Exploring UK companies’ legal ownership chains to detect red flags and verify beneficial ownership information: Part 1

By Andres Knobel and Oliver Seabarron

The Tax Justice Network in cooperation with the CORPNET group at the University of Amsterdam (@UvACORPNET) and the Data Analytics and Society Centre for Doctoral Training at the University of Sheffield (@DataCDT) has mined and applied advanced analytics to Orbis data to identify patterns and red-flags on the ownership chains of UK companies. Findings include that 74 per cent of UK companies have very simple structures (a natural person directly owning the company or just one intermediary entity in between. Only 5 per cent of UK terminal companies have more than 5 layers, and only 0.5 per cent have more than 10 layers. However, two UK companies of our sample have 23 layers of intermediary entities up to a natural person shareholder. We checked the records of one of these 23-layered companies in Companies House and found that they have declared wrong information (entities as beneficial owners) and even contradictory information on the addresses and shareholders (when comparing information available on the accounts, annual returns and other registered data).

Context of beneficial ownership transparency

Beneficial ownership transparency (identifying the natural persons who ultimately own and control companies and trusts) is getting a lot of global momentum as one of the most relevant tools to tackle illicit financial flows related to money laundering, corruption and tax abuse. As our latest update of the state of play of beneficial ownership registration around the world shows, based on findings from the Financial Secrecy Index 2020, more than 80 jurisdictions have approved laws requiring beneficial ownership information to be registered with a government authority.

However, verification of registered beneficial ownership information continues to pose challenges in all countries. For this reason, we have set up a multi-stakeholder group to promote verification of beneficial ownership and organised a call to map current verification strategies around the world.

One of the first public cases of verification of beneficial ownership data was carried out by Global Witness. Based on the open data format of the UK’s beneficial ownership register held by Companies House, Global Witness was able to analyse UK beneficial owners and thus detect many red-flags, including 500 ways to write “British” in the field for nationality, cases of disqualified directors and so on. Unfortunately, UK data on legal owners is not available in structured data format for bulk downloads to run proper checks. The data also lacks enough identification details – only legal owner’s names are made publicly available.

The importance of legal ownership and the full ownership chain

Beneficial ownership is arguably more useful than legal ownership to tackle illicit financial flows. After all, the legal owner (the shareholder) may be another company, but neither companies nor trusts can go to jail for illegal activity, only a natural person can.

This doesn’t mean that the legal owners are irrelevant. On the contrary, data on the legal owners and the full ownership chain is necessary to detect abusive practices, such as circular ownership or fragmented ownership to avoid beneficial ownership reporting requirements. At the same time, information on the full ownership chain is necessary to confirm the beneficial owner’s identity. In the figure above, Mary is both the beneficial owner of company A, and the legal owner and beneficial owner of company F. Given that the beneficial owner is in principle[1] also a legal owner of the last layer, by identifying every legal owner in the ownership chain it is possible to confirm the beneficial owner’s identity. Applying logic: if Mary -> (owns) company F -> company G -> company H -> company A, then we can confirm Mary -> company A. It’s important to note here that a beneficial owner may include an individual who controls the entity through mean other than ownership. However, here we consider that the natural person shareholder, Mary, is the beneficial owner (although she could just be a nominee, unless the information is verified).

Most countries, including the UK and Denmark only publish information on the first layer (company H) and the beneficial owner (Mary) but nothing on the intermediary entities in the ownership chain.

This lack of information on the full ownership chain is not a problem in the scenario where the ownership chain of any local company includes exclusively other local companies. Where no foreign entities at all are involved in the ownership chain of a local company, all the relevant information would be available in the same register, even if it required navigating through many different records. For instance, the register’s records on company A would hold information about company H and Mary. It would be possible to search for the register’s records on companies H, G and F to confirm that Mary is indeed the beneficial owner of company A.

However, if any of the intermediary entities are foreign companies (like the example in the figure above), the UK register may have no information on the legal owners of companies H, G and F. In this case, it will be necessary to go to the registries of the country of incorporation of each intermediary entity to find the corresponding legal ownership information (in the figure’s example, it would be necessary to search the registries from the US, Luxembourg and Panama). It only takes one of these countries to fail to provide legal ownership information, to make it impossible to identify the full ownership chain. In that case, it won’t be possible to confirm the beneficial owner either.

To make matters worse, the possibility of not finding legal ownership information on an intermediary entity isn’t just a potential risk but a very real one. Our latest paper on the state of play of beneficial ownership registration shows that out of the 133 jurisdictions covered by the Financial Secrecy Index, only 37 jurisdictions have proper legal ownership registration (where bearer shares don’t pose risks). Out of these 37, only 11 jurisdictions provide information online (out of which, only 1 in open data format).

Exploring the ownership structure of local companies to detect red-flags

Apart from looking at the full ownership chain of a specific company to confirm its beneficial owner, it is possible and relevant to systematically analyse ownership chains for all local companies. As described by our paper on beneficial ownership verification, that are many steps needed to verify beneficial ownership information, including authentication (eg the beneficial owner is who they say they are), authorisation (eg the lawyer incorporating a company on behalf of the beneficial owner is authorised to do so) and validation (eg write “British” properly). However, the most complex verification process is detecting red-flags and outliers (eg a director managing thousands of companies at the same time).

To detect outliers, it is necessary to know what a typical company looks like. For example, do most companies have one, two or ten shareholders? How are shareholdings allocated among shareholders, equal distribution (50-50 split, 33-33-33 split or 99-1 split)? How many layers are present in the ownership chain?

By knowing what a regular company looks like, it would be possible to identify outliers and audit them further to detect possible wrongdoing before illegal activity takes place. For example, if someone is trying to create a company with a very odd structure, authorities may want to investigate this company to understand the reason behind the extra complexity. This detection would be enhanced even further if countries knew not only the structure of a regular company, but also the typical corporate structure used in money laundering, tax evasion or corruption cases to compare it to. This way, if authorities explored and identified typical ownership structures beforehand, it would be possible to run systematic checks upon incorporation, to verify whether the new company’s structure resembles that of a regular company or that of a company involved in illegal activities. Suspicious companies could be investigated to prevent them from incorporating, opening bank accounts and engaging in illegal activities.

Exploring UK companies’ legal ownership chains

Inspired by Global Witness’ analysis on beneficial ownership data, the research on Tenders in EU: how much goes to tax havens? and Javier Garcia-Bernardo’s work on global corporate ownership networks, the Tax Justice Network produced an analysis of UK companies’ legal ownership chains. This project was the result of interdisciplinary work carried out mostly by Oliver Seabarron (DataCDT/Tax Justice Network) as part of his PhD, under training and supervision from Javier Garcia-Bernardo (UvACORPNET/Tax Justice Network), based on the legal ownership framework and analysis proposed by Andres Knobel (Tax Justice Network).

Sourcing ownership data for analysis

Based on the explanations above, Companies House’s legal ownership data was not sufficient for the purposes of our analysis . Instead, data from Orbis was used, which has the following limitations:

It would be rather simple to analyse the ownership chain of companies, if all UK companies looked like this:

However, reality looks more like this:

To be able to analyse the data, we simplified the scope of the analysis. We took a sample that applied two conditions:

  1. Terminal companies: the analysis covered only companies that didn’t own other companies (or those that owned less than 50 per cent of another company). This prevents companies integrated within a long ownership chain to be considered as independent chains (in which case we would be double counting some companies).

Consider the ownership chain in the above figure: Mary -> (owns) F -> G -> H -> A. When we analyse A’s ownership chain, we see that there are three intermediary entities (F, G and H) up to the beneficial owner Mary. However, if we didn’t limit our analysis to terminal companies (eg company A), our analysis would also present “Mary -> F -> G->” as the (independent) ownership chain of company H, “Mary->F->” as the (independent) ownership chain of company G, and “Mary->” as the (independent) ownership chain of company F. In other words, we would be adding noise to the analysis by recording for one ownership chain (company (A) with three intermediary companies) as several more chains (company (H) with two intermediary companies; company (G) with one intermediary company; and company (F) with no intermediary companies).

  2. Shareholders with > 50 per cent ownership. To avoid circular ownership situations that would result in a never-ending loop, the sample considers only layers where the entity shareholder above owns more than 50 per cent of the capital.

Otherwise, the analysis of the figure below would result in: company E is owned by company D, which is owned by company C, which is owned by company E, which is owned by company D, which is owned by company C, which is owned by company E, which is owned by company D…

These two conditions, unavoidably, narrow the scope of our analysis to exclude more highly complicated ownership chains.

Firstly, only the chains through primary shareholders are captured, and therefore chains through any minority shareholders are not analysed.

In addition, as the following figure describes, if none of a company’s entity shareholders own more than 50 per cent (dashed arrow), it will be considered as though there are no additional layers above the company (as though the company were owned directly by natural person shareholders or beneficial owners. Another consequence is that the ownership chain may be broken into several parts:

For example, the  ownership chain on the left hand side of the figure is Mary-> company F-> company G-> company H-> company I-> company L-> company M. However, given that company I owns only 20 per cent of company L, the analysis will consider that company’s M chain includes only one layer (company L). The analysis will also consider that (intermediary) company I is a terminal company (so its ownership chain, which includes companies H, G and F will be considered as independent from companies M and L).

On the other hand, the ownership chain on the right hand side of the figure, of terminal company O (Mary-> company F-> company G-> company N-> company O) will be disregarded. This is because company N only owns 20 per cent of company O, and is not a UK company, hence not considered a terminal company.  Therefore, the analysis will determine that company O has zero layers (as though it were only owned by natural persons).

The narrowing of scope resulting from these conditions, however, is minor. A statistical check of our results found that less than 10 per cent of cases in the analysis had their chains simplified or “broken” by the two conditions, with the majority of these instances occurring in the first layer of ownership. To find out more about the robustness checks and results across different samples, look at the fact sheet here.

Findings – Part 1

The first sample analysed 327,587 UK terminal companies. Of these, 12 per cent had zero layers and 62 per cent had one between the company and the beneficial owner. This is consistent with the OECD’s Global Forum 2018 peer review report on the UK, which informed that “an analysis from the current PSC Register [beneficial ownership register] shows that approximately 80 per cent of companies are directly owned by natural persons or by companies whose immediate shareholders are natural persons and are managed by the same persons. The remaining 20 per cent are more complex structures” (page 45, [TJN-Note]).

The following figure shows the distribution of the number of layers (intermediary entities between a company and its beneficial owner), for those companies with one or more layers:

Interestingly, only 5  per cent of UK terminal companies have more than 5 layers, and only 0.5 per cent have more than 10 layers. This suggests the proposal mentioned in our paper on beneficial ownership verification to limit the length of the ownership chain to up to two or three layers (to make it easier to verify beneficial ownership information) wouldn’t affect the vast majority of UK companies because most of them already use very few layers. Coincidentally, the World Bank’s well-known The Puppet Masters’ report on grand corruption cases proposed a three-layer test for sniffing out inappropriate complexity (this may likely apply to small companies but not to listed multinationals): “One compliance officer suggested an informal ‘three-layer complexity test’ as a quick-and-dirty rule of thumb. Whenever more than three layers of legal entities or arrangements separate the end-user natural persons (substantive beneficial owners) from the immediate ownership or control of a bank account, this test should trigger a particularly steep burden of proof on the part of the potential client to show the legitimacy and necessity of such a complex organization before the bank will consider beginning a relationship.” (page 56).

As regards the outliers, there are two companies that have 23 layers up to a natural person (or where there is no more data)

Cross-checking Orbis and Companies House data

According to Orbis, one of the terminal companies with 23 layers had 15 layers of UK entities and 8 layers of entities from the Cayman Islands. We decided to check the information from that terminal that was available at Companies House.

The first observation is that it is very difficult to obtain information on legal owners from Companies House. The first and best option is to look at annual returns which are available as an image, ie non-machine-readable pdfs. However, many of the layers didn’t have updated annual returns. Second, it is possible to look at the company’s full accounts, read the notes and hope that there is some information on legal owners. Many of the layers’ accounts referred to the immediate layer above, and the controlling group, a private equity company from Canada listed on the Toronto’s stock exchange.

However, these are some of the issues we found:

Conclusion

A first analysis of Orbis data shows that corporate ownership is very complex and messy. Company registries that offer information online, for free and in open data format can help obtain necessary information to verify the beneficial owners. However, the lack of verification and enforcement on beneficial ownership data, allows companies to declare an entity, instead of a natural person, as a beneficial owner (as Global Witness had already warned). On top of this, the UK’s lack of open data format for companies’ legal ownership information, makes it very hard to track the ownership chain of companies. This problem is exacerbated by the lack of verification on legal owners, where either annual returns are not filed on time, or where the information reported by the full annual accounts contradicts the shareholder information reported by the same company. In any case, the trove of useful free online data in the UK makes it possible to obtain some information, which is much better than Cayman’s case, where each search costs USD $36, and it’s not clear what information will be obtained.

However, this problem is exacerbated when the ownership chain is long and it includes different types of legal vehicles from different countries. The terminal company that we analysed was “easy” because it included many companies from the UK. Had it included trusts or limited partnerships from the UK, or entities from many other countries, our findings would have been even more limited.

One way to reduce the risks of legal and beneficial ownership inaccuracies is to set limits on the length of the ownership chain, so that it includes few layers (ideally not more than one or two, unless the need is justified). The other complementary limit would be qualitative: to only allow intermediary entities, as long as they are incorporated in countries offering free online data on their legal and beneficial owners. In the case of the UK, both our findings and the OECD’s Global Forum peer review report demonstrate that the vast majority of UK companies (between 75 and 80 per cent) already have very simple structures, so none of them would be affected by the proposed length and quality limits.

The next part of this project will include an analysis of the country of incorporation of most layers of UK terminal companies.

Generation Equality – Calling young feminists for tax justice

The call for youth-led organisations and movements to lead the Action Coalitions for Generation Equality has been reopened by UN Women. Deadline 19 July 2020.

UN Women is part of the United Nation and is the overall convener of the Action Coalitions. The Action Coalitions cover six critical areas (see below) designed to help achieve substantive gender equality and rights for women. Tax Justice is central to achieving greater economic justice and rights.

The Generation Equality Forum is a global gathering for gender equality, convened by UN Women and co-chaired by France and Mexico.  The virtual Forum events (as they must since COVID 19) take place 25 years after the Beijing Declaration and Platform for Action (English, Spanish, French, Russian, Arabic, Chinese) – the ‘blueprint to achieve women’s empowerment and gender equality’. The Generation Equality Forum will take stock and chart a set of actions to accelerate progress for women’s rights and substantive gender equality.

What are Action Coalitions?
Action Coalitions will be vital to a strong, vibrant and results-driven constituency of partners. UN Women is the overall convener of the Generation Equality Action Coalitions, covering six critical areas:

What is required of leaders of Action Coalitions?
The criteria for all leaders of Action Coalitions is as follows:

Why should you apply?
Youth is one of the pillars for the Generation Equality Forum, and this will be a great opportunity to lead feminists and activists around the world, putting young person’s rights at the centre of all commitments. You’ll get to network with decision-makers and feminist movements, and have a chance to engage meaningfully in five year-plan actions.

Apply now

View the application form in: English, Spanish, French.

It’s got to be automatic: Trillions of dollars offshore revealed by Tax Justice Network policy success

This is a moment, in these strange times, to celebrate an ongoing success in the history of the tax justice movement. Automatic, multilateral exchange of information on financial accounts is the A of our ABC of tax transparency. It has been a campaign aim since our inception in the early 2000s, as the key to ending bank secrecy. It is the start point to unravel the enormous volume of illegitimately held global wealth.

The OECD announced this week that “nearly 100 countries carried out automatic exchange of information in 2019, enabling their tax authorities to obtain data on 84 million financial accounts held offshore by their residents, covering total assets of EUR 10 trillion” (their emphasis).  

Back in the day, the OECD was the stout defender of information exchange ‘upon request’. That polite phrase referred to a standard under which countries looking at a particular individual (no ‘fishing trips’ allowed) had to put together a small dossier to justify it, and then ask financial centres nicely for specific pieces of information. In many cases they still didn’t get it, because of some invented obstacle or other. That’s why we’ve always advocated automatic exchange: the annual, multilateral exchange of information on the financial accounts of other countries’ residents.

And how times change…

Tax Justice Network, 2005: The current state of the European Union Savings Tax Directive is far from ideal [but it] has established the principle of automatic information exchange between nations and is therefore a welcome step towards a global framework for automatic information exchange.

– Tax Us If You Can , Tax Justice Network, 2005 (p.40).

OECD, 2020: Automatic exchange of information is a game changer… The discovery of previously hidden accounts thanks to automatic exchange of information has and will lead to billions in additional tax revenues.

~ OECD Secretary-General Angel Gurría, 30 June 2020.

Estimating the hidden sums

An important tactic we used to bring attention to the issue was to publish estimates of the volume of assets involved. Just how much money, potentially ill-earned and untaxed, was floating around the world while policymakers put their fingers in their ears and shouted ‘La la la! “Upon request” is the OECD standard!’?

A study published in 2005, The Price of Offshore, drew on data published by financial industry sources and estimated the global total of assets held offshore by high net worth individuals at approximately $11.5 trillion. With tax authorities providing little or no data on the scale of declared offshore financial assets, the proportion of this which was undeclared for tax purposes was literally, then, unknowable.

Front page coverage for The Price of Offshore, Revisited

In 2012, we published an update with a substantially more rigorous methodology: The Price of Offshore, Revisited. Here, James Henry – one of our senior advisers and the widely published former chief economist for McKinsey’s – utilises four different approaches to make the most of the available data, and provide a more robust estimate than any previous: some $21 trillion to $32 trillion.

It’s important to note, both in general and for this discussion in particular, that the estimate relates to a wide range of financial assets – but also excludes many non-financial assets. There is no way of stating with precision what share of the assets are declared to home tax authorities – although the evidence is clear that automatic information exchange dramatically increases compliance. The 2014 estimates of Gabriel Zucman, Berkeley economist and ICRICT commissioner, assess a rather narrower range of financial assets and put their total at roughly $8 trillion, of which around 80% is estimated to be undeclared to tax authorities.

Petr Jansky and I survey these and a range of other estimates in our new book, Estimating Illicit Financial Flows – published with open access by Oxford University Press. No method is perfect, because of the inevitable data problems – the very success of tax evasion depends on being uncounted. In part for that reason, policymakers not keen to take action were quick to pour scorn on the suggested orders of magnitude.

A measure of progress

There have been two critical steps on the way here: the EU Saving Tax Directive, which introduced a limited form of automatic exchange among EU member states; and the Foreign Account Tax Compliance Act, FATCA, which required the financial institutions of all other countries to provide equivalent information annually, and uni-directionally, that is, only one way, to the United States. At which point, the G8 in 2013 told the OECD to get with our programme!

This allowed the OECD to bring forward a multilateral instrument based on the EU approach, which would have been impossible without US permission. And although the Obama administration u-turned on its commitment to participate within a few months, the process was inexorably underway.

Now the OECD Common Reporting Standard is in place, with a couple of years of operation under its belt, and the OECD has announced new statistics on its coverage: 84 million accounts containing 10 trillion euros ($11.2 trillion).

I’ll come to the caveats below, but some positivity first. This is outstanding! Here’s why.

First, the world is finally taking seriously the scale and threat of offshore tax evasion. The ability of governments to tax their elites, and to ensure they contribute to the societies from which they profit, is greatly improved.

Second, the numbers confirm at a stroke the orders of magnitude involved, and indeed those estimated by James Henry for the Tax Justice Network. Bearing in mind that the data refer to a much narrower set of financial assets than the Price of Offshore estimates; and that they exclude the US and many lower-income countries; there is clear confirmation here.

Now imagine if the United States participated in automatic exchange as well. The US is the largest financial centre, and takes second place on the 2020 Financial Secrecy Index behind only the highly secretive Cayman. As such, the US is now the preferred tax haven for a great deal of foreign money – the last holdout against transparency. The value of financial accounts held would likely swell to perhaps $13 trillion or $14 trillion if the US were to participate – and the share of that additional wealth undeclared to home country tax authorities is likely to be particularly high. For now, you can find Jim’s latest estimates on his site.

Third, as Jim pointed out in correspondence, the new numbers confirm an important point about the Tax Justice Network’s approach. There is a virtuous circle built in. Progress on the ABC of transparency not only supports greater accountability and improved compliance directly. It also strengthens our estimates of scale, in turn raising the pressure for further transparency and the policy measures ultimately to end the abuses.

Sunlight disinfects, and the bigger the crack, the more pressure there is to open the door all the way.

But you’re still complaining?

You bet. The OECD’s Common Reporting Standard, as with the organisation’s adoption of our proposal for country by country reporting by multinational companies (at the behest of the G20), has introduced major and quite unnecessary flaws. In both cases, these involve a systematic bias against lower-income countries and in favour of the biggest OECD members – tax is ultimately political, not technical.

What’s next?

It’s clear that the fact that the OECD did adopt the Tax Justice Network proposal for multilateral, automatic exchange of information on financial accounts, despite all the flaws that need fixed, is having dramatic impacts. Trillions of dollars of offshore assets are now in tax authorities’ scope, that would not otherwise ever have been. We need to know more about them, and we need reporting to show tax authorities are acting on failures to declare – but we can see the world has already changed.

The old arguments have fallen away. The claims that such a scale of global, offshore assets was not credible; or that this type of coordinated policy response was unthinkable; these are gone.

And further change is coming. Trillions of dollars more, especially those of lower-income countries excluded by the OECD, remain out of the scope of tax authorities. As in the corporate tax reforms, the OECD has increasingly confirmed that it cannot or will not act as an honest broker.

Globally inclusive measures are needed instead, and the high-level UN FACTI Panel must take up this challenge when it reports next year. The Panel is now actively assessing the many weaknesses in international arrangements for Automatic information exchange; for public registers of Beneficial ownership; for Country by country reporting by multinationals; and much more. In their initial evidence sessions, the Panel has heard many calls for a UN convention, to ensure fully inclusive application of the ABC and to create within the UN system a space for genuinely global negotiations of corporate tax rules.

The remaining element for the Panel would be to take up the recommendation for a UN Centre for Monitoring Taxing Rights. This is a proposal I put forward in The Uncounted, a new book published by Polity Press (and kindly listed by Martin Wolf as one of the Financial Times books for Summer 2020). The Centre would be responsible for the collation, analysis and publication of global data on cross-border tax avoidance and tax evasion, and for tracking the resulting inequalities in taxing rights between countries. While the quality of ABC and other data available would eventually make estimations unnecessary, the Centre would likely play a role initially in driving forward the quality of international estimates such as the Price of Offshore.

Lastly, one to flag. In September 2020, the Tax Justice Network and key partners will be publishing a major set of new numbers…

Image: “the money is that way” by theclyde is licensed under CC BY-NC 2.0

Edition 30 of the Tax Justice Network Arabic monthly podcast #30 الجباية ببساطة

Welcome to the 30th edition of our monthly Arabic podcast/radio show Taxes Simply الجباية ببساطة contributing to tax justice public debate around the world. Taxes Simply الجباية ببساطة is produced and presented by Walid Ben Rhouma and Osama Diab of the Egyptian Initiative for Personal Rights, also an investigative journalist. The programme is available for listeners to download and it’s also available for free to any radio stations who’d like to broadcast it or websites who’d like to share it. You can also join the programme on Facebook and on Twitter.

In the 30th edition of Taxes Simply:

Walid Ben Rhouma and Osama Diab discuss new statistics issued by the Central Agency for Public Mobilization and Statistics (CAPMAS) on the economic impact of the coronavirus on Egyptian households; the discussion focuses on the social groups most affected by the crisis and the unequal impact of the crisis.

Plus: we present a summary of tax and economic news from the Arab region and the world including: 1) A new agreement between Egypt and the IMF 2) The United States blocks a proposal to tax multinationals and 3) The fears for a Tunisian economic contraction.

الجباية ببساطة #٣٠ – الأثر غير المتكافئ لجائحة كورونا على الدخل

أهلا وسهلًا بكم في العدد الثلاثين من الجباية ببساطة. في الجزء الأول من هذا العدد يتناقش وليد بن رحومة وأسامة دياب حول إحصائيات جديدة صادرة عن الجهاز المركزي للتعبئة العامة والإحصاء المصري عن أثر فيروس كورونا الاقتصادي على الأسر المصرية، ويتمحور النقاش حول أكثر الفئات تضررًا من الأزمة والأثر غير المتكافئ للأزمة.

في القسم الثاني نتناول ملخص لبعض أخبار الضرائب والاقتصاد من المنطقة العربية والعالم، ويشمل ملخصنا للأخبار: ١) اتفاق جديد بين مصر وصندوق النقد؛ ٢) الولايات المتحدة تعطل مشروعا لفرض الضريبة على الشركات متعددة الجنسيات؛ ٣) توقعات بانكماش الاقتصاد التونسي.

تابعونا على صفحتنا على الفايسبوك وتويتر https://www.facebook.com/ TaxesSimplyTweets by taxes_simply

The Tax Justice Network’s Francophone podcast: Un nouvel outil pour traquer la vulnérabilité aux flux financier Illicites, édition 17

Here’s the 17th edition of Tax Justice Network’s monthly podcast/radio show for francophone Africa produced and presented by finance journalist Idriss Linge in Cameroon. Nous sommes fiers de partager avec vous cette nouvelle émission de radio/podcast du Réseau pour la Justice Fiscale, Tax Justice Network produite en Afrique francophone par le journaliste financier Idriss Linge au Cameroun.

Pour cette 17ème édition de votre Podcast Francophone « Impôts et Justice Sociale », nous revenons sur l’outil de mesure du niveau d’exposition des pays aux Flux Financiers Illicites. Cette plateforme développée par Tax Justice Network, permet à diverses catégories d’utilisateurs, de mesurer le risque de fuite des capitaux qui existe entre les pays et leurs partenaires commerciaux. Nous revenons aussi sur les débats parlementaires au Cameroun, où un député interroge le gouvernement sur les cadeaux fiscaux faits aux entreprises du fait de la crise, alors que le pays a besoin de ressources. Nous interrogeons enfin divers acteurs de la société civile africaine sur les questions de transparence budgétaire en Afrique

Interviennent dans ce podcast:

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Beneficial ownership transparency in Africa: The state of play in 2020

Leak after leak has confirmed what African citizens have long suspected: the elite hide their actions and identities to loot state resources and reduce taxes owed. A new study published today by the Tax Justice Network Africa and Tax Justice Network examines one of the steps African countries are taken to address this issue: beneficial ownership transparency.

Earlier this year, the International Consortium of Investigative Journalists investigated Africa’s wealthiest woman, Isabel dos Santos, who is the daughter of former Angolan President José Eduardo dos Santos, for allegedly moving millions in public assets and revenue out of Angola.

Comprising over 715,000 documents, the Luanda Leaks on the surface sounds like just another story of corruption in Africa. However, the leaked documents suggest that dos Santos and her husband were only able to move the ill-gotten gains thanks to a web of at least 94 secrecy jurisdictions across the world through an “archipelago of shell companies”.

Indeed, as Claudia Gastrow writes

“‘African corruption’ is only African as regards its victims, its perpetrators are institutions and individuals from across the globe who are willing to loot without conscience as they watch their offshore accounts grow.”

Claudia Gastrow, Laundering Isabel Dos Santos, Africa is a Country

Financing Africa’s development is deeply undermined by global financial secrecy. Illicit financial flows exiting the continent dwarf overseas development assistance entering the continent, and erode the sovereignty of nations in raising revenues domestically for public expenditure and investment.

In 2015, in 30 African countries, capital flight averaged about two-thirds of gross domestic product and vastly exceeded external debt. While illicit assets abroad are private, debt is a collective liability of current and future generations of Africans.

Tackling illicit financial flows with beneficial ownership transparency

Mr Smith is the beneficial owner of Company A in this complex arrangement – (Adapted from OECD & IDB, A Beneficial Ownership Implementation Toolkit, 2019, p. 8)

African countries are taking action to domestically address financial secrecy, including requiring the beneficial owners of companies, partnerships, foundations and trusts to register. Identifying, registering and disclosing the real people (beneficial owners) who ultimately own or control legal vehicles is a key policy for promoting and protecting domestic revenue mobilisation that may otherwise be eroded by illicit cross-border financial transactions including money laundering, tax evasion and avoidance, corruption and terrorist financing.

Beneficial ownership registration was placed squarely on the African agenda to address illicit financial flows in 2015, with the launch of the African Union and United Nations Economic Commission for Africa’s report of the High Level Panel on Illicit Financial Flows from Africa. The High Level Panel was emphatic that the year-on-year haemorrhaging of government revenues was a fundamental obstacle to achieving sustained human development, the fulfilment of basic human rights and the ending of poverty.

Beneficial ownership disclosure can allow better oversight by the public and their representatives, especially when entities are involved in extracting mineral resources that are vested in the state on behalf of the people or are bidding for public contracts. For example, beneficial ownership information is vital for monitoring compliance where countries have mineral and local content laws in place that require a certain proportion of mineral rights be held by indigenous groups, or nationally-owned or majority women-owned companies be prioritised in a mining company’s procurement of goods and services.

The state of play of beneficial ownership in Africa today

A new study published today by the Tax Justice Network Africa and Tax Justice Network examines the progress being made towards beneficial ownership transparency in 17 African countries. This draws on the data from the Financial Secrecy Index 2020 and complements a global study of beneficial ownership registration.

The study finds that seven jurisdictions have introduced legislation requiring the registration of beneficial ownership information. These are Botswana, Egypt, Ghana, Kenya, Mauritius, the Seychelles and Tunisia.

Botswana joins just three other countries worldwide (Argentina, Ecuador and Saudi Arabia) that have transparent measures for companies that can be interpreted as requiring all beneficial owners with just one share to register.

Across the world, 81 of the 133 countries assessed in the Financial Secrecy Index have laws and regulations for beneficial ownership registration. Of these countries, 68 countries have partial or complete registration of beneficial owners, and in some cases, this is not only for companies, but also for partnerships, foundations and trusts.

Jurisdictions with laws and regulations for beneficial ownership registration in 2020

Effectiveness of laws is, however, limited in countries that continue to allow bearer shares and where updating information is not mandatory. No African country makes beneficial ownership information available online, for free, for all sectors, and for all legal vehicles.

The chart below shows the state of play for beneficial ownership registration of companies in Africa. For beneficial ownership registration to be effective, bearer shares must be cancelled, be made unavailable or be immobilised. All domestic companies must be required to register all of their beneficial owners in all cases, except for common exemptions for state-owned companies and listed companies. The effectiveness of beneficial ownership registration is also dependent on the information being updated along with the threshold set for registration; it should not be higher than the “more than 25% ownership” threshold. For the greatest transparency, all information should be available online, ideally for free and in open data format.

Effective registration of company beneficial ownership information

In 6 of the 17 assessed African countries, bearer shares have not been immobilised as shown in the first column of the chart below (Angola, Kenya, Liberia, Morocco, South Africa, Tanzania). The second column shows that of the 10 countries where bearer shares do not pose a risk, only Ghana, Botswana, Seychelles and Tunisia require the registration of all beneficial owners of all types of companies with a government authority, like the Registrar of Companies. The next column goes on to show that in only three jurisdictions – Ghana, Botswana and the Seychelles – does this information have to be updated. In none of the assessed countries does this information have to be online.

This year progress is expected for ending anonymous companies extracting solid minerals, oil and gas in Africa. Countries participating in the voluntary Extractive Industries Transparency Initiative are required to introduce public registries for beneficial owners of mining, oil and gas companies. Yet beneficial ownership transparency is required for all sectors.

Recommendations

The study makes practical recommendations on how countries can implement beneficial ownership registration and improve the effectiveness of disclosure. In summary:

Such domestic action is critical for African countries. Yet the main providers of financial secrecy lie outside the continent. Thus furthering the global movement towards greater public beneficial ownership disclosure is required. Making information public across all jurisdictions will provide African governmental regulatory authorities and watchdogs, financial institutions, investors, journalists and civil society groups with access to information for investigations, asset recovery, public contracting, entering mining contracts, improving tax compliance, and more.

The continent must continue to stand united in requiring those most complicit, especially former colonial powers, to make this information publicly available.

Download the report.

Carbon Taxes Can Be Progressive: Myth-busting and Mainstreaming Carbon Taxes

We recently published a two part Tax Justice Focus special on climate crisis and tax justice. This blog reproduces the article by Jacqueline Cottrell, in which she explains that while carbon taxes were once at the centre of discussions about tackling climate crisis, aggressive lobbying by fossil fuel advocates persuaded the public that they are regressive and would hit the world’s poorest hardest. In this article Cottrell calls for citizen’s assemblies to embed carbon taxes in a broader progressive agenda. Click here to download the first and second parts of our Tax Justice Focus special.

by Jacqueline Cottrell

Myth-busting

It is an old story of neoclassical economics that policymakers must be prepared to trade off positive environmental outcomes and GDP growth. Today, in the European Union at least, this myth has been overcome; policymakers now refer to green taxes as “growth-friendly” and are supportive of a European green deal. Myth-busting has been relatively successful – and for good reason. None of the huge body of scientific research conducted to examine the impacts of carbon taxation have produced any evidence that it has a negative impact on GDP growth. Instead, research has indicated that a carbon price is the most efficient and effective instrument to reduce GHG emissions, whether implemented by means of taxes or trading.

When it comes to carbon taxation and social equity, however, many myths persist. It is received wisdom that carbon taxes are unfair and inequitable and have a disproportionately negative impact on lower income groups. The reality is more complex. To understand it, we need to take a closer look at the different dimensions of inequity relevant to climate policy and carbon taxation.

Let us look first at policy outcomes. Without additional welfare spending, carbon taxes may lead to price increases that have negative impacts on lower-income households. On the other hand, carbon taxes can raise really substantial amounts of revenue. A tax of US$70/tCO2 has the potential to raise revenues worth 1-3% of GDP in most countries, or 2-4% of GDP in major developing economies such as China or India. This implies that in low- and middle-income economies, with an average tax-to-GDP ratio of just 12%, carbon taxes can raise 25% more revenue.

In most of low and middle-income countries, the revenues a carbon tax of US$70/ tCO2 could raise dwarf current spending on health, education or welfare. Carbon taxes have the potential to act as a hugely powerful engine for change, reducing inequality and establishing targeted welfare programmes and free health and education systems, as well as funding the transformative changes required to tackle and adapt to the climate emergency.

The second dimension pertains to inequity of contributions to the climate crisis. In 2015, Lucas Chancel and Thomas Piketty found that just 10 percent of the global population – amongst the world’s wealthiest – emit 45 percent of global CO2 emissions. The bottom 50 percent of emitters, almost exclusively from developing countries, are responsible for just 13 percent of global emissions. If we do not implement a carbon tax for social equity reasons, we are letting these 10 percent of polluters get away without paying for the impact of their excesses on the global climate.

Seen in these terms, and assuming that appropriate redistributive mechanisms are in place – free installation of small-scale renewable energy such as rooftop solar, solar water heating or biogas, distribution of clean energy-efficient stoves, cash transfers, or a carbon dividend as proposed by James Boyce in this issue – a high carbon tax, of which 45 percent is paid by the top 10 percent of polluters, has an air of “Robin Hood” about it. The final dimension of inequity relates to climate change outcomes: the devastating impact of the crisis will be most felt by the poor and vulnerable groups, as they will be least able to adapt or respond.

So, why have we not reached agreement on a global carbon tax? The answer to this question is way beyond the scope of this article. But at least one of the reasons is also linked to inequity: in this case, inequity of representation in policy-making. Many industries and individuals have a strong financial interest in the status quo: oil and mining companies, energy-intensive industry, wealthy consumers (let me remind you: around 10 percent of the global population responsible for 45 percent of GHG emissions), to name but a few. These groups exert a great deal of influence in global policy debate, while the voices of the world’s poor and vulnerable are hardly represented.

In contrast to big business, which spends billions lobbying governments every year, civil society is underfunded and poorly organised in comparison, and up until now, has tended not to focus on tax policy.

The joy of tax?

Some citizens are passionately interested in taxes and recognise their potential to shape our societies, looking to Scandinavian countries as an example. All Scandinavian countries have a carbon tax: Sweden has the mother of all carbon taxes, at a rate of US£127/tCO2. Nevertheless, life in Sweden is relatively normal: there are no blackouts, people still drive Volvos, dance to Abba and shop at IKEA, while Sweden leads the way in decarbonising electricity, heating and transport.

On the whole, however, interest in tax policy is limited, including carbon taxes. Josephine Public does not know much about carbon tax, and certainly does not appreciate its potential to raise revenue worth between 1-4% of GDP. Neither does Josephine know that these revenues could be redistributed in whatever way governments see fit, or that they have the potential to transform our societies and economies through redistributive mechanisms, increasing investment in health, education, jobs, low-carbon industries, and access to sustainable energy for all.

Josephine also doesn’t know the best news of all: carbon taxes are fair, as the wealthiest and the biggest polluters pay the most.

Unfortunately, in reality carbon taxes generally hit the headlines when they are perceived as being too high, unfair, or punitive. Articles in favour often cite policy wonks arguing about “externalities”, “the social cost of carbon” and “market failures”. Even if this jargon means something to tax justice campaigners and climate activists, it does not serve well as a call to arms for the typical wo/man on the street. How can we change this?

Mainstreaming

In the past, we did not take the climate crisis seriously enough. Initial responses to “global warming” were not proportionate to a threat to our continued existence on the planet.

In the Northern hemisphere, many joked about warming sounding quite promising. In the global South, governments prioritised GDP growth, calling on high-income governments to tackle climate change given their historical responsibility.

Climate scientists were rightly cautious about drawing a causal link between individual extreme weather events – hurricanes, typhoons, droughts, desertification, devastating floods – and the climate crisis, a reticence which has served as ammunition to climate deniers.

Today, our vocabulary and our understanding has changed. Where public discourse once referred to “climate change” or “global warming”, we now talk about the “climate crisis” or the “climate emergency”. The good news is that this reflects a growing shared understanding of the seriousness and immediacy of the problem.

All over the world, street protests are putting climate action centre stage: schoolchildren and students are participating in “Fridays for Future” strikes, while citizens old and young are joining the Extinction Rebellion’s calls for decarbonisation. In October 2019, 400 scientists joined protests on the streets of London, several of them contributors to IPCC reports on climate change.

Yet to go further and achieve decarbonisation, these movements need to identify and articulate specific policy demands. Policy wonks contend that the best carbon tax would be a global one – to prevent distortions between countries and keep decarbonisation as efficient as possible. The question is: How might a global carbon tax be achieved?

The Extinction Rebellion in the UK is calling for a citizen’s assembly. Taking a global approach and creating a number of citizen’s assemblies, one for each continent, or part of a continent, would take the instrument debate out of clandestine meetings between big business and policymakers and move it into the public domain, to a place where evidence is public and subject to scrutiny.

Citizen’s assemblies would put the evidence in favour of carbon taxation, alongside other instruments, before a wide audience. It would give experts the opportunity to explain why carbon taxes are a good thing, that they can be effective, fair and equitable, and that their revenues can be used to reshape the societies and economies we live in. I believe that under such circumstances, the case for a carbon tax would win out.

Mainstreaming climate policy discussions through citizen’s assemblies would create a platform for the planet’s inhabitants all to be vocal in our support of ambitious climate policy in general and carbon taxes in particular. The results could be fed into UNFCCC negotiations and drive the step change in climate policy which is both urgently necessary and sadly lacking. What a coup for the UK government at the COP26 in Glasgow if they could negotiate a global agreement to implement a series of global citizen’s assemblies in 2021?

Ultimately, we have to recognise that one way or another, we are all going to have to deal with the climate crisis. We can choose to address it now with a carbon tax, reducing GHG emissions and using revenues as an engine for enhancing social equity and transforming our economies and societies according to our democratic wishes. Alternatively, we can pass the problem on to future generations and leave them to look on, powerless, as the climate emergency transforms our societies and economies in ways that we cannot imagine. Putting this choice in the hands of global citizens now is the only equitable way forward.

* Jacqueline Cottrell is an environmental fiscal policy consultant active in the field of development cooperation for numerous international organisations. She is a Senior Associate at Green Budget Germany and a member of the international programme committee of the Global Conference on Environmental Taxation. Her publications include a study on fiscal policies to address the health impacts of the transport sector in Jakarta, Indonesia (UNEP, forthcoming), A Climate of Fairness: Environmental Taxation and Tax Justice in Developing Countries (VIDC 2018), andEnvironmental Tax Reform in Developing, Emerging and Transition Economies(German Development Institute, 2016).

Systemic racism, reparations and tax justice: the Tax Justice Network podcast, June 2020

In this episode of the Tax Justice Network’s monthly podcast, the Taxcast:

Faulkner wrote: “The past is never dead. It’s not even past.”

As we discuss, the legacy of centuries of institutionalised racism is that a wealth chasm has been created between black and white communities.

We also know that the City of London in Britain built its wealth from slavery and empire. Still today, major finance sectors have extractive business models which impoverish some of the world’s poorest nations. And, financial secrecy is another form of empire.

So how can we think about combining tax justice and reparations? Keval Bharadia‘s work on a super tax on the $8 trillion a day financial markets could help show the way. And all financial institutions must have independent slavery money audits. For those financial institutions now coming forward and offering what they’re calling reparations funds, how do we ensure that these funds are large, they’re targeted to the right places, and they’re ongoing?

A transcript of the programme is available here (not 100% accurate)

Featuring:

We’re recovering from many things. We’re recovering from COVID-19, we’re recovering from 400 years of oppression, and we are also recovering from a looming economic downturn. And one thing we know for sure, and we continue to learn with every economic downturn is that States have choices. They have a choice point and that’s to cut services and continue to cut their budgets that harm families that are in need – or raise revenue, raise revenue on corporations, raise revenue on those that are most profitable and the wealthy. And that’s a racialised choice, given the country’s history and ongoing biases.”

~ Cortney Sanders, Center on Budget and Policy Priorities

There needs to be a proper negotiation on what level of reparations should be paid and to whom and who will be responsible for holding reparations in trust funds for the genuine benefit of the descendants of slaves. What must not happen is that banks and other companies use tokenistic reparation payments as an exercise in white-washing while not disclosing the full history of their involvement in slavery or in imperial plunder and pillage.”

~ John Christensen, Tax Justice Network

Want to download and listen on the go? Download onto your phone or hand held device by clicking here.

Want more Taxcasts? The full playlist is here and here. Or here.

Want to subscribe? Subscribe via email by contacting the Taxcast producer on naomi [at] taxjustice.net OR subscribe to the Taxcast RSS feed here OR subscribe to our youtube channel, Tax Justice TV OR find us on Acast, Spotify, iTunes or Stitcher etc. Please leave us feedback and encourage others to listen!

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Tax Justice Network Portuguese podcast #14: De onde virá o dinheiro para salvar vidas?

Existem “pílulas tributárias” para uma retomada econômica mais sustentável e redistributiva.

O  episódio #14 do É da sua conta receita quatro “pílulas” que podem fortalecer o orçamento público para que governos tomem decisões justas no enfrentamento da crise, priorizando o combate à pobreza e à desigualdade, a manutenção de empregos e o resgate de pequenas e médias empresas.

Nosso colunista, jornalista da Tax Justice Network Nick Shaxson aborda a primeira “pílula tributária”, a taxação sobre lucro excedente de grandes corporações. A Comissão Independente para a Reforma do Imposto sobre Corporações Internacionais (Icrict) apresenta a “pílula” para adequar a tributação de multinacionais que operam em monopólios ou oligopólios. A terceira “pílula” é a taxação de grandes fortunas. Revisão de isenções e benefícios tributários a empresas e setores econômicos e transparência sobre esse tipo de decisão resumem os efeitos esperados pelo uso da quarta “pílula tributária”.

Participantes desta edição:

Download do podcast: https://traffic.libsyn.com/secure/edasuaconta/edasuaconta14.mp3

Leia mais:

Campanha Taxar Fortunas para Salvar Vidas

10 Medidas Tributárias Emergenciais

Imposto às grandes fortunas: propostas em todo o mundo (em espanhol)

É hora de reviver os impostos sobre lucros excedentes (em inglês)

Relatório da ICRICT “Pandemia global, recuperação econômica sustentável e tributação internacional (em inglês, espanhol e francês)

Conecte-se com a gente!

www.edasuaconta.com 

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É da sua conta é o podcast mensal em português da Tax Justice Network, com produção de Daniela Stefano, Grazielle David e Luciano Máximo e coordenação de Naomi Fowler.O download do programa é gratuito e a reprodução é livre para rádios.

Seeking a tax justice podcast commentator and consultant in Arabic

The Tax Justice Network produces five monthly podcasts: the Taxcast in English,  Justicia ImPositiva in Spanish, Impôts et Justice Sociale in French, É da sua conta in Portuguese, and our Arabic podcast الجباية ببساطة

Our monthly podcasts are aimed at ordinary citizens, campaigners and practitioners, filling the gap in regional media coverage and analysis of tax, redistribution, financial secrecy and the global infrastructure of corruption, holding governments to account. The podcasts empower citizens to engage in and influence debates on these issues, and provide the solutions needed to support change. The podcasts are offered free to radio stations, as well as for downloading. They also reach key influencers: journalists, researchers, bloggers, tax and corruption experts, lawyers, policy makers, politicians and NGOs.

The Tax Justice Network is seeking a tax justice commentator and consultant for our Arabic podcast. Please find all details on the role and how to apply here. The deadline for applications is July 20th 2020. [Update: application deadline now extended to September 2nd 2020 with a new start date of September 7th 2020]

Our producer Walid Ben Rhouma has been producing and hosting the podcast for almost three years and, after a happy and fruitful relationship, our collaborating journalist and human rights expert Osama Diab is leaving our tax justice podcast family and handing on the microphone!

If you’re the right person to replace him, we’d love to meet you. You need to be an Arabic and English speaker who can continue Osama’s role of helping educate listeners in an accessible way on tax justice, helping source stories, great interviewees, compile headlines, always finding effective ways to explain to listeners about taxation, financial secrecy, tax havens, corporate tax cheating, and economic justice, communicating the global power aspects of who makes the rules, and how.

You will need to be very familiar with the Tax Justice Network’s solutions to all these problems and able to communicate them and ensure the programme is ‘on-message’. You will also appear each month on the podcast as a commentator discussing and analysing one or two agreed topics relevant to that month with Walid. You will be supported by me, Naomi Fowler – I produce the English language podcast, coordinate all our
podcasts, and will have editorial oversight.

Please find all application details here. I look forward to hearing from you. Here’s the team you’ll be a part of, broadcasting tax justice in five languages:

Track your country’s vulnerability to illicit financial flows with our new tool

Illicit financial flows are transfers of money from one country to another that are forbidden by law, rules or custom. They damage economies, societies, public finances and governance of countries around the globe. A key challenge to tackling illicit financial flows is the difficulty countries face in identifying which financial flows carry the largest risk to their economies. The Tax Justice Network is today launching the Illicit Financial Flows Vulnerability Tracker to help countries identify the trading partners and channels that pose the greatest risks to their economies.

Our previous research identified the eight main channels in which illicit financial flows take place: trade (exports and imports), banking positions (claims and liabilities), foreign direct investment (outward and inward) and portfolio investment (outward and inward).

For each of the eight different channels through which illicit financial flows operate, we calculated three measures.

  1. Vulnerability captures how financially secretive the country’s trade, investment or banking partners are. Vulnerability reports the average financial secrecy level of all partners with which the country trades or invests for a given channel, weighted by the volume of trade or investment each partner is responsible. For example, if all the inward foreign direct investment a country receives comes from the Cayman Islands, one of the world’s greatest enablers of financial secrecy, the country would have a high vulnerability measure on foreign direct investments.
  2. Intensity reports the share of national GDP that the channel makes up, helping capture the importance of the channel to the country. Intensity does not measure the secrecy involved in the channel nor the risks of illicit finanical flows the channel poses. For example, foreign direct investments may represent 10 per cent of a country’s GDP.
  3. Exposure combines a channel’s vulnerability and intensity to estimate the share of a country’s GDP exposed to illicit financial flows by the channel. Comparing the exposure levels of different channels helps countries identify the channels that most expose their economies to illicit financial flows. For example, if a country’s inward foreign direct investment channel has a vulnerability of 76 and the channel accounts for 10 per cent of the country’s GDP, the country’s exposure score in inward foreign direct investment would be 7.6 per cent. This means 7.6 per cent of the country’s GDP is exposed to illegal transfers of money.

The Tax Justice Network’s new Illicit Financial Flows Vulnerability Tracker allows users to explore illicit financial flows data with interactive tools, and understand which countries are more vulnerable to illicit financial flows, and more importantly, why: which partner countries and which channels are responsible for the vulnerability in a country’s economy.

The tracker consists of three tools: map view, country profiles and country comparison.

Tool 1: Map view

The interactive map allows users to understand which countries and regions are more vulnerable to illicit financial flows. For example, we see that the vulnerability of Brazil to outward foreign direct investment in 2017 is 67 (a very high score). This implies that Brazilian residents own many companies in places with high levels of financial secrecy, indicating high risks for illicit financial flows (and offshore tax evasion) to occur via direct investment.

Tool 2: Country profile

Clicking on a country (or clicking on “country profiles” in the top menu) takes you to the country profile page of the country you selected. Each country’s profile page provides a detailed breakdown of the 10 trading partners that are most responsible for the country’s vulnerability, intensity or exposure for a given channel. Country profile pages also allow you to see year to year changes in a country’s vulnerability, intensity or exposure levels for all eight channels. In the case of Brazil’s country profile, the webpage shows that high vulnerability to outward direct investment is caused by the top three partner countries: Cayman Islands (responsible of 27 per cent of the vulnerability), British Virgin Islands (17 per cent) and Bahamas (14 per cent)). Cayman Islands—with a secrecy score of 76, British Virgin Islands—with a secrecy score of 71and Bahamas—with a secrecy score of 75— are three of the most secretive countries in the world. The left panel allows the user to easily switch between channels, variables and years.

Tool 3: Comparison tool

Finally, the comparison tool allows you to compare countries’ vulnerabilities, intensities and exposures across different channels. For example, comparing Brazil, Chile, Argentina and Peru, we can observe that Brazil is highly vulnerable to illicit financial flows. While Peru’s vulnerability has decreased over time, Brazil’s remained constant.

The rest of this blog provides three case studies we’ve compiled on Ukraine, Ghana and India by using the Illicit Financial Flows Vulnerability Tracker.

Case study 1: Ukraine

The majority of foreign direct investment entering Ukraine comes from three countries: the Netherlands, Cyprus and Russia. Other highly secretive jurisdiction, such as Switzerland and British Virgin Islands are also among the top investors in Ukraine.

Foreign direct investment (inward flow)

Foreign direct investment exiting Ukraine is primarily destined for Russia and Cyprus.

Foreign direct investment (outward flow)

Case study 2: Ghana

Ghana gained independence from the United Kingdom in 1957. However, the influence of the former empire is still highly present. Outward bank deposits are often situated in the United Kingdom and British Crown Dependencies Jersey and the Isle of Man.

Bank deposit (outward flow, claims)

A large share of inward foreign direct investment comes the United Kingdom, and, concerningly, from highly secretive British Overseas Territories: the Cayman Islands, the British Virgin Islands and Bermuda.

Foreign direct investment (inward flow)

India: The Mauritius connection

A large fraction of India’s inward foreign portfolio investment (non-controlling investment in equity and debt securities) enters the country via Mauritius, Luxembourg and Singapore, notorious corporate tax havens known for their roles as conduits. This is not so evident for outward foreign portfolio investment, dominated by flows to the United States and the United Kingdom.

Portfolio direct investment (inward flow, liabilities)

Portfolio direct investment (outward flow, assets)

Visit the tracker

US blows up global project to tax multinational corporations. What now?

“(Other nations) had all come together” via the OECD to “screw America and that’s just not something we’re ever going to be a part of”.

~ US Trade Representative Robert Lighthizer addressing Congress, 17 June 2020, per Sydney Morning Herald.

Boom. The US has blown up ‘BEPS 2.0’, the OECD’s tax reform process with the Financial Times reporting that US Treasury Secretary Steve Mnuchin has written to four European finance ministers to say that the US was “unable to agree even on an interim basis changes to global taxation law that would affect leading US digital companies.” 

US Trade Representative Robert Lighthizer told the US Ways and Means Committee, in response to a question about the letter, that the intention was to block any further progress at the OECD. “We were making no headway and [Mnuchin] made the decision that rather than have them go off on their own, you would just say we’re no longer involved in the negotiations.”

The finance ministers of France, Italy, Spain and the UK responded to the letter – per Belgium’s Le Soir – to say that “the positions and proposals of the United States have always been respected and taken into account”. Although they couldn’t resist a little dig, noting that this included an important US proposal that had never been “fully explained“.

The Trump administration then added the now-traditional confusion, with Treasury spokesperson Monica Crowley tweeting a one-line statement that contradicted Lighthizer on both the nature of the US decision and the reason for it: “The United States has suggested a pause in the OECD talks on international taxation while governments around the world focus on responding to the COVID-19 pandemic and safely reopening their economies.” (Italics added.)

The OECD hit back with its own statement, not from the tax team but directly from the Secretary-General Angel Gurría. His threat was clear: “Absent a multilateral solution, more countries will take unilateral measures and those that have them already may no longer continue to hold them back. This, in turn, would trigger tax disputes and, inevitably, heightened trade tensions. A trade war, especially at this point in time, where the world economy is going through a historical downturn, would hurt the economy, jobs and confidence even further.”

A strong response, effectively arguing the US is irresponsible to undermine talks. But in truth, the process was already in disarray, with the non-OECD members of the Inclusive Framework – that is, the lower-income countries that have typically been rule-takers as far as the OECD is concerned – openly calling out the institution’s failure to take meaningful account of their views. More than that, the OECD had already abandoned – at the behest of the US – most of the original ambition. While still paying lip service to the pledge to go ‘beyond the arm’s length principle’, the secretariat had tried to impose a US-French deal that did little of this at best.

Our research with the Independent Commission for the Reform of International Corporate Taxation (ICRICT) showed that the OECD proposal would have moved few of the profits declared in tax havens back to the countries where the real economic activity takes place; and would have primarily benefited a few OECD members, including the US, over all others. (Incidentally, we published the full model and the full dataset; sadly, the OECD has still to publish their data or any replicable model, providing only top line numbers that are hard to square with any others).

Digital services taxes? No thanks

Again, what next? The obvious outcome is that a whole slew of countries will now introduce their own digital services taxes (DSTs), to claim some revenues from these major tax-avoiding multinationals. No bad thing, you might think, and perhaps a small step to reduce tax injustice…

But: Digital services taxes are bad taxes. There, I said it. They don’t deal with profit shifting. They don’t ensure a level playing field between businesses (quite the opposite). They don’t address the global inequalities in taxing rights between countries. Digital services taxes don’t address the issue of unearned rents in the pandemic. And they don’t build towards the broader reforms of corporate tax that are now urgently needed (again, quite the opposite).

What do digital services taxes do? They may raise some – typically small – amounts of additional revenue, at a time when it is much needed. They may reduce the effective policy bias to a sector that has been particularly aggressive in its tax dodging. OK. Digital services taxes allow governments to respond to public pressure to do something about tax dodging – without actually doing very much.

The threat of countries going their own way on this added pressure for some international progress at the OECD, but that’s done now. And the threat of digital services taxes certainly did nothing to prevent good proposals like that of the G24 being ditched in favour of the limited, highly complex alternative negotiated bilaterally by the US and France (until the US today threw its toys out of the pram).

Priorities for countries

The ideas that drove the original optimism around BEPS 2.0 have not gone away. And nor, despite the pandemic, has the systemic tax abuse of multinational companies or the role of their advisers at the big four accounting firms. There is an urgent need for reform – and revenue. If countries are to take unilateral action, here are three options – all ultimately consistent with the broader reforms needed:

1. Countries should introduce excess profits taxes. These will allow states to capture a share of the large unearned profits of those companies that are benefiting from the massive state intervention of lockdowns, while all others suffer. But these must be based not on the declared local profits of multinationals, but on a fair share of their global profits. Take the global profits above, say, a 5% return; then apportion to the country a share in line with their share of the multinational’s global sales and staff. The country can then tax these exceptional, unearned, locally generated profits, at a rate of say 75%-95%.

[If all countries do this, there is no double taxation and the multinationals even get to keep a bit of their unearned profits. Not bad for a pandemic when so many are losing so much, so let’s not take any complaints too seriously.]

2. Countries can introduce formulary alternative minimum taxes. Leave the OECD’s failed rules in place for now, awaiting some global negotiation, but draw a line on the extent to which profits can be shifted. If the declared profits after transfer pricing, thin capitalisation and all the other manipulations end up being less than, say, 80% of the country’s fair share of the global profits under a unitary tax approach, the tax authority should simply draw a line there and claim that as the minimum tax base.

[Again, this approach will not lead to double taxation unless other countries are taxing far more than their share – in which case multinationals should be encouraged to address any complaints there instead.]

3. Countries could move unilaterally to a full unitary and formulary approach. There’s no reason, in fact, not to just go the whole way. There’s no need for global agreement, and no reason for this to cause double taxation unless, again, other states are taxing more than their fair share.

Whichever path countries or regional blocs like the EU choose, they should ensure that multinationals are required to publish their country by country reporting. This will confirm to the world that the country is not taxing more than its fair share; and reveal if other countries are continuing to procure profit shifting. And of course, country by country reporting shows the public which multinationals – and which tax advisers – are most aggressively flaunting their social responsibilities to pay tax fairly, like the rest of us. What’s not to like?

Where now for the OECD?

At one level, the OECD faces a simple choice. While it has said that the show must go on, there is presumably a more thoughtful process happening behind closed doors. They could opt to complete the exercise, in the hope that Trump will be replaced and a new administration willing to get on board with the outcome will be along shortly. But this would be an EU deal, with few other countries able or willing to engage fully during the pandemic, and OECD members unwilling to cede real power. And in any case, how likely is it that global corporate tax reform would head the action list of an incoming Biden administration facing a twin crisis of corruption and COVID?

Would the EU want to bother, or instead push ahead itself and finally bring in the Common Consolidated Corporate Tax Base (CCCTB) – ideally on a full unitary basis? It’s hard to see how the OECD could regain any credibility with the Inclusive Framework after putting a red line through their work programme at the behest of the US, so the only argument would have to be ‘come on back, the big bully has gone’. Tricky, although it could perhaps work a bit if the EU was willing to see a more ambitious outcome internationally – something closer to the Common Consolidated Corporate Tax Base for all. But given the EU’s difficulties in dealing with its own tax havens, no one should hold their breath.

Alternatively, the OECD could do what we asked them to do a few months ago: accept that this process is toast, and unconscionably unfair to non-OECD members, and abandon it. It should be painfully clear to all that the negotiation of international tax rules is political, not technical; and the OECD’s legitimacy, such as it is, is technical and not political. This is not the right forum.

The OECD’s future role on tax could be in providing technical support to its members in a global tax negotiation. That negotiation must be at the UN – not because it is perfect, but because that is what it is for: to provide a forum for global political negotiations. The OECD has recently inveigled its way into UN processes, seeking a role to guide some kind of ‘BEPS 3’ for lower-income countries. This too is clearly illegitimate; but hints perhaps at a technical role on the fringes of a political process.

There are many good people working at the OECD to make international tax better. But the organisation has confirmed once again, for what should be the very last time, that it is a members’ club only and cannot be trusted to run a genuinely inclusive process.

Where now for the excluded of the ‘Inclusive Framework’?

It is not coincidental, of course, that OECD members are primarily countries that have had empires and/or are ‘settler nations’ – while those in the ‘Inclusive Framework’ are primarily the colonised, the ‘settled’. If ever there was a time to leave this behind, it’s now.

Three options stand out.

1. The possibility of meaningful, regionally led reforms. A combination of the technical group and the political (the African Tax Administration Forum working with the African Union, say); or a technical group working with a regional power (CIAT, the Inter-American Center of Tax Administrations, with Argentina, perhaps).

2. The UN might finally take on its role as the global forum for the global negotiations over global taxing rights that must, eventually, come to pass. A critical decision facing the high-level UN Panel on Financial Accountability, Transparency and Integrity (FACTI), when it reports in January 2021, is whether to put its full backing to the proposal for a UN tax convention. Such an instrument is intended to deliver fully multilateral commitments to tax transparency measures, and at the same time to establish the forum for such negotiations.

OECD members have already indicated their opposition, following their longstanding blocking of a meaningful role on tax for the UN. If the OECD is a busted flush, even this could perhaps shift; but for now, the third option may be the best bet:

3. This would be process-led by the G24 or G77 groups. The idea would not be to move immediately to a formal, global negotiation. Instead, the groups could convene an open discussion among states, with strong technical support, to allow exploration of the options and likely revenue and broader economic impacts. In effect, the idea would be to convene the sort of process that the Inclusive Framework had set out in its work plan, but with genuinely open participation.

This would allow the potential for consensus to emerge over time, but also provide technical support for countries taking more immediate measures – of the sort described above, for example – in the face of the pandemic and other revenue pressures. The Tax Justice Network stands ready to assist with technical support to any such process, as undoubtedly would the wider global tax justice movement.

Image: “ஆடுகளம்” by Logeshwaran Rajendran is licensed under CC BY-NC 2.0.

The Reboot #2: how to pay for the pandemic (video)

Everyone knows the global economic system isn’t working in the interests of most of us. In our new video series the Reboot we talk about how to fix it. From lockdown because of covid19 Naomi Fowler speaks to John Christensen and Nicholas Shaxson of the Tax Justice Network.

In this second episode of the Reboot: the big question people are asking as many governments are busily ‘printing money’ to tackle the coronavirus is – how can we afford this? We talk about wealthier. economically powerful countries with strong currencies and independent central banks and why they absolutely can afford this. And then we’ll look at the situation for countries which don’t have strong currencies or powerful central banks, many of whom are already seriously indebted to the IMF, World Bank and private creditors.

Naomi Fowler is the host and producer of the Tax Justice Network’s monthly podcast The Taxcast which is available on most podcasts apps.

John Christensen is co-founder of the Tax Justice Network and is a forensic auditor and economist. His research on offshore finance has been widely published in books and academic journals, and John has taken part in many films, television documentaries and radio programmes.

Nicholas Shaxson is a journalist and writer with the Tax Justice Network. He is author of the book Poisoned Wells about the oil industry in Africa, Treasure Islands: Tax havens and the Men who Stole the World and The Finance Curse: how global finance is making us all poorer.

Covid-19: An opportunity for structural reforms to create a people-centred economic system

TJN-AFRICA STATEMENT

This statement from Tax Justice Network-Africa,
reproduced below, can be accessed in pdf format here.

The COVID-19 pandemic has exposed systemic inequalities in the current social, political and economic systems. African countries are disproportionately bearing the brunt of the impacts of the pandemic as a result of decades of privatisation and austerity measures resulting in underfunding of social sectors. The crisis has also exacerbated the weak monetary and fiscal systems, with a limited fiscal capacity to respond. African countries are now also experiencing reduced tax revenues due to reduced economic activities as a result of the loss of export earnings and commodity price collapses.

The differentiated COVID-19 impacts in Africa as in many countries in the global south are as a result of neoliberal, neo-colonial and patriarchal economic systems of oppression through decades of structural adjustment programmes of the 1980/90s. The main political mantra of the Structural Adjustment Programme was to minimise the welfare state by reducing the involvement of State in socio-economic programmes. These policies focused on unviable capital-intensive industries often in commodity sectors, instead of promoting competitive labour-intensive industries. Africa’s low average annual growth of 3.3% in 2014-19 has in turn constrained public finances, leading to underfunded social sectors including health and education systems, weak governance, rapid increases in public debt, and large infrastructure deficits. This neoliberal system continues to entrench a broken international financial architecture that enables illicit financial flows, tax evasion and avoidance by the rich and MNCs. This broken tax system allows transnational corporates to minimise their taxation by shifting their profits to offshore tax havens.

Additionally, the MNCs lobby and obtain low or zero corporate income tax rates from governments growing use of generous tax giveaways aimed at attracting foreign investments. The private sector-led growth policies have resulted in severely undermining the capacity of the State to generate domestic resources required to invest in social sectors and made African countries largely reliant on extern aid to support government programmes. Trade liberalisation has also reshaped economies and relegated developing countries to mainly producing and exporting primary commodities and importing manufactured goods and now impacted by the drop in the price of commodities in the context of a global recession.

The Covid-19 pandemic has created an opportunity to address some of the underlying principles of neo-liberal economic theory and demand structural and systemic reforms for redistributive justice including progressive taxation reforms, and where the wealthy elite and multinational companies pay their fair share. It’s about creating an opportunity to re-examine the continent’s fiscal and economic-policy priorities and creating alternatives to the current structure’s economic model that is fit for purpose and reinvigorating the role of the State.

The impacts of the global pandemic in Africa are not limited to health; it has also affected peoples’ lives socially and economically. Firstly, the pandemic has exposed weak public health systems which are understaffed and poorly resourced due to decades of underfunding and privatisation. Africa is witnessing the vulnerability of privatised and discriminatory health systems, and COVID-19 is increasing the pressures on the already unresponsive public healthcare systems. Secondly, reduced economic activities as a result of lockdown containment measures have led to a reduction in tax revenues despite the increased spending in the health sector. Fewer exports from African countries due to reduced demand and less economic activity has the probability of leading to a substantial economic recession requiring governments to inject money into the economy for survival. However, Africa’s ability to use monetary and fiscal policies to mitigate the pandemic’s economic impact is limited. African countries’ governments and central banks lack the fiscal policy space and capacity to adopt robust and often unprecedented short-run stimulus measures. Governments are constrained by monetary arrangements that prevent them from implementing national strategies. Besides, many African countries have unsustainable sovereign debt levels. Currently, the continent has a total external and domestic debt stock of $500 billion, and the median debt-to-GDP ratio had risen from 38% in 2008 to 54% in 2018. By causing a collapse in exports and terms of trade, the COVID- 19 pandemic is pushing African countries into negative per capita growth.

The effects of the coronavirus are also being felt disproportionately by the poor and the working class. The ILO estimates that more than 72% of total employment in sub-Saharan Africa is in the informal sector. Despite this sizeable informal economy of up to 90%, African countries do not have social welfare systems to cover those without jobs as a result of lockdown measures. The pandemic has led to massive layoffs and non-payment of wages, pushing many workers into unemployment, poverty and starvation. The pandemic has also revealed and deepened existing gaps in social protection systems and has also translated into an intensified care burden for women. This has resulted in increasing the underpaid and unpaid care work and reinforcing patriarchal norms because women, on average perform 76.2 per cent of total hours of unpaid care work, more than three times as much as men. Lastly, most African countries are agriculture-based, and the GDP is primarily built upon agricultural services. However, food sovereignty and security is threatened as food supply chains are disrupted.

We urge African governments to:

Tax Justice Network Spanish language monthly podcast: Los ganadores de la pandemia

Welcome to this month’s podcast and radio programme in Spanish 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! (Ahora también estamos en iTunes y tenemos un nuevo sitio web.)

En este programa especial sobre el coronavirus:

Invitad@s:

MÁS INFORMACIÓN:

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Ahora estamos en iTunes

O envien un correo electronico a Naomi [@] taxjustice.net para ser incorporado/a a nuestra lista de suscriptores.

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COVID-19: Progressive Tax Measures to Realize Rights

Several months into the COVID-19 pandemic people are bracing themselves. ‘Build back better’ is the mantra, but what does that mean in terms of tax justice and human rights?  How should governments respond in the face of anticipated economic and social hardships?

Like many others we are concerned governments’ policies should not deepen inequalities or negate many of our fundamental rights. In the wake of the 2008 financial crisis, many governments ran roughshod over their human rights obligations, insisting that such considerations could not be priortised in the context of such a calamity. This perverse logic had devastating impacts for many millions of people. Indeed it is precisely in the face of a global emergency that human rights norms and standards should be given the highest priority.

This time we want to see a way forward which is both progressive and sustainable.  The Center for Economic & Social Rights (CESR) shares this vision.  Many of the public clearly share it too.

To find the right solutions we need to untangle ‘progressive’ rhetoric from ‘regressive’ policies.  It’s important we establish which are the policies that will make a positive change to people’s lives. And which are the harmful ones which will fail you because, for example, of the country you live in, your race, or your gender. 

CESR is publishing a series of straightforward issue briefs which aim to unpack the human rights principles that must be taken into account in policy responses to the pandemic and what social activists need to know. We are delighted to collaborate with CESR on this their latest briefing Progressive Tax Measures to Realize Rights.  The full briefing is available as a pdf here in English and in Spanish here.

You can find CESR’s published and forthcoming briefings here.

Tax, reparations and ‘Plan B’ for the UK’s tax haven web

The killing of George Floyd by US police in Minnesota, on 25 May 2020, has sparked a public response both more powerful and more international than almost any of the previous cases in a very long line – including Breonna Taylor in Kentucky, 13 March 2020. The demands for justice extend far beyond the specifics of the individuals involved, and instead reach deep into the structurally racist inequalities embedded in countries all around the world.

Reparations for slave… owners?

In the UK, welcome attention is being paid to the typically whitewashed history of the British Empire. As statues of (white, male) slave traders tumbled, Naomi Fowler (the Tax Justice Network’s creative strategist and presenter of the monthly Taxcast) reported on a long-running investigative project. This focuses on the financial institutions and others who benefited from the unrivalled generosity of the British government, which in 1835 recompensed the slave owners who were to be ‘dispossessed’ by the abolition of the legal right to hold title to other human beings. Such was the scale of the repayment, at around 40% of annual revenues, that UK taxpayers continued to service the resulting debt until 2015.

The UK Treasury’s bizarre, tone-deaf decision to celebrate the final payment being made prompted a wave of revulsion at the idea that taxes paid by UK tax residents in this century could have been used, in effect, to make good an imagined debt to those who profited from human misery in one of the most shameful elements of an imperial history not lacking in competition. That response included a petition, now reopened, calling for the government to return to taxpayers these illegitimately raised revenues.

The notion that we as tax payers in Britain, including those whose ancestors were subjected to the horrors of enslavement, have by your own admission, financially contributed to such payments, is totally unjust and abhorrent to us… We at no time consented to the misuse of our tax monies to reward such abominable crimes. We therefore demand refund in full so that such funds can be put to better use in repairing the harms done and paid for not in our names.“

– Cleo Lake, petition to HM Revenue and Customs.

‘You broke the social contract’

As both the petition and Naomi Fowler’s piece note, the sums extracted globally by the British empire were much bigger than the compensation paid to slavers – running easily into the trillions of dollars, rather than the few tens of billions associated with this debt. What sort of reparations could conceivably address this scale of damage?

And the human costs of the structurally embedded racism, in both former imperial powers and in settler/colonial states, run far higher. The racial wealth gap is extraordinary, is not closing and will not do so under the types of policies typically considered. White power didn’t just push Black people and others behind, as if stealing some money in a game of Monopoly – as Kimberly Latrice Jones lays out here, ‘you fixed the game… you broke the social contract.’

https://twitter.com/Trevornoah/status/1269291643842289666

Two recent papers from Dr Trevon Logan, the Hazel C. Youngberg Distinguished Professor of Economics at the University of Ohio, show one role of tax in how white people broke the social contract. First, in ‘Do Black Politicians Matter? Evidence from Reconstruction’ (March 2020, Journal of Economic History), Logan shows that after the American Civil War,

“an additional black official increased per capita county tax revenue by $0.20, more than an hour’s wage at the time. The effect was not persistent, however, disappearing entirely once black politicians were removed from office at Reconstruction’s end. Consistent with the stated policy objectives of black officials, I find positive effects of black politicians on land tenancy and black literacy. These results suggest that black political leaders had large effects on public finance and individual outcomes over and above electoral preferences.”

Effective taxation supports the 4 Rs: revenue, redistribution, re-pricing (of public bads) and political representation. Attempts to include freed slaves in public services for the first time required new revenues, to complete a broader social contract, and Black politicians were more likely to pursue this aim. But resistance was often violent – aiming, almost literally, to break that social contract before it could be embedded.

Second, in ‘Whitelashing: Black Politicians, Taxes, and Violence’ (June 2019, NBER), Dr Logan finds that successful revenue-raising was also associated with a higher likelihood of (white) political violence against Black people:

A dollar increase in per capita county taxes increases the likelihood of a violent attack by more than 25%. The result is robust to numerous economic, social, historical, and political factors. I also find that counties where black officeholders were attacked had the largest negative tax revenue changes between 1870 and 1880 and that violence against black politicians is unrelated to other forms of post-Reconstruction racial violence. This provides the first quantitative evidence that political violence at Reconstruction’s end was related to black political efficacy.”

How would one go about establishing an appropriate level and means of reparation for the scale of damage done – not only the outright theft of lives, but the burning down and looting of possibilities for political, social, economic, human development? There are many great resources out there to help think about what this could mean, and this white British male blogger is in no way qualified to opine on right ways and wrong. What does seem clear, however, is that while a monetary aspect is likely necessary, it could never be sufficient. That which must be repaired is also social and political, not purely economic.

Reparations—by which I mean the full acceptance of our collective biography and its consequences—is the price we must pay to see ourselves squarely… What I’m talking about is more than recompense for past injustices—more than a handout, a payoff, hush money, or a reluctant bribe. What I’m talking about is a national reckoning that would lead to spiritual renewal.“

– Ta-Nehisi Coates, ‘The Case for Reparations‘, The Atlantic June 2014.

Global extraction

On the other side of one of empire’s many coins, we find the UK’s network of small islands operating as financial centres. Nick Shaxson’s book Treasure Islands and Michael Oswald’s film, The Spider’s Web, document how the UK turned away from its responsibilities to its remaining territories. Instead of making the financial commitment to support their development as the sun set on the British Empire, successive governments chose instead to encourage them down the road of tax havenry – attracting dirty money from all over the world, and channelling it into the City of London.

The intention was to engineer a ‘win-win’: providing a development path for the territories that would ‘save’ the UK from providing aid funds on an ongoing basis, while at the same time ensuring the continuing pre-eminence of the UK as a global financial centre.

The actual effect, arguably, was lose-lose. Many of the UK’s dependent territories saw a sharp and sustained rise in inequality, as foreign financial services professionals entered and captured the greater share of any subsequent benefits in economic growth. At the same time, a predictable Dutch disease played out, from Jersey to Cayman, with agriculture, tourism and other alternatives largely squeezed out by the new industry, making both the economies and the politics of these islands increasingly dependent on the whims of accounting and international law firms – rather than democratic preferences. This capture, part of what we have labelled the Finance Curse, further deepens the inequality and corruption facing islanders.

Meanwhile, at an international level, the emergence of the UK’s network of secrecy jurisdictions has been a central driver in the process of global extraction that has followed the period of formal Empire. The UK and its network, if taken as a single entity, would consistently be at the top of both the Financial Secrecy Index and the Corporate Tax Haven Index – in other words, the network is the greatest threat facing the world in all aspects of illicit financial flows, from tax abuse to grand corruption.

As we show in a new book with Petr Janský (now free to download in open access, from Oxford University Press), these illicit flows undermine the 4 Rs of tax in countries all around the world. In simple monetary terms, corporate tax avoidance is estimated to cost some $500bn a year in lost revenues, and offshore tax evasion a further $200bn – but as with the pattern of racist political violence that Prof Logan documents in the US, the governance damage is likely to be far greater than the simple loss of immediate revenues for public services.

It is difficult to imagine the means and level of reparations by which the UK might begin to make amends for the global extraction it has driven during decades, and continues to drive today. A very first starting point would be to bring the UK and the network into line with the ABC of tax transparency – committing fully for all of the jurisdictions to participate in Automatic, multilateral exchange of financial account information; to deliver public registers of verified Beneficial ownership information for all companies, trusts and foundations; and to require public Country by country reporting from all multinationals.

In terms of the UK’s territories and the islanders themselves, the position is perhaps more straightforward. The UK has, in effect, saved money year on year by promoting their tax havenry rather than supporting broad-based, sustainable human development strategies. The City of London too has benefited, by receiving a greater stream of (partially laundered) dirty money; although of course this has also contributed to the UK’s own finance curse, driving the governance and inequality problems it now faces.

These funds, in effect taken from the territories by the UK’s failure to meet its responsibilities, should now be provided as the basis to support that permanent transition – away from tax havenry, with both the global and local costs that it imposes, and towards alternative strategies: the ‘Plan B’ that islands should have been supported to develop since the 1950s, instead of pursuing financial secrecy. This is a topic about which the Tax Justice Network has been involved in discussions with partners in many of the jurisdictions over a number of years, and we are cautiously optimistic now about policy ideas beginning to come forward. We’re always interested to hear from others on this, and to support where we can, so do get in touch if that’s you.

Image credit: “New York Protest” by KarlaAnnCoté is licensed under CC BY-ND 2.0.

Britain’s Slave Owner Compensation Loan, reparations and tax havenry

Update: you can hear Naomi Fowler and John Christensen discussing this research in edition 102 of the Taxcast, our monthly podcast, starting about 2 minutes in:

It’s hard to believe but it was only in 2015 that, according to the Treasury, British taxpayers finished ‘paying off’ the debt which the British government incurred in order to compensate British slave owners in 1835 because of the abolition of slavery. Abolition meant their profiteering from human misery would (gradually) come to an end. Not a penny was paid to those who were enslaved and brutalised.

The British government borrowed £20 million to compensate slave owners, which amounted to a massive 40 percent of the Treasury’s annual income or about 5 percent of British GDP. The loan was one of the largest in history.

We wanted to find out which financial institutions were involved in this loan, so I sent two Freedom of Information requests to the UK Treasury and the Bank of England about it. I received two responses, which I’ll detail later, but the names and details of those creditors and investors remain frustratingly out of sight. If you feel you have the skills and time to help us continue the search, please get in touch.

As the toppling of the statue celebrating slave trader Edward Colston by Black Lives Matter protestors in Bristol shows (after years of trying to have it removed, placed in a museum, and being ignored) it’s never been more painfully apparent that, as Kris Manjapra writes,

legacies of slavery continue to shape life for the descendants of the formerly enslaved, and for everyone who lives in Britain, whatever their origin. The legacies of slavery in Britain are not far off; they are in front of our eyes every single day.”

‘s article, along with the work of historian David Olusoga inspired this blog, our investigations, and our Freedom of Information requests on this subject.

British taxpayers would never have discovered they’d completed these loan repayments in 2015 if someone in the British Government’s Treasury Department hadn’t posted this on its official Twitter channel to its hundreds of thousands of followers: Continue reading “Britain’s Slave Owner Compensation Loan, reparations and tax havenry” →

What’s your SCORE? The case for Sustainable Cost Reporting

We recently published a two part Tax Justice Focus special on climate crisis and tax justice. This blog reproduces the article by Richard Murphy, in which he outlines how radical changes to accounting rules would require companies to comprehensively disclose their carbon emissions. Sustainable Cost Reporting, Richard argues, would put company directors into a position where they must accept responsibility for the harm caused by ‘externalities’. Click here to download the first and second parts of our Tax Justice Focus special.

by Richard Murphy *

Accountancy was established to protect investors from fraudulent managers. As the activities of companies now exceed planetary limits accountants must think much more carefully about their public interest responsibilities. Here one of the discipline’s most original and influential thinkers sets out the role new reporting standards could play in aiding a swift and just transition away from fossil fuel dependence.

The climate crisis is real: it is settled science that we must take immediate action to address its consequences. Across the world there has been a response that few in any activist community can ignore. There have been demands for a Green New Deal. Extinction Rebellion has led protests that have revealed the power of civil disobedience. Greta Thunberg has become a global figurehead for creating school strike protests.

The demands have, however, been primarily aimed at governments, which is reasonable given their responsibility for setting environmental policy.  Governments will also be responsible for delivering the new public infrastructure needed to support the different types of economic activity that we now require. But we should not ignore the fact that as few as twenty oil and coal companies may ultimately account for one third of greenhouse gas emissions,[1] and just one hundred companies may account for seventy per cent of these emissions.[2]

What does this have to do with tax justice? In practice, quite a lot, since one of the possible reactions to the climate crisis is to tax the use of carbon-based fuels and another is to provide tax incentives to business to change their behaviour. Both might have a

significant impact on corporate tax bases and we need to understand what this might mean. However, we have almost no reliable data from most businesses on their carbon emissions; nor do we know enough about the economic impacts of any major policy proposals to be in a position to take decisions on such matters . As significantly, when it comes to the corporate tax base, we have almost no idea about which businesses might survive the transition to a net-zero carbon world, and which might not.

That said, moves are underway to address this issue.  Former Governor of the Bank of England, Mark Carney, is promoting voluntary accounting standards created by a Bank for International Settlements initiative called the Task Force on Climate-related Financial Disclosures (TCFD).[3] Carney is to be commended for getting this ball rolling, but what he proposes is inadequate. The TCFD standards are voluntary and current rates of compliance are lamentably low.[4] Worse, TCFD standards do not require businesses to account for the carbon emissions that the products they create or sell give rise to when used by a customer, which means that the downstream environmental externalities businesses create in pursuit of their profits will go unreported.  Given that the climate crisis has arisen because of businesses failing to take responsibility for the externalities of their activities, it is unacceptable for the TCFD standards to omit these downstream externalities.

For this reason the Corporate Accountability Network is developing what it calls sustainable cost reporting (SCORE), a new, mandatory accounting standard which will require businesses to disclose their greenhouse gas emissions (GHG) under four categories:

As is apparent, remoteness from control increases as the Scope number rises, but in each case the reporting entity facilitates the emission. In Scopes 3 and 4 the disclosure has to be split between upstream supply and downstream customer chains so that these can be fully understood. All disclosure will be on a country-by-country reporting basis to both reveal the geographic spread of the impact and to curtail carbon dumping.

Once this information has been disclosed, the reporting entity has to prepare a plan to become net carbon zero, as is necessary if the impact of climate change is to be managed. Crucially, SCORE requires that this plan be published and the cost to the reporting entity of its achievement must be estimated.

The most radical requirement of SCORE is that this cost has then to be included in the accounts of the reporting entity – in full – at the time of adoption of the SCORE standard. The logic is simple: SCORE recognises that the cost to the business of tackling climate change increases if action is deferred, therefore recognition of this cost in the accounts will encourage early action to minimise the final cost to the business of eliminating carbon emissions from its production and consumption chains. That this reverses the traditional accounting approach of discounting future costs is beside the point: nothing is normal about climate change and its impact.

Some important issues should be noted. The first is that SCORE does not put a cost on carbon usage: it covers the cost of removing it, making it far more robust than any alternative approach. SCORE also enables appraisal of each reporting entity on its own terms.

Second, the cost must be based on known technology: a precautionary principle must be applied, meaning that unproven technology cannot be assumed to deliver net-zero carbon, although investment in such technology to reduce the cost provision required (and so, in effect, declare a carbon cost reduction profit) is encouraged.

Third, the provision for costs will need to be reappraised annually and reported upon as a key accounting issue, thus enabling stakeholders to appraise companies’ commitment to their plans, and whether or not those commitments are being delivered on within the cost target. This will allow investors to identify companies that are best able to eliminate GHG emissions.

Crucially, SCORE will reveal that some companies might not be able to make this transition. They are carbon insolvent because they either cannot adapt their processes or will not be able to raise sufficient capital to do so. SCORE will allow for early identification of these entities, providing more time for them to be wound up in an orderly fashion.

All of this feeds into tax justice. The wise use of subsidies, tax allowances and reliefs can be appraised. Indeed, they can be designed to encourage companies with a good SCORE. And if carbon tax is to be used, then its impact – and how to manage the risks within it – will also be capable of appraisal using better data than any we have currently available.

Accounting may have the reputation of being boring. However, counting the right thing, in the right way, at the right time is now key to social, economic, tax and environmental justice. SCORE is designed to help achieve this goal.

* Richard Murphy FCA is the Director of the Corporate Accountability Network and Professor of Practice in International Political Economy, City University, London. His books include The Joy of Tax and The Courageous State.

[1] https://www.theguardian.com/environment/2019/oct/09/revealed-20-firms-third-carbon-emissions

[2] https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/327/original/Carbon-Majors-Report-2017.pdf?1499691240

[3]https://www.fsb-tcfd.org/

[4] https://www.fsb-tcfd.org/publications/tcfd-2019-status-report/

Nixon-era laws have shaped western racism and protected ‘enablers’ of financial crimes

This guest blog written by Dr Mary Alice Young of the University of the West England proposes that in the aftermath of Covid-19, Western governments must redress antiquated and inherently racist organised crime control laws

By Dr Mary Alice Young*

Organised crime is not homogeneous, and is wrongly assumed by many policy makers to be so. This flawed perception of what constitutes organised crime is why countries struggle with ineffective, outdated, organised crime control laws; modern laws which have been constructed around the historical and prohibitionist Nixonian “drug war” template from the 1970s – including the Organized Crime Control Act, the Comprehensive Drug Abuse Control Act and the Bank Secrecy Act (the latter forming the foundation of today’s global anti-money laundering regime) – and which are therefore predicated on the notion that all types of organised crimes groups operate in a similar manner to drug trafficking organisations; that organised crime exists as an external threat linked to minority and ethnic groups; and that the activities carried out by these illicit business ventures must therefore be treated in a similar manner to drug trafficking offences.

Added in to this continuing and incorrect perception of organised crime, is the fact that the definition of the concept itself is fraught with various national, regional and international interpretations which are embedded into global legal systems.  Such interpretations of organised crime into the legal systems of countries, also encompass the assumption that Western efforts to control drug trafficking are the blueprint of so called “good practice”. Yet none of us are any the wiser as to what organised crime is and how to curtail it and efforts to halt its spread remain largely ineffective.

With my colleague Dr Michael Woodiwiss (IASOC Distinguished Scholar), I have written about and published critical works on the conceptualisation of organised crime and its control using primary archival data and empirical data in the form of interviews, most recently in our article “A world fit for money laundering: the Atlantic alliance’s undermining of organized crime control”.  We have explored and continue to explore the processes which have contributed to present day organised crime control laws including those which are designed to combat a myriad of financial frauds and crimes (namely, the global anti-money laundering template). 

Norm shaping, in this context relating to the creation of principles designed to regulate the activities of criminals, rests upon historical and United States (US) borne assumptions of what constitutes organised crime.  The exportation of organised crime control laws from Western countries, to vulnerable countries such as those in the Global South, for example Jamaica and other small island developing states, means that such countries are forced to adopt inflexible, inappropriate and often irrelevant policies.

In Jamaica, the interviews I carried out highlight that the main concerns for law enforcement involve the illicit trafficking of firearms from the US (where they are manufactured) to Jamaica – where they are used, often ending in the tragic loss of Jamaican lives. However, the immediate concerns of Jamaican law enforcement officials and policy makers, are superceded by the priorities of the US which views the lotto scam (a type of advance fee fraud) as a paramount concern because it victimises US citizens and thus is seen as a direct threat to the US, yet conversely does not consider the need to examine the illicit traffic of firearms leaving its ports. Laws, policies, reports and agreements, are therefore tailored to suit the country wielding the greatest financial and political power at the global level, and so remains the fixed narrative left over from the Nixon era, that organised crime cannot be home-grown but is carried out by those belonging to ‘The Other’ – groups which are viewed as not belonging, being different, and existing outside of what is considered acceptable or normal.

It could be observed that organised crime control laws rest upon inherently dangerous perceptions of what ‘The Other’ constitutes. Especially given that from the outset, the US war on drugs was a tactical decision by the Nixon Administration to damage the Black community and conceal anti-democratic and radical tendencies within the American state. This fact was stated by Nixon’s former domestic policy adviser John Ehrlichman who stated in a 1994 interview with Dan Baum, that the Nixon White House had two enemies, these being the anti-war left and black people; by associating marijuana and heroin with those communities, the White House could criminalise them and therefore cause the disruption of those communities.

In reality, organised crime cannot be neatly shoehorned into conveniently labelled boxes depicting characteristics such as race, religion and vocation – although we have the popular media and Hollywood to thank for those demonising stereotypes. Organised crime is adaptive, flexible, exploitative and sometimes rather mundane.

Organised crime moves with us in everyday life: walking the streets with us and constructing the buildings we utilise, keeping corner shops stocked, manicuring the nails of hands up and down the country from Aberdeen to Axminster, cocooning some of us in a false sense of security by offering a chemically induced escape from the everyday, and allowing some of us to purchase rare works of art, animals and antiquities. It allows some of us to live a life of unquestionable luxury, and others just to survive on a daily basis.

Organised crime allows the purchasing of everything from breasts and Botox to trainers and takeaways. Organised crime does not limit itself to class, wealth or status, and we only need to revisit the recent Panama and Paradise Papers to know that the economically and socially elite are as important to the process of illicit money movement, as the local drug dealer is to the dispersal of synthetic drugs on a council estate in the West Midlands.

The vital role of “white collar” enablers in helping to perpetuate organised crime, was recognised forty five years ago by the United Nations at its Fifth Crime Congress on the 1 September 1975, in Geneva, Switzerland. On the table for discussion was the issue of ‘Crime as Business’ which incorporated sub-discussions on ‘Organised Crime, White Collar Crime and Corruption’. The Secretariat concluded in their final report, that in the context of organised crime as business, criminal activities were characterised by those of a high social status – often possessing considerable political power – which enabled them to use or misuse legitimate techniques in business and industry, and therefore remain undetected and invisible.

The recent financial scandals reported in the news are evidence of the fact that the movers and shakers in the world of criminal money management, largely fall outside of ‘The Other’ classification, and often represent individuals more closely associated with the American norm of “white” middle-class America and who prioritise consumption, pleasure and the accumulation of wealth – those who are best placed to circumnavigate the anti-money laundering and organised crime control laws. This is a section of society which was favoured by Nixon’s administration in 1970 and remains so by the Trump administration fifty years later.

As the Covid-19 pandemic wreaks havoc across the globe, recent events following the tragic death of George Floyd at the hands of US law enforcement officers, remind us that the devastating legacy of Nixon’s war on drugs lives on.

The racism, brutality and bigotry directed at the Black community has been normalised under the guise of so-called crime control laws and criminal justice (and has further been widened to apply to anyone who does not fit the accepted social norms so visibly promoted in the West); the dichotomy between the treatment of white collar criminals able to funnel unquantifiable amounts of filthy money through Western financial centres at great cost to the societies of developing nations, and low tier, opportunistic, survivalist criminals, has never been so stark.

While it is far too early to predict how organised crime control will be affected by the pandemic, I urge all governments in the aftermath of this crisis – including the UK government – to reconsider their fundamental misunderstandings of organised crime. Confusions and misunderstandings which are predicated on the aforementioned incorrect, historical perceptions built by US administrations in days gone by, but which continue to inform modern day crime control initiatives.

* Dr Mary Alice Young is a Researcher and Senior Lecturer in International Criminal Law, University of the West of England – [email protected]

How authorities, banks and researchers from around the world are verifying beneficial ownership information

We have recently blogged about the first call of the new Advisory Group to promote beneficial ownership verification that we are co-developing together with the Financial Transparency Coalition, Transparency International, Global Witness, Global Financial Integrity, OpenOwnership, The B Team and the World Economic Forum’s Partnering Against Corruption Initiative (PACI).

We have now held three calls with the Advisory Group, the most recent of which mapped various strategies currently being used to verify beneficial ownership information. These strategies ranged from manual approaches to more advanced and technological ones. All three calls have been very promising for a number of reasons.

First, it involves a diverse multi-stakeholder approach. The organisations participating in the calls have included global and local civil society organisations, journalists and researchers, government authorities from developed and developing countries (especially in Europe, Latin America and Africa) and international organisations (some acting in an observer status), including the World Bank, the IMF, the EU Commission, Europol, the UNODC, the Inter-American Development Bank, the Inter-American Center of Tax Administrations (CIAT), EITI, Open-Government Partnership (OGP), and the German Corporation for International Cooperation (GIZ), among others. However, even more interesting may be the wide participation from the private sector, including banks and other financial companies (Citi, HSBC, Bank of Montreal, PayPal), and compliance and data companies such as Kroll, Ofido and Refinitiv.

What’s great about this wide spectrum of participants, is not just that we all got together to discuss beneficial ownership verification, but that there is an agreement about the most common loopholes, challenges and risks in relation to beneficial ownership transparency as described by this summary of our second call. Most, if not all, participants agree on the importance of public access to beneficial ownership information and the need to verify the information.

Another remarkable aspect is the wide interest in this topic. The first exploratory call to get feedback on the concept note and the second call to discuss common loopholes and challenges, each brought together close to 50 people in a virtual call. In our third and most recent virtual group call, held on 15 May, the number of attendees jumped to more than 90 people representing organisations from 24 different countries including Argentina, Armenia, Canada, Colombia, Costa Rica, Denmark, Ecuador, Germany, Italy, Kenya, Latvia, Nigeria, Norway, Panama, Peru, Slovakia, South Africa, Spain, Switzerland, Tanzania, UK, Ukraine, Uruguay and the US.

Having started delivering virtual conferences more regularly in December 2019 before the Covdi-19 pandemic, we used our learning on how to make virtual conference interactive and engaging to encourage contributions on innovative approaches to beneficial ownership verification. The first call was an exploratory meeting and provided everyone with opportunities to give their feedback in a very horizontal way. Everybody, from department heads of policy-setting international organisations to community activists from the global south, was on an equal footing. The second call featured virtual breakout sessions where participants held discussions in small groups and then shared the outcomes and findings of their discussions  with the rest of the participants once the small groups reconvened. During our third call, we heard 15 brilliant elevator-pitch presentations (4 minutes each) from participants on what is happening in their corner of the world in terms of verification.

The 15 inspirational presentations were delivered by 4 authorities from Denmark, Spain, the UK and Uruguay, 1 journalist from Argentina, 4 activists and researchers from Ecuador, Italy, Germany and the UK, 2 global banks, 3 global data IT and compliance companies and 1 practitioner from Slovakia.

Here’s a snapshot of what we learned:

Verification in some cases requires intense manual work, involving case by case checks, audits, sanctions and the intervention of notaries or lawyers to ensure someone will be held liable for the truthfulness of the registered data. Uruguay and Spain involve notaries. In the case of Spain, Mariano Garcia Fresno, Head of Analysis and Reporting Unit of the General Council of Notaries, described how notaries do thorough checks on the information before they allow a company to be registered. Ines Cobas, from Uruguay’s National Internal Audit Office (AIN), also audits companies’ beneficial ownership registered data by doing integrity and quality checks which may involve obtaining all underlying documentation from a company. Andrej Leonitev exemplified how Slovakia has a very advanced system to ensure a local Slovak intermediary, a lawyer or other professional, will check and be held liable for the beneficial ownership identification and online publication for any company involved in procurement or other receipt of public fund/assets.

Intense manual work was also required by researchers including Tax Justice Network-Germany. Christoph Trautevetter described how, by researching about beneficial owners of investment funds who own Berlin real estate, he found inconsistencies between the information provided by the beneficial ownership registries of Germany, Luxembourg and Denmark (including between Luxembourg’s commercial register and beneficial ownership register). Andres Arauz from EcuadorPapers.org also found the case of politician’s owning offshore entities in violation of their country’s laws.

What is clear though, is that digitalisation is a basic need to facilitate verification of information, especially automated cross-checks and more sophisticated mechanisms. Ricardo Brohm from La Nacion Data in Argentina described how he has been collecting (and sometimes also scrapping) data from a wide range of public sources to create ownership and network maps that enabled him to discover a full story (about the comprehensive list of people and companies related to a conflict of interest case) from a whistleblower mentioning one company obtaining illicit subsidies. Andres Arauz also scrapped Ecuador’s legal and beneficial ownership data to allow searches to be made. Transcrime and its spin-off Crime&tech are also creating their own tool to investigate illicit companies, including redflags that could indicate that a company has been infiltrated by the mafia.

Nienke Palstra from Global Witness described how digitalised and structured information available in open data format, as offered by the UK’s Companies House, is what enabled them to do the well-known analysis of the UK beneficial ownership information and identify many redflags. Global Witness’ findings have helped campaigning in the UK to improve data accuracy. In relation to this, Stephen Webster from BEIS described the current discussions in the UK to implement improvements and add verification mechanisms to Companies House’ beneficial ownership data.

Digitalised and structured data enables automated cross-checks. In addition to the manual checks described above, Uruguay runs some cross-checks between data from tax authorities and the beneficial ownership register to detect cases of non-compliance and impose sanctions. Spain’s notaries register also includes automated cross-checks to identify inconsistencies on a beneficial owner’s shareholdings. However, Jesper Bertelsen from the Danish Business Authority described that Denmark has taken automated cross-checks and verification to a whole new level, including machine-learning and verification of non-resident beneficial owners (about whom Denmark doesn’t have much data). What’s more, they have been inspired to keep working on improving their system after reading our paper on beneficial ownership verification. Interestingly, the Danish Business Authority proved us wrong. We had hoped these checks would become a reality in about five years or so, but Denmark shows that it’s possible to do these checks now. Countries have no time to lose.

As for adopting the latest technologies, Francesco Cardi from Onfido described how they use machine learning to safely confirm the online identity of individuals. Che Sidanius from Refinitiv discussed how they use data and the latest technologies to untangle the complex network of company ownership for the purposes of identifying sanctioned entities and enable organisations to meet their other global regulatory obligations. Another case of machine learning and big data, but also combining banking data on account holders to detect money laundering was illustrated by Howard Cooper from Kroll.

Finally, Juan Reyes from Citi and Ben Trim from HSBC described the procedures undertaken by their banks to perform customer due diligence to determine beneficial ownership of their clients and some of the potential benefits of registers that were verified.

To sum up, all around the world and among different stakeholders (authorities, journalists, researchers and activists, practitioners, banks and compliance/data companies), diverse but related verification strategies are taking place. There is no perfect mechanism, but a combination of various approaches is likely the best way to ensure data accuracy.

We hope that this first mapping approach has inspired participants to make use of mechanisms that have not tried before, so as to create synergies and learn from each other’s practices and lessons.

What’s next?

In principle, our goal was to have a demand-driven approach, where we would find one or two countries interested in implementing a short-term pilot to verify beneficial ownership information. For this reason, we have been carrying out bilateral calls with four countries already, and are planning to keep reaching out to more countries with the help of Open Government Partnership (OGP) and the Extractive Industry Transparency Initiative (EITI).

However, until a pilot takes place, we are looking at different ways to channel the energy, interest, knowledge and experience already present in our multi-stakeholder community on beneficial ownership verification. We are exploring different approaches to include more stakeholders and to put the collective experience to practice.

The Reboot: new Tax Justice Network video series

Welcome to this first episode of The Reboot from the Tax Justice Network. Everyone knows the global economic system isn’t working in the interests of most of us. In our new video series we’re going to talk about how to fix it. From Covid-19 lockdown, Naomi Fowler speaks to John Christensen and Nicholas Shaxson of the Tax Justice Network about the other emergency we need to deal with – the climate crisis and how we finance the transformation we urgently need.

You can read more on financing climate justice here and here in our special Tax Justice Focus featuring the writing and research of leading thinkers and researchers.

Naomi Fowler is the host and producer of the Tax Justice Network’s monthly podcast The Taxcast which is available on most podcasts apps.

John Christensen is co-founder of the Tax Justice Network and is a forensic auditor and economist. His research on offshore finance has been widely published in books and academic journals, and John has taken part in many films, television documentaries and radio programmes.

Nicholas Shaxson is a journalist and writer with the Tax Justice Network. He is author of the book Poisoned Wells about the oil industry in Africa, Treasure Islands: Tax havens and the Men who Stole the World and The Finance Curse: how global finance is making us all poorer.