Page 34 – Tax Justice Network

Gibraltar and the battle against the European Commission for their tax ruling practice

Guest Blog
Prof. Dr. Patricia Lampreave, EU tax and state aid expert

On 19 December 2018, the European Commission issued a final decision on the Gibraltar tax system. It´s a highly controversial decision and it’s the first time that two different decisions were coupled into one.

Following a Spanish complaint in October 2013, the Commission opened an in-depth investigation into Gibraltar’s corporate tax regime to verify whether the corporate tax exemption regime applied between 2011 and 2013 for interest (mainly arising from intra-group loans) and royalty income selectively favoured certain categories of companies, which would be a breach of EU state aid rules.

In October 2014, the Commission extended its State aid investigation to also cover Gibraltar’s procedures for granting tax rulings. The Commission had concerns that tax rulings granted since the Corporate Tax Act 2010 (ITA 2010) by Gibraltar’s tax authorities, which had wide powers to issue tax law provisions, consistently misapplied the provisions of the Corporate Tax Act 2010.

Analysis of 165 tax rulings indicated that requests for tax rulings provided too little information about the company or its activity. In some cases, even the name of the requestor was not provided as the request was made through a fiduciary or lawyer. Tax authorities, without conducting any substantive ex ante monitoring or ex post control in order to safeguard its national tax base, just rubberstamped requests, holding that the activity of the company was performed wholly outside Gibraltar and therefore the income generated was exempted tax. According to Gibraltar’s legislation, only income accrued in or derived from Gibraltar is subject to a 10 per cent corporate income tax. The 165 tax rulings were categorized by type of income (income derived from intermediaries activities, consultancy fees, passive incomes, profits derived from marketing, from procurement of petroleum products and logistic organisation, income derived from trusts or holding companies and even income derived from tax rulings that prolonged benefits that the 2010 tax act was supposed to abolish). The Commission’s investigation opening in 2014 was accompanied by an annex with the name of the companies that had obtained tax rulings. The vast majority were non-EU multinational enterprises, some of which were resident in tax havens, and some were individuals who were resident in northern Europe.

The final decision issued on 19 December addressed both Spain’s complaint about Gibraltar’s corporate tax regime and the Commissions concern about Gibraltar’s procedures for granting tax rulings. The Commission’s final decision was a pseudo-Solomonic solution. From the 165 tax rulings analysed, the Commission concluded that only 5 tax rulings concerning the tax treatment in Gibraltar of passive income generated by Dutch limited partnerships are selective, and so in breach of EU state aid rules. According to the tax legislation applicable in both Gibraltar and the Netherlands, the profits made by a limited partnership in the Netherlands should be taxed at the level of the partners. In the five cases, the partners of the Dutch partnerships were resident for tax purposes in Gibraltar and so should have been taxed there. However, under the five contested tax rulings, the companies were not taxed on the royalty and interest income generated at the level of the Dutch partnerships.

These five tax rulings continued to exempt the partnerships’ incomes from interest and royalties from taxation even after Gibraltar adopted legislative amendments to bring this income within the scope of taxation in 2013 (passive interest) and 2014 (royalties). The total unpaid tax amounts have been calculated to be around €100 million, which the EU has ordered Gibraltar to recoup.

Aside from these five tax rulings, however, and despite all the analysis stated in the Commission’s investigation opening of 2014 concerning Gibraltar’s questionable procedures for granting tax rulings and the content of the other 160 tax rulings listed in the annex, the Commission has decided it has not found unlawful state aid.

Trusted with investigating Gibraltar’s practice of rubberstamping tax rulings, now the Commission is the one who rubberstamps, concluding that Gibraltar’s tax ruling practice was perfect during all these years and that tax authorities have only granted five illegal tax rulings. Of course, the five scapegoats will appeal to the European Court of Justice.

Edition 12 of the Tax Justice Network Arabic monthly podcast/radio show, 12# الجباية ببساطة

Welcome to the twelth 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 #12: We discuss what happened to the economy in 2018, we look at the “Owners of Egypt” and ask what are the economic reasons behind the protests in Sudan?

In the twelfth edition of Taxes Simply

we summarise the most important economic events in 2018.
in the second section of the programme, Walid Ben Rhouma interviews economics journalist and researcher Mohamed Gad about his recently published book “The owners of Egypt: the story behind the rise of Egyptian capitalism”; the book covers the transition to capitalism in Egypt in the productive and non-productive sectors and its impact on wealth distribution in society.
in the third and last section, we interview the Sudanese economic analyst Mutasim Agraa about the economic reasons and grievances behind the recent protests in Sudan. Continue reading “Edition 12 of the Tax Justice Network Arabic monthly podcast/radio show, 12# الجباية ببساطة” →

UK next in the UN hot seat over impact of City of London, Crown Dependencies and Overseas Territories tax policies on women’s rights

Guest blog
Kathleen A. Lahey
Professor of Law, Queen’s University
Non-Executive Director, Tax Justice Network

Advocates for gender equality in the United Kingdom of Great Britain and Northern Ireland or in any of its three Crown Dependencies and fourteen Overseas Territories have a unique opportunity to address the UN Committee on Discrimination against Women in Geneva by 28 January 2019 on how the UK’s tolerance of offshore tax avoidance and financial secrecy laws undercuts gender equality.

In several groundbreaking decisions and reports released beginning in 2014, this UN Committee has concluded that all countries that have adopted the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) have obligations to raise enough budgetary revenues to fund gender equality programs in all spheres of their influence. For the UK, this means that the Government has a responsibility to ensure that businesses and wealthy individuals do not use either UK domestic facilities such as those provided by the City of London or by its offshore Crown Dependencies or Overseas Territories to avoid taxation or accountability for illicit financial gains.

Recent CEDAW actions have increasingly recommended that governments take specific steps to reduce gender inequalities. In 2014, the CEDAW Committee decided in the Blok complaint, which was brought under its Optional Protocol rules, that the Netherlands could not exclude self-employed women from maternity leave provisions, requested the government to change the legislation, and directed it to pay reparations to the women injured by this discrimination. In 2015, the Optional Protocol Canada Inquiry produced five pages of detailed directions on program and gender equality improvements crucial to help lift Canadian women from poverty.

Then in 2016, submissions by Alliance Sud, the Center for Economic and Social Rights, the NYU School of Law Global Justice Clinic, Private Eye and Tax Justice Network resulted in the CEDAW Committee issuing Concluding Observations[1] that call on Switzerland, ranked number one on the Tax Justice Network’s Financial Secrecy Index, to take undertake impact assessments on how its financial secrecy and tax laws affect women’s rights overseas and change any its domestic policies that contribute to those violations of their equality rights.

These developments provide ample basis for making similar types of submissions to the CEDAW Committee by 28 January 2019[2] on how the UK’s network of domestic and Crown Dependencies and Overseas Territories tax and financial disclosure rules impairs women’s rights to gender equality at home and overseas, and thus need to be subject to the same kinds of changes.

The CEDAW Committee called on all UK sectors to address these points in the List of Issues delivered to the UK Government on 3 August 2018:

In paragraph 1, how the UK is fulfilling its indication that it ‘will soon’ extend the application of CEDAW to its Crown Dependencies and Overseas Territories, and
In paragraph 5, what measures the UK has taken to ‘conduct independent, participatory, and periodic impact assessments of the domestic and extraterritorial effects of the State party’s financial secrecy, trust and corporate tax policies and laws, such as those applicable in the Cayman Islands, on women’s rights and on the substantive equality of women and men? In the light of the negative impacts of the State party’s austerity measures on programmes that benefited women and girls, please inform the Committee if the State party envisages assessing the extent to which revenue losses, due to the use of offshore tax avoidance facilities, exacerbate gender inequality in the State party.’

The UK’s 16 November 2018 replies[3] to the CEDAW Committee List of Issues consist of two limited statements on which civil society, academic, human rights and other stakeholder organizations can provide crucial evidence to the Committee in its deliberations, which begin on 18 February 2019:

In paragraph 3, the UK advises that as of 2017, four more Overseas Territories became subject to CEDAW and that extension of CEDAW is ‘underway’ in four other ‘remaining’ locations; and
In paragraph 7, the UK advises that withdrawal of reservations regarding the Isle of Man ‘will be progressed in due course.

Virtually none of the substantive effects of the combined UK and Crown Dependencies and Overseas Territories financial secrecy and tax avoidance facilities on gender equality were addressed by the UK Government in this exchange of documents.

The challenges are great: The UK is the second biggest centre for wealth management after Switzerland, and, at the same time, its own National Crime Agency acknowledges that ‘hundreds of billions of pounds of international criminal money is laundered through its banks every year.’ The UK accounts for 17 per cent of the global market in offshore financial services, even though it is itself only ranked 23rd in the FSI. Not only is the City of London one of the world’s largest financial centres, but it is also ‘built substantially on “offshore” characteristics’ and is well known for its lax but accessible financial regulation and services.

In addition, however, the UK still provides considerable support and a great deal of control over the Crown Dependencies and Overseas Territories. Jersey Finance, the official marketing arm of the Jersey offshore financial centre, states that ‘Jersey represents an extension of the City of London.’ The Panama and Paradise Papers have shed an increasingly strong light on the antisocial and crime-fueling activities of the Overseas Territories, while illicit financial flows continue unchecked in the UK as well as in the Crown Dependencies.

In the meantime, women in both the UK and its satellites continue to face high levels of gender inequalities that are not being actively or effectively addressed by their governments.

The ground-breaking outcomes of CEDAW’s review of Switzerland’s offshore and financial secrecy policies demonstrate what can be achieved when gender equality, human rights and tax justice advocates join forces to use existing laws and international treaties to challenge in-country and cross-border tax abuse as violation of human rights.

As submissions to the CEDAW Committee’s upcoming Review session on the UK become available, they will be made available under the Tax Justice Network’s Gender and Tax Justice page.

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[1] United Nations, Committee on the Elimination of Discrimination against women, Convention on the Elimination of All Forms of Discrimination against Women [CEDAW Committee], Concluding observations on the combined fourth and fifth periodic reports of Switzerland, UN Doc CEDAW/C/CHE/CO/4-5, paras. 40-41, at pg 15

[2] Participation by Non-Governmental Organizations, Seventy-second session (18 February–8 March 2019), Geneva, Palais des nations, Room XVI, par. V, at pgs 1-2, setting the deadline for written submissions at 28 January 2019.

[3] CEDAW Committee, List of issues and questions in relation to the eighth periodic report of the United Kingdom of Great Britain and Northern Ireland, Addendum, Replies of the United Kingdom of Great Britain and Northern Ireland to the list of issues and questions, Seventy-second session (18 February–8 March 2019), UN Doc CEDAW/C/GBR/Q/8/Add 1, 16 November 2017, at pgs 2-3.

Brussels celebrates ‘tax freedom’ for billionaires on 4th January 2019

Our colleagues in Belgium have decided to celebrate the fourth of January as the day when billionaires in Belgium will have earned sufficient to pay their tax bill for the whole of 2019. In an era of preposterous inequality, social fragmentation and political crisis, what’s not to celebrate? Continue reading “Brussels celebrates ‘tax freedom’ for billionaires on 4th January 2019” →

Landmark moments for tax justice from 2018 worth celebrating

From conference fringe talks to top of global agendas, tax justice issues have come along way since the turn of the millennium. Progress made in recent years, including the milestones reached in 2017, was held and built upon in 2018, cementing tax justice as more than just a fad –it’s a wholesale shift taking place across the world in how we see the role of tax in our responsibility towards each other and towards the planet. Continue reading “Landmark moments for tax justice from 2018 worth celebrating” →

How to assess the effectiveness of automatic exchange of banking information?

In December 2018 the OECD’s Global Forum published the new terms of reference to assess compliance with the OECD’s Common Reporting Standard (CRS) for automatic exchange of information. Two weeks later, the EU Commission published a report about automatic exchange of information within the EU. Both reports are show the urgent need for effective statistics. Why are civil society organisations the only ones explicitly asking for this? More importantly, when will we get heard?

The OECD, like any good monopoly, makes countries get the whole package they offer. (There’s no other show in town). First the legal framework: the Common Reporting Standard (CRS) for automatic exchange of information. Then the explanatory manual (the CRS Commentaries). Then the installation instructions (the CRS Implementation Handbook), and finally, the OECD sends its own inspectors (the Global Forum) to review countries’ use of the OECD product (the CRS) and to tell them what else they need to get. Continue reading “How to assess the effectiveness of automatic exchange of banking information?” →

The UK must face up to the gender inequality it enables internationally

Co-written by the Tax Justice Network and Oxfam GB

The United Kingdom is currently being reviewed by the United Nations (UN) on how well it is meeting its commitments on women’s gender equality rights guaranteed by the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW). This review includes evaluating how the UK has failed to prevent many of its Crown Dependencies and Overseas Territories from becoming some of the largest tax havens in the world.

The UK has a disproportionate influence on financial transparency and tax policies globally because of the Overseas Territories and Crown Dependencies — a network of secrecy jurisdictions which it supports and over which it has ultimate sovereignty. While the UK has made some domestic progress by improving transparency on who owns companies in the UK, its territories still refuse to publish such information. After intense campaigning within the UK parliament supported by a range of NGOs, the UK government agreed that it would require the Overseas Territories to implement a key transparency measure by the end of 2020, or else have it imposed. Continue reading “The UK must face up to the gender inequality it enables internationally” →

Research fellow in financial secrecy, for new research grant

We’re delighted to announce the start of a ‘Does Transparency bring Cleanliness? Offshore Financial Secrecy Reform and Corruption Controlnew’, a Global Integrity-DFID Anti-Corruption Evidence (GI-DFID-ACE) research project with Dr Daniel Haberly of the University of Sussex. And that means we’re looking for a star research fellow, with an interest in the issues explored by the Financial Secrecy Index, and in the kind of work that led Dan to produce the figure above. Please spread this far and wide.

Job description: Research Fellow in Financial and Development Geography (focus on Financial Secrecy and Corruption)

This position is to assist with key tasks for 22 months of a 2-year Global Integrity-DFID Anti-Corruption Evidence (GI-DFID-ACE) grant-funded project led by Daniel Haberly (University of Sussex) and Alex Cobham (Tax Justice Network): Does Transparency bring Cleanliness? Offshore Financial Secrecy Reform and Corruption Control.

There is growing international reform effort targeting the issue of financial secrecy, and in particular the role of “offshore” financial secrecy jurisdictions in enabling criminal activities including the hiding of corrupt funds by political elites. However, we have little evidence on (long-term) outcomes: has greater transparency actually reduced the illicit use of OSJs?

This project aims to fill this gap in understanding of outcome effectiveness by 1) compiling the first historical database of financial secrecy indicators by jurisdiction, and 2) using this database to examine the impact of changing offshore secrecy on the hiding and movement of corruption proceeds through shell companies, as revealed in leaked datasets (Panama and Paradise Papers). Findings will be timely and important, providing critical guidance to still-intensifying financial transparency reform efforts.

Key tasks of the research fellow will likely include (but not necessarily be limited to) the following:

Assisting with the construction of a new historical database of key financial secrecy indicators in a number of offshore jurisdictions, which will extend the time dimension of the Tax Justice Network’s existing Financial Secrecy Index
Assisting with the compilation of an international database of country-specific variables on policy, institutional, political and other economic factors with a bearing on illicit financial flows, as well as directly compiling data on offshore shell company use by political elites in selected countries.
Preparing, conducting, and interpreting the results of panel regression and other statistical analyses.
Helping to organize, as well as participating in, project workshops.
Co-authoring publication of project findings as journal articles and a policy report
Participating in other forms of impact-oriented activities (e.g. media and stakeholder engagement).

Full details of the post are available at: https://www.sussex.ac.uk/about/jobs/research-fellow-0520.
For inquiries, please contact Daniel Haberly at the School of Global Studies, University of Sussex ([email protected]).

The gilets jaunes and how NOT to implement an environmental tax: the Tax Justice Network’s December 2018 podcast

In edition 84 of the December 2018 Tax Justice Network’s monthly podcast/radio show, the Taxcast: time’s running out to tackle the climate crisis facing us all. We look at environmental taxes and making them fair, speaking to the authors of new report A Climate of Fairness: Environmental Taxation and Tax Justice in Developing Countries

Plus: we discuss the gilets jaunes in France, a movement that’s been widely reported as being anti-green taxes, but is in fact born from wider desperation for their ‘let them eat cake’ President Macron to reverse a series of policies that have worsened inequality in the country. We give Monsieur le President a lesson in how not to implement an environmental tax…

Featuring:

Tatiana Falcão and Jacqueline Cottrell, authors of the Vienna Institute for International Dialogue and Cooperation report A Climate of Fairness: Environmental Taxation and Tax Justice in Developing Countries (details below) and John Christensen of the Tax Justice Network. Produced and presented by Naomi Fowler, also of the Tax Justice Network.

this is a real economic, tax justice struggle…wherever I went [in France] I heard Macron being described as the plutocrat’s president”
~ John Christensen on the gilets jaunes in France
We have about 10, 12 years to really get the climate problem really under control and really start to bring down our emissions, I hope governments will start to shift towards this higher intervention again and to introducing a carbon price because the alternatives are much worse”
~ Jacqueline Cottrell

Continue reading “The gilets jaunes and how NOT to implement an environmental tax: the Tax Justice Network’s December 2018 podcast” →

Unbelievable! The Ethical Failure at the Heart of Corporate Tax Avoidance

In this year-end guest blog, Tristan Shirley explores the belief system that underpins tax avoidance by multinational corporations and reflects on the ethical failures revealed by their unbelievable behaviour.

Almost every commuter on the train is reading the free paper. There is a surprised headline exclaiming the negative impacts of austerity and rising inequality, although everyone remains expressionless. Although reading a London commuter’s face for feeling is folly, I wonder if it is because they know that the political and financial system around them legally and aggressively redistributes capital out of their public purse via tax avoidance. It is unlikely; the highly opaque, complex and supposed legality of tax avoidance hinders the public from seeing its existence and influence in everyday life. After all some may have unknowingly paid for their tickets via the tax avoiding trainline!

Around the world many people are calling for tax justice, and there is growing understanding and evidence to demonstrate the damage tax avoidance has on the provision of human rights and distribution of political power. There are also proven ethical tax reform initiatives which would massively improve on the status quo. Why then, in the face of such clear analysis do tax avoiding (not evading) multinational corporations (MNCs) believe their behaviour is still acceptable and fail to adopt reform? For me and many others it is unbelievable! From that commute I set out to prove it.

Beliefs are the acceptance that something exists or is true and they can be used to justify action, such as avoiding paying tax. Beliefs sit together within systems where they interact and influence each other in an interconnected manner. Therefore a believer has a degree of control on which part of their beliefs to modify or distort when presented with contrary evidence, often protecting a stronger core belief. For example, Flat Earthers (people that believe the earth is flat) can ‘‘…postulate that satellite photographs are affected by systematic distortions of light, that people have hallucinations about ships disappearing over the horizon…’’ so as to maintain that the earth is flat.

You will be pleased to hear that there are limits to these distortions. The limit is defined by what can be considered as plausible. The Flat Earthers distortions break the seams of plausibility and as a result their belief system isn’t credible. Sure, anyone can believe what they want to believe but it is implausible to do so.

Hang on, surely a corporation can’t believe!? A MNC can and does in fact believe, through its Corporate Internal Decision (CID) structure which organises personnel towards the corporation’s endeavour and exercise of corporate power. It is the executives and senior leadership who are responsible for formulating the CID and embedding a culture of tax avoidance. They do so because they believe in the sanctity of the fiduciary duty, in return for equity and power they place the interests of the shareholder ahead of their own and obviously, those of third parties. Usually in the pursuit of profit!

Instinctively human rights should easily challenge the MNCs belief system as being implausible. The global MNC tax avoidance of $500 billion per annum massively harms people, especially those in developing countries where governments cannot uphold their obligations to their citizens. It is clearly morally reprehensible, however, having this label does not make it something implausible to believe in. MNCs are business orientated and their function is to generate profit on behalf of their shareholders, it just so happens in doing so MNCs believe in the fiduciary obligation as more plausible than moral obligations and the rights of several billion people who are affected.

Intuitively in a similar vein, social contract theory between citizens and state seems to be hold the answer to challenging the plausibility tax avoidance beliefs. In 2016 Pakistan lost an estimated 40% of tax revenues to MNCs. Theoretically, such tax avoidance threatens the assumptions of fairness and egalitarianism on which the social contract between state and individuals rests. Citizens of Pakistan would be unlikely to actively agree to enter into an agreement with MNCs and the state, if such unfavourable outcomes were known. Unfortunately though for us, the social contract is in fact inapplicable to MNCs. They may benefit from the provisions of the state but they do so as a third party, not as an equal contributing participant within the contract, they are not a citizen and only need to abide by the law. Laws which funnily enough promote vast tax avoidance. Unfortunately any further philosophical coercion towards paying tax that ordinary citizens like you and I have are voluntary for the MNC.

With hindsight the fiduciary duty is resilient, these criticisms fail to diminish the nature and importance of business and the unique characteristics it bestows on MNCs. It is clearly morally reprehensible and massively damaging for the social contract to believe in avoiding tax, yet given the fiduciary contract and its vital role in business not implausible. Nonetheless, it is in the constant appeals to the ‘nature’ of business and profit that gives MNCs enough rope, to eventually hang themselves.

The market in which businesses operate does in fact provide it’s own robust moral framework. It is based on the market’s purpose of distributing goods in the most efficient manner possible by setting the best ‘price’ dictated by supply and demand. In our real-world market there are imperfections which restrain this efficiency. To behave in a way that exploits them is deemed as unreasonable, leading to market inefficiencies otherwise known as ‘Market Failure’.

Unsurprisingly, tax avoidance exploits market imperfections so that the MNC is able to charge artificial prices that are “too low,” relative to the true cost. This process of externalising costs (to the citizens of host countries who have to pay for the remaining tax liability) increases the amount of profits that executives are able to deliver in line with the fiduciary duty.

This behaviour is rife in the current competitive market and the dysfunction it creates is evident as markets fail to deliver on their purpose. It is implausible for MNCs to believe in tax avoidance, not because of human rights or social contract considerations which to some extent are independent of them, but because in doing so they emaciate and cripple the global market on which their very own and so many others existence relies on. With the damage done, retrospective pleas of ‘but it was legal!’ will hold even less merit.

Business ethics and its impact has long been restrained by appeals to the fiduciary duty. It has been sidelined and adherence to its advised ethical norms or practices have been limited to voluntary adoption to likes of ‘CSR’. Belief in the current fiduciary duty without modification is simply unbelievable. The behaviour of MNCs needs to be contextualised within the larger competitive market system in which they operate; tax avoidance for short term profit causes market failure and is not excusable and their behaviour must reflect that. For example, by pursuing with vigour ethical tax reforms like the multi-factor global formulary apportionment with a minimum corporate tax rate.

Positively, the legal interpretation of the fiduciary duty (in UK law at least) has become clearer, thanks to the work of TJN and their legal work. Farrer and Co. are of the opinion that it is not possible to construe that duty as constituting a positive duty to avoid tax, in fact to do so is ‘misconceived’. The nature of the fiduciary relationship does not in fact limit the ethical considerations of MNC boards and the payment of tax. The result being that the tax avoidance beliefs inculcated in a MNC at a leadership level are in fact not just implausible philosophically, but also perhaps implausible in law too.

Of course executives will still appeal to the sanctity of the fiduciary duty until the tide truly changes. However, given that belief is implausible and clearly undermined, we witness their real belief that much clearer – it is simply greed.

Who knows, one day MNCs that believe in tax avoidance may be deemed as absurd as Flat Earthers. A change in this direction may result in significantly larger tax bills to MNCs, but to be honest that cost was theirs all along.

GRI invites feedback on its first global tax transparency standard

A new draft Standard on tax and payments to governments was published today by the GRI, the global standard setter for sustainability reporting. This is the first global standard designed to help organisations understand and communicate the impact of their tax strategies on the economies and societies they operate in using country by country reporting techniques. The GRI, whose Sustainability Reporting Standards are currently used voluntarily by over 4,000 organizations in over 90 countries, is now inviting public comment on the draft GRI Standard.

The draft Standard was developed by an expert, multi-stakeholder Technical Committee which included Alex Cobham, our chief executive. The Technical Committee was setup in 2017 with the task of making tax reporting more transparent and accessible in response to organisations’ tax affairs facing increasing scrutiny from stakeholders, tax authorities and citizens.

Tax and related payments to governments are the fundamental source of revenues, and consequently, a vital means to finance sustainable human development. The integration of national economies and markets in recent years has placed international tax rules under greater strain. Recent tax related scandals like LuxLeaks and the Panama Papers have prompted stakeholders to ask for greater and more transparent corporate reporting on tax and other payments to governments.

Tax transparency promotes trust and credibility in the taxation system and in the tax practices of organisations. It enables stakeholders to make informed judgments about whether an organisation’s position on tax and payments to governments is acceptable and informs public debate. Equal access to quality information also contributes to better-informed public debate on tax policy.

Since 1997, GRI Standards have become the world’s most widely adopted global standards for sustainability reporting. According to the GRI website, 93 per cent of the world’s largest 250 corporations now report on their sustainability performance. By helping organisations communicate their impact on climate change, human rights, governance and social well-being, GRI Standards have enabled real action to create social, environmental and economic benefits for people across the world.

The inclusion of country by country reporting in the new draft Standard on tax and payments to governments marks another milestone for tax transparency. Country by country reporting requires multinational corporations to provide a jurisdiction-level breakdown of activities, profits declared and tax paid. The practice clarifies where corporations are conducing real business activity and where they are reporting their profits, making it easy to identify risks of profit shifting for tax avoidance – and to identify the jurisdictions that are attracting profit shifting at the expense of other countries.

The first draft international accounting standard for country by country reporting was created for the Tax Justice Network in 2003 by Richard Murphy, an accountant who is also a member of GRI’s Technical Committee. The approach was initially written off as unrealistic, and a version for the extractive sector was blocked by the Big Four accounting firms at the International Accounting Standards Board in 2006 despite the support of investor and philanthropist George Soros and Publish What You Pay, a global coalition. Today though, there are a number of standards for country by country reporting including for financial institutions in the EU, and for reporting to tax authorities for all large multinationals under the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan. The new draft GRI Standard will not only help catapult the practice to thousands of organisations across the world, it sets out by far the most robust implementation of the practice.

There are three main ways in the GRI’s draft Standard’s approach to country by country reporting is superior to the OECD’s approach.

First, under the draft GRI draft Standard, organisations publicly share their country by country reporting data. Country by country reporting data currently collected by tax authorities under OECD rules is kept private. Making country by country reporting data public contributes to better-informed public debate on tax policy and serves as a strong deterrent against corporate tax dodging.

Second, the draft GRI Standard distinguishes between intra-group sales (which occur between a multinational corporation’s branches) and unrelated party sales. This distinction is crucial to separating real economic activity from purely accounting transactions.

Third, the draft GRI Standard requires reporting companies to either use audited financial statements or financial information filed on public record, or to reconcile the reported information with the data stated in these. Where numbers do not reconcile, companies can explain. This avoids a situation where public country by country data simply cannot be reconciled with published financial information which would otherwise undermine trust in all of a company’s reporting. The draft Standard’s distinction between intra-group sales and unrelated party sales is crucial to reconciling this information.

The draft GRI Standard will be open for public comment for 90 days, until 15 March 2019. GRI will offer free webinars during the public comment period, where stakeholders can learn more about what’s included in the draft Standard.

Sharing your feedback will help the GRI make tax reporting more transparent and accessible to a wider range of stakeholders. Make sure you have your say on whether the draft Standard is clear and feasible to report on, and if it will deliver the valuable information you need to make sound assessments about an organization’s tax approach. Input from investors and asset managers would be of particular value.

The draft Standard is available as an interactive PDF here. You can register and provide your feedback by downloading the PDF and completing the forms. Please submit the PDF with your completed feedback before 15 March 2019. You can learn more about the GRI Standard on tax and payments to governments here. In the December edition of the GRI podcast to hear directly from Technical Committee members, including Rob Wilson of investor MFS and our chief executive Alex Cobham, about why the need for increased tax transparency is so urgent, and the value the Standard offer.

The Tax Justice Network’s December 2018 Spanish language podcast: Justicia ImPositiva, nuestro podcast, diciembre 2018

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:

The challenges for Mexico’s new president Andres Manuel Lopez Obrador: can he fulfill his promises?
How Latin American elites are threatening democracy in the region: we look at a new report on captured democracies
Dangerous liaisons: is the free trade agreement between the European Union and the Mercosur a gift to European tax havens?
And who stands to benefit from Costa Rica’s fiscal reforms?

Guests:

Carlos Brown Solá of Fundar (el Programa de Justicia Fiscal del centro de análisis e investigación)
Rosa Cañete, of OXFAM
Verónica Grondona, advisor to the Grupo Confederal de la Izquierda Unitaria Europea-izquierda Verde Nordica
Jorge Coronado Marroquin of the Latin American Network on Debt, Development and Rights, LATINDADD

Continue reading “The Tax Justice Network’s December 2018 Spanish language podcast: Justicia ImPositiva, nuestro podcast, diciembre 2018” →

The US can be blacklisted under the OECD’s new rules due to a forgotten commitment

We recently criticised the report the OECD sent this month to the G20 which hinted that 15 (mostly small) jurisdictions are at risk of being blacklisted. We reiterated our concerns over the new OECD criteria to identify tax havens, particularly because of one arbitrary caveat, which looks like it was added just to let the US off the hook. But thanks to the useful memory and analysis of Alex Cobham, our chief executive, we’ve realised that the US should be blacklisted, even if we abide by the OECD’s capricious rules.

In 2014, automatic exchange of information finally became the new global standard for exchanging information, which the Tax Justice Network had been advocating since 2005. Therefore, when the G20 asked the OECD to come up with “strengthened” criteria to identify tax havens, the OECD rightly added an “immediate trigger” about automatic exchange of information.

Until then, jurisdictions simply had to meet two out of three requirements: (1) compliance with “exchanges upon request” (the old but surviving global standard for exchanging information), (2) commitment to automatic exchange of information (the new global standard) and (3) signing the Multilateral Tax Convention on Administrative Assistance (that would enable both types of exchanges of information). With the strengthened OECD rules, however, it wasn’t enough to comply with two out of three if automatic exchange of information wasn’t one of the two met requirements.

As we described in our blog about the previous version of the OECD’s criteria and in our blog about the truth-stretching “largely compliant” rating awarded to the US by the OECD’s Global Forum, the OECD faced a challenge when designing the new rules: how to actually become more strict on countries, while ensuring that the US would not be disturbed? We hypothesize that they came up with a clever plan: engineering compliancy ratings that were subject to discretion, and when this wasn’t possible, to simply “fix” the requirements themselves.

The US met the first requirement by achieving a “largely compliant” rating on the exchange of information on request. While the Global Forum considers most countries to be “compliant” and “largely compliant”, that the US has achieved a “largely compliant” rating in the second round of reviews is outrageous, particularly because in this round a country’s rating must reflect how well it ensures availability of beneficial ownership information. Not only does the US not register any beneficial ownership information, it doesn’t even ensure that more basic legal ownership information is registered. It’s not just the Tax Justice Network’s Financial Secrecy Index that has called out the US for its poor performance on legal and beneficial ownership availability. The Financial Action Task Force (FATF) also rated the US as “non-compliant” in respect to effective implementation of beneficial ownership (this is assessed by immediate outcome 5, where the US got the lowest possible rating, “low level of effectiveness”, that would be equivalent to a “non-compliant”). The FATF also rated the US as “non-compliant” in respect to Recommendation 24 on the legal framework on beneficial ownership of legal persons.

For the other two criteria, the OECD had to manipulate the actual requirements (similar to corrupt countries that manipulate bids for public procurement).

Since the requirement on the Multilateral Tax Convention was beefed up from “sign” the convention to actually “have it in force”, the OECD added an alternative: “or have a sufficiently broad treaty network”. The US is the only major country not to have the Multilateral Tax Convention in force (they are only party to the original Convention that excluded developing countries and failed to ratify the amended Convention that is already in force for 112 jurisdictions). The OECD never defined what “a sufficiently broad treaty network” means, but we have no doubt they would consider the US’s treaty network to be sufficiently broad.

Up until now, the farfetched compliancy ratings and loophole-ridden requirements gave the US enough slack to meet two out of three requirements, but how could the US avoid the new immediate trigger about automatic exchange of information?

The OECD came up with a ridiculous caveat.

The immediate blacklist for failing to implement automatic exchange of information pursuant to the OECD’s Common Reporting Standard would be triggered only if a jurisdiction “contrary to its commitment to the Global Forum to implement the AEOI Standard by 2018, [has] not met the AEOI [automatic exchange of information] benchmark”.

This is worse than accepting the excuse “the dog ate my homework”. According to the OECD, the homework wasn’t even required, because the student never committed to submitting it in the first place! Fulfilling one’s commitments may be relevant to hold someone to account for their promises. But the OECD blacklist is supposed to identify jurisdictions that failed to be transparent, not those that broke their promises to be transparent.

This “commitment to automatic exchanges” caveat looks especially suspicious when compared to the other two requirements: jurisdictions must have a “largely compliant” rating and the Multilateral Tax Convention in force, regardless of any commitment to achieve those results.

To leave no doubt, the Global Forum 2018 report on automatic exchange of information described

“All jurisdictions asked to commit to the Global Forum’s AEOI Standard have now done so, except the United States.” (emphasis added)

We had celebrated that the Global Forum had finally called out the elephant in the room, that the US isn’t participating in the Common Reporting Standard for automatic exchange of information. But very likely, the purpose of this paragraph wasn’t to make us happy, but to leave no doubt that the US had never committed to automatic exchange of information in the first place (so that the immediate blacklist wouldn’t be triggered).

We thought the OECD and the US managed to get away with it, but then our Chief Executive Alex Cobham recalled an OECD declaration of May 2014 signed by the US showing that the US did commit to implement the OECD standard for automatic exchange of information:

“WE, THE MINISTERS AND REPRESENTATIVES of … the United States…
WELCOMING the OECD Standard for Automatic Exchange of Financial Account Information, which provides the key elements for establishing a single, common global standard for the automatic exchange of financial account information (hereafter “the new single global standard”)…
4. ARE DETERMINED to implement the new single global standard swiftly, on a reciprocal basis. We will translate the standard into domestic law, including to ensure that information on beneficial ownership of legal persons and arrangements is effectively collected and exchanged in accordance with the standard;…” (emphasis added)

This explicit declaration signed by the US confirms that the US did commit in May of 2014 to specifically implement the OECD’s Common Reporting Standard for automatic exchange of information: the declaration refers to the “new single global standard” and the recitals specify that this refers to the OECD standard. This means that the US’s commitment to automatic exchange of information was not a generic one that could have been fulfilled for instance, by the US Foreign Account Tax Compliance Act (FATCA) framework.

What is there left to say against such a blatant declaration of guilt? Perhaps some may argue that the US “declared to be determined” (but not “committed”) to implement the OECD standard. Or maybe that the US committed “to the OECD” but not “to the Global Forum” about implementing the OECD standard – the Global Forum happens to be part of the OECD. The grounds left for not blacklisting the US under the OECD’s rules are as narrow as the hairs these counterarguments would seek to split.

We hope the OECD won’t use these unscrupulous arguments, and instead will right a long standing wrong by blacklisting the US until they implement the OECD standard for automatic exchange of information. On a side note, the OECD could also hold the US to account on their other promises “including to ensure that information on beneficial ownership of legal persons and arrangements is effectively collected” since the US failed on this too.

If the OECD continues to undermine their own rules, throwing away any remaining credibility in order to avoid speaking truth to power, the EU should set aside this distortion when it comes to their own listing of non-cooperative jurisdictions. The OECD has demonstrated it cannot be used as a neutral arbiter, and any objective application of the EU’s own underlying criteria would require the US to be listed. We would, of course, recommend our earlier proposal to enlist US financial institutions as lobbyists for progress by reciprocating the FATCA threat of a 30% withholding tax.

More transparency rules, less tax avoidance

Guest blog
By Leyla Ates
Altinbas University in Turkey

The European Council has taken important steps to enhance the exchange of information between tax administrations in order to promote tax transparency and fair tax systems in EU countries. This in turn creates a deeper and fairer single market.[i] However, ambiguity in disclosure obligations and a high threshold requirement risks leave the door open wide enough for dubious tax schemes to slip through.

One of the benefits of the European single market is that EU citizens and businesses have the freedom to move, do business and invest across national borders. But since direct taxation is not harmonised across the EU, this freedom also entails that some taxpayers manage to avoid or evade paying tax in the countries they reside or do business in. In 2011, the EU Council agreed to ramp up cooperation between tax administrations to help make sure taxpayers pay their fair share (Council Directive 2011/16/EU).

On 25 May 2018, the cooperation between tax authorities was enhanced to include mandatory automatic exchange of information in relation to reportable cross-border arrangements (Council Directive 2018/822/EU).[ii] The new directive further expands the scope of automatic exchange of information in tax matters, which had already been enlarged to include automatic exchange of financial account information in 2014, of cross-border tax rulings and advance pricing arrangements in 2015, and of country by country reporting in 2016.

Mandatory disclosure of aggressive tax planning schemes

Mandatory disclosure rules require intermediaries such as tax advisors, accountants and lawyers to report to tax administrations on aggressive tax planning schemes they are selling or making. Taxpayers are also required to report to tax administrations on the aggressive tax planning schemes they are making use of.

The mandatory disclosure rules aim to combat tax avoidance by means of helping identify regulatory loopholes, helping tax administrations to assess the risks, having deterrent effects on taxpayers and reducing the supply of these schemes by tax advisors.[iii]

In 1984, the United States became the first country in the world to introduce mandatory tax disclosure rules. Since then, a few other countries including some EU members have also introduced mandatory disclosure rules into their tax systems (the UK, Ireland, Portugal, plus Canada, South Africa, South Korea and Israel among non-EU countries). Indeed, the Lux Leaks and Panama Papers scandals and the fiscal State Aid cases pushed this anti-tax avoidance mechanism up on the EU base erosion and profit shifting agenda by demonstrating the role of intermediaries in the area of aggressive tax planning. As a first result of this political pressure, the European Council has now not only required common tax rules for mandatory disclosure in member states by 31 December 2019, but also placed an obligation on all member states to automatically exchange information on reportable cross-border schemes by 1 July 2020.

More information for all EU governments

The new directive requires the information is automatically exchanged with other EU members through a central directory. Thus, all EU countries will have access to a database on tax avoidance schemes. A similar database called the “aggressive tax planning depository” has existed within the OECD[iv]: such depository includes 400 types of schemes but is only available to a close-knit group of countries.[v] The new directive will create a level playing field for all EU member countries in terms of access to such relevant information.

Failure of the promoter-based approach

The assessment of the recent progress however is not entirely positive. The potential for ambiguity on what constitutes a tax avoidance scheme creates a serious risk that cross-border arrangements go unreported. Precisely because there are numerous and regular conflicts between tax administrations and taxpayers/advisers on the interpretation of tax laws, it should be expected that many schemes will be designed in grey areas which certain promoters might chose to interpret as not being subject to the remit of the reporting obligation. To mitigate against this risk, the reporting obligation should not just fall on either the client using an aggressive tax planning scheme or the promoter (tax advisers) of the scheme, but on both.[vi]

Unfortunately, the directive places the disclosure obligation primarily on the intermediaries, ie the tax advisors, accountants and lawyers designing and selling aggressive tax planning schemes. In some limited instances, taxpayers are also obliged to disclose tax planning schemes. If both were obliged to report independently on marketed/used tax avoidance schemes, the detection of illicit schemes would have been facilitated.

High threshold requirement: the main benefit test

The new directive sets out generic and specific hallmarks for describing whether a transaction is reportable or not. This is a general implementation under existing mandatory disclosure regimes. However, the directive also sets ‘the main benefit test’ as a threshold that a reportable scheme must satisfy before it is assessed against the generic hallmarks and some specific hallmarks. For a scheme to satisfy the test, it must be established that the main benefit, or one of the main benefits, which a person may reasonably expect to get from the scheme is a tax advantage. While threshold requirements are often used to filter out irrelevant disclosures and reduce tax administrative burdens, setting up a high threshold for disclosure can create an inappropriate justification for escaping mandatory disclosure obligations. The OECD stated that the main benefit test is a high threshold for disclosure.[vii] Thus, the European Council has opened a door through which intermediaries may inappropriately skip out on their mandatory disclosure obligations.

This article was originally published by Leyla Ates on The Progress Post on 12 November 2018. The article has been reproduced here with permission from the author and magazine.

References

[i] European Commission Staff Working Document Impact Assessment, SWD (2017) 236 final, Brussels, 21.6.2017, p. 4, available at https://ec.europa.eu/transparency/regdoc/rep/10102/2017/EN/SWD-2017-237-F1-EN-MAIN-PART-1.PDF.

[ii] Official Journal of European Union, L 139, 5 June 2018. According to Article 3, the Directive came into force on the twentieth day following its publication in the EU Official Journal i.e. 25 June 2018.

[iii] Tax Justice Network, Financial Secrecy Index 2018 Methodology, p. 95, https://www.financialsecrecyindex.com/PDF/FSI-Methodology.pdf.

[iv] http://www.oecd.org/ctp/aggressive/co-operation-and-exchange-of-information-on-atp.htm.

[v] Only to the members of the ATP Expert Group that is a sub-group of OECD Working Party No. 11.

[vi] Tax Justice Network, p. 96.

[vii] OECD, Mandatory Disclosure Rules, Action 12 – 2015 Final Report (2015), p. 37.

The G20 and the OECD disappoint again

We recently published an optimistic blog post about the advances made at the OECD’s annual Global Forum meeting that took place on 22 November 2018. Now, less than 10 days later, the OECD has submitted a report to the G20 and the G20 have issued a Communiqué that together bear some disappointing news.

First, the G20’s Communique.

We thought it was hard for a non-binding communiqué that superficially refers (in just one paragraph) to all relevant issues on tax and financial transparency to get any worse. We were wrong.

The G20’s 2017 Communique made these positive remarks about automatic exchange of information and beneficial ownership:

We look forward to the first automatic exchange of financial account information under the Common Reporting Standard (CRS) in September 2017. We call on all relevant jurisdictions to begin exchanges by September 2018 at the latest (…)

As an important tool in our fight against corruption, tax evasion, terrorist financing and money laundering, we will advance the effective implementation of the international standards on transparency and beneficial ownership of legal persons and legal arrangements, including the availability of information in the domestic and cross-border context (…) [emphasis added]

(That we considered these remarks to be positive gives you an idea of how low our expectations were)

One could argue that the US was implicitly covered in the call “on all relevant jurisdictions” to start implementing the Common Reporting Standard for automatic exchange of information. In addition, it was important that the G20 recognized the importance of beneficial ownership transparency for both companies and trusts to tackle corruption, tax evasion and money laundering. Arguably, this applied to the US and to many other G20 countries where beneficial ownership isn’t even available. Argentina, which held the G20 presidency in 2018, not only failed to keep the status quo set by these remarks but actually made its own corporate transparency worse. Only the EU could be said to have made progress on this issue.

The G20’s 2018 Communiqué now seems to be backpedaling on its previous Communique. The new declaration removed the call on relevant jurisdictions to start automatic exchanges and erased all references to beneficial ownership. In place of these calls, the 2018 Communiqué merely welcomes the:

“…commencement of the automatic exchange of financial account information and acknowledge the strengthened criteria developed by the OECD to identify jurisdictions that have not satisfactorily implemented the tax transparency standard.”

We’ll get to the supposedly “strengthened” criteria put forward in the OECD’s report to the G20 in a minute, but there’s another shortcoming in the Communique. Out of the blue, the G20 took a big step backwards in the fight against tax avoidance:

“We will continue our work for a globally fair, sustainable, and modern international tax system based, in particular on tax treaties and transfer pricing rules” (emphasis added)

Not only has the G20 toned down or erased recognition of the most important tools available today for tackling tax evasion, corruption and money laundering, it has specifically given recognition to the very mechanisms that can be abused to enable tax evasion, corruption and money laundering.

We wonder if this is a response to our welcoming of the IMF questioning the sustainability of the arm’s length principle while exploring unitary taxation, only a few months earlier. Or to the long list of recent publications on how tax treaties can negatively affect developing countries.

The Communiqué published in Buenos Aires has failed to comply with a popular Spanish expression “Si no suma, que no reste” (if it won’t add value, at least it shouldn’t take it away).

Now, back to the usual suspect: the OECD.

Based on the OECD’s “strengthened” criteria which it put forward in its new report to the G20 (just imagine what the weaker version looked like!), jurisdictions should comply with two out of three requirements and avoid the two immediate triggers to prevent being blacklisted. If they fail on any of the immediate triggers, they will be blacklisted even if they comply with the two of the requirements. The three requirements are

Obtaining at least a “largely compliant” rating from the Global Forum peer reviews on exchange of information on request (EOIR). A “non-compliant” rating would “immediately trigger” being blacklisted.
Implementing automatic exchange of information (AEOI) pursuant to the OECD Common Reporting Standard (CRS). Not implementing the CRS if the jurisdiction committed to doing it would “immediately trigger” being blacklisted (The condition in this trigger clause seems to primarily just benefit the US who never committed to the CRS in the first place. In any case, this seems to be more sensible than exempting a country just because it’s located between Canada and Mexico or makes good apple pie!),)
Having the Multilateral Convention on Administrative Assistance in Tax Matters (aka the Multilateral Tax Convention) in force, or a sufficient network of bilateral treaties that allow exchanges on request and automatic ones.

Thanks to the OECD’s report to the G20 we know that the OECD blacklist based on the new strengthened criteria isn’t ready yet, but we can deduct which 15 jurisdictions are at risk of being identified.

It also helps to compare these 15 jurisdictions, with the Tax Justice Network’s Financial Secrecy Index’ top 15 ranked jurisdictions:

Financial Secrecy Index compared against jurisdictions at risk of being blacklisted by OECD

The Financial Secrecy Index ranks jurisdictions according to the “worst offenders”, meaning those who are mostly responsible for global financial secrecy and which, if they became transparent, would have a positive and tangible impact on reducing financial secrecy in the world. This would clearly be the case for the US, Switzerland, Cayman Islands, Hong Kong, Singapore, Luxembourg, Germany, the United Arab Emirates, Lebanon and Panama among others. These top 15 jurisdictions on the Financial Secrecy Index account for 62 per cent of the global market of offshore financial services. On the contrary, the 15 jurisdictions at risk of being blacklisted by the OECD (mostly small islands) account for only 0.64 per cent of the global market of offshore financial services. In other words, if the 15 jurisdictions at risk of being blacklisted by the OECD became fully transparent, it would be hard to tell the difference at a global level, given that they account for less than 1 per cent of the global offshore financial services. The 15 jurisdictions at risk of being blacklisted by the OECD provide almost 100 times less offshore financial services than the 15 jurisdictions identified by the Financial Secrecy Index.

Moreover, these 15 jurisdictions at risk of being blacklisted by the OECD, don’t really need to become fully transparent to be off the hook. Small improvements will do.

Here are all the changes the 15 jurisdictions need to undertake to avoid the blacklist:

Dominica, Israel, Montserrat, Niue, Russia and St. Vincent only failed the “immediate trigger” on automatic exchange of information (AEOI). They committed to start implementing the Common Reporting Standard (CRS) for automatic exchange of information in 2018 but haven’t done so yet. Once they start exchanging, they’ll be safe.
Anguilla, Marshall Islands, Sint Maarten and Turkey are rated “partially compliant” by the Global Forum, which falls below the minimum requirement of “largely compliant”. More crucially, they have not implemented their commitment to the automatic exchange of information, thus triggering immediate backlisting. Because these jurisdiction already meet the requirement of having the Multilateral Tax Convention in force, they would only need to start automatic information exchanges (to meet the immediate trigger) to be safe from the blacklist. While they could also improve their rating to at least “largely compliant”, they don’t really need to because by implementing automatic exchanges, they would already be complying with two out of the three requirements, including both immediate triggers.
–Antigua and Barbuda, Brunei, Qatar and Vanuatu failed the immediate trigger for not implementing their commitment to automatic exchange of information commitment and they do not have the Multilateral Tax Convention in force. While they are all “largely compliant” regarding exchanges on request, they won’t be able to engage in automatic exchange of information to meet the immediate trigger unless they also sign and ratify the Multilateral Tax Convention.
–Trinidad and Tobago is the only jurisdiction that needs to make some big changes. In addition to starting automatic exchanges (so as not to keep failing on the immediate trigger for not implementing their AEOI commitment), Trinidad and Tobago will also need to improve its Global Forum rating on exchange of information on request because its current “non-compliant” rating is another immediate trigger. In other words, even if they start implementing the automatic exchange of information, unless they improve their compliancy rating, they will still be blacklisted,). However, in order to start automatic exchanging information, they will also need to become a party to the Multilateral Tax Convention. On the bright side (for Trinidad and Tobago, not for global transparency), once this Caribbean island signs and ratifies the Multilateral Tax Convention and starts implementing automatic exchange of information, they will only need to improve their Global Forum rating to a “partially compliant” and still be white-listed.

The Global Forum ratings

Obtaining a “largely compliant” rating is one of the three factors needed to avoid the blacklist. How hard is it to achieve it? Not that difficult, as long as you are a powerful country. If you don’t believe it, just look at the number of countries considered “compliant” and “largely compliant” by the Global Forum:

Table of jurisdictions categorised by Global Forum peer review ratings

Source: 2018 OECD report to the G20 (red underline added)

The vast majority of members of the Global Forum are considered to be “compliant” and “largely complaint”, including the worst offenders on the Financial Secrecy Index (underlined in red).

We wonder which rose-tinted glasses the Global Forum is looking through at the world of transparency and how they can ever explain the likes of the Russian Laundromats and other cases of grand corruption given how perfectly transparent their world appears to be.

Other organisations, including the Tax Justice Network, are not as optimistic at the Global Forum. Let’s take a look.

The OECD report to the G20 includes a colour-coded table showing the ratings of 39 jurisdictions from the second round of peer reviews against the exchange of information on request (EOIR) standard. This table, reproduced below, refers to the three sections (A, B and C) of the peer reviews that assess availability of ownership information and accounts, access to information by authorities and exchange of information.

Given that many organisations apply the same traffic-light colour coding (green = transparency; yellow = partially secretive; orange= largely secretive; red = fully secretive), we can compare colour composition of the Global Forum’s transparency table to the colour composition of the Financial Secrecy Index’ Secrecy Score and the Financial Action Task (FATF) 4^th round of mutual evaluations on compliance with anti-money laundering recommendations.

To make it comparable, we only focus on the 39 jurisdictions assessed by the Global Forum’s second round of reviews that have also been assessed by the Financial Secrecy Index and the FATF. We only show the colour ratings of indicators from the Financial Secrecy Index and the FATF that are relevant to the Global Forum’s second round of review. In the case of the Financial Secrecy Index, these are indicators 1 to 3, 5 to 7, 18 and 19 on ownership information, accounts, banking secrecy and exchange of information. In the case of the FATF, these are recommendations 24 and 25 on availability of beneficial ownership information and effective implementation of these recommendations (Immediate Outcome 5).

This is what the ratings for the same jurisdictions (where available) look like according to each organisation:

Comparison: Financial Secrecy Index vs FATF vs Global Forum ratings

Both the Financial Secrecy Index and the FATF have overall much more red, orange and yellow (the FATF uses light green in place of yellow) especially with regard to ownership information (the first six columns of the Index and all three columns of the FATF). While the Global Forum overall has more green (aka compliance), the Global Forum’s first column (on availability of ownership information) does show much more colour diversity and less green. Nevertheless, the Global Forum’s last column, which shows the overall rating, is the one that matters for the OECD blacklist, and in this case, the vast majority of countries are “compliant” (green) or “largely compliant” (yellow).

In conclusion, we would love to live in the world portrayed by the G20 and the OECD, where most countries are fully transparent (including all major financial centres) and where some automatic exchange of information among some countries, tax treaties and the arm’s length principle are enough to tackle all illicit financial flows (including tax avoidance). However, we happen to live in a world where illicit financial flows are alive and kicking, in many respects thanks to the G20,OECD countries and their dependencies that fail to implement real transparency and instead engage in a race to the bottom offering less regulation, less taxes and less questions asked when it comes to accepting non-residents’ money.

Tax justice pushes forward at OECD’s Global Forum

The OECD’s Global Forum held its annual meeting in Uruguay on 22 November 2018 where more of the Tax Justice Network’s proposals and those of our allies on automatic exchange of information have been incorporated into Global Forum policies and remarks – albeit some watering down.

Momentum for tax justice has been steadily growing since the start of the 21st century. The last few years in particular saw significant grounds made following a number of major tax haven leaks. A long list of Tax Justice Network proposals based on the ABC’s of tax transparency – automatic exchange of information, beneficial ownership and country by country reporting – which were brushed off at first as unrealistic – are now endorsed in some form or fashion by most countries and major organisations, including the G20 and the OECD.

As lines in the sand get redrawn, it becomes more urgent than ever to make sure policy changes result in real financial transparency rather than face-saving window dressing. The outcomes of the OECD’s Global Forum have critical implications for the implementation of the automatic exchange of information between countries signed up to the Common Reporting Standard. But do these go far enough to address the asks that the Tax Justice Network is calling for today?

First, the good news.

The OECD calls out the non-reciprocal, American elephant in the room

We repeatedly warned about the US’s lack of participation in the Common Reporting Standard in 2014, 2015, 2016 and especially in our 2018 blog post about how the OECD tax haven blacklist let the US off the hook. Most recently, our bilateral financial secrecy index analyses found that the US was creating the highest risk for offshore tax abuses for the European Union. But now, the Global Forum’s Automatic Exchange Implementation Report surprised us with this mild, but still relevant statement:

8. All jurisdictions asked to commit to the Global Forum’s AEOI Standard have now done so, except the United States. As of 2015, the United States exchanges certain information automatically pursuant to its various Model 1 FATCA intergovernmental agreements, which includes recognition by the government of the United States of the need to achieve full reciprocity.” (emphasis added)

This is relevant because it’s the first time that the OECD states the obvious: that the US isn’t implementing the Common Reporting Standard and that the US exchanges only “certain” information automatically. The OECD’s list of jurisdictions committed to the Common Reporting Standard only has a footnote saying that “the US exchanges information automatically pursuant to FATCA” (without saying that this means the US is not implementing the Common Reporting Standard). In the past, Switzerland and Luxembourg tried to treat the US as participating in the Common Reporting Standard in order to disregard anti-avoidance measures applicable to non-participating countries. This new statement from the Global Forum helps narrow the grey area the US has operated in.

Curtain call for the automatic exchange of information dating game

The Tax Justice Network has insisted the automatic exchange of information between countries can only bring about real transparency when all countries automatically exchange information with each other. But the OECD’s legal framework for automatic exchange of information effectively created a dating game where countries can cherry-pick who they share information with. For a good example of this, see our blog on Switzerland’s approach to automatic exchange of information.

The Global Forum has now called on members to share information with all participating countries, putting an end to the dating game:

7. All Global Forum members (…) were asked to commit to: (…) 2. exchange information with all interested appropriate partners – being all those interested in receiving information and that meet the standards in relation to confidentiality and the proper use of data.” (emphasis added)

More, though not enough, light on which countries are choosing financial secrecy

Up until now, we were unable to determine which countries were choosing “voluntary secrecy”, that is, to send but not receive any information via the automatic exchange of information. Through voluntary secrecy, tax havens can effectively offer a way out of the increasingly global system of automatic exchange of information by selling passports or residencies. Passports and residencies for sale schemes, aka “golden visas”, from voluntary secrecy countries create a huge risk because anyone acquiring them (and claiming to be a resident from these voluntary secrecy countries) would become a non-reportable person, meaning that banks wouldn’t even bother to collect any information about them.

The OECD had previously omitted to name which countries were choosing voluntary secrecy. The OECD merely listed all countries sending and receiving information, mixing together those that were not receiving information because they lacked the technical or legal requirements with those that were not receiving information because they voluntarily chose not to. The Global Forum is now naming some names:

As an example, some jurisdictions do not wish to receive information. This includes 11 jurisdictions that do not have systems for direct taxation and exchange information only on a non-reciprocal basis (i.e. they send but do not receive information)¹
¹ Anguilla, The Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Marshall Islands, Nauru, Qatar, Turks and Caicos Islands and United Arab Emirates”

It appears that out of all the countries choosing voluntary secrecy, the above listed 11 countries do not receive information because they do not have systems in place for direct taxation. Additionally, Switzerland has confirmed that both Cyprus and Romania do not receive information because they do not yet meet international requirements on confidentiality and data security. What reasons, then, do the other countries choosing voluntary secrecy, like Costa Rica, have for not receiving information? Why is the refusal to receive information that can be used to tackle tax abuse, corruption and money laundering accepted as a valid choice?

The risk of voluntary secrecy is also relevant for the statistics on automatic exchange of information that we have been proposing since 2014 in different publications and interactions with policy makers (see the last point below). The idea of these statistics is to show how much money residents from every country hold in each financial centre. Our proposed statistics would be highly hampered if countries failed to collect information on residents of certain countries in the first place, especially on those claiming to be resident in a voluntary secrecy tax haven. In such cases, statistics would be able to show how much money Argentine residents hold in say Switzerland, but not how much money Cayman or Anguilla residents hold in Swiss banks. This would create a big black hole, reducing the effectiveness of statistics. So far it appears that only Andorra will address this properly by collecting information on all non-residents (the famous “wider approach”). Others, particularly Switzerland, Hong Kong and Qatar appear to be coordinating with the voluntary secrecy tax havens or with secrecy in general, since they will collect information on much fewer residents than other countries:

Using exchanged information to tackle corruption and money laundering

Since 2014, the Tax Justice Network has repeatedly made the case that information received through the automatic exchange of information under the Common Reporting Standard can help tackle not just tax evasion, but also corruption and money laundering. However, the OECD (very likely pushed by Switzerland’s “speciality” principle) wouldn’t allow authorities to use information for these “extra” non-tax purposes.

In order to address this, back in 2016 we joined the Financial Transparency Coalition in a letter to the OECD and the Global Forum, asking them to address this issue. We even drafted a declaration, based on the Multilateral Tax Convention requirements, which all countries could sign to allow for information to be used to tackle corruption and money laundering. We received no response. But now, in Uruguay, the Global Forum published the Punta del Este Declaration signed by Latin American ministers stating:

4. We encourage all Latin American countries to further strengthen their efforts in tackling cross-border tax evasion, corruption and other financial crimes through closer cooperation, both at the global and regional levels, including in particular through more intense use of all the available exchange of information tools for the purpose of deterring, detecting and prosecuting tax evaders;
(…)
6. We will consider the possibility of (i) wider use of the information provided through exchange of tax information channels for other law enforcement purposes as permitted under the multilateral Convention on Mutual Administrative Assistance in Tax Matters and domestic laws.” (emphasis added)

The Global Forum’s recognition here of the key role exchange of information plays in tackling wider corruption, crime and violence is paramount. Importantly, the Punta del Este Declaration breaks rank with the eyes wide shut consensus, although other countries within and outside Latin America should join the Declaration and start using information to tackle all illicit financial flows.

The impact of the all these tax justice successes at the Global Forum will go a long way in the near and far future. Some Tax Justice Network asks, however, were not addressed by the OECD or the Global Forum. Here’s the bad news.

The OECD sees the risks of golden visas, but not the risktakers

Since the OECD published the Common Reporting Standard (CRS) in 2014, the Tax Justice Network has warned that passports and residency for sale schemes can be abused to avoid automatic exchanges of information. The OECD finally addressed the risk in February 2018 when they opened a consultation on this issue. This consultation led us to write a report on risky jurisdictions offering golden visas and we joined the Financial Transparency Coalition’s response to the OECD consultation.

On 16 October 2018, the OECD eventually came up with a list of 21 risky jurisdictions whose golden visas schemes potentially jeopardised the integrity of the Common Reporting Standard. On November 13 2018, we published a blog post criticizing the OECD’s blacklist for not just being unproductively short, but for also failing to include OECD countries and for having a knack for getting even shorter (four jurisdictions had already been removed between 16 October and 13 November). Just over a week later, the OECD’s Global Forum decided to remove yet another jurisdiction for the list, this time Panama.

The OECD drag their feet on making automatically exchanged information publicly available

Based on our research on the loopholes affecting the effectiveness of automatic exchange of information, we have concluded that the best approach to address these loopholes is to publish aggregate statistics on the data collected for the automatic exchange of information under the Common Reporting Standard. These statistics would breach no confidentiality and demand no extra cost from tax authorities or banks. They have already collected all relevant information. All we are asking is for tax authorities to publish the totals by country of origins, eg “In Germany, all Argentine residents hold X million euros, all Austrian residents hold Y million euros, all Brazilian residents hold Z million euros.” We have created a template for this here, we have explained how it could be used to identify schemes that avoid being reported under automatic exchange of information here, and we have given an example of similar financial data that’s already public here.

Now, we are waiting for the OECD to come up themselves with the idea of publicising statistics to ensure compliance with the Common Reporting Standard. Importantly, statistics would also give civil society organisations, journalists and authorities from developing countries that are unable to join the Common Reporting Standard access to basic aggregate information about where the world’s residents hold their offshore accounts.

The march of tax justice has proved to be irrevocable. As the year draws to a close, the progress achieved in 2018, on top of that achieved in 2017, is worth taking a moment to celebrate. And while a lot of work still lies ahead, we at The Tax Justice Network are very excited about taking the momentum for tax justice to greater heights in the year to come.

Comparing financial secrecy in Israel to other OECD countries

This week, Tax Justice Network Israel released a report in collaboration with the Friedrich-Ebert-Stiftung Israel comparing financial secrecy in Israel to that of other OECD countries. Based on the Financial Secrecy Index 2018 results, the report analyses Israel according to each one of the 20 indicators that compose the secrecy score in the Financial Secrecy Index and compares the results to those relevant to other OECD countries. Israel was ranked 34th out of 112 jurisdictions, with a secrecy score of 64 out of 100.

The report, covered in depth by the Times of Israel, indicates that out of OECD countries, banking secrecy in Israel is ranked the third most secretive of all OECD member states after Switzerland and Austria. This is mainly due to Israel tough stance against financial whistle blowers, and other financial institutions who break client confidentiality. The report also points out that while Israel maintains a central register of real estate owners, alongside 32 other OECD countries, the registry does not contain information on beneficial owners. Furthermore, it is accessible online only to the Israeli public.

In terms of trusts, Israel is classified in the most secretive category, along with another 10 OECD countries, for not requiring overseas trusts to register, even if they are managed by an Israeli trustee. This is because Amendment 168 of the Israeli Income Tax Ordinance (hereinafter: ‘amendment 168’) exempts new immigrants and returning veteran Israelis from reporting on such trusts. Furthermore, while trusts created in Israel have to provide details on their beneficial owners, the registry is made by Israel Tax Authority, rather than the companies registry, which means that the information is not publicly available.

In its recommendations, Tax Justice Network Israel called on the Israeli government to cancel amendment 168 which was passed in 2008 with the goal of attracting to the country wealthy new immigrants and Israelis who returned after living for at least 10 consecutive years overseas. Amendment 168 exempts these newcomers from reporting on their overseas assets and income for 10 years. The exemption prevents Israel from applying systematic procedures for collecting information on money held by Israelis overseas. Such procedures include, for example, cross-referencing information submitted to Israel with records held by other countries, real estate agents or media and internet reports.

The report argues that amendment 168 actually attracts to Israel people who wish to conceal their income, evade taxes, or launder their money. In fact, a 2016 State Comptroller’s report has already warned that the absence of such systemic procedures incentivises the laundering of capital or the use of capital which has been laundered overseas in ways that would harm both society and the Israeli economy. The State Comptroller further warned that this exemption did not meet international standards for transparency and information exchange because Israel cannot collect information on irregularities or criminal acts made by Israelis overseas.

The report urges Israel to pass regulations that will enable it to honor a commitment it made in 2014 to join the OECD’s Common Reporting Standard (CRS) and, as of September 2018, to automatically exchange financial information about accounts held by foreign residents. The report mentioned that 26 OECD countries have already begun to exchange CRS information since 2017, and that out of 101 nations that already joined the CRS, Israel is one of the only ones not to have done so, alongside Turkey and classic tax havens such as Dominica, the Caribbean island of St. Maarten, and Trinidad and Tobago (and of course, the US, which still refuses to join while sticking to its own bilateral Foreign Account Tax Compliance Act mechanism).

The report also mentions that Israel is in breach of its additional commitment to the OECD to meet country by country reporting requirements, i.e to force large multinational companies to submit financial reports on each country in which they operate, in order to prevent them from shifting their profits to tax havens or to low tax jurisdictions and thereby minimise or avoid paying tax.

The report further warned that if Israel does not honor its international commitments, it is likely to enter the lists of non-cooperative countries maintained by the OECD and the European Union. The inclusion of Israel in such lists could eventually lead to a lowering of its credit rating, which could then lead to an increase in taxes, a cutback in state expenditure and an increase in unemployment.

These recommendations coincided last week with an implied warning by Angel Gurria, OECD secretary-general, according to which if Israel does not swiftly pass the regulations to enable automatic exchange of financial information, the OECD would have to report Israel as a non-compliant country early next year.

Finally, the report also calls on the Israeli government to oblige both public and private companies to register their beneficial owners and to set a deadline for cancelling or converting bearer shares.

The report did provide some positive findings. Compared with other OECD countries, Israel cooperates well with other countries on money laundering and bilateral tax treaties, it does not give an Israeli citizenship in return for financial investment and is one of the few OECD member countries that require taxpayers to report on certain aggressive tax planning schemes.

Download the report

World Bank roundtable: illicit financial flows

Alex Cobham, Chief Executive of the Tax Justice Network, will be taking part in a roundtable discussion at the World Bank in Washington DC on 6 December about illicit financial flows. Details are above. Participants from outside the World Bank are welcome to join by Webex (meeting number and password above; you can also call in to one of these phone numbers using the meeting number as the access code; please RSVP).

WHAT IS THE CONTENT?

From the LuxLeaks to the Paradise Papers, by way of the Panama Papers, revelations about the exploitation of financial secrecy have provided an ongoing backdrop to international politics in the last decade. Illicit financial flows (IFF) is an umbrella term which has succeeded in uniting a broad range of related development concerns, from the tax abuses of multinational companies and high net-worth individuals, to grand corruption and the laundering of the proceeds of criminal markets. The resulting consensus for action drove target 16.4 of the Sustainable Development Goals (SDGs), a global commitment to reduce IFF. A process is now underway to develop technically-robust indicators to ensure national-level accountability for the financial secrecy that drives these corrupt and criminal behaviors.

WHAT WILL YOU LEARN?

This roundtable will explore the political emergence of the IFF agenda, the definitional and technical aspects, and the leading estimates and measures, including the proposed SDG indicators.

WHO IS PRESENTING?

BIOGRAPHIES

Alex Cobham (@alexcobham) is a development economist and chief executive at the Tax Justice Network. He previously held research and policy roles with the Center for Global Development, international NGOs, and at the University of Oxford; and has consulted widely, including for the UNCTAD, UNECA, DFID and the World Bank. Alex’s research has focused on the scale of revenue losses from tax avoidance; on comparative international measures of ‘tax haven’ secrecy; and on horizontal and vertical inequalities. The Tax Justice Network is an expert network of accountants, economists, lawyers and many others in professional practice, academia and civil society. Since its formal establishment in 2003, the Tax Justice Network has worked to bring issues of tax avoidance, tax evasion and other abuses of financial secrecy from the margins to the centre of the global policy agenda.

Edition 11 of the Tax Justice Network Arabic monthly podcast/radio show, 11# الجباية ببساطة

Welcome to the eleventh 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 # 11 – The “Nets of Oil” film and Jordan’s new income tax law

In the eleventh edition of Taxes Simply, we begin as usual with our news brief, which includes:

Airbnb’s removal of its listings in the West Bank settlements from its websites
Strikes and protests in Tunisia against IMF austerity
Nissan’s Carlos Ghosn arrest and dismissal from his job on charges of corruption.

In the second section of the programme, Walid Ben Rhouma asks Ahmed Awad, Director of the Phenix Center for Economic and Informatics Studies about the most controversial points of the new tax law in Jordan, and its potential effects on economic and social rights and tax justice.

In the third section, Walid Ben Rhouma interviews Mabrouka Khedir, director of the film “Nets of Oil” which explores the devastating impact of oil leaks on the Tunisian island of Qirqana and its fishing-dependent economy amid the absence of any form of environmental taxation or effective compensation. Continue reading “Edition 11 of the Tax Justice Network Arabic monthly podcast/radio show, 11# الجباية ببساطة” →

The Spider’s Web documentary viewed over one million times on YouTube

Since it was uploaded to YouTube just ten weeks ago, Michael Oswald’s seminal documentary film on Britain and its tax haven empire has gained over 1,000,000 views. “The Spider’s Web: Britain’s Second Empire” documents how British elites created a network of tax havens after World War II and the lengths they take today to preserve it – exemplified in a chilling scene where a Jersey police officer harasses and interrupts the filmmakers’ interview with a tax haven whistleblower. Based on Nick Shaxson’s (pictured below) best-selling book Treasure Islands: The Men Who Stole the World, the film delivers a sobering account of Britain’s role in corrupting the global economy.

The Tax Justice Network congratulates everyone involved in the making of the film.

The documentary is available for free on YouTube in English, French, German, Italian and Spanish. Subtitles are available in French, Spanish, German, Italian, Russian, Arabic, Korean, Hungarian, English, Turkish and Portuguese.

Director Michael Oswald said about his inspiration for the film:

I realized that there was an interesting, coherent and self-contained story that had not been told, the story of Britain’s transformation from a colonial power to a financial power, and the myriad and obscure financial structures created by City of London financial interests that lie at the heart of this transformation.” (read more here.)

Tax Justice Network’s John Christensen, who co-produced The Spider’s Web, traces his interest in the subject back to the late-1970s when he and various colleagues started to look at London’s role as a global tax haven:

We had no doubt that the City of London was a major player in the process of looting poorer countries of their wealth and in protecting Britain’s secrecy jurisdiction satellites from political attempts – at the United Nations, for example – to rectify the policy and regulatory flaws that enabled capital flight and tax dodging on such an immense scale.” (read more here)

Made on an astonishingly small budget, The Spider’s Web has been acclaimed by reviewers. Here is a sample of what they’ve said:

Forget anything by John Le Carre, this is a real political drama which is more thrilling than anything seen in Tinker, Tailor, Solider, Spy.”
– Filmotomy
Framed with strong images of the City of London, tax havens and set to a haunting original soundtrack, The Spider’s Web is a film all ordinary, tax-paying citizens should watch.”
– Modern Times Review
The Spider’s Web gives an excellent overview of the scale of the global tax dodging problem and its corrosive effects on democracy.”
– Open Democracy
This film is not a thriller. There are no crimes, murders, war or rape. But it deals with the consequences of such acts, metaphorical or real, and you need a strong constitution to watch it, if you care about the state of capital. It is calm, professional and accurate, like a hitman should be. I can’t recommend it enough.”
– Mr Ethical, whistleblower

Watch the documentary for free.

To tackle tax abuse and crime, we must take on the enablers

There is increasing public awareness worldwide of the level of malpractice by (and lack of accountability of) banks, law firms, the offshore magic circle, real estate agents, trust companies, large corporations and so on. Yet the ‘enabler industry’ is mounting a fightback against the modest yet significant transparency obligations imposed on it after Lux Leaks, Swiss Leaks, Panama Papers, Paradise Papers and other scandals. Meanwhile it is lobbying governments, even helping to formulate government policy, and continuing to benefit from unbalanced power, opacity and impunity. The professional enablers are often natural allies for those behind the dark money that is distorting economies and politics globally.

Our annual tax justice conference on the 2nd and 3rd July in 2019 will strike at the heart of the beast. Co-organised with the Association for Accountancy & Business Affairs and City, University of London (CityPERC), the conference will focus on the role of professional enablers of tax abuse and crime, and will present and discuss ideas on how to deal with them.

We’re looking for qualitative and quantitative research on the role and influence of the enablers, as well as innovative proposals for their better regulation. We would particularly like to hear from you if you are a practitioner working in crime prevention and detection agencies or asset recovery, if you are working with whistleblowers or if you are a whistleblower, or if you are monitoring lobbying and dark money, researching offshore practices and law, developing ideas on accountancy values and ethics, or have new ideas for protecting the public, democratic institutions and economies. The deadline for submitting papers for the conference is 14 December 2018.

UPDATE: The deadline for submitting papers for the conference has been extended to 31 December 2018. Continue reading “To tackle tax abuse and crime, we must take on the enablers” →

Financial crime is a feature of our global financial system, not a bug: pioneering economist Susan Strange

We’re sharing, with kind permission, the following article written by journalist Nat Dyer for independent global media platform Open Democracy.

The global financial crime wave is no accident

Financial crime is a feature of our global financial system not a bug, pioneering economist Susan Strange recognised. Her message is more urgent than ever.

There was a little bit of good news this month for those worried about a tidal wave of McMafia-style financial crime. A new UK government agency tasked with fighting it – the National Economic Crime Centre (NECC) – opened its doors.

I say “little” because financial crime is far more deeply rooted in our financial and political systems than we like to acknowledge.

From the LIBOR-rigging scandal to the offshore secrets of the Panama Papers and ‘dark money’ in the Brexit vote, it is everywhere. In my recent work with anti-corruption group Global Witness, I saw first-hand how ordinary people in some of the world’s poorest countries suffer the consequences of corruption and financial crime. We exposed suspicious mining and oil deals in Central Africa, in which over a billion dollars of desperately-needed public finances were lost offshore. The story is about the West as much as Africa. The deals were routed through a dizzying web of offshore shell companies in the British Virgin Islands, often linked to listed companies in London, Toronto and elsewhere. Even if the NECC is given enough resources and collaborates widely, it has got its work cut out. Continue reading “Financial crime is a feature of our global financial system, not a bug: pioneering economist Susan Strange” →

Job description: Research Fellow in Financial and Development Geography (focus on Financial Secrecy and Corruption)

The global financial crime wave is no accident

Thank you!