FT letter: tax reform is needed, but not the destination-based cash flow tax

The Financial Times has published a letter from a wide range of tax justice specialists (including this blogger) commenting on a proposal from Martin Wolf that the corporate income tax (CIT) be replaced by an entirely different tax called the destination-based cash flow tax.  In response we argue that the DBCFT does not provide an answer to the problems confronting the CIT, and will almost certainly worsen global inequality if it were implemented:

(the DBCFT), in effect, is nothing more than an additional VAT in those places with the biggest consumer markets in the world.

The consequence is that it will be regressive within a state as the incidence will be highest on those with lowest income, since the tax will be easy to pass on to consumers. It will reapportion taxable income from the world’s poorer regions and states to the richest ones of all. It will, as a result, increase global inequality when the precise opposite is needed.”

Others have reached similar conclusions.  The members of the International Commission for the Reform of International Corporation Taxation (ICRICT) made a comparative study of various ways of taxing corporations and concluded that DBCFT had several inherent flaws which render it unacceptable:

The commission identifies a wide range of weaknesses for the destination-based cash flow tax (DBCFT) which for a period dominated policy discussions in the United States. First, it would require much greater cooperation between states to resolve issues around MNE operations where there is minimal physical presence in a jurisdiction. Second, the likely violation of World Trade Organisation rules would encourage protectionist conflict. And third, importantly but completely overlooked in the US debate, a global shift towards DBCFT would exacerbate rather than ameliorating the tax injustices that lower-income countries already face.”

Instead, we suggest in our response to Martin Wolf’s article that the time has arrived for the CIT debate to accept that the logical way forward is to adopt the unitary approach to taxing multinationals and apportion the profits to different countries on the basis of economic substance, i.e. sales, employment and where productive assets are actually located:

There is a basis available for global international tax reform. It is to apportion the global profits of companies to states on the basis of where their sales, employment and assets are located. This would deliver global tax justice and coincidentally achieve the other objectives of an effective corporation tax. This is the required direction in which reform must take place.”

We have written extensively about unitary taxation, see here and here, for example.  Beyond the tax justice community the momentum for change in this direction is steadily building; just yesterday, for example, we expressed our support for a new IMF report on corporate taxation which proposes replacing the existing arm’s length based approach with unitary taxation and formulary apportionment:

We also welcome the IMF’s support for replacing the arm’s length approach with unitary taxation and formulary apportionment, so that tax is paid where real business happens – not where profits are surreptitiously shifted to. As the IMF report says, this ‘would greatly reduce the scope for profit shifting’. The IMF’s research confirms that if multinationals were to be taxed in line with where their employees actually work, developing countries would see their tax revenue rise by over 30 per cent on average, with the greatest benefits for smaller and lower-income countries.”

Read Martin Wolf’s article here. And read our response here.

 

Do women go unseen in tax justice?

Imagine if over 50 per cent of the world’s population were cast with an invisibility that impacts their birth, their childhood, their working life, their parenting life, their caring life, their mental and physical health and well-being, and their death? Less hard to imagine, perhaps, if you are one of the women represented in that majority.

On International Women’s Day the tax justice movement must ask: do we sufficiently acknowledge and address women’s invisibility as part of our tax ‘justice’ work. Here are three ways in which women go unseen.

The world’s great invisible economy: unpaid care work

There are over 2 billion people in the world in need of care – that’s more than the number of people on Facebook and more than the number of cars in the world. The majority of care work provided in the world, however, is provide by women and girls for no pay – often women and girls from already marginalised groups, ie unemployed, poor, disabled, uneducated. Care work is just one example of a substantive role played by women and girls which is highly undervalued to the point of invisibility. The ILO’s excellent report on this sets out the growing challenges, inequities and human rights issues within the so called care economy where:

“In 2015, there were 2.1 billion people in need of care (1.9 billion children under the age of 15, of whom 0.8 billion were under six years of age, and 0.2 billion older persons aged at or above their healthy life expectancy). By 2030, the number of care recipients is predicted to reach 2.3 billion”

In 2013 in Mexico, the economic value of unpaid care and domestic work as a percentage of GDP was greater than mining, construction, and transportation and storage combined.

The ILO report makes the point that unless these care needs are properly resourced, global inequalities will continue to grow. Women are not only undervalued for their care role, as mothers they are penalised because of the impact on short term earnings and lifetime earnings for having children. This is even the case in highly developed social democratic countries. It has a uniquely gendered impact. Until care work is seen and valued for its fundamental and growing importance, those in care, and the women providing unpaid care, will continue to need well-resourced social protections that are often largely absent.

Regressive tax cuts cut women out of the democratic process

The invisibility of women is perpetuated when women exist ‘outside’ the tax system. The continuing populist trend in many countries of lowering income tax thresholds means the tax system fails women in its vital role of strengthening the bond between citizen and government in representative democracy. Tax underpins the social contract and for many women that is a right denied them. As countries’ tax bases shrink, so does the space for addressing gender inequalities and holding government accountable.

The erasure of women via the erosion of income and corporate tax is compounded by women’s invisibility in decisions to increase VAT to make the difference. The lack of gender disaggregated data means the true impact of regressive tax regimes on women goes unseen. According to the UN, only 13 per cent of countries dedicate any budget to compiling gender statistics.

New tools for speaking up, old rules for who speaks

As people across the world go online to mark and celebrate International Women’s Day, it’s worth highlighting how traditional gender roles continue to play out undisturbed in digital communications:

“Gender norms infiltrate digital communication today as powerfully (and as detrimentally to women) as they do in-person, show decades of linguistic analysis.”

Gender bias can both shadow and be engrained in new and different forms of digital communication. The ‘mansplaining’ in the networking meeting, the ‘manel’ at the conference, both are behaviours that can be mirrored in digital spaces. These spaces are ours for communicating, for creating, for sharing knowledge and expertise.  They are amongst our most important tools for moving our work forward. Regardless of the place or the space, we limit the nature of tax justice without challenging old patterns of gender bias

We need to be better, more rigorous in measuring women’s lives and we need to do this before when we recalibrate a system which is not fit for purpose. We need to challenge ourselves and others and be better at ‘seeing’ women’s invisibility in our advocacy and in our practice, in our institutions as well as in those we seek to influence.

Seeking a Portuguese language radio and podcast producer (Produtor programa de rádio/podcast português)

 

The Tax Justice Network is seeking a journalist who is fluent in Portuguese and English to produce a monthly Portuguese-language 30-minute podcast and radio show.

Each show will cover global tax justice news and ideas, with a focus on Brazil and Lusophone Africa, and will offer accessible, entertaining and solutions-based analysis. You will need strong and up-to-date experience of radio production, and preferably also of social justice reportage. As well as being a very strong communicator in Portuguese, you will need to be a confident English speaker to be able to follow our research closely and join occasional remote team meetings. You will be proactive, independent, fizzing with ideas and have a passion for tax justice and social justice.

A Tax Justice Network está procurando um jornalista fluente em Português e Inglês para produzir um podcast com episódios mensais de 30 minutos em português.

Cada programa cobrirá notícias e ideias sobre justiça fiscal global, com foco no Brasil e na África Lusófona, e oferecerá análises acessíveis e propositivas. Você precisa ter experiência recente em produção de rádio e, de preferência, na realização de reportagens sobre justiça social. Além de ser ótimo comunicador em português, você precisa falar inglês com confiança para acompanhar nosso trabalho de pesquisa e eventualmente participar de reuniões remotas com nossa equipe. Você também deve ser proativo, independente, cheio de idéias e apaixonado por justiça fiscal e justiça social.

Find out more and apply online / Saiba mais e inscreva-se online

Registration now open for Tax Justice Network’s 2019 annual conference


We’re delighted to present the programme for the Tax Justice Network’s 2019 conference, at https://taxjustice.net/tjn19. Registration is now open at the same address.

The conference, jointly hosted this year with City, University of London and the Association for Accountancy and Business Affairs, takes places in London on 2-3 July.

The conference organising team can be reached on [email protected].

‘The Magic Money Tree:’ From Modern Monetary Theory to Modern Tax Theory

by John Christensen and Nicholas Shaxson

Modern Monetary Theory (MMT) has gained prominence since the global financial crisis. The rising star US politician Alexandria Ocasio-Cortez said recently we should be “open” to its ideas, and some mainstream economists have given it a (qualified) endorsement.  For many, it offers a powerful critique of the damaging austerity policies that were implemented in the western world since the global financial crisis, and an important plank of new progressive thought.  MMT also has many critics.

For the tax justice movement, however, MMT opens an important debate about the role of tax. One of the MMTers’ central arguments — that governments don’t need tax revenues if they want to spend money — seems to conflict with our argument that governments must tax rich corporations and crack down on tax cheating and tax havens in order to pay for roads, schools, teachers and hospitals. Continue reading “‘The Magic Money Tree:’ From Modern Monetary Theory to Modern Tax Theory” →

When will the British government impose public registries on its tax havens?

UPDATED

Not so long ago Lee Sheppard, one of the US’s top experts in international tax, gave a pithy and accurate explanation of why powerful countries don’t just close down the tax havens that are undermining their tax and criminal justice and regulatory systems.

We don’t shut [these financial whorehouses] down, because the town fathers are in there with their pants around their ankles.”

This morning the UK government delayed a parliamentary vote scheduled for today that could potentially have required Britain’s three Crown Dependencies (Guernsey, Jersey, Isle of Man) to make their registries of company ownership fully searchable by the public.  This follows a Financial Times article entitled Crown Dependencies Set For Transparency Clash with Westminster, which suggested that parliamentarians would probably vote in support of this step.

According to the FT, the Crown Dependencies are threatening a “major constitutional clash” with Britain if it tries to get them to be more transparent about the mucky shell companies being set up there. More specifically:

The chief ministers of the three islands will travel to London to try to head off a cross-party legislative move by MPs to force them to introduce by 2020 public registers about the real owners of companies based there. . . [members of parliament] will push a parliamentary amendment to require public registers containing details of anyone owning more than 25 per cent of a company based in one of the crown dependencies.”

Continue reading “When will the British government impose public registries on its tax havens?” →

Edition 14 of the Tax Justice Network Arabic monthly podcast/radio show, 14# الجباية ببساطة

Welcome to the fourteenth edition of our monthly Arabic podcast/radio show Taxes Simply الجباية ببساطة contributing to tax justice public debate around the world. (In Arabic below) 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 would like to broadcast it. You can also join the programme on Facebook and on Twitter.

Taxes Simply #14 – The use of taxes as a means of pressure in Palestine, and growing inequality despite economic growth in Lebanon. In the 14th edition of Taxes Simply:

Continue reading “Edition 14 of the Tax Justice Network Arabic monthly podcast/radio show, 14# الجباية ببساطة” →

Tax Inspectors Without Borders – a Tax Justice Network idea bears fruit

The Economist is running an article about a fairly new body called Tax Inspectors Without Borders (TIWB), a programme backed by the OECD and the UN Development Programme (UNDP) to provide tax assistance to hard-pressed revenue authorities in poorer countries, whose underpaid officials struggle to match the awesome legal and accounting firepower of the world’s multinationals.

This is a vast issue: IMF research estimates that global profit-shifting by multinationals cheats the world’s treasuries out of around $600 billion a year, while the Tax Justice Network estimates $500 billion annually. Although high-income countries are the biggest losers in absolute terms, it is lower-income countries that are taking the biggest hit in terms of the share of lost revenue – which means that the likely human cost is highest in these places. Continue reading “Tax Inspectors Without Borders – a Tax Justice Network idea bears fruit” →

NEW: Francophone Africa Tax Justice Network podcast goes live: lancement d’un Podcast Francophone par Tax Justice Network

We’re proud to share the Tax Justice Network’s brand new podcast/radio show produced in, and for francophone Africa by finance journalist Idriss Linge in Cameroon. The podcast is called Impôts et Justice Sociale. It’s available to anyone who wants to listen to it, and, as is the case with all our monthly podcasts, (Spanish, Arabic, and English), it’s free to broadcast for any radio station that wishes to air it. This French language podcast aims to contribute to ideas and debates on tax justice and social justice in the region. We’re sharing below this month’s very first episode, followed by a press release in French with all the details for following the show and where to find it:

Nous sommes fiers de partager la toute nouvelle émission de radio / podcast du réseau Tax Justice, produite en Afrique francophone par le journaliste financier Idriss Linge au Cameroun. Le podcast s’appelle Impôts et Justice Sociale. Il est disponible pour tous ceux qui veulent l’écouter et, comme tous nos podcasts mensuels, (espagnol, arabe et anglais), il est gratuit à diffuser pour toute station de radio qui souhaite le diffuser. Ce podcast en langue française vise à susciter des idées et des débats sur la justice fiscale et la justice sociale à de nouveaux publics. Nous partageons ci-dessous le tout premier épisode de ce mois-ci, suivi d’un communiqué de presse avec tous les détails sur le suivi de l’émission et où le trouver: Continue reading “NEW: Francophone Africa Tax Justice Network podcast goes live: lancement d’un Podcast Francophone par Tax Justice Network” →

Job vacancy: Tax Justice Network Conference Intern

We’re hiring again! Details of the role below, and job information pack to download here.

Update 20 March: This post has now closed and applications received after the deadline will not be considered.

Key facts:

Application closing date: Sunday 17 March 2019
Start date: Monday 8 April 2019
End date: Wednesday 10 July 2019
Reports to: Head of Operations
Contract: Fixed-term UK employment contract
Hours: Variable (15 hours / week to 7 June, 37.5 hours / week 10 June to 10 July)
Compensation: £22,000 pro rata
Location: Flexible, home-based (but will need to be in UK between 1 July and 10 July)
Other requirements: Right to work in the UK, ability to work from home

Role description

The Tax Justice Network’s annual research conference in 2019 is taking place at City University, London on 2 and 3 July. The theme of the conference is ‘professional enablers of tax abuse and crime: the role of banks, law firms and accountants’. The conference is expected to attract around 150 delegates from all over the world (and more watching online, as well as some presenting remotely). The programme (to be published in March) will include up to 20 plenary and parallel sessions, in which about 55 papers on a range of topics related to the theme will be presented and discussed. We will also produce a conference booklet in advance that will contain summaries of all of the papers and brief commentaries by the moderators of each session.

We are looking for a dynamic, diligent and collaborative intern to help the small team at the Tax Justice Network (the Head of Operations, Researcher, Finance Manager and Communications Coordinator) who are organising the 2019 conference during the run-up to the event, during the conference itself and immediately afterwards. The main deliverable will be the production of the conference booklet, but the intern will also be expected to act as the main point of contact for delegates and speakers during the pre-conference period, to assist the team with a range of other issues during this phase, and to help to deal with a wide range of issues and requests during the conference itself.

We are looking for someone who is able to work independently to the highest standards, demonstrating exceptional attention to detail while prioritising and completing tasks to strict deadlines. In the pre-conference period, the work can be done from anywhere, but during the conference itself the intern will need to be based in London (we can cover travel and accommodation expenses if needed).

We especially welcome applications from members of minority groups.

Key responsibilities

Person specification

Skills and experience

Attributes

How to apply

Please upload a CV (resume) and answer a series of questions, addressing the experience listed in the person specification as well as your motivation, using our online application form [link now removed] by Sunday 17 March 2019 at 23.59 GMT.

Update 20 March: This post has now closed and applications received after the deadline will not be considered.

The #LuxLeaks corporate tax deals – still no investigation? Plus financialisation of ‘aid’ in the Tax Justice Network February 2019 podcast

In Edition 86 of the February 2019 Tax Justice Network’s monthly podcast/radio show, the Taxcast (available on iTunes, Stitcher, Spotify and other podcast platforms):

Featuring:

Simon Bowers of the ICIJ on why the EU Commission has so far failed to investigate the LuxLeaks cases almost five years later:

it’s a burning question…the EU’s Competition Commissioner Margarethe Vestager said yes, we’re looking at these documents, we will examine it, we’ll evaluate whether or not this leads to the opening of a case and we’ve not heard anything since…We all know how soft power works and there is clearly a conflict there.”

Continue reading “The #LuxLeaks corporate tax deals – still no investigation? Plus financialisation of ‘aid’ in the Tax Justice Network February 2019 podcast” →

World’s biggest monopolist pays negative taxes

Via the Washington Post:

According to an analysis by the Institute for Taxation and Economic Policy (ITEP,) a leading US tax justice group, Amazon got a $129 million tax rebate last year, equivalent to a minus one per cent US federal tax rate, its second year running of negative taxes. (Its effective tax rate there was 3.0 per cent from 2009-18, according to ITEP.)  We haven’t surveyed its tax bills in other countries, but it is known to use tax havens like Luxembourg extensively to cheat on its taxes worldwide. And this follows Amazon’s long-running Hunger Games – style competition to get US localities to offer it the biggest subsidy packages to try and persuade it to locate its second headquarters there: a shake-down that New York thankfully rejected recently.

How is Amazon escaping tax? a recent public filing says:

We have tax benefits relating to excess stock-based compensation deductions and accelerated depreciation deductions that are being utilized to reduce our U.S. taxable income [and] . . . As of December 31, 2018, our federal net operating loss carryforward was approximately $627 million and we had approximately $1.4 billion of federal tax credits potentially available to offset future tax liabilities.”

Well, in short, they can deduct bumper stock benefits for executives from the company’s tax bill, and they have also made past losses (at least on paper), which they can hold in reserve and deduct against future tax bills. (There are also other tax tricks, such as a ruse to cut its US sales taxes, which its competitors can’t match).

But this isn’t the end of the story.

Monopoly rising, tax falling

Let’s start with a question. Amazon, at the time of writing, had a market capitalisation of $800 billion, making it the world’s second most valuable company, just behind Apple, at $805 billion. Given this immense wealth, what is it with these “losses” we keep hearing about?

Well, part of the answer is that multinationals tend to be good (BAD!) at cooking up fake (or questionable) losses, to set against their tax bills, and they tend also to be good (BAD!) at lobbying for tax changes that make it easier to conjure up those losses.

But there’s a more interesting thing going on here too, which is about monopolies and market power. Amazon is, with little question, the world’s biggest monopolist. Crucially, it controls much of the infrastructure on which its competitors sell their products, or use cloud computing services, and this position of power enabling it to kill or hurt its competitors on a factor — market power — that has nothing to do with genuine economic productivity, innovation or entrepreneurship. It’s pure wealth extraction. Many players in the digital economy have to pay a private “Amazon tax” to stay in business.

That last section in italics is pretty much a word-for-word copy of language we often used to describe multinationals’ use of tax havens to cut their tax bills: we have simply replaced “tax cheating” with “market power.”  (We will have more — a lot more — to say about this theme, quite soon: there is enormous overlap between the world of tax justice and that of monopolies and antitrust.)

Now, alongside those other tools for cutting tax bill, Amazon has been deploying another. It could easily use its massive existing market power to force consumers and others to pay higher prices. Yet anyone who has ordered cheap stuff on Amazon will feel that it hasn’t obviously done so. That’s because it has historically preferred to build market share by keeping its prices relatively low. While this strategy of selling cheaply may have reduced its profits – see the first half of the above graph — low profits have had the benefit (to Amazon) of cutting its tax bills.

But the other benefit, hand in hand with the tax benefit, is that its low prices have helped kill — maybe ‘slaughter’ is the right word — its competitors and its suppliers, allowing it to build not just market share, but market power.  (Amazon once had a “Gazelle” unit whose task was to approach and buy up competitors “the way a cheetah would a sickly gazelle,” as Amazon’s boss Jeff Bezos, pictured, described it.) It is hardly a coincidence that nearly all of the richest people in the world are monopolists who have got rich through exerting power in markets.

Analysts have long argued that Amazon’s strategy has been to build market power for a while, then later on, once it had amassed enough to have to start worrying about a democratic response, to start flexing its muscles, and reap the profits. That seems quite compatible with the above graph.

It may be that Amazon’s US tax payments will eventually rise. But perhaps its pursuit of loopholes and lobbying will continue to keep the tax bill down. As the economist Gabriel Zucman points out

Year after year, their 10-K says: “As we utilize our federal net operating losses and tax credits, we expect cash paid for taxes to significantly increase”… But somehow it never increases.

It’s time now to push for much more radical change in the international tax system.

 

 

 

New report: Are European corporate registries equipped to tackle tax evasion and financial crime?

A new report published today by the Tax Justice Network, focuses on the role that corporate registries in the European member states play in fighting fiscal fraud and tax avoidance. The report presents results from a new survey sent out by the Tax Justice Network to corporate registries of all European member states. It analyses the data we received from seven respondent jurisdictions (the UK, Sweden, Denmark, Romania, Belgium, Latvia, Slovenia and Slovakia) and combines it with additional data available through the International Business Registers reports and the Financial Secrecy Index.

While nobody would dispute the important contributions corporations make towards a prosperous society, strong evidence from several offshore leaks disclosed in recent years highlights the immense risks that arise when corporations are afforded significant levels of both power and secrecy. The amount and quality of information available to authorities and the public about corporate vehicles is often the decisive factor that tips the balance between the usefulness and harmfulness of corporations. Given that corporate registries constitute the primary source of information about a corporate entity for the public as well as for authorities like financial crime investigation units and tax administrations, corporate registries play an important role in preventing corporations from being misused to conceal money laundering, tax evasion and corruption – all of which foster inequality within and often in between countries.

We designed the survey to assess the legal powers and capacities of corporate registries. The survey is also designed to look for variables that could indicate whether corporates registered in a particular jurisdiction are more likely to be used for illicit purposes. General indicators included:

Some of the indicators we assessed may require further research due to the response rate and the concern that the sample analysis may not be representative for all jurisdictions. Nonetheless, the report presents some interesting findings. As the chart underneath illustrates, we found that 32 per cent of the limited companies in Denmark did not file accounts as required by law and approximately 250,000 limited companies in the UK failed to file their accounts as well. That may indicate a problem with the de facto availability of annual accounts.

Figure: Filing of annual accounts by limited companies as percentage of total number of registered limited companies

Figure: Filing of annual accounts by limited companies as percentage of total number of registered limited companies

Both Belgium and the UK reported a high number of companies that dissolved within a year of incorporation and may have thus never been required to file their accounts. It should be investigated whether this practice is frequently used for illicit financial activity. Furthermore, about 500,000 limited companies in the UK were considered dormant. This may pose a risk given that dormant companies only need to file an abbreviated version of accounts.

Three respondent countries permit foreign companies to operate within their jurisdictions without registering. This might enable individuals to circumvent domestic laws and register in another jurisdiction which offers weaker regulation.

Finally, regarding identification of beneficial owners, we found that jurisdictions employ only a few data validation activities such as cross-checking with other registries or allowing anonymous reporting of false information. We recently published another report on the verification of beneficial ownership available here.

Today’s report is the second of a twin project, funded by the European Union Horizon 2020 as part of the Combating Fiscal Fraud and Empowering Regulators (COFFERS) programme. The twin project aims to generate comprehensive comparative analyses of administrative and enforcement capacity of both tax administrations and corporate registries in European member states, to counter fiscal fraud and tax avoidance. The first part of the project focused on the capacity of tax administrations in the European Union to fight inequality and was published by the Tax Justice Network on 15 November 2018.

Download the report

Fair Tax Week in the UK

We’re sharing this information below from our friends and colleagues at the Fair Tax Mark, who are doing so much great work to celebrate those many businesses which do pay their fair taxes by awarding them the Fair Tax Mark, moving towards a fairer economy for all. Their Fair Tax Week takes place from the 6th – 14th July 2019. You can get a flavour of some of the speakers from last year’s Fair Tax Mark event here.

In fact, July 2019 is going to be a strong tax justice month, with the Tax Justice Network’s annual conference taking place on the 2nd and 3rd July this year in London. We’ll be releasing more information on our programme of events soon, but this year the focus is on the professional enablers of tax abuse and crime: the role of banks, law firms and accountants. But back to the Fair Tax Mark and the details on their Fair Tax Week: Continue reading “Fair Tax Week in the UK” →

The Tax Justice Network’s February 2019 Spanish language podcast: Justicia ImPositiva, nuestro podcast, febrero 2019

Welcome to this month’s latest 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 radiofónica! (abajo en Castellano).

In this month’s programme:

Continue reading “The Tax Justice Network’s February 2019 Spanish language podcast: Justicia ImPositiva, nuestro podcast, febrero 2019” →

Why has the European Commission not investigated #LuxLeaks tax deals?

Today Simon Bowers of the International Consortium of Investigative Journalists asks a very pertinent question, which you can read in full here. Some of the deals signed behind closed doors, brokered by accountancy firm PwC, known as “tax rulings” — meant some companies were able to pay less than 1 per cent tax in Luxembourg, stripping tax revenue away from fellow member states at a time when austerity has decimated public service provision and undermined basic human rights. While we applaud the investigations into the tax affairs of other companies and progress that has been made by the EU’s Competition Commissioner Margrethe Vestager, we have to wonder why she hasn’t investigated even one of the cases exposed by the brave whistleblowers Antoine Deltour and Raphael Halet. Continue reading “Why has the European Commission not investigated #LuxLeaks tax deals?” →

Hey EU Council! think again on whistleblower protection

The Tax Justice Network is a signatory to the following letter, sent this morning to the EU Council.  We argue that the proposed EU Directive on the protection of whistleblowers does not adequately protect public interest, and will inhibit whistleblowers from revealing information about employers who are knowingly breaking laws. For example, the current proposals would not have protected the LuxLeaks whistleblowers from the legal attacks mounted against them by Big Four accounting firm PwC and the Luxembourg authorities.  For more background information visit the website of Whistleblower Protection EU

+++++++

MAKING WHISTLEBLOWING WORK FOR EUROPE

12th February 2019

 

To EU Council Members

The EU is poised to take a momentous step and adopt a new directive to protect whistleblowers across Europe. This could have a dramatic impact on the capacity and ability of whistleblowing to work in all our interests. We know that protecting those who speak up in the public interest saves lives, protects our environment, reveals and stops corruption, and stems the huge financial losses to business and governments that result from failures to address wrongdoing.

It is vital that an EU Directive on the protection of whistleblowers protects the free flow of information necessary for responsible exercises of institutional authority. This is why we, the undersigned, have come together to urge the EU Council to do the right thing – and adopt the Parliament’s position on the reporting channels.

Protecting disclosures made outside the employment relationship is at the heart of providing real whistleblower protection. It must be understood that in doing so:

• It allows law enforcement and regulatory bodies to do their jobs properly;

• It is the vital safety net for protecting the public interest and the public’s right to know when organisations are corrupt or fail to take responsibility;

• It ensures employers take seriously their responsibility to make it safe and acceptable to report internally;

• There is no evidence this undermines internal channels as the genuine first port of call for individuals; and

• It protects freedom of expression.

As it stands, we are very concerned that the EU is about to agree a directive that will dangerously reinforce the status quo and make it even harder for individuals to report breaches of law and wrongdoing.

It is right that organisations across all sectors are encouraged to take steps that make it easier and safer for those who work with them to report concerns, but it is essential that competent regulatory and law enforcement authorities have access to the information they need to fulfil their mandates. By making it mandatory to report to the employer first – and obligatory to use the channel employers are required to set up with only risky and uncertain exceptions – the directive unwittingly builds in information control systems that will both hamper internal good management and make certain responsible disclosures to competent authorities illegal.

If this mandatory internal disclosure regime stands, the directive will have abandoned responsible Europeans who raise concerns appropriately to their employers through their supervisors or normal management channels of communication, who disclose information to competent authorities who have the power and mandate to address wrongdoing, or who provide information to the journalists who investigate and report in the public interest. They will suffer. Europe will suffer.

We remind the EU institutions, in trilogue negotiations right now, that their promise to better protect whistleblowers across Europe requires taking democratic accountability seriously. Regulatory authorities, governments and businesses across Europe are actively seeking information from those who speak up so that they can better protect and deliver services and protect the rights of the communities they serve.

The EU has a moral and legal responsibility to adopt a directive that builds on the Council of Europe Recommendation and international best practice consensus that protects the voluntary choice of channels for those who disclose wrongdoing.

Thank you for your time in this matter.

Respectfully,

 

Access Info Europe

Akademikerne, The Danish confederation of professional associations

Anti Corruption International

APADOR-CH, The Association for the Defence of Human Rights in Romania – the Helsinki Committee

APJA, Association of Professional Journalists of Albania

ARTICLE 19

ASEBLAC, Asociación Española de Sujetos Obligados en Prevención del Blanqueo de Capitales

Associated Whistleblowing Press (AWP)

Association for Accountancy & Business Affairs, UK

Association of Hungarian Journalists (MUOSZ)

Blueprint for Free Speech

Center for Independent Journalism

Centre for Free Expression, Ryerson University, Toronto, Canada

CFDT Cadres, Confédération française démocratique du travail Cadres

Corporate Europe Observatory

CREW – Centre for Research on Employment and Work, University of Greenwich

Deutscher Journalisten-Verband

EPSU, The European Federation of Public Service Unions

Estonian Association of Journalists

Eurocadres, Council of European Professional and Managerial Staff

Eurodad, European Network on Debt and Development

Eurogroup for Animals

European Federation of Journalists

FABI, Federazione Autonoma Bancari Italiani

FAPE Spain, La Federación de Asociaciones de Periodistas de España

FH, Danish Trade Union Confederation

FIBGAR, Fundación Internacional Baltasar Garzón

FNV, Dutch trade union federation

Free Press Unlimited

Government Accountability Project

Hungarian Press Union

Independent Organized Crime Research Network for Law Enforcement Officers & Academics

Independent Trade Union of Journalists and Media Workers

Journalists’ Union of Macedonia and Thrace Daily Newspapers – GREECE

National Whistleblower Center

News Media Europe

Oživení o. s.

Panhellenic Federation Unions Journalist

PCS, Public and Commercial Services Union

Protect

Public Services International (PSI)

Reporters Without Borders

Riparte il futuro

shoeman.eu/

Stefan Batory Foundation

Swedish Union of Journalists

Tax Justice Network

Tax Justice UK

Tax Research LLP

TCO, The Swedish Confederation of Professional Employees

The Ethicos Group

The European Centre for Press and Media Freedom

Transparency International

Transparency International Denmark

Transparency International Estonia

Transparency International EU

Transparency International France

Transparency International Greece

Transparency International Ireland

Transparency International Italia

Transparency International Latvia (Delna)

Transparency International Nederland

Transparency International Portugal (TI-PT)

Transparency International Romania

Transparency International Slovakia

Transparency International Slovenia

Transparency International Spain

UGICT CGT, Union Générale des Ingénieurs, Cadres et Techniciens

Union Journalists’ of Turkey

Union of Journalists in Finland

UTC-UGT, Unión de Técnicos y Cuadros

VVJ/AVBB, Vlaamse Vereniging van Journalisten

Whistleblower Network Germany

Whistleblowing International Network

Xnet

 

How Brexit may deepen the Finance Curse

The evidence is now incontrovertible that finance-dependent countries like Britain are suffering from a bad case of the finance curse. The simplest proposition here is that countries with little financial sector development need more finance, but only up to a certain optimal point, after which growth in finance or a financial sector tends to damage economic growth and suffer a range of other harms. The basic relationship is captured in the inverted “U” shape in the image (many more graphs here). Many countries, including Britain, passed that optimal point long ago.

The evidence continues to mount up.  The latest comes from a fascinating paper by Martin Sandbu, a high-profile Financial Times journalist, in an article in the Political Quarterly entitled Brexit and the Future of UK Capitalism. Continue reading “How Brexit may deepen the Finance Curse” →

Let’s talk about what nobody at Davos wanted to talk about: tax and women

We’re sharing here and article written by the Tax Justice Network’s Liz Nelson, head of our research and campaigning on Tax Justice and Human Rights for the news, discussion and debate website Irish Broad Left. The original article was published here.

Let’s talk about what nobody at Davos wanted to talk about: tax and women.

This year’s annual billionaires’ gathering at Davos was notable for surfacing one or two lone voices questioning the sustained value of philanthropy. Sitting on the fringes, they were challenging anyone who would listen – not many, I suspect – to consider a more revolutionary (radical) solution to global inequalities. There is an alternative, they argued, to relying on wealthy people to decide which causes get supported with an untroubling proportion of their private wealth: tax. Why, they asked, was no-one really talking about tax? Continue reading “Let’s talk about what nobody at Davos wanted to talk about: tax and women” →

Edition 13 of the Tax Justice Network Arabic monthly podcast/radio show, 13# الجباية ببساطة

Welcome to the thirteenth edition of our monthly Arabic podcast/radio show Taxes Simply الجباية ببساطة contributing to tax justice public debate around the world. (In Arabic below) 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 would like to broadcast it. You can also join the programme on Facebook and on Twitter.

Taxes Simply #13 — The death of an econometric model, and the revival of a Mubarak family BVI company

In the 13th edition of Taxes Simply we start with a summary of the most important tax and economy news from the region and the world. Our news includes:

Continue reading “Edition 13 of the Tax Justice Network Arabic monthly podcast/radio show, 13# الجباية ببساطة” →

Quote of the day – accountants “not set up to look for fraud.”

Following the acrimonious collapse of a British cake business, Patisserie Valerie, a quote of the day from a top accountant:

We’re not looking for fraud, we’re not looking at the future, we’re not giving a statement that the accounts are correct . . . we are looking in the past and we are not set up to look for fraud.”

What they are set up for, it seems, is to receive fees. Many large firms receive large fees for auditing the companies that fail, then receive further large fees for carrying out insolvency processes. Their size and reach, particularly when it comes to the “Big Four” firms PwC, Deloitte, EY and KPMG, also gives them enormous market power, enabling one firm, PwC, to “name its price” in an insolvency case.

Here’s another quote, from an earlier episode, where a Big Four auditor is being grilled over a similar debacle:

I would not hire you to do an audit of the contents of my fridge, because when I read it, I would not know what was actually in my fridge or not. And that’s the point of auditing, isn’t it?

Quite.

Oligopoly Capitalism: economic and democratic threats: the Tax Justice Network’s January 2019 podcast

In Edition 85 of the January 2019 Tax Justice Network’s monthly podcast/radio show, the Taxcast (available on iTunes, Stitcher, Spotify and other podcast platforms):

Featuring:

Continue reading “Oligopoly Capitalism: economic and democratic threats: the Tax Justice Network’s January 2019 podcast” →