Page 56 – Tax Justice Network

Our June 2016 Podcast: Brexit, quantifying kleptocracy & why Panama Papers is tip of offshore iceberg

In our June 2016 Taxcast: how different could the lives of those in poverty have been without secrecy jurisdictions? We give you the very latest estimates on the missing trillions offshored from the world’s developing regions. Also: Brexit and the special interests behind it: “Nakedly, brazenly, they’re pushing the City of London’s deregulated, criminal approach to finance”. Plus, the Panama Papers shed some light on secretive, pro-tax haven US lobbying group the Center for Freedom and Prosperity’s funders.

“the revelations from the Panama Papers have been sensational but an international investigation with some kind of subpoena power would I think be 10 times as important.”
James Henry

Featuring: John Christensen of the Tax Justice Network, and Columbia University Professor, Economist, lawyer and Tax Justice Network senior advisor James Henry. Produced and presented by Naomi Fowler for the Tax Justice Network.

You can subscribe to our youtube channel or email Naomi [at] taxjustice.net to be added to the subscriber email list, or subscribe to the Taxcast on our rss feed. You can of course also also follow The Taxcast and the Tax Justice Network on twitter.

Download to listen offline here: http://traffic.libsyn.com/taxcast/Taxcast_June_16.mp3

And…join us on facebook https://www.facebook.com/TaxJusticeNetwork

Home websites: www.tackletaxhavens.com/taxcast www.taxjustice.net/taxcast

Brexit: the Tax Justice Network backs Remain

Brexit: The Tax Justice Network backs Remain

Britain likely to become a full blown tax haven in the event of a vote for leave
The EU provides the best opportunity to prevent a damaging race to the bottom in international tax and regulation of the finance sector

The Tax Justice Network, an independent international network focused on tax and tax havens, and not aligned to any political party, today came out in support of the Remain campaign in the UK referendum on EU membership.

In a statement released today, the Tax Justice Network said: Continue reading “Brexit: the Tax Justice Network backs Remain” →

Finance Uncovered: new investigation into Rift Valley Railway

From Finance Uncovered, a TJN-supported journalism project:

“Today, De Correspondent (Netherlands), The Daily Reporter (Kenya), The Observer (Uganda) and MO (Belgium) have published an investigation into the Rift Valley Railway, the historic railroad connecting Kampala to the port of Mombasa. The investigation developed a project of Patrick Mayoyo, one of our members from Kenya and involved journalists from Belgium and the UK.
In this article our team reveals that the World Bank has opened an inquiry into potential embezzlement of public funds after international development institutions invested over $140m into the line. We travel from Nairobi to Mombasa to find out why RVR has gone off the rails.”

The section “Rift Valley goes offshore” is particularly useful for our purposes. Now read on.

More unfair tax treaties may be renegotiated

This time it’s Uganda. From Martin Hearson:

“The government announced in its latest budget that it has finished formulating its new tax treaty policy, and will be renegotiating treaties that don’t comply. Seatini and ActionAid Uganda will no doubt chalk this up as a success.”

In Uganda, these two local NGOs have argued, apparently with good reason, that the country’s tax treaty network ‘is one of the mechanisms used by companies to avoid paying taxes, leading to illicit financial flows and tax losses for Uganda.’

Hearson also has a new working paper, co-authored with Jalia Kangave, entitled A Review of Uganda’s Tax Treaties and Recommendations for Action, whose summary states: Continue reading “More unfair tax treaties may be renegotiated” →

Swiss whistleblower Rudolf Elmer: ‘they want to crucify me, as an example to other bankers’

Elmer (right) in a symbolic handover of data to Julian Assange

Rudolf Elmer, the Swiss whistleblower who has been pursued by Swiss courts for a decade and served over half a year in prison while accused of (according to Switzerland’s peculiar courts) violating the Swiss banking secrecy law, now faces two more court trials: one, on June 23rd, as part of the ongoing case for which he has already been in prison; and one on June 24th, relating to the symbolic handover of a data file to Julian Assange at the Frontline Club in London.

Journalists, save the date: June 23 and June 24. Though the Brexit vote will dominate media coverage around that time, don’t forget Elmer.

In an email to TJN last week, Elmer said: Continue reading “Swiss whistleblower Rudolf Elmer: ‘they want to crucify me, as an example to other bankers’” →

What might Brexit do for tax havens and tax justice?

Where to now, Jeeves?

The UK votes on Thursday in a referendum over leaving the European Union. While there are dynamics that play in different directions, such a ‘Brexit’ would almost certainly see the UK itself push further down the road of tax havenry, hurting its own citizens and causing wider global damage.

The tax injustice effects

The most obvious effect, in Britain, is illustrated by this quote from Rupert Murdoch, arguably Britain’s most influential media magnate, via the journalist Anthony Hilton.

Continue reading “What might Brexit do for tax havens and tax justice?” →

Are European Union finance ministers about to deliver another stitch-up on corporate tax?

Update 3, June 21. The EU Press Release is here. Scornful comments continue to circulate.

Update 2: This blog is turning into a series of updates in *italics*, with the original background discussion in plain text underneath. Currently, the situation is uncertain – two hours ago, Jeroen Dijsselbloem, the president of Ecofin, tweeted:

Jeroen Dijsselbloem ?@J_Dijsselbloem 2h
#ECOFIN hope for a deal on the #ATAD-discussions on Monday #EU2016NL

So things are not decided yet. Meanwhile, one of our commenters, watching this situation unfold, has added:

Note that the text of CFC rules has slightly changed compared to the text in the blog, the text “the taxpayer can establish that” have been deleted again. That only further weakens the already useless compromise text.
While the CFC rules against parking profits in tax havens have been watered down, the other BEPS elements have been sabotaged too.
The limitation of interest deductions was weak to start with, but member states can now delay implementation for five year, and existing loans used for profit shifting are exempt until they mature. Like Tove, Lotta and Sol already noted, some member states said they first want an OECD agreement that all OECD members have to implement this, but there is no initiative whatsoever to upgrade the argeed OECD BEPS “common approach” on limiting interest deductions to a “minimum standard”.
The rules against hybrid mismatches, which are situations where profits end up in between two countries and remain untaxed, were incomplete to start with. Although the OECD has clearly spelled out a common approach that can be applied unilaterally as well as bilaterally between any two countries, the proposed compromise only addresses mismatches between two EU countries. The EC will come with a proposal to address mismatches between an EU country and a third country later this year.
In short, EU ministers of finance have completely sabotaged three key OECD BEPS actions – however, it is still possible that after the weekend, it will turn out there is no deal yet.

For those interested, here is the link to all public statements by ministers of finance in the morning:

http://video.consilium.europa.eu/en/webcast/6ab6c51a-afdc-4a41-8192-0415600f1b7e

And here is the link to the press conference this afternoon:

http://video.consilium.europa.eu/en/webcast/2519ce6f-446f-4325-84d5-0c5e1b6a71c1

Update 1: June 17th. Another commentator on this continuing email thread:

“The public debate on ATAD [the EU Anti Tax Avoidance Directive] is over for now, and ministers will try to reach final agreement on some of the outstanding issues. We expect them to reach an agreement later this afternoon. The press conference is scheduled for 16:30 CET and can be watched live here.”

Sol Picciotto, said, based on what is known so far:

“The whole package is now so weak that it is clear that governments want to continue their tax competition games, and are not serious about corporate taxation.”

Another email commentator:

“I hope everyone’s filling up their buckets of scorn, ready to be poured all over the outcome when it’s finally announced! It is pathetic, isn’t it.”

Original blog:

We’ve just received this, via email:

“Tomorrow, the EU Ministers of Finance will meet in the Ecofin Council in Luxembourg. Probably they will reach political agreement on the EU Anti-Tax Avoidance Directive. Confirming . . . fears, the so-called CFC rules against parking profits in tax havens have been watered down to something completely useless. And I mean COMPLETELY useless.”

All this, on the eve of a possible “Brexit” referendum, fired ultimately by anger at an establishment consensus that is viewed as out of touch with ordinary people (read this brilliant short analysis on that). What a spectacular folly this tax move would turn out to be, if things unfold here as feared. Continue reading “Are European Union finance ministers about to deliver another stitch-up on corporate tax?” →

New paper: Taxing Multinational Enterprises as Unitary Firms

Prof. Sol Picciotto

A new paper by TJN Senior Adviser Sol Picciotto, for the International Center for Tax and Development (ICTD).

Summary:

This paper explores the issues raised for international tax rules of explicitly treating multinational enterprises (MNEs) as single or unitary firms. It first briefly explains why reform of international corporate taxation is important particularly for developing countries, then outlines the flaws in the current system.

It discusses the impetus created for reforms, and the political and institutional dynamics of the tax treaty system. An evaluation is provided of the results of the G20/OECD project on base erosion and profit shifting (BEPS), focusing essentially on the extent to which they moved towards a unitary approach, and the problems created by their continued adherence to the independent entity principle.

It then outlines several proposals which, in different ways, would apply a unitary approach to MNEs. The remainder of the paper focuses more particularly on one variant: unitary taxation with formulary apportionment – this was the focus of the ICTD’s research programme, which resulted in the outputs discussed here. It outlines the main findings on optimal design of an international formulary apportionment system, evaluates the evidence about its possible effects on national tax revenue, and considers the possibilities and prospects for adoption of such a system regionally.

It contains some devastating critiques of the OECD’s BEPS (“Base Erosion and Profit Shifting”) project to tackle corporate tax cheating, including, among many other things:

“The political mandate for the BEPS project was expressed in broad and simple terms. It called for a reform of international tax rules to ensure that firms could be taxed ‘where economic activities occur and value is created’ (OECD 2013: 4). However, it also insisted that ‘changes to international tax rules must be designed to address the gaps between different countries’ tax systems, while still respecting the sovereignty of each country to design its own rules’ (G20 2013: 4). These aims are contradictory. . . . The conflict is exacerbated when a government decides that its tax system must be competitive in order to be business-friendly.”

So how have the contradictions been resolved?

“Instead of resolving the central issue by a principled agreement, the problems have been deferred to be decided on an ad hoc basis. The main beneficiaries are the specialists, particularly in transfer pricing, which has grown to be an enormous field of professional practice in the past thirty years. Their considerable investments in intellectual capital make it hard for most of them to envisage or accept a new approach, and the increased complexity will further enhance the value of their expertise. It will also create an even higher entry barrier for newcomers, particularly from the many developing countries that have introduced transfer pricing regulations only in the last five to ten years. Many aspiring professionals will no doubt relish this challenge, but if the rewards for some individuals are high, so is the social cost of devoting scarce skills to operating a defective system.”

What a triumph.

“A more effective solution, which would entail explicit abandonment of the independent entity principle and treating MNEs as unitary firms, would largely deprive them of this power to tweak national tax rules to try to attract investment by MNEs.”

Anyway, there is plenty more in here. Now read on.

Switzerland is handing back looted money. How big a deal is this?

“Are we Swiss all criminals?” The poster asks.

In the context of a fun Twitter fight and finger-pointing between the Swiss Bankers’ Association and the German Finance Ministry, there’s a newish story on Quartz entitled Swiss bankers swear they are trying to help Africa get its dirty money back. It begins like this:

“It irritates Valentin Zellweger that ‘no longer than six minutes into any James Bond movie, a sleazy Swiss banker still appears.’ “

This is, of course, the story that Switzerland, which is still ranked top of our last Financial Secrecy Index, has not only made *some* improvements to its egregious and globe-harming secrecy regime, but it is engaged in a furious domestic and international public-relations exercise to try and distance itself from a deeply criminal past. Nobody should ever forget Swiss bankers’ efforts to use deception, fraud and other tricks to hang onto assets belonging to the families of Jews murdered by Hitler’s regime, before being dragged into making some amends by global outrage. And as if that weren’t bad enough, there’s oceans of other murderous and criminal stuff that we shouldn’t forget either.

Well, the Quartz article continues: Continue reading “Switzerland is handing back looted money. How big a deal is this?” →

Guest article: transparency upside down

Jorge Gaggero

Jorge Gaggero, a long-time contributor to TJN, has written a guest article comparing Transparency International’s Corruption Perceptions Index (CPI) ranking with our Financial Secrecy Index. (Originally published at Revista Turba.)

One ranking is an upside-down version of the other. Those countries which look good on political corruption (the UK, the U.S., Singapore, Hong Kong) are actually among the worst providers of financial secrecy, according to the FSI.

The article also points to a ‘fraternal’ alliance between the U.S. and the UK as key players in the offshore system, whose financial sector actors have been important protectors of the system.

Read Gaggero’s article here (only in Spanish).

Norway’s oil fund: a minor victory for tax ethics

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*Big new update* under this guest blog.

Norway’s Oil fund, which says it is worth $7.1 trillion Kroner last year (about US$860 billion at current exchange rates), is so important in world markets that a cottage industry of fund-watchers has sprung up. Several civil society bodies have sought to influence the fund, in particular to get it to invest in a more ethical and responsible way. Now Sigrid Klæboe Jacobsen, Director of Tax Justice Network – Norge, has written us a guest blog outlining a meaningful advance in this area.

Minor victory for tax ethics in the Norwegian Oilfund

On Monday the 30th May 2016 the Norwegian Parliament voted in favour of including tax ethics in the investments made by The Government Pension Fund Global (popularly called the Oilfund and managed by Norges Bank – NBIM). The Parliament has requested that the Oilfund produces an “expectation document” on tax for companies they invest in.

The good news is that this is the first time any measures in combatting tax havens and financial secrecy have been passed in relation to the Oilfund. The bad news is that the wording is very vague, so the “expectation document” might never see the light of day. Continue reading “Norway’s oil fund: a minor victory for tax ethics” →

TJN sparring partner caught up in Panama Papers scandal

Back in 2005 a lobby group in Washington, D.C. issued a press release entitled Tax Justice Network Sides with Europe’s Tax Collectors, Ignores Critical Role of Low-Tax Jurisdiction in Protecting Human Rights and Promoting Pro-Growth Policy.

The bizarre press release accused us of putting at risk the lives of “Jews in France, or homosexuals in Saudi Arabia” because . . . well, read the press release to get a flavour (and look at our generic responses to these kinds of things, here or here, for instance.)

The Center for Freedom and Prosperity (CFP, for it was they) were a tiny but influential organisation linked to the libertarian Cato Institute, which proved a key player in beating back the OECD’s so-called Harmful Tax Competition initiative to tackle tax havens, launched in 1998 to little effect.

Now the Washington Post is carrying an article entitled How an obscure nonprofit in Washington protects tax havens for the rich. And the nonprofit is, of course, our old friends the CFP.

Continue reading “TJN sparring partner caught up in Panama Papers scandal” →

Now Luxembourg, Switzerland are working to bolster Tax Haven USA

Luxembourg and Switzerland: long-standing partners in the facilitation of crime

Update: making clear that the Swiss text we cited is a provisional test.

As we’ve often said before, it is counterproductive (and an analytical error) to see the fight against tax havens in purely geographical terms. When the U.S. Justice Department started taking action against Swiss bankers, this was not a battle between Switzerland and the United States: it was a battle pitting wealthy, unaccountable élites against their own societies, which just happened to be played out on this particular U.S-Swiss terrain — just as it is played out on many other terrains, day after day.

Indeed, the U.S. has been fairly successful against the Swiss because it targeted Swiss banks, rather than Switzerland: the latter (geographical) approach would have been far less successful and would have resulted in the Swiss coming together in a defensive huddle to defend against Big Bully USA. For those keen on tackling tax havens, this is an important insight.

Anyway, this context is important if we want to understand Luxembourg’s latest gambit, apparently to support the cause of Tax Haven USA, which is continuing to emerge as a secrecy jurisdiction of extreme concern. More recently, Switzerland seems to be following Luxembourg and also collaborating with the U.S. secrecy machine.

Why would these mucky European tax havens want to support an apparent ‘competitor’ on secrecy? What’s happening now is an extremely worrying development, and the OECD needs to summon the courage to step in with an outbreak of honesty – and urgently.

Continue reading “Now Luxembourg, Switzerland are working to bolster Tax Haven USA” →

New tools for tax policies and human rights

From Righting Finance:

The connection between civil and political rights and tax policy is so strong, that in a 2014 report on tax policy and human rights (“the report”), the UN Special Rapporteur on Extreme Poverty and Human Rights in 2014 said that the link runs both ways. That is, civil and political rights bear consequences for tax policy. But the formation of accountable states is closely tied to the emergence of taxation. And where tax abuse and unfair tax practices erode confidence in government the environment will be less prone to foster the right to take part in the conduct of public affairs.
A new publication by RightingFinance centers on the implications of civil and political rights for tax policy. The publication is the third in a series of advocacy tools on tax policy and human rights with the aim of assisting education and dissemination of the standards on tax policy and human rights contained in the above-mentioned report. Each of the advocacy tools addresses normative foundations of the rights in question, their applications to tax policy – including explanations and references to practical examples – and guiding questions for reflection.

Continue reading “New tools for tax policies and human rights” →

More sordid details about the Luxembourg tax cheat factory

If you read one story today, read this, from Private Eye. A couple of small excerpts reveal the extent to which tax havens like Luxembourg are ‘captured states”:

Applications for the favourable rulings, Halet told the court, were sent every Wednesday at 1.30pm in batches of 30 to 40 and returned to PwC, stamped and approved, at 5pm. The applications, running to around 20 pages each, were passed on a USB memory stick to a senior official in the tax authority, Marius Kohl. But when the man nicknamed “Monsieur Ruling” in the tax world started losing these and forgetting passwords, he was given direct access to PwC’s system. The tax advisers at PwC, meanwhile, kept the letterhead for Kohl’s division so they could draft his acceptance notices themselves.

And it wasn’t just the supine tax authorities: Continue reading “More sordid details about the Luxembourg tax cheat factory” →

The false promise of tax haven blacklists

Lotta Staffans: author of Eurodad’s article

From Eurodad:

This week, European Union finance ministers agreed to establish a common EU blacklist of so-called “non-cooperative jurisdictions” – in other words, tax havens. With one tax scandal unfolding after the other, listing and sanctioning tax havens may seem like a good solution. However, as tempting as it may sound, this EU exercise is doomed to fail – and here’s why.
. . . Tax havens are not an external matter to the EU, quite the contrary – some of the world’s most powerful tax havens are to be found in Europe.
For example, a new report from Oxfam uses European Commission (EC) data to analyse the role of the Netherlands as a corporate tax haven. It shows how the Netherlands is making large-scale tax avoidance possible and how Dutch regulations are an integral part of the international tax system that enables multinationals to avoid at least US$100 billion in taxes in developing countries every year. Several other EU Member States – such as Luxembourg, Ireland, Malta and the UK – have also been criticised for helping multinational corporations to avoid taxes. Yet you will not find any of these countries on a blacklist produced by the EU.

Continue reading “The false promise of tax haven blacklists” →

Quote of the day – London and money laundering

From London’s new mayor, Sadiq Khan:

“I have got nothing against luxury properties being built in London. What we can’t have is London being the world’s capital for money laundering.”

Ten years ago, who could have predicted this kind of comment?

See more here. Just for instance.

Automatic Information Exchange is not the answer!

June 7: We’ve updated this blog, to make changes to the beginning of the article, which required some clarification.

Recently the British, German, French, Italian and Spanish finance ministries issued a statement in which they said:

“We commit to establishing as soon as possible registers or other mechanisms requiring that beneficial owners of companies, trusts, foundations, shell companies and other relevant entities and arrangements are identified and available for tax administration and law enforcement authorities.”

Continue reading “Automatic Information Exchange is not the answer!” →

New Research Shows Millionaires Less Mobile than the Rest of Us

From Citizens for Tax Justice, a blog that’s worth reproducing in full, as yet more useful ammunition to wheel out against those who keep banging on about tax cuts and so-called ‘competitiveness.’

New Research Shows Millionaires Less Mobile than the Rest of Us
A new study (PDF) released today provides the best evidence yet that progressive state income taxes are not leading to any meaningful amount of “tax flight” among top earners.
Stanford University researchers teamed with officials at the Treasury Department to examine every tax return reporting more than $1 million in earnings in at least one year between 1999 and 2011. They found that while 2.9 percent of the general population moves to a different state in a given year, just 2.4 percent of millionaires do so. Even more striking is that for the most “persistent millionaires” (those earning over $1 million in at least 8 years of the researchers’ sample), the migration rate is just 1.9 percent per year. As the researchers explain: “millionaires are not searching for economic opportunity—they have found it.” Continue reading “New Research Shows Millionaires Less Mobile than the Rest of Us” →

Want to end corruption? Crack down on tax havens.

That headline comes from an opinion piece just in the Washington Post, written by Nicholas Shaxson, a TJN writer.

Among other things, it’s searching for deeper understandings of corruption that capture its systemic effects on rules, systems and institutions.

“Nigerian writer Chinua Achebe points toward a better, more systemic definition of corruption in his 1983 classic, “The Trouble with Nigeria”: “A normal sensible person will wait for his turn if he is sure that the shares will go round,” he wrote. “If not, he might start a scramble.”
Picture society as a queue. Disrupt a queue with, say, a fire hose, and after the spluttering has ceased, order should re-emerge – just as stable countries recover from earthquakes or economic shocks. Yet when the strongest push in at the front, that is more dangerous: People begin to lose faith in the queue, and in each other. They start to wonder: “Why should I pay my taxes if the rich go offshore and evade theirs?” Or “If I don’t snaffle that stream of oil revenue to feed my family, then that jerk in the next ministry will get it.”

Now read on. Also see our very recent Corruption edition of Tax Justice Focus.

Liberia’s mysterious company registry system

LISCR offices, Monrovia

Our friends and colleagues at Finance Uncovered have written a fascinating story entitled Liberia: America’s outpost of financial secrecy, which has been published today in South Africa’s Daily Maverick in cooperation with AmaBhungane.

We’d urge you to read the whole fascinating story of skulduggery and mystery on this little-understood African tax haven. But here are a couple of small tidbits, as tasters:
“Some of the tax advisers who use the registry also seemed strangely unwilling to discuss it. Price Waterhouse Coopers is the only member of the “big four” accountancy firms with an office in Liberia, and is listed as a “certified service provider” on the LISCR’s website. To qualify for this programme PwC must actively promote the use of Liberian companies. When we contacted them, the company said it would only respond to a letter delivered to its Monrovia office.
A letter was delivered, but no reply was forthcoming.”

Continue reading “Liberia’s mysterious company registry system” →

Three lessons on the hidden cost of corruption – for the West

A guest blog by Sigrún Davíðsdóttir

Corruption and corrupt business practices have often been portrayed as a problem only endured by poor countries, of little consequence to the developed West. The three following stories show that this is a wrong-headed, old-fashioned understanding, reflecting earlier times when corruption was poorly understood. By now, we should all know better.

The first story could still be happening in corrupt countries, whether Italy or Russia, where corruption and organised crime prevents people from turning their dreams into a job-creating engine. The second story shows how the West is actively enabling corrupt people in poor countries to stay in power, undermining democracy, economic development, stability and wealth creation – and also harming the West, directly and indirectly. The third story shows that it’s mistaken to think of offshore as far away from Western countries: on the contrary, offshore is onshore in the West, creating a space that enables corruption and threatens financial stability. Continue reading “Three lessons on the hidden cost of corruption – for the West” →

The tax injustice effects

Minor victory for tax ethics in the Norwegian Oilfund

New Research Shows Millionaires Less Mobile than the Rest of Us

Thank you!