Page 66 – Tax Justice Network

Reporting a crime is not a crime

Dr Mary Young

UPDATE: Since publishing this blog on 26th November 2015 the Swiss Federal Court in Bellinzona has sentenced HSBC whistleblower Herve Falciani to five years in prison. Mr Falciani, who was tried in absentia, was charged with data theft, industrial espionage and violation of Swiss banking secrecy laws. More here

This is an edited version of the editorial written for Tax Justice Focus – The Whistleblower Edition by Mary Alice Young of the University of West England. Continue reading “Reporting a crime is not a crime” →

Book review – The Joy of Tax

The following review, by Dan Hind, was first published in the Whistleblower Edition of Tax Justice Focus Continue reading “Book review – The Joy of Tax” →

Tax Justice Focus – The Whistleblower edition

The latest edition of our newsletter Tax Justice Focus, with a special focus on whistleblowers, is now available for download here.

Guest edited by Mary Alice Young of the University of the West of England, this edition is both an exploration of the difficulties confronting people who want to blow the whistle on companies engaged in providing financial services, and an acknowledgment of their personal courage.

For decades the world of offshore finance has been shrouded in deep secrecy. Created by and on behalf of the wealthiest and most powerful people on the planet, offshore finance has been a mechanism for them to sidestep taxation, regulation, investigation and democracy. Offshore secrecy takes many forms, and has been reinforced by the strong omertá that grips the offshore finance industry. As we have witnessed in recent years, banks and accounting firms are particularly ruthless is their treatment of whistleblowers,and they are supported by the secrecy jurisdictions from which they operate, see here and here for example. As Young observes:

“Offshore jurisdictions are in the business of making life difficult for whistleblowers through formal legislation and through the informal forcement of social codes; the unwritten rules of conduct and the herd mentality that affect those who work in the financial sector. To borrow from hackers’ slang, hostility to whistleblowers is a feature, not a bug; it is an attractive part of the financial secrecy package which offshore jurisdictions peddle to clients.”

But not every banker or accountant is gripped by the herd mentality. Exceptions stand out; people who can resist the lure of high salaries and excessive lifestyles, and who have the courage to stand up for their principles, normally at great personal price. As UBS whistleblower Stéphanie Gibaud comments in the lead feature article:

” . . when one understands that there is something wrong with private banking – in effect, offshore banking, blowing the whistle internally or externally can feel like committing suicide: a quick death or a long and painful one, but the end of a certain kind of life, nonetheless.
. . . the so-called privileged elite is extremely well organized and is united when it comes to defending their own interests. Private banking is one part, an important part, of this organization in defence of privilege.
Once you have blown the whistle in the private banking sector, well-trained managers will do all they can to crush you like an insect. Their techniques will vary in intensity from demotion and social isolation all the way through to discrimination and harassment. Your reputation will suddenly be ruined throughout the financial sector. Insurance companies and business partners but also the clients of the private banks will all hear about your supposed failings.”

Whistleblowing is not for the faint-hearted; as TJN’s director, John Christensen, himself a whistleblower, dryly observes, anyone who exposes the corrupt practices of the offshore enablers can expect “Savage kickback from employers whose business models are based on secrecy; they will do whatever it takes to punish you as a deterrent to others. The rich and powerful are at their most thuggish when their backs are up against the wall.”

In this edition:

Stephanie Gibaud reflects on her experience in private banking and explores the reality of what happens once someone decides to speak out about unethical or illegal activity, and stresses the lengths to which the banking industry will go to ensure that the whistleblower is isolated, degraded and denounced. She goes on to ask a number of searching questions about the silence that surrounds elite criminality.

John Christensen reflects on his experiences when he decided to speak out about malpractice in the highly secretive jurisdiction of Jersey, and gives a sober assessment of what whistleblowers can expect from their colleagues, employers, friends, media and judiciary once they stick their heads over the parapet.

Kenneth Rijock, both a lawyer and convicted money launderer, gives wouldbe whistleblowers a brief introduction to information security – the techniques that we can use to avoid detection by crooked employers and, ultimately, jail.

William Byrnes introduces us to three of the highest profile whistleblowers from the financial sector, and explores the relationship between whistleblowing and tax compliance and highlights the much anticipated legislation of several offshore jurisdictions who are looking to introduce statutory laws to protect whistleblowers who report tax crimes.

Radio producer Naomi Fowler talks about the extraordinary difficulties journalists face when trying to persuade editors of the newsworthiness of offshore finance. In Naomi’s words:

“As a journalist and citizen I thought these issues were dynamite, something to be shouted from the rooftops, that everyone should know about. But radio stations wanted mafia stories from Sicily or bribery stories from Latin America, where I was sometimes based. To no avail I tried to explain I had much bigger corruption stories from the City of London, of staggering global significance.”

And Dan Hind reviews Richard Murphy’s new book The Joy of Tax, reflecting that “Murphy has done terrible damage to the cosy consensus that once protected the offshore sector. In The Joy of Tax he sets out to do the same to the onshore conventional wisdom. It is one hell of a fight to pick. But he’s used to apparently impossible odds.”

Download The Whistleblower’s Edition here, and feel free to circulate it to colleagues and friends.

New report: tax treaties in sub-Saharan Africa

New TJN-Africa report

Via Martin Hearson’s website, here is a new report he authored for Tax Justice Network-Africa. As Hearson says, it’s based on field research done a year ago and has been a little while getting into print.

Here’s a link to read it online at academia.edu

Here’s a link to download the PDF

Among many other things, the report highlights the extent to which tax treaties — which have profound implications for how the tax revenues from cross-border investments are shared between countries (see here) — have been negotiated amid highly unequal power relationships: Continue reading “New report: tax treaties in sub-Saharan Africa” →

The Tax Justice Network’s November 2015 Taxcast

In the Tax Justice Network’s November 2015 Taxcast: Why is the City of London losing so much business to New York, Hong Kong and Singapore? Our conclusions are quite different from those of a British Bankers Association report on the subject. Listen to the Taxcast here. Continue reading “The Tax Justice Network’s November 2015 Taxcast” →

Short animation: tax is paid by everyone, for everyone

From TJN-Israel and law students at Israel’s College of Law and Business, an excellent short animation reminding people of the roles that tax plays in civilised society. Enjoy.

The Norwegian shareholder registry: now open for all

A random excerpt, obtained by TJN three minutes ago. Click to enlarge.

A random excerpt, obtained by TJN 90 seconds ago. Click to enlarge. Better still, try it for yourself.

The Norwegian Shareholder Registry now open for all

A guest blog by Sigrid Klæboe Jacobsen, Director, TJN-Norge

Two programmers from an IT company, acting on their own initiative, spent a weekend doing the job that the Government hasn’t wanted to do: they have made it possible for anyone to search the Norwegian Shareholders Registry.

You can now search all Norwegian shareholders at the website www.aksjeeiere.no Continue reading “The Norwegian shareholder registry: now open for all” →

Colombia and civil war: the role of tax

Thomas Mortensen, country manager for Christian Aid in Colombia

A guest blog By Thomas Mortensen, with thanks. A bilateral ceasefire is due in Colombia in the coming weeks, hopefully December 16th.

Tax is not the most obvious remedy for civil war but in the case of Colombia, it could go a long way. The country has suffered an internal armed conflict for more than 50 years, which has left 7 million victims. One of the underlying causes of the war is economic inequality. Colombia is the most unequal country in Latin America and tenth in the world^[1]. One of the reasons for this is that Colombia’s fiscal system has completely failed to reduce inequality. Continue reading “Colombia and civil war: the role of tax” →

Britain can force its tax havens to curb secrecy. But will it?

Does the buck stop at Buckingham Palace?

Jolyon Maugham, a UK tax barrister, has written a useful blog looking at promises the UK coalition government made before the last election about getting its offshore satellites to curb financial secrecy — and then he has compared those promises to the actions that have been taken since then.

Do read the whole short blog, but the conclusion is:

“What’s happened?
. . .
In a word, nothing.
The UK does possess the power to force our tax havens to adopt this measure – at least that’s what an article in the highly respected New Law Journal concluded. It’s just a matter of political will. Which seems to be in rather shorter supply after the General Election than it was before it.

Continue reading “Britain can force its tax havens to curb secrecy. But will it?” →

Who ultimately pays the corporate income tax? (Again.)

Kimberly Clausing, US tax academic

We have written many times about the ‘incidence’ (or, if you like) burden of the corporate income tax. When you tax corporations, who ultimately pays it: the workers, through lower wages? The consumers, through higher prices? Or is it the shareholders and owners of capital?

It’s a crucial question. Defenders of wealth and entrenched privilege love to argue that it’s ‘workers’ who ultimately pay the tax: if they can persuade people that that is true then they can argue that it’s a pointless, regressive tax and should just be abolished. It’s often accompanied by sniggering about ‘lefties’ hitting the wrong targets and confidently delivered statements like “most economists agree that the burden falls on workers.” Continue reading “Who ultimately pays the corporate income tax? (Again.)” →

Crickhowell and the tax rebellion: the mouse that roared?

Bucolic Crickhowell: are these tax schemes open to the public though?

Bucolic Crickhowell: but are these corporate tax schemes open to the public?

Update: the Crickhowell activists have set up a new website: Fair Tax Town.

We’re delighted to see that a forthcoming BBC TV programme will highlight a major tax injustice that we have long drawn attention to: that multinational corporations are killing small businesses partly by being able to out-dodge them on tax. Britain’s Independent newspaper reports:

“When independent traders in a small Welsh town discovered the loopholes used by multinational giants to avoid paying UK tax, they didn’t just get mad.
Now local businesses in Crickhowell are turning the tables on the likes of Google and Starbucks by employing the same accountancy practices used by the world’s biggest companies, to move their entire town “offshore”.

Continue reading “Crickhowell and the tax rebellion: the mouse that roared?” →

How Ireland became an offshore financial centre

This month we published our fourth Financial Secrecy Index (FSI), complete with a series of reports about each of the biggest tax havens and secrecy jurisdictions, looking into the political and economic histories of how and why they went offshore, who was involved, and where the bodies are buried.

The one report that wasn’t ready on publication date last week was Ireland. Now, finally, here it is. It is pasted below – but it’s also available in a prettier pdf version, here.

All the individual country reports are available on the FSI website.

Continue reading “How Ireland became an offshore financial centre” →

Still Broken: major new report on global corporate tax cheating

Update, Dec 7, 2015: a new paper in the Journal of World Business, which contains this:

“Home country statutory corporate tax rates have a small impact on tax haven use. In general, corporate tax rates are an important factor in driving MNEs to set up tax haven subsidiaries. However, as long as there is a significant gap between tax rates in OECD countries and those in tax havens, our results suggests that reducing corporate tax rates will not substantially change the likelihood of MNEs setting up tax havens subsidiaries. MNEs will continue to take advantage of the host country specific advantages available in tax haven locations, which include minimal rates of corporate income tax, light-touch regulation and secrecy.”

Our emphasis added. Which strongly supports the conclusions of the reports we cite below.

From the summary of our co-authored new report:

“In 2013 the OECD, supported by the G20, promised to bring an end to international corporate tax avoidance which costs countries around the world billions in tax revenues each year. However, with the recently announced actions against corporate tax dodging, G20 and OECD countries have failed to live up to their promise. Despite some meaningful actions, they have left the fundamentals of a broken tax system intact and failed to curb tax competition and harmful tax practices.”

In dollar terms, G20 countries are the biggest losers – while low income developing countries such as Honduras, the Philippines and Ecuador are hardest hit because corporate tax revenues comprise a higher proportion of their national income. The G20 Heads of State are expected to consider a package of measures they claim will address corporate tax avoidance at their annual meeting in Turkey on 15th and 16th November.

The key reforms are the OECD’s so-called “BEPS” project on corporate tax cheating, which we’ve written about extensively. And the details from the report:

“In 2012, US multinationals alone shifted $500–700bn, or roughly 25 percent of their annual profits, mostly to countries where these profits are not taxed, or taxed at very low rates. In other words, $1 out of every $4 of profits generated by these multinationals is not aligned with real economic activity.”

These findings are based on major new TJN research by Alex Cobham and Petr Jansky, which can be found here (and will be permanently available on our “Reports” and “Magnitudes” pages: it focuses on U.S. multinationals, not just because it’s important, but also because of data availability.)

Here’s a picture that illustrates one important aspect of the problem:

For some, that may seem like just numbers and graphics. But as the report notes, this has major implications:

“As governments are losing tax revenues, ordinary people end up paying the price: schools and hospitals lose funding and vital public services are cut. Fair taxation of profitable businesses and rich people is central to addressing poverty and inequality through the redistribution of income. Instead, the current global system of tax avoidance redistributes wealth upwards to the richest in society.
That is why civil society organizations, united in the C20 group, together with trade unions, are calling for the actions announced by the OECD to be regarded only as the beginning of a longer and more inclusive process to re-write global tax rules and to ensure that multinationals pay their fair share, in the interest of developed and developing countries around the world.”

Claire Godfrey, head of policy for Oxfam’s Even it Up Campaign said:

“Rich and poor countries alike are haemorrhaging money because multinational companies are not required to pay their fair share of taxes where they make their money. Ultimately the cost is being borne by ordinary people – particularly the poorest who rely on public services and who are suffering because of budget cuts.”

Rosa Pavanelli, general secretary of Public Services International said:

“Public anger will grow if the G20 leaders allow the world’s largest corporations to continue dodging billions in tax while inequality rises, austerity bites and public services are cut.”

Alex Cobham, TJN’s Director of Research, said:

“The corporate tax measures being adopted by the G20 this week are not enough. They will not stop the race to the bottom in corporate taxation, and they will not provide the transparency that’s needed to hold companies and tax authorities accountable. It’s in the G20’s own interest to support deeper reforms to the global tax system.”

Endnotes

The report is available in French and Spanish too, on the Global Alliance for Tax Justice site.

The full paper behind the report is published in the peer-reviewed working paper series of the International Centre for Tax and Development – the leading international and interdisciplinary academic centre in its field, funded by the UK and Norwegian governments:

Full ICTD working paper and the data annex: Cobham Jansky 2015 – Data annexes.

Our new ScaleBEPS page is permanently available on our “Reports” and “Magnitudes” pages and will be updated with latest news on the size of corporate tax cheating.

Guest blog: sun, sea, sand, tourism and fantasy finance

Where are you going on your next holiday?

The chances are if you are flying to a Sun&Sea destination, it will be with a tax-dodging company.

A guest blog by Linda Ambrosie. Listen to her on the Taxcast here.

Do you recognize any of these names: Barceló, TUI or Melía?. In English-speaking countries, these names may not be familiar. How about these companies: Thomson (UK), Sunwing Travel Group (Canada), Innside (Germany)?

And you thought you were doing your best to avoid the tax dodging companies. Well, think again. Continue reading “Guest blog: sun, sea, sand, tourism and fantasy finance” →

UK and China: the national security threat from the City of London

In March we wrote a short article (also discussed in our Taxcast) about the U.S.’ ire about what US officials said was Britain’s ‘constant accommodation’ with China.” That followed an earlier article a TJN blogger wrote in The American Interest about Russia and the City of London. In both cases we pointed squarely to the ‘offshore’-focused City of London as the source of the trouble:

“The City of London has been licking its lips at the prospect of a lot of money from the ‘offshore Renminbi’ market, and Chinese leaders know very well how powerful a tool the City can be in getting British leaders to do what they want.
Continue reading “UK and China: the national security threat from the City of London” →

Leaked documents: how Luxembourg, Netherlands have blocked EU tax reforms

From Sven Giegold, without comment:

The Netherlands and Luxembourg prevented progress on EU measures aimed at preventing tax dumping for years, according to leaked minutes of a Council working group being reported in the German media today (1). The documents on which the articles are based are precisely those documents to which the European Parliament’s special committee investigating tax issues has been denied access. Commenting on the revelations, Green economics and finance spokesperson Sven Giegold said: Continue reading “Leaked documents: how Luxembourg, Netherlands have blocked EU tax reforms” →

The 2015 Financial Secrecy Index in the global media

From The Economist print edition

Since its first publication in 2009, TJN’s Financial Secrecy Index has helped transform public understanding of the geography of tax havens. This has been helped by the huge international press coverage the index receives. This week’s launch of the 2015 FSI results has been no exception, with literally hundreds of articles in the international and national presses, including the local presses of the smaller secrecy jurisdictions. Continue reading “The 2015 Financial Secrecy Index in the global media” →

Rangers lose the big tax case: what now?

The Offshore Game, a TJN-supported site dedicated to looking at tax havenry in sport, published this long article about Scotland’s Rangers football club yesterday. It is important not just for the interests involved, but because of principles at stake, not least concerning discretionary trusts (see our primer on trusts here.)

Update: UK barrister Jolyon Maugham has commented on this case, on Radio Scotland. He said he expects this case to be successfully appealed (we disagree) but he added, dramatically:

“If this decision is not appealed to the Supreme Court or the Supreme Court decides in HMRC’s favour on an appeal, it will knock out almost all if not all employee benefit trust planning. So it is an incredibly powerful decision.”

He added that he thought there would be rather more than 5,000 such schemes in operation in the UK: so this is indeed a big deal.

We should add as something of a riposte to Maugham (who wasn’t very specific about the reasons why he expects the case to be successfully appealed) that public opinion has shifted decisively in this area, and Supreme Court judges do pay great attention to the public mood.

See also the January 2015 Taxcast on the Rangers offshore disaster.

Anyway, the following article also reminds us of how this kind of stuff – tax dodging via offshore arrangements – distorts competition in markets – as we explained recently. Here’s the OG article, in full.

Ibrox Stadium: Creative Commons licence from Diego Sideburns https://www.flickr.com/photos/diego_sideburns/

RANGERS LOSE THE BIG TAX CASE – WHAT NOW?

Today, the Court of Session in Scotland ruled in favour of Her Majesty’s Revenue and Customs in the Big Tax Case. The Big Tax Case was a challenge to Rangers’ use of an offshore tax avoidance scheme to pay its players. Continue reading “Rangers lose the big tax case: what now?” →

Fifty Shades of Tax Dodging: how EU helps support unjust global tax systems

A major new report written by civil society organisations in 14 countries across the EU, co-ordinated by Eurodad.

Fifty Shades of Tax Dodging: the EU’s role in supporting an unjust global tax system

Continue reading “Fifty Shades of Tax Dodging: how EU helps support unjust global tax systems” →

TJN unveils its new Financial Secrecy Index

Today the Tax Justice Network launches the 2015 Financial Secrecy Index, the biggest ever survey of global financial secrecy. This unique index combines a secrecy score with a weighting to create a ranking of the secrecy jurisdictions and countries that most actively promote secrecy in global finance.

The full press release is here.

The Financial Secrecy Index is here. For the larger jurisdictions you can click on a country to receive a full historical narrative of how that place became a secrecy jurisdiction or tax haven. Continue reading “TJN unveils its new Financial Secrecy Index” →

Luxembourg – how’s that tax cleanup going?

[vc_row][vc_column width=”1/1″][vc_column_text]An interesting and important tweet.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_raw_js]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[/vc_raw_js][vc_column_text](The source appears to be this.)

Now the truth is – as we’ll be demonstrating in our imminent Financial Secrecy Index 2015 to be launched worldwide on Monday – that Luxembourg has in fact made *some* improvements recently to its secrecy offering, in the sense that it’s become a bit less secretive and less aggressive in terms of undermining European schemes to boost transparency.

But there is still a long way to go. For a blistering account of Luxembourg’s recent role in financial globalisation, take a look at FT Alphaville’s recent The Case Against Luxembourg.

Here is a taster.

and we can’t ignore this one either: not least for the headline.

There are plenty more where these came from.[/vc_column_text][/vc_column][/vc_row]

NYT on The Price We Pay: exacting, disturbing, enlightening, must be heard

From the New York Times:

“Throughout the world, inequality is soaring to new heights, and the wealth of nations, which once provided prosperity to the majority, has gone missing.” So begins the narration for “The Price We Pay,” Harold Crooks’s exacting and disturbing documentary about offshore tax havens for multinational corporations, the growing concentration of money within a narrow minority, and the erosion of social benefits. The ideas in this densely packed but enlightening film can be challenging, but must be heard.”

Continue reading “NYT on The Price We Pay: exacting, disturbing, enlightening, must be heard” →

Where are you going on your next holiday?

RANGERS LOSE THE BIG TAX CASE – WHAT NOW?

Fifty Shades of Tax Dodging: the EU’s role in supporting an unjust global tax system

Thank you!