexity. Although there was no consensus among participants, some of the comments and discussions referred to:
The need for evidence that complexity is indeed creating secrecy risks.
Discussion of what a legitimate need for complexity may be. (The Tax Justice Network disagreed that tax planning or isolating risks would be “legitimate” arguments. In fact, we published a spin-off from this discussion proposing to rethink the system of limited liability, where the beneficial owner should be held accountable.)
Caution about some measures, eg a requirement to obtain prior authorisation before incorporation, because these could backfire by becoming a source for corruption.
Questioning whether complexity was an issue to be addressed at all.
Based on the feedback, discussion and presentations, we published this report with a focus on the secrecy risks (affecting beneficial ownership transparency) created by complex ownership structures. The report attempts to address some of the comments at the roundtable which questioned whether there is a need to regulate complexity or whether there’s adequate evidence that complexity is actually abused. In response to these comments, the report includes evidence of cases where complex ownership structures were abused to engage in money laundering, corruption, sanction circumvention, tax abuse, and so on.
The report also considers the justification for complexity, questioning some of the arguments mentioned by participants at the roundtable and evaluating other factors that would determine what measures are needed, especially the number of entities with complex structures and their economic significance.
The paper also offers a list of factors that could create complexity such as a high number of layers, presence of entities from secrecy jurisdictions in the ownership chain, and so on. The report includes an analysis of when those factors in isolation would be inoffensive (eg a high number of layers would create no harm if only local entities are allowed to integrate into the ownership chain because the local commercial register would have information available on each layer). However, the report considers that in most cases, none of the “neutralising measures” that would render the identified factors as inoffensive in isolation are implemented and so the factors continue to pose a risk even in isolation.
Acknowledging that this is a work in progress where discussions have just started, the report prescribes no specific policy to follow, but analyses the pros and cons of different measures (eg prohibition of complex structures versus “doing nothing”) and offers a list of actions that countries should consider, such as running an exploratory analysis of their own companies’ structures to determine outliers.
You can download the report by clicking on the link below. If you would like to be part of the discussion or have any feedback, please write to [email protected].
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:
Un mundo sin paraísos fiscales. Les contamos cómo cambiaría en nuestra vida cotidiana y laboral si nos libramos del mundo offshore.
¿Qué es la financiarización de la economía global?
El FMI viola sus propias reglas en el acuerdo con Argentina.
Cuántas multinacionales hay y cuántas pagarán el impuesto mínimo
INVITADOS:
Edmund Fitzgerald, experto en finanzas de la Universidad de Oxford y miembro de ICRICT, la Comisión Independiente para la reforma de la Fiscalidad corporativa internacional
Oscar Ugarteche, director del Observatorio de América Latina, y autor de “La gran mutación” www.obela.org
Welcome to the 50th 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 #50 من الجباية ببساطة نناقش مع الباحثة في العدالة الضريبية نرهان شريف، تقرير حالة العدالة الضريبية 2021 والذي نُشِر بشكل مشترك من قبل شبكة العدالة الضريبية “TJN”، والتحالف العالمي للعدالة الضريبية، والاتحاد العالمي للخدمات العامة الدولية زيادة على جولتنا مع الأخبار الضريبية في لبنان، مصر، المغرب، تونس والعراق
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 36ème édition de votre podcast impôts et justice sociale proposé par le réseau Tax Justice Network, nous vous proposons un entretien avec Nohoum Diakite, le coordinateur au Mali de la coalition Publiez Ce Que Vous Payez. Avec lui nous revenons sur les enjeux de la justice fiscale pour ce pays, qui depuis pratiquement deux ans est géré par des militaires et qui actuellement fait l’objet de sanction par la CEDEAO sous-région dont elle est membre. Nous discutons proposons aussi une déclaration du ministre Lanciné Condé en charge de l’économie, des finances et du plan en Guinée Conakry, qui dont son avis sur les exonérations fiscales.
Dans ce podcast vous écouterez
Nouhoum Diakite, Coordinateur de Publiez Ce Que Vous Payez Mali
Lanciné Conde, Ministre en charge de l’Economie des Finances et du Plan/ Guinée Conakry
~Mali – l’exigence de la justice sociale au-delà des sanctions et de la junte #36
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]
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