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Just how do you change the world?

The Greatest Invention: Tax and the Campaign for a Just Society

Foreword by John Christensen

Experts wanted for hazardous mission. Small wages, fierce resistance, many years in the wilderness, constant pressure. November 10, 2003

Jeremy Corbyn’s victory in the Labour leadership elections in the UK and Bernie Sanders’ barn-storming campaign for the Democratic presidential nomination in the U.S. have brought economic justice into the very centre of political debate in the English-speaking world. Ideas that once seemed marginal are now becoming part of a new common sense.

Since 2003 the Tax Justice Nework has been analysing the offshore system and the global economy on which it depends. Its members around the world have been developing both a critique of the current order (Treasure Islands, The Price of Offshore) and a programme of reform (automatic information exchange, country-by-country reporting). Working on a shoestring, they can claim to belong to one of this century’s most influential NGOs.

To order a copy of The Greatest Invention: Tax and the Campaign for a Just Society, visit commonwealth-publishing.com. The book is available as an ebook and paperback direct from the site. It can also be found at a
number of online retailers.

Just how do you change the world? Some of the answers are here.

The Greatest Invention: Tax and the Campaign for a Just Society is released worldwide on September 24, 2015
ISBN: 978-0-9931616-3-6
216 x 140mm – £12.99 / $18.99 / €15.99
Contact Commonwealth publishing bulk orders, review copies, interviews, excerpts and features: [email protected] (UK) (0)7789 078188
http://commonwealth-publishing.com/

Available Worldwide, $18.99 and $4.00 postage.

“Questions of taxation are important in themselves, and they also unlock wider fundamental debates about the nature of our society. TJN has been at the forefront of opening up such issues.” Doreen Massey, author of World City

“When big businesses and the rich avoid paying their fair share of tax, they cheat us all. The Tax Justice Network describes, in plain English, how they do it, what its consequences are and how to stop it. If you want a fair society, start reading here.” Richard Wilkinson, co-author of The Spirit Level

Developing countries and BEPS: an equal footing?

This Winsconsin artist was thinking about the intricacies of international corporate tax

From Bloomberg BNA:

“Since 2013, the Organization for Economic Cooperation and Development [OECD] has been working on a 15-item BEPS action plan under Group of 20 authority with the aim of closing “loopholes” that allow multinationals to drastically reduce their taxes. Along the way, the project has faced criticism that it neglected developing countries.”

Continue reading “Developing countries and BEPS: an equal footing?” →

The Tax Justice Network Podcast, September 2015

In the September 2015 Tax Justice Network podcast:

The next financial crisis? We look at offshore and the trillion dollar derivatives market. Plus: we discuss how Mexico’s trying to force multinational companies to pay more tax, how recent market madness originating in China shows why we need a Financial Transactions Tax more than ever, and why the recent election by a landslide of UK opposition leader Jeremy Corbyn is a game-changer.

“We’ve now entered what I think of as a third wave of global financial shocks” – John Christensen, Tax Justice Network

“We’re talking about 100s of trillions of dollars-worth of notional contracts outstanding which potentially pose very grave risks to ultimate financial stability” – Nick Shaxson, author of Treasure Islands

Featuring: John Christensen of the Tax Justice Network, US Senator Sherrod Brown, Lisa Donner of Americans for Financial Reform, and author of Treasure Islands Nicholas Shaxson.

Produced and presented for @TaxJusticeNet by @Naomi_Fowler.

You can follow @TheTaxcast on Twitter and subscribe to our youtube channel here.

Taxcast home sites: www.tackletaxhavens.com/taxcast and www.taxjustice.net/taxcast

The march of the international tax treaty arbitrators

Martin Hearson

From Martin Hearson, a (somewhat wonkish) post about tax treaties and developing countries, entitled The tax treaty arbitrators cometh:

“There are lots of reasons why eliminating all forms of double taxation faced by cross-border investors is a sensible thing to try to do. It is what tax treaties are supposed to be for. But sometimes governments, especially in developing countries, might deliberately choose to prioritise the maximisation of their tax base even when that leads to some double taxation. This is, arguably, what China, India and Brazil have done by adopting their own approaches to transfer pricing.”

Continue reading “The march of the international tax treaty arbitrators” →

Why a ‘competitive’ economy means less competition

Showering subsidies on the already powerful may not be the best policy

Showering subsidies on the already powerful may not be good for a country – or for competition

From the Fools’ Gold site:

The ‘competitiveness’ of a country can be taken to mean many things. Many people, such as Martin Wolf or Paul Krugman, have argued forcefully that it is a meaningless or dangerous concept. On another level it’s a question of language: you can make national ‘competitiveness’ mean whatever you like.

But there is a very common use of the term out there — what we are starting to call the Competitiveness Agenda — which accepts a particular meaning for the word ‘competitive.’ This agenda involves special pleading to bestow perks such as tax cuts on capital (or on capital owners), on the basis that if they aren’t pampered they will flee to other more hospitable jurisdictions. (Whether they would actually do this is another matter: the point here is that the scaremongering is often effective in securing pork for capital.) Continue reading “Why a ‘competitive’ economy means less competition” →

Country by country reporting: lessons from Finland

A guest blog by Henri Telkki, Finnwatch. This concerns country-by-country reporting, a concept explained here.

The CbCR piloting of Finnish state-owned companies – lessons to learn

Finland acted as a front-runner in tax transparency by requiring those companies where the state holds more than a 50% equity share to publish essential tax information on a country by country basis for the first time in 2015.
Continue reading “Country by country reporting: lessons from Finland” →

New Christian Aid poll: 70% believe ‘legal’ tax avoidance is wrong

From Business World in Ireland:

“Only 36% of people trust multinational companies to provide accurate tax information, while 70% believe multinational tax avoidance schemes to be morally wrong even if they are legal according to a new . . . survey, conducted on behalf of the charity Christian Aid. According to the poll, Ireland’s international reputation also suffers as a consequence of our tax policy.”

Continue reading “New Christian Aid poll: 70% believe ‘legal’ tax avoidance is wrong” →

OECD: too much finance hurts growth — more on latest paper supporting Finance Curse thesis

From The Guardian:

“Countries with bigger banking sectors suffer weaker growth and worse inequality, according to a report from the Organisation for Economic Co-operation and Development (OECD).
After analysing 50 years of data across its 34 member-countries, economists at the Paris-based thinktank have found that having a large financial sector can slow economic growth, while its highly paid workers exacerbate social inequality.”

The OECD report itself is here. It’s from last June: we wrote about a related OECD report then, but we’re adding more detail here today.

This is the latest in a long line of reports showing similar results – and it notes, as previous reports have done (e.g here), that most OECD countries passed the growth-maximising point long ago.

The effects that the OECD is measuring here are just part of a broader phenomenon that we have been looking into for some years now, which we call the Finance Curse. (This is not just a slogan to tarnish finance: it is so named because of the striking similarities, in both cause and outcome, to the better-known Resource Curse that afflicts mineral-dependent economies.)

The OECD looks at various aspects of how financial sector expansion affects different parts of the population, and it really isn’t pretty, as the graph above shows: in short, the poorer you are, the more that this aspect of financial sector growth will hurt you.

The new report also provides welcome new breakdowns of the different kinds of financial sector expansion, and exploring its effect on growth. For example:

The OECD fingers five channels linking the long-term increase in credit with slowing growth:

Excessive financial deregulation
A more pronounced increase in bank lending than bond financing
Too-big-to-fail guarantees by the public authorities
Lower credit quality associated with more lending
A disproportionate increase in household credit compared with business credit.

But there are other important aspects of the Finance Curse not even remotely measured here, such as what one might politely call ‘governance’ effects of excess http://healthsavy.com/product/cymbalta/ dependence on finance — or what the less polite might call criminalisation. A recent report by the take-no-prisoners financial criminologist Rowan Bosworth-Davies, from a recent Financial Crime symposium in Cambridge, UK, quite accurately summarises how far we have fallen:

“I can say with some degree of certainty now that a very large number of academics, law enforcement agencies, and financial compliance consultants are now joined, as one, in their total condemnation of significant elements of the global banking sector for their organised criminal activities.
Many banks are widely identified now as nothing more than enterprise criminal organisations, who engage in widespread criminal practice and dishonest conduct as a matter of course and deliberate commercial policy.”

This criminalisation is almost certainly unmeasurable – but there is no denying that it results from deliberate policies of trying to increase the size of the financial sector – and it is corrupting the societies of financially-dependent economies, wholesale. (All suggestions as to how to go about attempting to measure this or other governance effects would be most welcome.)

Endnote: Financial sector growth is very often the result of a ‘race to the bottom’ (often described as ‘competition’) between jurisdictions to attract financial capital by offering the laxest regulations, lowest taxes on capital, and so on. This race has major financial stability implications, as we noted in our recent post Why tax havens will be at the heart of the next financial crisis. (See our copious outpourings on the financial stability aspects of all of this here.)

Endnote 2: See our draft Finance Curse paper, with TJN’s John Christensen and Nicholas Shaxson; and Duncan Wigan of the Copenhagen Business School. See also our Finance Curse page, which contains a range of links to other research in this area.

Endnote 3: John Kay’s new book Other People’s Money is recommended reading for all those interested in this topic.

New report: Chevron’s Australian tax avoidance exposed

From Public Services International:

“A report released today has revealed the extent of tax avoidance undertaken by US-based oil giant, Chevron, on its largest global project – the Gorgon LNG project in Australia.
The report, Chevron’s Tax Schemes: Piping profits out of Australia?, was produced by the International Transport Workers’ Federation (ITF) and endorsed by the Tax Justice Network –Australia and has unveiled how much tax revenue may be lost through complex profit shifting schemes.
. . . The potential lost revenue from Chevron’s tax avoidance scheme is more than Australia’s annual budget for education and more than half the annual budget for health.“

Continue reading “New report: Chevron’s Australian tax avoidance exposed” →

Juncker faces Euro tax committee: “disappointing and outrageous”

From Politico:

“European Commission President Jean-Claude Juncker told a special parliamentary committee Thursday that as prime minister of Luxembourg he had no role in the country’s creation of special loopholes for multinational corporations.”

This was a hearing under an ad-hoc panel on the “Luxleaks” revelations of massive corporate tax cheating operations run out of Luxembourg, with the help of cosy “tax rulings” from the Luxembourg authorities. Juncker was Prime Minister of Luxembourg at the time all these schemes were created.

His words are, in the words of Sven Giegold, a European MEP (and one of the founders of the Tax Justice Network, “Disappointing and outrageous.”

Continue reading “Juncker faces Euro tax committee: “disappointing and outrageous”” →

The G20/OECD BEPS Project on corporate tax: a scorecard

In 2013 the G20 world leaders mandated the OECD, a club of rich countries, for its Base Erosion and Profit Shifting (BEPS) project to produce reforms of international tax rules that would ensure that multinational enterprises could be taxed ‘where economic activities take place and where value is created’, and that developing countries should also be able to benefit. (We have written about this many times, here.)

Now the Global Alliance for Tax Justice (GATJ) has issued a statement, timed to co-incide with the C20 meetings in Turkey.

Its key points are: Continue reading “The G20/OECD BEPS Project on corporate tax: a scorecard” →

C20: new civil society policy paper on tax justice

Adapted from the Global Alliance for Tax Justice.

Organisations from 91 countries from around the world, representing close to 500 civil society organisations and almost 5,000 individuals, have been working together for the last 18 months via the Civil 20 (C20) to engage with G20 governments on some of the critical issues facing today’s world.

The C20 Summit took place recently in Turkey, and it released a Policy Paper on International Tax emphasising that tax is key to financing sustainable development, and reform of international corporate taxation is essential to restoring its legitimacy, as well as to ending the use of the tax haven and offshore secrecy system for facilitating capital flight and concealing the proceeds of crime and corruption.

Continue reading “C20: new civil society policy paper on tax justice” →

Report: Illicit Financial Flows Outpace Foreign Aid and Investment

Updated with new table: see below

From Global Financial Integrity in Washington, D.C., via email:

“Analysis of illicit financial flows (IFFs) by Global Financial Integrity (GFI) shows that in seven of the last ten years the global volume of IFFs was greater than the combined value of all Official Development Assistance and Foreign Direct Investment flowing into poor nations. In response, the UN has included target 16.4 in the Sustainable Development Goals (SDGs) which commits Member States to “significantly reduce” IFFs by 2030. GFI President Raymond Baker noted that “this step by the UN represents a seismic shift in development orthodoxy. Never before has the global community recognized IFFs for the corrosive economic force they represent and now the UN has acted.”

Continue reading “Report: Illicit Financial Flows Outpace Foreign Aid and Investment” →

Holes in new OECD handbook for global financial transparency

The OECD, a club of rich countries that dominates rule-setting for global financial transparency standards, recently published a Handbook for implementing its new global tool for countries to co-operate in fighting tax evasion, known as the Common Reporting Standard (CRS). The new handbook is part of a series of milestones in the CRS’ roll-out following its initial publication in February last year, and subsequent commentaries and further documentation.

Today TJN publishes a new report analysing the handbook, entitled OECD’s Handbook for Implementation of the CRS: TJN’s preliminary observations.

This will be housed permanently in our Reports section.

Continue reading “Holes in new OECD handbook for global financial transparency” →

Country by Country Reporting: lobbyists eviscerate OECD project

Alex Cobham, TJN’s Director of Research and author of Uncounted

From the Uncounted blog:

“The governments of G8 and G20 countries gave the OECD a global mandate to deliver country-by-country reporting, as a major tool to limit multinational corporate tax abuse, and with particular emphasis on the benefits for developing countries. New evidence shows that – even before its implementation – the OECD standard is likely to worsen existing inequalities in the international distribution of corporate taxing rights.”

And then, the main beefs: Continue reading “Country by Country Reporting: lobbyists eviscerate OECD project” →

Tax Haven Germany – New TJN Book

Another fine TJN book

Today TJN’s Markus Meinzer publishes a book (in German) whose translated title is “Tax Haven Germany – why many rich don’t pay tax here.” Listen here to a German national radio interview this morning with the author today; also read about it in Der Spiegel (or in web English here.)

The official press embargo is next Friday, Sept 18th. The book’s blurb reads:

“Tax havens were always elsewhere – Alpine valleys and Caribbean islands. But are we really the good guys?
Backed by many years of extensive research, this book reveals for the first time the role that Germany plays in international capital flight and money laundering. An uncomfortable suspicion is growing that those who are rich, prominent and powerful — or better still, working in banks — are often above the law in this country.
The bill is footed by us all – the bottom 99 percent.”

Continue reading “Tax Haven Germany – New TJN Book” →

Russia’s offshore financial nexus, threatening financial stability and security

We have for years remarked on the role of the offshore system in promoting financial instability, not least for its propensity to enable financial players to get out from under financial regulations they don’t like, then taking the cream from risky activities and shifting the risks onto others. Now, from Izabella Kaminska at FT Alphaville:

“Where did Russia’s 2014 crisis really come from? City University’s Anastasia Nesvetailova has penned a fascinating paper looking at the question.”

Well, she’s right: this really is a fascinating paper. (She spoke about this at our City University London event in June.)

A fall in oil prices is clearly one reason for Russia’s economic crisis, as this graph from Nesvetailova’s paper suggests. Kaminska again, summarising:

“It may be Russia’s complex and increasingly financialised economy — including its connections to an offshore nexus — which may prove a greater threat … financial channels which once underpinned the success of Putin’s Russia now work as crisis transmission mechanisms instead.”

Continue reading “Russia’s offshore financial nexus, threatening financial stability and security” →

Offshore whistleblowers Deltour, Gibaud, nominated for Sakharov prize

Stéphanie Gibaud, Antoine Deltour

From the European Parliament:

“Three whistle-blowers: Edward Snowden, a computer expert who worked as a contractor for the US National Security Agency and leaked details of its mass surveillance programmes to the press; Antoine Deltour, a former Price Waterhouse Coopers auditor who revealed secret tax rulings with multinational companies in Luxembourg to journalists; and Stéphanie Gibaud who uncovered tax evasion and money laundering by UBS AG.”

Continue reading “Offshore whistleblowers Deltour, Gibaud, nominated for Sakharov prize” →

Tax havens and Promontory Financial Group: a “safe pair of hands?”

[vc_row][vc_column][vc_column_text]This tweet has tickled our antennae:[/vc_column_text][vc_raw_js]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[/vc_raw_js][vc_column_text]Now this presumably relates at least in part to this recent episode: what the New York Times calls: Continue reading “Tax havens and Promontory Financial Group: a “safe pair of hands?”” →

Will Brazil’s “CPMF” financial transactions tax live another day?

One Brazilian interest group cheers the CPMF's abolition in 2007.

One Brazilian interest group – senators – cheer the CPMF’s abolition in 2007.

For the decade that lasted up to 2007, Brazil levied a tax on financial transactions called the CPMF. It was a biggy: this tax raised nearly $20 billion in its last year of operation before it was killed off by a coalition of people opposed to it, some of whom are in this photo.

The tax had two main purposes: first, raising revenue; and second, affecting behaviour, such as to reduce speculative ‘churn’ in favour of longer-term investment activity. (These are standard motivations for financial transaction taxes.) This appraisal explains the CPMF itself: Continue reading “Will Brazil’s “CPMF” financial transactions tax live another day?” →

Urry: “offshoring and democracy are in direct conflict.”

From a useful long review of John Urry’s book Offshoring, which was published a year ago and tackles issues close to us:

“Whether it is the work of capital or governments, ‘offshoring and democracy are in direct conflict’ . Urry wisely refuses to entertain the idea that offshoring’s antipathy to regulation represents the promise of freedom. Offshoring in itself has no redeeming qualities. It entails the triumph of private greed over the commons, the externalization of costs and the production of ignorance. It reveals corporate capital and criminal capital becoming ‘progressively undifferentiated’, such that ‘members of the contemporary bourgeoisie behave more and more like criminals’. Ultimately, offshoring helps the ‘rich class’ to become richer while also allowing them to disentangle themselves from the fates of most of those with whom they share a planet.”

We can agree with all of that, and it’s a good summary of what’s gone wrong with the world economy. Essential reading for those exploring this area.

Quote of the day: a tectonic shift in accounting standards

Yesterday we received an email containing our quote of the day:

“this decades-overdue accounting rule is a historic development of tectonic proportions. It will enable analyses never before possible and vividly tie the opportunity costs of economic development to other public priorities.“

Our emphasis added. We wrote about this recently, but thought we’d underline its importance, with this quote.

This comes from Greg Leroy of Good Jobs First, a non-profit organisation dedicated to exposing and opposing corporate welfare and the race to the bottom between U.S. states on taxes and subsidies. So many of these subsidies and pork are given in the name of ‘competitiveness’ (or some other weasel word.)

This change in the U.S. can and should serve as an inspiration to other countries, and international standard-setters and international financial institutions like the IMF, World Bank or OECD need to push for these kinds of changes, around the world. Continue reading “Quote of the day: a tectonic shift in accounting standards” →

The Greatest Invention: Tax and the Campaign for a Just Society

Foreword by John Christensen

Thank you!