An opportunity to influence the IMF to support more transparency in tax, the fight against money laundering and illicit financial flows
A current survey for civil society to comment on the reform of the IMF’s anti-money laundering and combating the financing of terrorism Strategy (AML/CFT Strategy) and a recent IMF paper on the synergies between tax and anti-money laundering are welcome steps, particularly compared to the less progressive country-level tax and austerity recommendation.
IMF signalling a move in the right direction
Against the backlash of the European Court of Justice November 2022 ruling invalidating public access to beneficial ownership information, and the reluctance of the Financial Action Task Force (FATF) to require beneficial ownership registration for trusts in reforming Recommendation 25, and while we wait for more progress on a UN Tax Convention, it is heartening to see the IMF being open to push for more transparency.
In 2020 the IMF had start requiring countries receiving Covid-19 emergency funding to publish the beneficial owners of companies involved in procurement related to the pandemic. More recently, it endorsed the publication of beneficial ownership for companies registered in the United States in the context of the U.S. “Article IV” report, and real estate transactions in the context of Canada’s “Article IV” report. These are tiny steps compared to the need to have fully public beneficial ownership registries for all companies operating in the country but represent great strides. Of course, we want to take this forward, and there now seems to be an opportunity available to civil society organisations.
Engagement with civil society
The IMF has started a consultation with civil society organisations (available until May 14 here) to receive comments on how to improve its anti money laundering and combating the financing of terrorism strategy. As discussed at our panel during the 2023 Spring Meetings (together with Yan Liu, IMF Deputy General Counsel and Marcus Pleyer, former President of the Financial Action Task Force) this is supposed to be more than just a survey to tick the box. It’s still too soon to tell if they will deliver, but the fact that they have committed to publishing the responses, engaging in a proper consultation process with feedback and calls beyond just one survey, and more importantly, the fact that they are inviting our comments before all decisions have been made, all gives us some reasons to remain hopeful.
Importance of improving IMF AML framework
As research recently published shows, the IMF’s AML conditionality may reduce the degree of illicit outflows countries suffered, although this is usually dwarfed by the increases of illicit outflows that are due to other elements of IMF packages such as austerity and regressive taxes. In other words, improving the IMF AML framework may yield even more positive results, while even more pressure should be put on the IMF’s country-level recommendations.
Response to the IMF survey
As for the IMF survey on the reform of the anti-money laundering strategy, the more engagement they get, the more chances there are to have an effective framework aligned with civil society asks.
If anyone wants to get inspired on how the IMF should reform its anti-money laundering strategy, you can download our response.
Our response focuses on the main following points:
The IMF should stop endorsing (eg via its policy and assessments) the weak standards and bias of the Financial Action Task Force and the OECD. Instead, they should go beyond these standards (eg based on our Roadmap to effective beneficial ownership transparency) by:
Requiring public access to beneficial ownership information, either as a condition to receive funds or as part of technical assistance or its annual surveillance engagements. It’s one thing to question the austerity measures or other debt conditions imposed by the IMF, but we certainly don’t want the money being lent to a country to end up in a politician’s Swiss bank accounts. Transparency conditionality including in relation to beneficial ownership should be required whenever a country receives money, especially when the loan will need to be repaid with taxpayers’ money.
Focusing on the role of big financial centres and other offshore centres, including the US, Switzerland, the UK and Luxembourg, especially in terms of the flows of illegal and tax avoidance money that they accept in their financial system and broader economy (eg real estate). In essence, the IMF should counterbalance the bias of other organisations by focusing – through its surveillance and financial sector assessment program – on countries topping the Financial Secrecy Index. Those issues have destabilising effects and could be looked at through the IMF mandate of maintaining the stability of the financial sector and broader economy.
Thinking big, or in the IMF’s terms, by focusing on “macro-critical” issues, such as the lack of beneficial ownership transparency for trusts, investment funds and listed companies, the need for transparency on foreign entities, the need for asset beneficial ownership transparency (towards a global asset registry), the need to improve SWIFT messages to include beneficial ownership and to use it to detect money laundering schemes, to continue to focus on anti-money laundering supervision of banks to prevent illicit flows to be channeled through them, etc.
The need for more cooperation between tax and anti-money laundering authorities. This is so obvious and yet so ignored. It’s widely known that authorities work in silos, where tax authorities exchange more information with their foreign counterparts than with the local financial intelligence unit in charge of anti-money laundering. This is no surprise, given that standards designed by the OECD prevent the use of bank account information beyond tax purposes (eg for anti-money laundering or anti-corruption), although some recent advances like the Latin American Punta del Este Declaration is trying to foster more cooperation.
The problem of secrecy and enablers to facilitate both money laundering and tax evasion. It is no surprise that those engaging in money laundering or tax crimes engage in the same strategies that usually involve secrecy, complex ownership structures, enablers, etc. That is why the solutions are also similar. Beneficial ownership transparency is so important, because it can kill many birds with the same transparency stone. Likewise, the paper rightly requires that tax planners and other tax enablers should also be subject to customer due diligence and anti-money laundering requirements.
Conclusion
Recent analysis finds that IMF engagement at country level exacerbates illicit financial flows; but anti-money laundering is one area where IMF engagement has a positive effect. For this reason, strengthening the IMF’s anti-money laundering policy base in comparison to the kneejerk trade liberalisation or financial sector ‘reform’ agenda, can be sufficiently impactful that it is worth civil society engagement.
The IMF has sufficient funds and powers to make its own decisions rather than to blindly follow the OECD or the Financial Action Task Force standards, which are too weak to be effective. We must hope that they take civil society’s comments seriously and improve the strategy so as to achieve real change: including through support for public beneficial ownership, more pressure on big financial centres and more focus on progressive tax issues, in general (eg wealth taxes) and as part of the anti-money laundering reforms (eg more tax and anti-money laundering cooperation, more work on tax as a predicate offense to money laundering, etc.)
As the world celebrates the 30th anniversary of #WorldPressFreedomDay on 3 May, we reflect on the importance of the media in bringing transparency to fundamental inequalities – including in respect of tax abuses.
To tackle inequality, one has to understand wealth. One cannot understand wealth without understanding how money flows, and who owns what. Transparency is indispensable.
Painting a compelling picture
Information is a public good, and data is a strategic public asset. However, the mere availability of data in its raw form does little to secure real change. Transparency can only bring about meaningful change when sometimes seemingly disparate data is woven together to tell a story. For data to truly add value, it needs to be analysed, matched and mined in a way that paints a meaningful and compelling picture on how money flows, and who it flows to.
While much of this work is done by researchers, it is just as often done by investigative journalists, requiring of them to not only be skilled analysts, but skilled narrators. This is why we have spent so much time helping incubate projects such as Finance Uncovered , training journalists to follow the money, and to deal with multi-jurisdictional financial secrecy.
While we continue to advocate for ever increasing data transparency, on World Press Freedom Day we also celebrate journalists the world over.
Press coverage shining a light on abuses of power, hidden wealth, corrupt dealings and tax abuse does more than raise public awareness. It is about far more than simply acting as a source of information. Good journalism makes conversations about tax injustices accessible. It is a fundamental tool of democracy that has the power to lead to meaningful policy changes. Good journalism empowers citizens to hold their governments to account and to shape public discourse.
Data leaks
In 2016 journalists at German newspaper Süddeutsche Zeitung secured access to some 11.5 million documents, leaked from Mossack Fonseca (at the time, the world’s fourth largest offshore law firm.) They shared the trove of data with media partners, including the Guardian and the International Consortium of Investigative Journalists, in a scoop known as the Panama Papers.
This was a milestone in public understanding of financial secrecy and global fraud, which we reported on at the time, speaking with journalists Frederik Obermaier and Bastian Obermayer about their interactions with ‘John Doe’. You can hear about that work from Episode 55 of our Taxcast podcast and listen to their reflections a year later in Episode 64.
Impact of the Panama Papers
The release of the data itself would have done very little. The hours that 370 reporters from 100 media organisations spent unravelling the data, by contrast, did a lot.
In their report on gauging the Global Impacts of the ‘Panama Papers’ Lucas Graves and Nabeelah Shabbir unpack how the data leak explicitly impacted the 88 countries in their study. At least 16 countries had at least one form of concrete reform, like a new law or policy, to address systemic issues exposed as a direct result of reporting on the leaked data. At least 45 per cent of the 88 countries studied explicitly noted that they were reviewing the implications of the papers. This included investigations by public agencies; parliamentary inquiries or hearings; dedicated commissions or task forces; and intergovernmental exchanging of data and coordination of investigations.
The Panama Papers brought citizens together in a call for change: protesting in the streets in Panama; lobbing bananas in Iceland; throwing rocks in Pakistan.
Consequently, the data leak propelled governments to launch wide-scale and in-depth investigations. Iceland’s prime minister stepped down after his family’s interest was revealed in an offshore firm that stood to gain from the bailout of failed Icelandic banks. In Pakistan, Prime Minister Nawaz Sharif was forced to resign, barred from holding office, fined $10.6 million, and sentenced on corruption charges. Italy’s Guardia di Finanza investigated 800 Italians implicated; the Australian Tax Office investigated a further 800.
It resulted in consequences for those who peddle opacity. Sweden launched an investigation into four banks (Nordea, Handelsbanken, SEB and Swedbank); European regulators (finally) shut down Malta’s Pilatus Bank. The British Virgin Isles fined Mossack Fonseca US$440,000 for countering terrorist financing and money laundering regulations – the highest ever levied by the regulator.
But perhaps most importantly, it resulted in some systemic change. France and Colombia both restored Panama to their tax havens list. Although the US still performs poorly on the Financial Secrecy Index, it has started cracking down on anonymous shell companies. In Canada, coverage sharpened public criticism of a tax-amnesty program for voluntarily disclosed hidden assets, ultimately resulting in tighter amnesty rules.
The Lebanese parliament voted to lift bank secrecy protections, in order to avoid being blacklisted by the OECD. Mongolia and Ecuador passed a law banning public officials and their family members from owning offshore companies.
Denmark’s finance minister cited the Panama Papers to justify hiring hundreds of new employees to bolster the fight against tax fraud. Panama adopted OECD reporting standards and finally criminalised tax evasion, after having been repeatedly blacklisted.
The price
Inevitably, transparency comes at a cost. Predictably many of the reporters who were instrumental in lifting the veil have come under fire.
A number of journalists lost their jobs in the wake of the leaks: a top editor of Hong Kong daily Ming Pao was unexpectedly fired on the same day the paper carried front-page reports on the Panama Papers. In Venezuela, a reporter for regime-friendly outlet Últimas Noticias was fired for working with the International Consortium of Investigative Journalists.
There are more than a dozen cases in which journalists or news organisations were threatened or restricted. In China censors instructed outlets to delete articles related to the Panama Papers. The Communications Minister in the Democratic Republic of the Congo publicly warned journalists to be ‘very careful’ about reporting on the data. Finnish tax authorities threatened to raid reporters’ homes to seize documents.
In Malta, the brave anti-corruption campaigner and journalist Daphne Caruana Galizia was killed by a car bomb; and in Slovakia, Ján Kuciak and his fiancée were shot to death. Both journalists had been working on the Panama Papers in particular – and on speaking truth to power in general.
Progress lost in the EU
One of the biggest impacts of the Panama Papers was kicking off a process that lead to EU countries finally establishing beneficial ownership registers and to various degrees providing public access to these registers.
The public beneficial ownership registers had the potential to deliver the type of transparency that had made the Panama Papers so impactful but without the need for journalists to take high risks and pay high prices for it. That progress however was short lived.
The European Court of Justice made a baffling decision late last year to ban public access to beneficial ownership registers, effectively barring EU governments from using a powerful transparency tool that was largely a response to Panama Papers. You can read more about this decision and our analysis of the consequences here.
What this now means is the EU is once again dependent on the brave work of investigative journalists to bring vital transparency to wealth and money flows in the EU.
Transparency and democracy
Joseph Stiglitz – recipient of the Nobel Prize in Economic Sciences – so rightly said, “A free press not only make abuses of governmental powers less likely, they also enhance the likelihood that people’s basic social needs will be met. Secrecy reduces the information available to the citizenry, hobbling people’s ability to participate meaningfully. Essentially, meaningful participation in democratic processes requires informed participants.”
The Panama Papers may arguably have had the biggest impact on the public imagination, but others like Luxleaks and the Pandora Papers play an equally important role in changing the landscape for the better.
What all of these data leaks have in common is that they only shed light and bring about change because of the work investigative journalists do to unpack the data. The data only becomes meaningful when the media weaves data into compelling narratives that speak to our collective need for justice.
It is impossible to address tax injustices without transparency. And it would be impossible to secure transparency without the unwavering work of investigative journalists the world over.
Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app. All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here. In this edition of the Taxcast:
It’s horrific that there are so many people across the world who still don’t have access to ‘survival rights.’ Things like basic sanitation, clean water, quality education, decent healthcare so that mothers can survive childbirth – and so their children can even survive their childhood! This is where tax justice gets the most urgent, because tax literally saves lives. In this Taxcast edition, host Naomi Fowler talks to people who’ve looked at new data that demonstrates this. We wish every CEO, every company board member, every shareholder and every government minister in the world would read this report. Then look us in the eye and tell us why they’re not moving every muscle in their body to do what is in their power to protect people, mothers and children. Because when they don’t, they do have blood on their hands.
“The world needs to start looking at tax as a human rights issue. Fair tax saves lives, tax abuse costs lives and the pathway to paying fair tax is through tax transparency. So corporations publishing their taxes and profits on a country by country basis, but also governments creating the right environment so that this is the norm, as opposed to the exception.” ~ Eilish Hannah, University of St Andrews
“We’re going to see more and more of this data being made public one way or another, both voluntarily and by mandate in different places. That’s the end game. In the meantime though, we’re losing time, we’re losing tax revenues, we’re losing the lives of children, of mothers. We’re losing public health and all sorts of public spending around the world. This is an urgent matter and we really should just move straight to public reporting, whichever way we can do it, wherever we are, as soon as possible.” ~ Alex Cobham, Tax Justice Network
“Just getting companies to disclose tax information is not something new. Already in the 1960s and ’70s African and Asian nations supporting the UN resolution on the New International Economic Order, were trying to gain sovereignty because they realised that even though they’d decolonised, the global economy was in the hands of the richest nations, in the hands of former imperial powers. And one of the ways this is done is through corporate power. Many of the multinationals are operating in these countries then, and still today are headquartered in the richest nations in the world. If companies aren’t paying their fair share of tax and are actually just shifting the profits out of countries, it means that governments are losing their revenue, losing their sovereign right to decide how to use taxpayer’s tax money and determine how to allocate it best for the nation. And government knows best, not companies.” ~ Rachel Etter-Phoya, Tax Justice Network
~ Tax Saves Lives
Further reading:
How can corporate taxes contribute to sub-Saharan Africa’s Sustainable Development Goals (SDGs)? A case study of Vodafone. Report available here.
Naomi: “Isn’t it horrific that there are so many people across the world who still don’t have access to what we could call ‘survival rights?’ Things like basic sanitation. Clean water. Quality education. Decent healthcare so that mothers can survive childbirth. And so their children can even survive their childhood?! This is where tax justice gets the most urgent, because tax literally saves lives. I’m going to talk to people who’ve looked at new data that demonstrates this. And I wish every CEO, every company board member, shareholder and every government minister in the world would read their report. And then look us in the eye and tell us why they’re not moving every muscle in their body to do what is in their power to protect people, mothers and children. Because when they don’t, they do have blood on their hands.”
Eilish: “The world needs to start looking at tax as a human rights issue. Fair tax saves lives, tax abuse costs lives and the pathway to paying fair tax is through tax transparency. So corporations publishing their taxes and profits on a country by country basis, but also governments creating the right environment so that this is the norm, as opposed to the exception.”
Naomi: “That’s Eilish Hannah of St Andrew’s University, one of the authors of the report “How can corporate taxes contribute to to sub-Saharan Africa’s Sustainable Development Goals? A Case Study of Vodafone.” Let’s start with a big multinational company. This report looks at Vodafone which, to its credit, for quite a few years, voluntarily published its accounts in each country it did business in. And yes, incredibly, many multinationals don’t have to do that still, we’ll talk more about that in a bit. Here’s one of their adverts – rather appropriately, this one features a mother giving birth in what looks like the back of a taxi:”
Vodafone advert: https://youtu.be/RGHyy_cTz7I
Naomi: “Isn’t that great?! Mother and baby are both doing well, all thanks to Vodafone! Now, most of these kind of companies are headquartered in wealthy, politically powerful nations. Vodafone is headquartered in the UK. But of course, they do business in many countries around the world. As this advert demonstrates. It’s an ad for Vodafone’s subsidiary in South Africa, Vodacom. It shows what looks like an emergency medical centre in the middle of nowhere, with a doctor and nurse, again, highlighting the lifesaving benefits of a decent phone connection:”
Vodacom advert: https://youtu.be/p_gZprbbMkk
Naomi: “So, Vodacom saves lives! Each year a company like this meets with its board and its shareholders, they publish a glossy brochure on how well things are going, and they take a few votes. But the accounts section of their glossy brochures may well be incomplete. That’s because for a long time many of these companies have been able to bundle up all their accounts from each country where they do business into one final convenient figure. That means they didn’t have to tell us their profits based on the business they were doing in each country, making it very challenging for tax authorities in those countries. Add to the mix that they were often using a tax haven or two, and shifting things all over the place to minimise their taxes still further! Well, the Tax Justice Network fought the good fight, arguing that multinationals should publicly report on their activities, country-by-country. For years we were told that it was an impossible dream, that it would never happen. Then the EU kicked off public country-by-country reporting for banks many years ago. And then they implemented – a watered down – country by country reporting version for multinationals headquartered in some jurisdictions. Under pressure, the OECD introduced its own version of country-by-country reporting, for the largest multinationals in all industry sectors. But, the data is private, and only easily accessible for OECD members. The EU has now required that this information is published by reporting multinationals operating in their jurisdiction, but, only for EU countries and a few others. You can see that bit by bit, it is getting harder for multinationals to hide from paying fair taxes in the places they’re actually doing business. But there’s still a long way to go. Here’s Alex Cobham of the Tax Justice Network:”
Alex: “So as of today, more than 90 countries or jurisdictions have implemented country by country reporting for private data under the OECD standard. Now because that data is not public, and is only exchanged privately between tax authorities, the OECD reckons that there are more than 3,300 bi-lateral exchange of information arrangements for country by country reporting in place. But of those – 93, I think it is, jurisdictions who are participating in information exchange, only nine of them are African, only two of them are least developed countries, only 28 are middle income countries. So this is overwhelmingly favouring OECD members getting access, and much less so the rest of the world.”
Naomi: “Hm. So, for example, African countries are rarely the headquarter countries for the world’s largest multinationals, right? That’s why what the most powerful nations do about this is so important. And obviously, there are historical reasons why, for example, African countries are so disadvantaged when it comes to getting access to country by country reporting by multinationals. There’s a history of disempowerment of those nations that’s a continuation of empire and patterns of extraction. Here’s Rachel Etter-Phoya of the Tax Justice Network:”
Rachel: “It’s interesting looking at the history because public country by country reporting or just getting companies to disclose tax information is not something new. Already in the 1960s and ’70s African and Asian nations supporting the UN resolution on the new international economic order, were trying to gain sovereignty because they realised that even though they’d decolonised, the global economy was in the hands of the richest nations, in the hands of former imperial powers. And one of the ways this is done is through corporate power. Many of the multinationals are operating in these countries then, and still today are headquartered in the richest nations in the world, and those efforts of African and Asian nations through the UN was really undermined and the club of the rich, the Organisation for Economic Cooperation and Development really took the reigns to try and maintain their control over designing tax rules and designing and deciding on what information gets shared or not. So, although when the Tax Justice Network two decades ago started to raise the call again for having, for the first time, public country by country reporting, corporate transparency in tax matters, the OECD said it was impossible and not gonna happen. And now today we do see progress, so the OECD now publishes some data that some companies and countries are providing to the OECD about where they are paying their taxes and profits. But, this is all anonymised, it’s not including all companies, it’s not including all countries. And this information is only available to tax authorities that are part of the global network, exchanging information, and the majority of the African countries are not part of this. Not because they don’t want to be, but because the way to get to join and the rules to be able to join are set by the OECD and there’s some hurdles that are just not possible at the stage for African countries to jump through. Particularly because they are former colonised states, and it was the way that the colonies worked and they were plundered and they weren’t able to, at those times, they were on the back foot when setting up systems. And so it means that there’s just not the right access to information, even though African and Asian nations have been calling for this, and Latin American countries as well.”
Naomi: “And so many of the OECD ‘rich country club’ member states are made up of – not only the worst global offenders for draining tax revenue from other countries, but a lot of them are former colonisers! And, before we get to the fascinating results looking at the data from Vodafone publishing its accounts country by country in six African nations – which we now know changed people’s lives – what can national governments do faced with multinationals taking advantage of rules that don’t force public reporting, country by country? Here’s Alex Cobham again:”
Alex: “If a multinational refuses to provide its country by country reporting data privately to its home country tax authority, or more likely if that home jurisdiction refuses to ask for the data in order to exchange it with others, then other countries are actually able in those circumstances to say to the multinational, ‘you’re operating in our country. And so you need to give us the information directly.’ This is what’s called local filing of country by country reporting data. But – that local filing is extremely rare, and in practice the local subsidiary of the multinational is able to say, ‘oh no, we don’t have that information. The parent of the group has that data, but they don’t give it to us, and so we can’t give it to you.’ So, you know, again, it’s just one of the ways in which this weakening of the OECD approach, moving away from public data, has ended up recreating these kind of power inequalities. Where the multinational’s able to say ‘no,’ it often will do.”
Naomi: “Charming! The realities of power, eh? How likely are some of the world’s less politically and economically powerful governments to push multinationals?”
Alex: “A country that’s weaker still has the power to demand local filing, and indeed you could demand local filing across the board rather than rely on information exchange. But you’d need, in a sense, the political support. In most cases, you know, this is a filing requirement, so you only have relatively small fines in place if companies don’t comply. Again, you could say, ‘this is a condition of operating in our economy. If you want to make money here, you have to give us this basic transparency.’ But that would take significant commitment from the government. Of course, you know, increasingly as this data is published by companies rather like Vodafone, voluntarily, but also companies that are reporting under the Global Reporting Initiative standard, which is a much more technically robust standard than the OECD one, countries can go, tax authorities can go and get that data themselves. Most excitingly, Australia has just published draft legislation that would require all multinationals over the size threshold operating in Australia to publish their country by country reporting data. And that would give a whole set of other countries around the world access to that data directly. So look, we’re on the road here. We’re gonna see more and more of this data being made public one way or another, both voluntarily and by mandate in different places. If the OECD was at all forward thinking, they’d say, ‘look, we need to get ahead of this. We need to finally respond to the public consultation that we did in 2020, to which the OECD has never published any response. What that showed overwhelmingly was that civil society and investors with trillions of dollars of assets under management were calling for the OECD simply to converge to the Global Reporting Initiative standard, which is much better, and to make the data public. That’s where this goes. You know, even the big four accounting firms are starting to recognise that that’s the end game. And it’s a question of, you know, whether they can drag their heels for another couple of years, or accept it and get ahead now. So, countries at all income levels will have access to this data soon enough, and the entire OECD architecture, both the relatively weak OECD standard, and this ridiculous mechanism for information exchange, will become obsolete fairly quickly. In the meantime though, we’re losing time, we’re losing tax revenues, we’re losing, as the Vodafone report shows, with those tax revenues, we’re losing the lives of children, of mothers. We’re losing public health and all sorts of public spending around the world. This is an urgent matter and we really should just move straight to public reporting, whichever way we can do it, wherever we are, as soon as possible.”
Naomi: “Yes indeed! With me now I’ve got Eilish Hannah from St Andrew’s University and, again, the Tax Justice Network’s Rachel Etter-Phoya. They’re co-authors of the report looking at how corporate taxes contribute to what’s known as the sustainable development goals. Let’s start with you Eilish on what those are, just quickly:”
Eilish: “Yes, sustainable development goals are a set of 17 interlinked goals, grounded in human rights law. They were adopted by the United Nations in 2015 as a continuation of the Millennium Development Goals. And basically their aim is to make sure that no human being is left behind and to make sure that our actions today don’t harm the wellbeing of the planet in the future and doesn’t harm the wellbeing of future generations. So the specific goals that we looked at in this paper were: access to basic sanitation and clean water, quality education, and then maternal and child survival rates, sustainable development goals three, four, and six. The climate change emergency and the pandemic sadly have threatened their progress, and in some cases they’ve actually reversed the progress we’ve made.”
Naomi: “Rachel, you’re in Malawi, you know yourself how the pandemic, the climate crisis, and other events have undermined progress on those goals?”
Rachel: “So yeah, here in Malawi, we were already reeling from high inflation, I guess the global economic crisis, the impact of the war in Ukraine, and then Cyclone Freddie hit, not just Malawi but Mozambique as well in particular. And it’s called so much devastation and people are starting to pick up their lives again now, working to rebuild. But it’s had a huge impact on the individual level, but also on the national level with government needing to respond to immediate needs, but also longer term planning to provide public services that work for everyone.”
Eilish: “Yeah, climate change is unfortunately causing ecosystem disruption in high and low income countries but very sadly, this is worse in lower income countries. Governments are having to spend more money and revenue and resources on recovering from natural disasters caused by climate change as opposed to the sustainable development goals.”
Rachel: “Yeah and so with the sustainable development goals, they’re a roadmap and it’s not just for governments to implement, but for everyone, so all sorts of organisations, including companies and the private sector, which is why we were looking at Vodafone in the paper.”
Eilish: “So our modelling looks at decades-worth of government spending data that it gets from UNU WIDER database, and the World Bank database, so we know that from looking at past spending habits over decades that you know, if they do have, see an increase in revenue, they do spend more on these rights, and it’s also supported in the literature as well.”
Naomi: “OK, so what did you find? Let’s look at Vodafone and the data you’ve looked at and analysed – you’ve looked at their tax contributions in six African countries. Vodafone voluntarily published its profits on a country by country basis, right?”
Eilish: “Yeah, at the time of the study, it was voluntarily publishing its taxes and profits on a country by country basis.”
Naomi: “Ha! That in itself is a sign to me of how far things have come because when I first started producing the Taxcast in 2012, Vodafone was one of the first big symbols of tax injustice in the UK that came to popular consciousness. There was a huge scandal about a sort of behind closed doors deal that they did with with the tax authorities in the UK after some clever corporate maneouver when they bought a company and then they routed the purchase through Luxembourg. Some estimates say they legally dodged paying £6 billion in tax, you know, all perfectly legal. Vodafone says the dispute was over a complex interpretation of the law and that various courts reviewed it before they settled. We only really knew about that agreement with the UK tax authority because of a very brave whistleblower, a tax lawyer working there at the time. And if you’re listening, thank you! There was also a protracted legal battle in India I remember with tax authorities there. Vodafone won that case in fact eventually, but they obviously decided that it was bad business to be fighting governments over tax. Now, whether their decision to voluntarily publish their activities at country by country level means they’re actually paying for taxes that they should, that’s another issue, isn’t it? I mean, that would take another study, but good for them that they did this, right?”
Eilish: “Yeah, I completely agree. I guess there’s no guarantee from what they’ve made publicly available that they’re paying their fair share of their tax liability, you know, the only way to know that I guess would be to do misalignment studies and to have a full set of their accounts. But as you say, Naomi, I think publishing your taxes and profits on a country by country basis is a really important transparency measure, and I guess you should give credit where credit’s due, so, yeah, there is public information available, which is why we chose them.”
Rachel: “Yeah, and a company can be doing something right in one area and be doing something really problematic in another area, so there was allegations in 2020 that one of the companies that are part of the Vodafone Group in Tanzania blocked network or blocked SMSs when they related to the opposition party, and obviously that had an outcome for the elections and so yeah, it’s really interesting to see how corporates engage, and Vodafone is very up front about it supporting the Sustainable Development Goals, and – it’s not always such a straightforward story.”
Naomi: “Yes, potentially not, although I imagine they’d deny that. Anyway, as far as I can tell today, Vodafone is not still voluntarily publishing its country by country accounts any more, which is interesting. It’s headquartered in the UK, which, by the way, had committed years ago to requiring multinationals to report publicly, country by country but guess what? They reneged on that in 2020. We’ve estimated, with others, that that could have recovered at least £2.5 billion in corporate tax every year for the UK Treasury. Anyway, tell me about the data from Vodafone and what you did with it?”
Eilish: “Yeah, of course. So we have an econometrician on the team who does the modelling, so he looks at the impact that increased government revenue will have on access to clean water, sanitation and education and then the impact that has on survival rates. So we used that modelling to get these results, and we looked at how much tax Vodafone paid in six African countries, so: Tanzania, Mozambique, Lesotho, Kenya, Ghana and the DRC. We looked at their contributions to these governments between 2007 to 2017, the average contribution in that time period, and then worked out how many people would have increased access to their rights and then increased survival rates from there. It’s probably important to mention, given we’ve brought up their tax controversies they had in 2012 that they only started publishing their tax reports on the country by country basis from 2012. So the estimates pre-2012 we’ve presumed is the same as the average between 2012 to 2017, which very well may not be the case. It may well be lower, so that is a limitation of the paper there.”
Naomi: “Again, so many reasons why transparency is important!” <laugh>
Eilish: “Yeah, no, it’s true!”
Rachel: “And what’s interesting in the model is that you take the figure and look at how governments have historically allocated their budget and assume that the governments will continue to allocate their budget in the same way, so split between all the sectors government always spends on. And then also there’s a five year lag because the research shows that generally, even if there’s an increase in spending in a certain sector, there’s a time lag of course before it has an impact on children being able to go to school or have access to clean water.”
Eilish: “Yeah, exactly yeah, and that’s based on their past spending habits, so the decades-worth of data from the databases that we talked about before.”
Naomi: “Yes, so – if a government typically was allocating say 10% of its revenue to health spending for many years – we know now from Vodafone’s data that each government received a certain amount of revenue from Vodafone, then you’ve kind of looked at it as 10% of this revenue will also be allocated to each sector the government is spending on, you can actually track it and its effects? That’s how we know that Vodafone’s taxes did change lives, right?”
Eilish: “Yeah, it’s true.”
Naomi: “Right. So what did Vodafone’s taxes mean for people?”
Eilish: “So yeah, so because of the taxes Vodafone paid between 2007 to 2017 over these six countries, it allowed over a million people to gain access to basic sanitation each year, and nearly a million people to gain access to basic drinking water each year, and cumulatively over 800,000 children were able to spend the next year in school. And because of increased access to these rights, over 54,000 children survived, and almost 4,000 mothers survived. And that’s just one company in just six countries. So, imagine how great it would be if every company did that in, in every country.”
Naomi: “Amazing!” <laugh>
Eilish: “It’s got huge potential!”
Rachel: “It does, and it shows us how important corporate income tax is and why it’s so important that companies are paying their fair share where they do their business and they don’t shift it offshore. And of course we’re not saying that Vodafone is paying their fair share, but just judging on what they declared, that has already had a huge impact with children and women and whole societies where they’re operating, which is really good. The other interesting thing that we observed is that the more income governments have, the better the governance is as well, so there’s sort of a virtuous circle between the relationship between government revenue and governance, which then also then has another positive impact on governments being able to deliver public services and use money efficiently, whether it’s raised through tax or through borrowing or other ways that the government generates income.”
Naomi: “Yeah and we know from your report that in lower income countries, even a small increase in government revenue does have a massive impact. I should say that that’s why the Tax Justice Network’s really supportive of non-profit public services, right, whether that’s state run or cooperative run, and I think you only have to look at the poor value for money that people in the United States get for healthcare access to see how important that is. Also, corporate tax is particularly important to lower and middle income countries because they get more of their share of tax revenues from that than in OECD countries, for example, where they have other tax bases to tax from, you know, like income tax?”
Eilish: “Yeah. Very sadly, in lower income countries, many individuals don’t have access to their fundamental rights or survival rights. Clean water, sanitation and quality education, which we know have been the most pivotal reason for increased survival rates over recent years. Everyone should have access to these rights in every country. And tax revenue is so important in these countries because it does increase access to these rights and the most realistic, feasible short to medium term solution for individuals to access these rights is through corporation tax, over any other form of tax.”
Rachel: “Mm. And so using the University of St. Andrew’s and the University of Leicester’s GRADE model, the government revenue and development estimations model, we find that an increase in revenue has a far greater impact for the number of children being able to attend school than in a richer country. So, an increase in corporate income tax just has a far greater impact for people and children being able to access their fundamental rights.”
Eilish: “Yeah. Because it’s – a lot of the rights they don’t have access to are cheaper than say it would be to increase survival rates in a higher income country.”
Naomi: “And something that comes up a lot in many countries is there’s a lack of trust in a tax system and in the governments that administer the tax system. There’s a popular belief, and not just in lower income countries, that taxes paid won’t actually translate into better services for ordinary people. I mean, people often don’t have a lot of trust that taxes will actually translate to a better life for them and that the state will use revenue in the public interest. What you would say to that?”
Eilish: “And it’s a really good question because that’s always the question that comes up, is government effectiveness. And so we’ve done some recent research looking at this, that has shown that increasing government revenue through tax does increase government effectiveness, and that’s supported by other studies. I mean, it does take time, so there’s a lag effect but you know, there’s multiple reasons why it does improve government effectiveness. So we know when they spend more on education, an educated populace will hold their government to account more.”
Naomi: “Yeah, this question is really all about one of our five Rs of tax, where we talk about representation being such an important aspect of tax in terms of building trust between the state and the people who live there. Improving representation is often a very neglected function of tax, but it’s so important. It’s very encouraging for us all to see that a large company like Vodafone is paying taxes into the system though isn’t it?”
Rachel: “Yeah, it’s really hard, isn’t it? ’cause if you see it as, I guess the, the state public purse as a bucket and you feel like you’re putting money in it, but it’s got holes and it’s coming out, it’s really hard to be motivated to pay tax. And I feel that on a personal level, even though I so deeply and fundamentally believe in tax justice, and tax justice is part and parcel of the same coin about the need to have tax justice, but we also need to have justice in expenditure, which has an impact on effectiveness. And I think those really go hand in hand, and yeah, as the research does show, increase in government revenue does have a positive impact on governance or government effectiveness, and therefore eventually on public services, it takes a long time, but it is a virtuous circle.”
Naomi: “Yeah, and again, it’s also about keeping the profit motive out of the public realm, profits from things like water and health really degrade that belief and trust people have that governments can act in the public interest when it comes to tax revenue. We’ve seen that slow degradation of trust in the UK as the public service space has been squeezed harder and harder and opened up to private interests.”
Rachel: “Yeah taxes save lives and our paper shows that, I mean taxes mean that more children go to school, can drink clean water, more mothers survive – this all contributes to sustainable development goals and to societies in a way the way where governments remain sovereign, I think that’s really important that a lot of the companies historically have talked a lot about their corporate social responsibility and have talked up all their investments in schools in the area where they’re working, like mining projects investing in schools, investing in farming cooperatives, is all really good and important, but if companies aren’t paying their fair share of tax and are actually just shifting the profits out of the countries, it means that governments are losing their revenue, losing their right, their sovereign right to decide how to use taxpayer’s tax money and determine how to allocate it best for the nation and government knows best, not companies.”
Naomi: “Yes, all that can take a very long time, for sure. But I think we can all agree here that if you’re a politically powerful wealthy country, you’re probably a member of the OECD, you have a responsibility to the rest of the world to make sure that any multinational company that is headquartered in your jurisdiction must do country by country reporting publicly. And if you’re not making that happen, then as I said earlier, you do have blood on your hands, because you’re not doing all that you can to uphold the rights of people, not necessarily people in your own population, obviously that’s important, but people who are living elsewhere too. And there is that duty – a legal duty – on governments in those wealthy countries where so many of these multinationals are headquartered.”
Eilish: “A hundred percent. I think the world needs to start looking at tax as a human rights issue. As this paper’s shown, fair tax saves lives, tax abuse costs lives. And as you say governments don’t only have a duty to respect, protect and fulfill rights in their own jurisdiction, they have extra territorial duties as well to protect human rights abroad. And if a corporation that they have under their jurisdiction is undermining those rights, then they have an obligation to do something about that. And also the corporation has a duty to respect those human rights by supporting those governments in those countries by paying their fair share of tax, so yeah, in not tackling tax abuse, corporations are failing in their human right duties, host countries – they’re failing in their human right duties and definitely home countries, like the higher income countries are a hundred percent failing in their human right duties.”
Naomi: “Yeah. Nearly all of them have signed up to the UN’s Convention on Human Rights and to support the sustainable development goals. So that is the way to do it!”
Eilish: “Yes. The only thing I would add is, you know, we’ve talked very much about the impact of tax in lower income countries, but, you know, it also does impact people living in higher income countries as well. The Tax Justice Network show that people who are living in higher income countries, they lose 8% of their health budget each year because of tax abuse, so while we facilitate it, we’re also kind of shooting ourselves in the foot in doing that as well, and, you know, higher income countries, we do still have our own issues, we’ve got increasing health inequalities, the most deprived in the UK, their life expectancy is now going down, and increasing our revenue through tax would help with that!”
Naomi: “Yes indeed. We need governments everywhere and their finance ministers to be on the right side of history here. Public country by country reporting will save lives.”
At the Tax Justice Network, we believe our tax and financial systems are our most powerful tools for creating a just society that gives equal weight to the needs of everyone. As we celebrate our twentieth anniversary this year, we note the change of era reflected by Your Majesty’s coronation. We hope this can mark a pivotal moment to address the heavy financial and human costs borne by ordinary people in the UK, the Commonwealth, and around the world, due to the UK and its network of tax havens over which Your Majesty is Sovereign.
I salute Your Majesty’s statements to the Commonwealth nations last year that we “must find new ways to acknowledge our past” and warmly welcome the desire expressed to deepen Your Majesty’s own understanding of the enduring impacts of slavery and other aspects of colonial violence and extraction.
Many of today’s British ‘satellite tax havens’ are an unresolved legacy from that time, having been facilitated to develop as financial and secrecy centres as the British Empire began to change in the 20th century. These tax havens continue to disadvantage their own inhabitants as well as some of the poorest people globally – and of course the people of the UK.
We believe Your Majesty can help by pointing the way to end one of the world’s most enduring injustices. The UK, the Crown Dependencies and the British Overseas Territories are collectively responsible for facilitating nearly 40 per cent of the tax revenue losses that countries around the world suffer annually to profit shifting by multinational corporations and to offshore tax evasion by primarily wealthy and powerful individuals. This makes the UK and its network of satellite tax havens the world’s biggest enabler of global tax abuse. Our latest estimates from the State of Tax Justice report put the sum of this tax loss imposed upon the world by British tax havens at over US$189 billion a year, which is more than three times the humanitarian aid budget the UN requested for this year.
The UK also suffers from the lose-lose game of tax havenry. We estimate the UK itself loses at least US$52 billion in tax annually to global tax abuse, which is equivalent to losing the annual wages of over 1 million NHS nurses every year to multinational corporations and wealthy individuals underpaying tax in the UK.
Research shows that it is the largest multinational companies and the wealthiest households that are responsible for almost all of this tax abuse. The effect is not only to strip away funding for desperately needed public services. It also undermines smaller local businesses, forcing them to compete on an unlevel playing field against larger rivals paying unfairly low taxes.
These abuses make the tax system much less progressive than legislated rules would imply. It results in society being scarred by needlessly deep, overlapping inequalities for women, racialised groups and disabled people especially.
Global tax abuse is aptly described by the former Prime Minister of Niger Ibrahim Mayaki and the former President of Lithuania Dalia Grybauskaitė, in a foreword to the UN High Level Panel Report on International Financial Accountability, Transparency and Integrity, as a “double theft”: it robs people of billions in public funds, and in doing so robs billions of people of a better future.
This is particularly true for lower income countries, which are hit hardest by global tax abuse. While higher income countries lose more tax in monetary terms, their tax losses represent a smaller share of their revenues – an estimated 9.7 per cent of their collective public health budgets. Lower income countries in comparison lose less tax in monetary terms, but their losses are equivalent to nearly half (48 per cent) of their collective public health budgets.
Many lower income countries which bear the greatest brunt of Britain’s network of tax havens – what has been called “Britain’s second empire” – are already dealing with the economic and environmental legacies of Britain’s colonial empire.
There has been growing consensus in recent years that global tax abuse robs states of the resources to fulfil their obligation as duty bearers of human rights. Curbing global tax abuse and illicit financial flows is defined as one of the UN’s Sustainable Development Goals for 2030. Earlier this year, the UN Committee on the Rights of the Child called on Ireland to “ensure tax policies do not contribute to tax abuse by companies registered in the State party but operating in other countries, leading to a negative impact on the availability of resources for the realization of children’s rights in those countries.”
It brings me no pleasure to highlight to Your Majesty, as the Head of State and Sovereign of the Crown Dependencies and Overseas Territories, that the British Virgin Islands, Cayman Islands, Bermuda and Jersey all rank above Ireland on the Corporate Tax Haven Index 2021, our ranking of jurisdictions most complicit in helping multinational corporations underpay corporate tax. Ireland ranks 11th and is immediately followed by the Bahamas in 12th and the United Kingdom in 13th. Regrettably, the financial regulations of Your Majesty’s jurisdictions can be arguably said to pose the biggest non-violent threat in the world to human rights.
If the global tax losses caused by the UK, Crown Dependencies and British Overseas Territories were to be reversed, research by the University of St. Andrews and University of Leicester estimates that 6.4 million people in lower income countries would gain access to basic drinking water, 12.6 million would gain access to basic sanitation, and 1.2 million children would be able to attend school for an extra year. These positive impacts would in turn have a knock-on impact of reducing child mortality, saving the lives of over 220,000 children under the age of five over the next decade.
In 2013, the Tax Justice Network’s founder and former economic adviser to the States of Jersey, John Christensen, wrote a letter to Her Late Majesty The Queen, detailing how the UK and its jurisdictions ranked high on the 2013 edition of the Financial Secrecy Index. The index is a ranking of countries most complicit in helping individuals hide their finances from the rule of law. Since then, the UK has only worsened its ranking on the index from 21st in 2013 to 13th in 2022. While successive editions of our Financial Secrecy Index show that the world is successfully curbing financial secrecy, the UK sticks out as one of the few backsliders who are dramatically increasing their supply of financial secrecy to the world.
In 2015 and 2016, the Government showed true leadership in this arena by becoming the first nation to adopt a public beneficial ownership register and the first nation to adopt the legal power to require multinational corporations to publish their public country by country reports. The Tax Justice Network was among the first to campaign for these measures as far back as 2003. We consider these measures to be among the most powerful transparency tools available to governments for dispelling the financial secrecy that enables tax evasion, money laundering and corruption, and for exposing the profit shifting that enables corporate tax abuse. On the global stage, the then Chancellor of the Exchequer The Rt Hon George Osborne encouraged the EU and members of the OECD to follow in the UK’s example on transparency.
Sadly, Your Majesty’s Government has since back-pedalled on this progress. The deadline for the Crown Dependencies and Overseas Territories to establish public beneficial ownership registers was pushed back, with recent statements by officials now hinting that the jurisdictions may never establish the registers. Jersey has even introduced a newform of anonymous ownership vehicle this year.
But perhaps most damaging is His Majesty’s Treasury’s public reneging in 2020, under then Chancellor of the Exchequer The Rt Hon Rishi Sunak, on the commitment to require public country by country reporting. To date, His Majesty’s Government has not once exercised the legal power it continues to enjoy under the Finance Act 2016 to require multinational corporations to make public their country by country reports. With our allies at Tax Justice UK, we have estimated that exercising this legal power can recover at least £2.5 billion in corporate tax every year for His Majesty’s Government that is otherwise being lost to tax havens. The EU and Australia are moving ahead to increase transparency in this area while the UK remains resolutely opaque.
The overall effect is that the UK’s network of tax havens over which Your Majesty is Sovereign continues to facilitate cross-border tax abuse and other illicit financial flows at global expense. Rather than beginning to pay reparations for the violence, enslavement and extraction of the British empire, the UK’s “second empire” is continuing to add to the debts that we owe.
The scale of that debt is almost certainly unpayable. At a minimum, however, the time has surely come to stop the clock running. That means reversing the policies that support financial secrecy and profit shifting, and keep the UK’s “second empire” as the most damaging actor globally.
In addition, the UK has a responsibility to jurisdictions that make up its network of tax havens – many of which were encouraged down the road of tax havenry since the 1950s by UK officials and policymakers, on the basis that this would reduce the need for official aid and generate financial flows to support the City of London. Leading economists and campaigners from around the world who gathered at a conference we hosted last year on ‘The UK’s role in tax as a tool for racial justice’ spoke of the importance of the UK committing significant funding now, in respect to the legitimate claim for reparations and to support the pursuit of alternative, and less harmful economic models.
Ending our role in tax abuse would benefit the people of the UK too. Your Majesty spoke in the Christmas message last year of the “great anxiety and hardship” for those struggling to “pay their bills and keep their families fed and warm”. It is difficult in this context of current economic hardship to understand why Your Majesty’s Treasury is leaving the option to recover £2.5 billion in tax from corporate tax abusers on the table and instead opting to require millions of hard working people to pay more tax on their incomes under the frozen income tax personal allowances.
Your Majesty’s Treasury also continues to underfund tax enforcement measures, even though the evidence shows that each £1 spent here will bring in a further £8 in revenues – simply by improving the compliance of the highest earners who currently enjoy impunity. It is a sad indictment of the triumph of ideology over evidence that the UK loses nine times as much to tax fraud as it does to benefits fraud, but dedicates more than three times as many staff to fighting benefit fraud. Research by TaxWatch UK also shows that the country pursues 23 times as many criminal prosecutions of benefits fraud as of tax fraud.
Internationally, the UK is now standing in the way of the march of progress. In a historic moment in November last year, the countries of the world unanimously adopted a resolution at the UN General Assembly to begin negotiations on establishing a new UN role on monitoring and setting global tax rules. These negotiations have the potential to herald in a new era of economic justice, where for the first time in history, our global tax rules are discussed and decided in a democratic and open forum at the UN.
For the past sixty years, global tax rules have been set by a small club of rich countries at the OECD, many of which like the Switzerland and the UK, are the world’s biggest facilitators of global tax abuse. A now decade-long attempt by the OECD to reform global tax abuse has failed to deliver.
For the majority of the world, moving rulemaking on global tax to the UN will create the opportunity for full sovereignty over their taxing rights for the first time since their independence. For the people of OECD member countries too, including the UK, the move will re-establish the scope for genuinely fair taxation by providing transparency and public accountability over their taxing rights, which their governments have often traded away behind closed doors at the OECD where corporate lobbyists and tax havens have long exercised oversized influence.
Worryingly, Your Majesty’s Government has already attempted to thwart these negotiations and prevent the move to the UN. The UK, the OECD and other rich nations applied unprecedented diplomatic pressure last year to prevent the resolution from coming to a vote. The UK voiced its opposition to the negotiations at the UN General Assembly last year and it is widely expected that the UK will leverage its weight to block negotiations from succeeding.
Our hope is that these negotiations will succeed and bring about a UN tax convention that delivers the policy solutions long called for by leading economists, campaigners and communities to truly end global tax abuse. To end the double theft of livelihood and future that multinational corporations and wealthy individuals have exacted on the world – and have done so to a great extent by leveraging the laws and financial systems of the nations and territories Your Majesty reigns over.
These negotiations mark a crossroad in history for people all around the world, for our planet and for future generations. At moments like this in history, people have looked to the Royal Family for guidance, for example and for hope. I urge Your Majesty to let Your Majesty’s voice be heard in this global discussion that will echo throughout history.
Lastly, I wish to commend the example Your Majesty has made by committing to voluntarily pay income tax, as did Her Late Majesty the Queen; and to note, in the span of Your Majesty’s charitable work, The Prince’s Responsible Business Network Business in the Community for its role in promoting responsible business practices, workplace equality, equal parental leave and just climate transition.
Along similar lines, Your Majesty may be interested in the work of the Fair Tax Foundation, a pioneering British organisation that manages the Fair Tax Mark, a robust and independent accreditation scheme for businesses that is often referred to as “the gold standard of responsible tax conduct”. The Fair Tax Mark has been tremendously successful in inspiring British businesses and initiatives to exercise and be proud of paying the right amount of tax, at the right time, in the right place.
The ranks of the Fair Tax Mark accredited now include some of the UK’s biggest employer, such as the Co-operative Group, Richer Sounds, the Timpson Group, Scottish Water and Dŵr Cymru/Welsh Water as well as FTSE 250 companies SSE, Pennon Group PLC, MJ Gleeson and The Watches of Switzerland Group.
The Fair Tax Mark recently became an internationally available accreditation, bringing this British badge of honour and ingenuity to the world. German, Italian and Danish multinational corporations have now attained the accreditation.
Corporate tax avoidance topped the UK public’s list of concerns in 2022 for the tenth consecutive year in a poll by the Institute for Business Ethics. Asked what issues most need addressing in their view of company behaviour, the British public put corporate tax avoidance above bribery and corruption, and above environmental responsibility and worker exploitation. In a poll by the Fair Tax Foundation in the same year, three quarters of respondents reported they would rather shop with, or work for, businesses that can prove that they are paying their fair share of tax.
Given the inspiring work of the Fair Tax Mark and the overwhelming support among the British public for the tax conduct the Fair Tax Mark celebrates, I wish to invite Your Majesty to consider once again setting another commendable example by encouraging Your Majesty’s enterprises to seek the Fair Tax Mark accreditation.
Tax is our social superpower. Instead of living short, harsh and solitary lives, tax allows us to organise to create the potential for a state with both the ability and the accountability to support progress for us all.
The social contract is at risk when overlapping inequalities are stark; when the origins of much wealth are in question; and when the tax compliance of the highest-income households is demonstrably poor. Bringing full financial and tax transparency to the monarchy offers a path for Your Majesty to provide a powerful impetus for good.
With best wishes,
Alex Cobham Chief Executive Tax Justice Network
cc The Rt Hon Rishi Sunak MP Prime Minister
Tax Justice Network Ltd C/O Godfrey Wilson Ltd, 5th Floor Mariner House, 62 Prince Street, Bristol, England BS1 4QD Enquiries to [email protected]
Crise climática, pandemia, guerra, Inflação e altas taxas de juros. Dois terços dos países do mundo tentam resolver as múltiplas crises com cortes nos gastos sociais ao invés de realizar reformas tributárias que garantam justiças fiscal e social.
Diante desse cenário, o episódio #48 do É da Sua Conta traz uma receita que garante aumentar a arrecadação sem mexer nos impostos. Como? Com 3 ingredientes: combate à sonegação fiscal, aumento na transparência, com registro de beneficiários finais de empresas, e revisão das isenções fiscais, principalmente as que são privilégios. Transcrição: #48 É da Sua conta
No É da sua conta #48:
Contexto brasileiro: Marco Antonio Rocha, professor de economia na Universidade Estadual de Campinas, explica o novo marco fiscal, taxa de juros e inflação. Traz também alternativas de políticas econômicas que beneficiariam mais a maioria da população brasileira.
Combate à Sonegação: Clair Hickman, do Instituto de Justiça Fiscal, traz a receita prática do que precisa ser feito para que os 200 bilhões de dólares parados no CARF sejam julgados e estejam à serviço da cidadania.
Transparência fiscal: Florência Lorenzo, da Tax Justice Network, explica como o registro de beneficiários finais pode contribuir para aumentar receitas.
Revisão das isenções fiscais: Rui Mate, do Centro de Integridade Pública, revela os custos dos benefícios fiscais de transnacionais que atuam no Moçambique e sugere que governo avalie se vale a pena liberar o solo para a extração de minérios.
Juvândia Moreira, da Central Única dos Trabalhadores e Trabalhadoras, conta como centrais sindicais pressionam o governo para mudanças no CARF e envia um recado à audiência do É da Sua Conta.
“O governo poderia ter optado por uma trajetória mais longa de estabilização da dívida pública e, com isso, ampliar o gasto público no curto prazo para poder viabilizar uma série de políticas públicas que foram promessas de campanha. ” ~ Marco Antonio Rocha, Universidade Estadual de Campinas
“São 18 anos para a decisão final de uma autuação fiscal. Para diminuir o tempo de litigiosidade “o Ministro da Fazenda precisa determinar que Receita Federal e CARF sigam a mesma interpretação da lei.” ~ Clair Hickman, Instituto de Justiça Fiscal
“Um sistema de intercâmbio de informação entre autoridades tributárias só funciona se toda empresa que abrir uma conta bancária em outro país tiver que registrar e fazer pública a informação sobre os beneficiários finais.” ~ Florência Lorenzo, Tax Justice Network
“Percebendo-se que os benefícios só vão criar custos, não há necessidade de atribuir benefícios. Olhando concretamente para o setor extrativo, o recurso está na terra. Se o custo (à sociedade moçambicana) vai ser superior que a sua exploração, é melhor deixar lá.” ~ Rui Mate, Centro de Integridade Pública
“Se o Estado está arrecadando menos e está investindo menos para gerar emprego e renda, é porque alguém está deixando de pagar imposto. E esse alguém são as grandes empresas.” ~ Juvândia Moreira, Central Única dos Trabalhadores e Trabalhadoras
“Cada renúncia fiscal indevida é uma pessoa a mais passando fome, é uma pessoa sem creche, é uma pessoa sem médico, é uma pessoa sem medicamento no posto de saúde. É isso que nós não queremos continuar assistindo.” ~ Fernando Haddad, Ministro brasileiro da Fazenda
Welcome to our Spanish language podcast and radio programme Justicia ImPositiva 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 radiofónico! Escuche por su app de podcast. (All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here.)
En este programa con Marcelo Justo y Marta Nuñez:
El sistema bancario mundial, ¿otra vez en la cuerda floja? ¿Quién va a pagar los platos rotos?
Los países centrales se apartan del paradigma neoliberal. La reacción en América Latina.
Cómo salvar los servicios públicos en épocas de crisis.
Y el debate sobre el modelo fiscal de Colombia y su proyección para la región.
INVITADOS:
Oscar Ugarteche Director del Observatorio Global Latinoamericano, OBELA, profesor de la Universidad Nacional Autonoma de Mexico (UNAM) y autor de Historia Critica del FMI
Bruno Susani, doctorado de la Universidad de París y autor de “La economía oligárquica de Macri”
Originally, the OECD’s idea of the new minimum tax was to make the international corporate tax system a little fairer. Now, Switzerland is among the front-runners to implement the new GLoBE rules (Global Anti Base Erosion Model Rules). Why is an infamous corporate tax haven so keen to introduce new international rules supposed to stop the race to the bottom? And what does this tell us about the winners and losers of the newest OECD tax reform?
Guest blog by Dominik Gross, senior policy officer for tax and finance policies at Alliance Sud.
The technicalities of the minimum global tax rate are with no doubt very sophisticated, but for every fiscal patriot in Switzerland its calculation is very simple. Former Swiss Finance Minister Ueli Maurer (who recently resigned), was one of the longstanding big figures of the nationalistic right-wing “Swiss peoples party”. He made the calculation quickly: “If Switzerland doesn’t take the extra money, others will.”
If you are cheering for global tax justice, however, you have to reverse the calculation. Countries in the global south hosting subsidiaries or affiliates of Swiss based corporations are only able to receive the money, if Switzerland doesn’t take it. That is, if Switzerland doesn’t introduce the Domestic minimum top-up tax (DMTT), which is the country’s major tool for translating the GloBE rules into its national tax laws (the others tools would be the Income inclusion Rule (IIR) and the Undertaxed Payment Rule (UTPR), which are not of great importance in the Swiss context). Unlike the last OECD corporate tax reform known as BEPS I, this time the OECD, G20 and EU are not relying on “blacklists” to motivate countries to join the GloBE club. Instead, they’re relying on economic incentives, which the former Swiss Finance Minister summarised above with an elegance of his own.
Switzerland’s tax policies are built on radical fiscal nationalism
Theoretically, Switzerland is free to take into account the interests of other countries, where a significant amount of the economic activities of its multinational enterprises are taking place. But such consideration isn’t the case at all. Last December, the Swiss parliament decided to translate the OECD minimum tax rules into a so-called “national supplementary tax”, the Swiss version of the domestic minimum top-up tax (DMTT). This will see multinational enterprises in Switzerland, which have so far benefited from an effective corporate tax rate (ie the tax rate on taxable profit after all deductions) of less than 15 per cent, subjected to a top-up tax that will raise the effective tax rate to the OECD minimum of 15 per cent. A commodity trader like Glencore in the Swiss canton of Zug that has been enjoying a very low tax rate of 11 per cent will in the future have to pay a supplement of 4 per cent on its profits reported in Zug. So far so good – multinational enterprises will be paying more tax on their profits, even if a tax rate of 15 per cent is still abysmally low.
But the domestic minimum top-up tax has a big catch from a development policy point of view. If Switzerland decides to adopt a minimum tax and to apply it to multinational groups in line with the OECD’s suggestions, it pre-empts other countries’ possibility under the same OECD rules to recuperate some of the tax on undertaxed Swiss income. Much of this income shouldn’t be Swiss income in the first place, given that it also includes profits shifted away from subsidiaries in those other countries.
This is highly significant for the effects of the OECD’s new minimum tax across the world. Switzerland is known to be one of the major global hubs for multinational enterprises. It is the country with the highest density of multinational corporations in the world, the home of some of the biggest financial companies in the world (such as UBS, Credit Suisse, Zurich, Swiss Re), of very prominent players in the pharmaceutical industry (Novartis and Roche), in food (Nestlé) and last but definitely not least in commodity trading (Glencore, Trafigura, Vitol and others). At the same time Switzerland is one of the most infamous secrecy jurisdictions as well. It ranks second on the Financial Secrecy Index, a ranking of countries most complicit in helping individuals hide their finances from the rule of law, and ranks fifth on the Corporate Tax Haven Index, which is a ranking of countries most complicit in helping multinational corporations underpay corporate income tax.
What this all means is countries currently losing out on tax revenue to multinational enterprises using Switzerland’s tax havenry services won’t be empowered by the OECD’s global minimum tax rules to recover that lost tax revenue. Instead –shamefully – the OECD’s new rules will reward Switzerland’s decades-long harmful behavior while multinational enterprises continue to underpay tax, particularly in the global south, as usual.
Switzerland’s introduction of the OECD’s new rules has repercussions all over the world
For the world, the above bears bad news for the following reasons:
The profit tax rates in the global south, where several Swiss multinationals are creating their values, are generally between 25 and 35 per cent. The introduction of the OECD minimum tax prevents profit shifting neither at the international level nor in Switzerland. The tax rate of 15 per cent is far too low for this. After the US tried to fix the minimum tax at a rate of 21 per cent during OECD negotiations in spring 2021, Switzerland together with other low tax jurisdictions such as Ireland and Luxembourg actively negotiated it down and pushed for the domestic minimum top-up tax. This is shown in a letter from the Swiss Finance minister to the OECD Secretary-General Mathias Corman in autumn 2021. The now much lower minimum tax of 15 per cent does nothing to prevent countries with higher tax rates from losing revenues due to profit shifting of Swiss multinational enterprises.
The way Swiss based multinational enterprises are shifting profits from low-income countries to Switzerland is illustrated, for example, through the case of the Swiss-Luxembourg agricultural commodity trader Socfin. A 2021 report by Swiss civil society organisations Bread for All (now HEKS/EPER), Alliance Sud and the German “Netzwerk Steuergerechtigkeit” (the German Tax Justice Network) shows that the company doesn’t book its profits where it creates its values (ie Liberia, Sierra Leone and Cambodia, where it operates its plantations for palm oil and rubber) Rather, Socfin books its profits where tax rates are the lowest, such as Switzerland and other corporate tax havens. In 2019, a study by the economists Petr Janský and Miroslav Palanský reported that at least about €80 billion in profits are being shifted annually from developing countries to low-tax jurisdictions like Switzerland. How much of this money ends up in Switzerland exactly is impossible to say, due to the secrecy of the Swiss tax haven and a lack of data in the source countries. But what is clear is that corporate tax havens like Switzerland, which are harming others by constantly producing new incentives for multinational enterprises to shift their profits to them, are at the same time the ones who will use the OECD’s new rules to collect the tax revenues lost to the profit shifting they enable.
Switzerland is a tax haven for multinational enterprises indeed. According to “economists without borders”, multinational corporations shifted $111 billion in profits to Switzerland last year. 39 per cent of the $22.7 billion corporate tax revenue Switzerland collected came from profit shifted into the country. But as mentioned before, due to the secrecy of the Swiss corporate tax haven we have to assume that not even Gabriel Zucman and colleagues are able to catch everything that flows into this small country in western Europe. Cases like Socfin’s, however, show that the corresponding amounts of such profit shifting must be expected to be considerably higher.
If Switzerland introduces the OECD’s minimum tax, it will deprive countries in the global south hosting subsidiaries of Swiss corporations of the right to tax these companies as they see fit under the GloBE rules. Unilateral measures, such as withholding tax on intra-group cross-border payments above 9 per cent (which is the threshold still allowed under the new OECD rules), can then no longer be applied by these countries to the subsidiaries of Swiss groups.
The economically disadvantaged countries of the global south will therefore not only be left empty-handed by the OECD’s reform, but their tax policy independence will also be further restricted. In order to at least mitigate this global injustice, which is anchored in the OECD’s minimum tax rules, Alliance Sud, in March 2022, proposed that a share the additional revenues expected to occur in Switzerland be returned to low-income countries in the global south. This could be easily done via financing instruments of international cooperation or international climate financing. In an open letter dating from June 2022, high-ranking representatives of the Association of African Tax Authorities (ATAF) backed this proposal by Alliance Sud. In the parliamentary discussion of the Swiss bill, however, no one paid attention to the spillover effects the Swiss domestic minimum top-up tax will have for countries in the global south. Developments like this may also be one of the reasons why important African economies such as Nigeria and Kenya have announced that they will not introduce the minimum tax. However, this would be of little help to them, as seen, when they are dealing with corporations that have their headquarters in a country that – like Switzerland wants to do – introduces a domestic minimum top-up tax. The additional tax revenue accrues there and the taxing rights of the country with the subsidiaries are curtailed.
Revenues from shifted profits will benefit the profit shifters
To make matters worse, Switzerland is already planning to use the additional revenues from the domestic minimum top-up tax to reward the tax abusers. Switzerland’s new rules force the federal and cantonal governments to use the additional revenue to further improve Swiss “competitiveness” (in global comparison, it is already one of the highest). These “improvements” can include reductions in capital taxes or in personal income taxes (especially for high incomes of for example corporate managers). Also being discussed are new special arrangements between the cantonal tax authorities and corporations in which the state takes over part of the companies’ operating costs; research promotion measures for (pharmaceutical-related) start-ups (in Basel); direct subsidies for wages paid by corporations.
So it’s not just people from other countries losing out to Switzerland’s domestic minimum top-up tax, but most Swiss citizens too. Attempts by Switzerland’s Greens and Social Democrats in parliament to put some of the additional revenues from the domestic minimum top-up tax towards subsidising childcare and health insurance did not succeed.
The result of all this that the revenues Switzerland collects from the domestic minimum top-up tax will flow back to the corporations that paid it. From the point of view of the corporations, this is a very clever plot: the tax revenues that Swiss corporations cheat other countries out of by shifting their profits to Switzerland, are now to be used in Switzerland for the benefit of precisely these corporations. No wonder the corporate associations such as Economiesuisse or Swiss Holdings want this reform at all costs – even if at first glance their members have to pay more taxes than before.
To summarise, what started out as an effort to undo the harms of profit shifting has been contorted by the OECD into a reward programme for corporate tax havens enabling profit shifting, and these corporate tax havens are already planning on passing along their rewards to companies doing the profit shifting. Rather than bring an end to the race to the bottom, the OECD’s new rules will preserve it in a perfect, perverse loop.
A referendum as the last chance
Swiss corporations are not only exploiting workers and polluting the environment in global south countries through their operations, they’re preventing the development of public services and infrastructure systems through their tax abuses in these countries.
In June, Swiss citizens will have the opportunity to vote on the introduction of the minimum tax in a referendum. We at Alliance Sud cannot accept another corporate tax reform that will ultimately only benefit these shameless corporations. It directly harms developing countries. If Switzerland doesn’t introduce the domestic minimum top-up tax, producing countries in which Swiss subsidiaries are operating will be granted more taxing rights than they would have under the OECD’s new global minimum tax rules. Alliance Sud therefore hopes that citizens will reject the proposal and send it back to government and parliament in order to bring about a better proposal that works for the people of Switzerland and the world all over.
Welcome to the 64th edition of our Arabic podcast/radio show Taxes Simply الجباية ببساطةcontributing to tax justice public debate around the world. It’s produced and presented by Walid Ben Rhouma and is available on most podcast apps. Any radio station is welcome to broadcast it for free and websites are also welcome to share it. You can follow the programme on Facebook, on Twitter and on our website. All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here.
في العدد #64 من بودكاست الجباية ببساطة إستضاف وليد بن رحومة الصحفي الإستقصائي محمد اليوسفي للحديث عن تحقيق صدر بموقع الكتيبة تحت عنوان “رجل الأعمال التونسيّ الطيّب البيّاحي في مغسلة الأموال القبرصيّة”. وجاء في التحقيق معطيات عن شبهات تبييض أموال وتهرّب ضريبي لحقت رجال أعمال تونسيّين من خلال الحصول على جوازات سفر ذهبيّة في قبرص اليونانيّة ومن ثم تكوين شركات خفيّة (بشكل مخالف للقانون التونسي) تنشط في مجالات مشبوهة.
Tunisia: The Cypriot laundrette at the service of tax evaders: in episode #64 of the Taxes Simply podcast, Walid Ben Rhouma speaks with investigative journalist Mohamed Al-Yousifi about his recently published investigation on “Alqatiba” website titled: “Tunisian businessman Taieb Bayahi in the Cypriot money laundrette.” The investigation reveals suspected money laundering and tax evasion by Tunisian businessmen through the purchase of golden passports in Greek Cyprus and then forming anonymous companies.
تونس: المغسلة القبرصيّة في خدمة المتهرّبين من الضرائب
Welcome to our monthly podcast in French, Impôts et Justice Sociale with Idriss Linge of the Tax Justice Network. All our podcasts are unique productions in five different languages every month in English, Spanish, Arabic, French, Portuguese. They’re all available here and on most podcast apps. Here’s our latest episode:
Dans cette édition de votre podcast Impôts et Justice Sociale produit par Tax Justice Network, nous revenons sur la publication du rapport de la transparence sur les bénéficiaires effectifs en Afrique, avec Eva Danzi, chercheuse chez Tax Justice Network. Nous vous proposons aussi une discussion que nous avons eue avec « Jules », un citoyen africain, avec lequel nous avons échangé des différentes activités de plaidoyer en cours pour une meilleure justice fiscale et sociale en Afrique.
Intervient dans ce podcast:
‘Jules,’ Citoyen Africain, Invité du Podcast, Cotonou, Bénin
Et pour ceux qui ont l’application Stitcher et iTunes ect
Si vous souhaitez recevoir cette production ou être média partenaires ou simplement contribuer, vous pouvez nous écrire à l’adresse Impô[email protected]
Cuidados com o lar, crianças, idosos, pessoas com doenças; trabalho precarizado e mal remunerado: as mulheres estãos exaustas! E a culpa também é dos super ricos … que seguem ditando as regras do jogo e contribuindo menos do que deveriam com impostos.
Orçamento público para serviços de cuidados por meio de uma tributação justa para aliviar o cansaço das mulheres, ao mesmo tempo em que se garante o direito ao cuidado de todas as pessoas, é o tema do episódio #47 do É da sua conta. Transcrição do episódio
No É da sua conta #47:
Como as crises ambientais, econômicas, sanitárias e outras afetam proporcionalmente mais a vida das mulheres
A relação secular entre a riqueza de alguns bilionários – a maioria no norte global – com a pobreza de milhares de mulheres – a maioria no sul global
Nós mulheres estamos exaustas: ouvintes contam como lidam com as múltiplas jornadas e sugerem políticas públicas que aliviem essa sobrecarga.
A tributação justa como solução: desigualdades de gênero na estrutura dos sistemas tributários devem ser corrigidas e deve-se investir em sistemas públicos de cuidados.
“Se traçarmos uma linha contínua, desde a colonização, a escravatura, vemos que são processos de extração de força de trabalho de populações periféricas, que estão na base da produção de riqueza para os grandes magnatas do capitalismo. As mulheres na África, América Latina e Caribe e Ásia continuam a ser exploradas através do trabalho produtivo e também reprodutivo.” ~ Âurea Mouzinho, Aliança Global para a Justiça Fiscal
“Na verdade, meu companheiro e filho contribuem com uma tarefa ou outra, um dia ou outro. É uma divisão desigual porque, no dia a dia, essa responsabilidade recai sobre mim.” ~ Teresinha Menezes, educadora social
“As noites são especialmente difíceis porque não temos cuidadora para um suporte prático nesse horário. Muito do meu trabalho é executado on line, às vezes no horário noturno. É comum que minha mãe não compreenda o que significa estar em chamada de vídeo e queira me interromper a todo custo. E isso com certeza gera algum grau de ansiedade a mais.” ~ Deborah Delage, consultora em amamentação
“Meu maior desafio é na hora de sair; pegar um transporte público com meu filho, uma criança de colo, pois as condições não são boas, está sempre cheio, às vezes não tem lugar para sentar. Vou levar o meu filho para a creche a pé e não tem como andar nas calçadas com o carrinho porque é esburacada, tem muitos desníveis.” ~ Michele Carvalho, artesã
“Os governos precisam reduzir a carga tributária injusta das mulheres e adotar uma tributação progressiva, redistributiva e igualitária de gênero. E isso inclui novas formas de tributação sobre o capital e a riqueza, bem como depender menos de impostos sobre o consumo também é importante.” ~ Roos Saalbrink, Action Aid
“É preciso gerar receitas e financiar uma transição para um sistema de cuidados público e formalizado. Os recursos para isso podem ser levantados a partir de políticas de justiça fiscal. A Tax Justice Network calcula que todos os anos se perdem quase meio trilhão de dólares para abusos fiscais causados por grandes multinacionais e de indivíduos muito ricos. Esses são recursos que poderiam ajudar a financiar essa transição.” ~ Florência Lorenzo, Tax Justice Network
“Um serviço público que eu pudesse contar seria o educativo, pra envolver toda a família nos cuidados, principalmente os homens, porque viemos de uma criação muito machista, muito preconceituosa. E a educação e os exemplos movem muito mais.” ~ Carla Avelina, administradora de empresas
“Reconhecer que a carga da mulher é maior é o primeiro passo para que a gente possa olhar e dizer que a gente pode dividir tarefas para que se reduza essa pressão sobre elas.” ~ Ivandro Claudino, analista de sistemas
Le 22 novembre 2022, la Cour de Justice de l’Union Européenne (CJUE) a annulé l’accès du grand public aux registres répertoriant les bénéficiaires effectifs, ou propriétaires réels, des sociétés. Pour de nombreux experts qui travaillent sur la question, cette décision a été prise comme une rétrograde sur les efforts visant à faire reculer l’opacité qui facilite les crimes financiers et économiques, ainsi que l’évasion fiscale et autres flux financiers illicites.
Selon Andres Knobel, spécialiste de la question au sein de Tax Justice Network, les seuls susceptibles d’avoir applaudi cette décision sont « …les oligarques, les fraudeurs et les criminels » qui par cette décision, ont retrouvé l’anonymat. Toujours de son point de vue, cela profitera aussi aux : « avocats, fiduciaires et autres professionnels qui se décrivent eux-mêmes comme des spécialistes de la planification fiscale internationale, ainsi que les conseillers juridiques de particuliers fortunés et très fortunés ou des experts en patrimoine privé et fiscalité ». Il a enfin estimé que cette décision n’a pas pris en compte les intérêts des groupes marginalisés
Vue de la société civile africaine, cette décision peut être très incomprises, car durant des années, ses membres ont mené des campagnes de plaidoyer pour l’instauration de règles plus transparente sur la divulgation des bénéficiaires effectifs. Pourtant, il ne devrait pas y avoir de raisons, pour que les changements survenus en Europe influencent négativement l’évolution de cette question en Afrique et ses avancées. La transparence sur les bénéficiaires effectifs dans le continent a une longue histoire et on peut la remonter au tout premier rapport du Panel de Haut Niveau sur les Flux Financiers illicites dirigé par l’ex-président sud-africain Thabo Mbeki.
Aussi, même si elles comportent certains manquements, les recommandations 24 et 25 du Groupe d’Action Financière (GAFI), recommande à l’ensemble des pays qui y participent, d’avoir un solide cadre de divulgation de la propriété effective. Enfin, en novembre 2022, le Groupe Africain au sein des Nations Unies a adopté une résolution en vue d’y débuter les négociations sur un cadre fiscal international plus équitable et participatif, et la transparence sur les bénéficiaires effectifs devrait y occuper une place prépondérante. C’est dans ce contexte qu’un groupe de chercheurs et acteurs de la société civile africaine ont collaboré pour la production de l’état sur la transparence relative aux Bénéficiaires Effectifs dans les pays Africains.
Des avancées notables…
Les enseignements qu’on en tire, permettent de dire qu’au-delà des avancées qui sont constatées, il existe encore des pistes d’amélioration sur le sujet. Une nouvelle positive c’est que même dans les pays où il n’existe pas encore de lois sur la transparence des bénéficiaires effectifs, les écosystèmes politiques et sociales travaillent à y remédier. L’autre bonne nouvelle, c’est que la notion se définit désormais très bien dans l’ensemble des pays de la région, signe que sa compréhension est désormais acquise. Dans le détail, on peut retenir les leçons suivantes.
Le rapport révèle que sur les 54 pays que compte l’Afrique, presque la moitié (23) ont adopté des lois sur la transparence des bénéficiaires effectifs. Il est toutefois important de noter, que ce chiffre représente une réelle évolution, car il y a quelques années ont en était pas là. Aussi, de nouveau pays s’ajoute chaque année à cette liste et en ce début 2023, trois autres se sont signalés, notamment le Cameroun, l’Afrique du Sud, et l’Ouganda.
En tant que continent riche en ressources du sous-sol, on retrouve 28 pays qui implémente les recommandations de l’Initiative pour la Transparence dans les Industries Extractives (ITIE) et depuis sa norme 2019, il est recommandé aux pays qui la mettent en œuvre de fournir des informations sur les bénéficiaires effectifs des entreprises de ce secteur.
On note toutefois, que seulement 12 des 28 pays engagés dans cette initiative en Afrique, ont des lois de portée générale sur la transparence des bénéficiaires effectifs. Dans certains cas, il existe des seuils différents de déclaration, entre le secteur extractif et les autres secteurs de l’économie.
Enfin, le Fonds Monétaire International, a joué un rôle majeur dans ce domaine, lorsqu’en 2020, il a exigé des gouvernements qui sollicitaient son aide dans le cadre de la riposte contre la Covid-19, que la liste des entreprises qui seraient contractantes dans ce contexte soit publiée, ainsi que celle des bénéficiaires effectifs de ces dernières. A ce propos, 34 pays africains étaient concernés.
L’intervention du FMI aura donc été d’une importance cruciale pour un engagement à la transparence sur les bénéficiaires effectifs, même si dans un cas comme celui du Cameroun, un audit publié par la Chambre des Comptes de la Cour Suprême, a révélé une mise en œuvre non effective. Une des préoccupations soulevées concernait une entreprise, qui selon l’institution judiciaire, appartenait in fine à celui qui présidait la commission de lutte contre la Covid et son frère.
Mais encore d’importantes améliorations à apporter…
Derrière ces avancées, se dissimulent cependant de nombreux efforts pour mise en œuvre effective d’un cadre de transparence sur les bénéficiaires effectifs, selon de nouvelles normes de conformité proposées par Tax Justice Network. Par exemple, on note que des pays devront encore améliorer les seuils de déclaration, pour les rendre les plus bas possibles. La moyenne dans les pays analysés est de 20% de participation, avec des pays qui ont atteint les 25%. Cela peut constituer une entrave à la transparence sur les bénéficiaires effectifs, en ce sens que par exemple, 5 personnes ayant des intérêts communs et qui détiennent chacun 20% d’une entité légale, ne seront pas contraints de s’enregistrer dans le registre des bénéficiaires effectifs, lorsque le seuil de déclaration est fixé à 25%
De ce point de vue, le Botswana fait figure d’exemple avec un seuil de 0%. Dans certains pays il est urgent d’uniformiser les seuils de déclaration. Au Cameroun il existe un taux de participation de 5% pour les sociétés minières, et de 20% pour toutes les autres entreprises. Au Sénégal, le seuil pour les sociétés extractives est de 2% et de 25% pour toutes les autres entreprises.
Une autre question essentielle qu’il faudra examiner est celle de l’accessibilité gratuite des données sur la transparence des bénéficiaires effectifs au grand public. Le plaidoyer de la société civile se poursuit à cet effet avec des impacts lents mais qui progressent. Un progrès significatif est celui du Botswana, où depuis le 25 février 2022, une loi a rendu accessible au public, les informations contenues dans le registre des bénéficiaires effectifs. L’ Afrique devra aussi poursuivre avec des efforts visant à élargir la qualité des entreprises susceptible de faire une déclaration des bénéficiaires effectifs, ainsi que les procédures de vérification y afférentes.
A cet effet, aussi bien les sociétés civiles peuvent solliciter un appui de Tax Justice Network, dont la feuille de route pour une transparence effective sur les bénéficiaires effectifs peut servir de modèle aux décideurs politiques qui cherchent à apporter des changements, et aux citoyens qui veulent s’assurer que les changements apportés aux cadres juridiques sont significatifs. La feuille de route définit dix objectifs que les cadres nationaux de propriété effective devraient atteindre.
Illicit money flows are notoriously hard to track. According to a 2011 report from the UN Office on Drugs and Crime, less than 1 per cent of proceeds from criminal activity that are laundered via the financial system are detected. In efforts to overcome this, authorities have tried to improve customer due diligence requirements, increased transparency around legal vehicles, and engaged in automatic exchange of bank account information to prevent money laundering.
However, existing mechanisms still have several loopholes and are not sufficient to effectively map and counter illicit financial flows. For instance, financial account information that is exchanged based on the US Foreign Account Tax Compliance Act or the OECD’s Common Reporting Standard can only be used for tax purposes and might not be useful in detecting other financial crimes. Additionally, the automatic exchange of information only covers data on annual income and account balances, which can easily be manipulated and does not enable investigations of individual transactions.
The fight against money laundering requires law enforcement agencies to “follow the money”, and, as we have argued, financial transaction data could be a game changer for this. A new study, published by researchers from the Tax Justice Network (as part of the TRACE consortium), investigates the potential, shortcomings, reform options, and prevalence of the use of the SWIFT financial messaging data in countering illicit financial flows among European law enforcement agencies.
The central role of SWIFT for countering financial crimes
The Society of Worldwide Interbank Financial Telecommunications (usually simply referred to as SWIFT) is an association which, among other things, is responsible for providing a global messaging system of financial information. In 2021, over 11,000 institutions participated in the SWIFT network, and more than 10 billion messages relating to financial transactions were sent through this system1.
The interest in accessing SWIFT data for detecting and combatting risks of illicit financial flows is not new. The Financial Action Task Force has sought access to SWIFT data since the 1990s, but SWIFT resisted. Despite this, authorities around the world have gained some access to SWIFT data. The US used SWIFT data in its Terrorist Finance Tracking Program to map out terrorist networks, and the US, EU, and UK expelled some Russian banks from the SWIFT network in 2022 to enforce economic sanctions against Russia. Researchers have also used SWIFT data to estimate capital fleeing Ecuador, and to study the impact of anti-money laundering regulation on payment flows.
SWIFT data can be useful in financial investigations and supervision in two ways. First, law enforcement agencies could access batches of SWIFT transactions for specific cases they are investigating, to trace specific transactions. Second, broad access to SWIFT data could enable advanced analytics to identify suspicious transaction patterns, develop risk algorithms, and guide policy analyses. This could be done through financial intelligence units or anti-money laundering supervisory bodies in the financial sector.
Our new report suggests, however, that SWIFT data is currently not, or very seldom, directly used by law enforcement agencies and financial intelligence units in the European Union, due to obstacles such as low-quality data, data compatibility, the need for technical expertise to analyse data, and the incompleteness of data. Despite this, the report concludes that authorities would find access to SWIFT data useful for both preventive analytics and investigations.
Concerns related to the incompleteness and quality of the data, especially relating to the capacity to match financial transactions to specific individuals, call to attention a need to strengthen the messaging standards and the institutional frameworks that govern money transfers, both at the regional and international level.
Governing financial messaging: International standards, legal frameworks and their loopholes
In 2012 the Financial Action Task Force introduced the travel rule, which requires some information on the originators and beneficiaries of payments to be carried through the entire payment chain. The rule’s objective is to make basic information available to law enforcement, financial intelligence units and financial institutions, to facilitate criminal investigations and the analysis, identification, and reporting of suspicious transactions. At its heart, the travel rule aims to create an audit trail, allowing for information about where a payment came from to “travel” through the payment chain along with the payment. These rules do not directly apply to the SWIFT organisation providing the messaging system, but to the financial institutions handling the wire transfers and payments, and who in turn own and operate the SWIFT organisation and system.
The European Union incorporated the travel rule into law by means of the Regulation on Transfer of Funds in 2015. Since July 2021, the EU has been discussing a revision of the regulation as part of its 6th anti-money laundering package. That revision’s main aim was to bring crypto transfers into the scope of the regulation.
Our report shows that both the Financial Action Task Force recommendation 16 and the European Union version of the travel rule have severe shortcomings from the perspective of an ideal and consistent transparency framework for financial transactions. For example, the inclusion of beneficial ownership information on payers or payees is required under neither the Financial Action Task Force recommendations nor under European transfer of funds regulations. In this regard, the data on the originators and beneficiaries of payments can refer only to a legal entity, and not to the individual who is benefiting from it. Furthermore, consistent, structured and unique identifier information about relevant legal or natural persons would not always be required under either of the rules, evidencing important weaknesses of both the travel rule and the European regulation.
The regulation on the transfer of funds has an additional weakness in both its original and revised formats with regard to intra-EU transfers. While the Financial Action Task Force travel rule mandates the inclusion of a name for both the payer and payee, the European Union does not require this information for transfers within the European Union. Additionally, the EU falls short of always requiring the inclusion of additional personal identification information, such as address or birthdate, for the payer. Intra-EU transfers only require account numbers for the respective parties, with the remaining information being provided on request within three working days.
Furthermore, the 2021 proposed recast of the European regulation on the transfer of funds may remove the mandatory inclusion of all the identification criteria of the payers of bank transfers. The listing of criteria now omits the word “and” in article 4.1, which previously clarified that all three identifying attributes (1. name, 2. account number, and 3. address including name of country; official personal document number; and customer identification number, or alternatively, date and place of birth) needed to be included in a transfer message. The removal of the word “and” in articles 4.1 and 4.2 may lead to some ambiguity about whether to include all identifying criteria – or if only one is sufficient. We believe that this potential ambiguity is likely to be addressed and removed through a further revision of the proposed rewording of the transfer of funds regulation which is set to be voted on in April 2023.
Compared to already weak Financial Action Task Force and European regulations, the SWIFT messaging format is even weaker, with no consistent, uniform or mandatory data structure, and dispensing with hard-wired, coded, and mandatory information to be included about both the paying and beneficiary customers. This is a key shortcoming of the SWIFT messaging format, since the lack of consistency makes data matching and mining extremely challenging, hindering efforts by law enforcement agencies to detect, address and prevent illicit financial flows. As a consequence, enforcement agencies may need to rely on financial institutions to provide the requested transactions in manually collated excel files that have been extracted from the original SWIFT transaction records, creating a series of risks, including everything from simple errors in copying and transposition, to the potential manipulation of evidence.
Anticipated developments
Effective standards governing financial messaging systems are a crucial though sometimes overlooked element in combating illicit financial flows. However, there is growing recognition of the importance of this issue. The G20 Finance Ministers and Central Bank Governors Meeting of February 2023 in Bengaluru, India, included a reference to the “travel rule” in their final communique:
“We recognise the urgent need to establish effective anti-money laundering and counter-terrorism financing regulations and oversight of virtual assets, especially to prevent their use in money laundering and terrorism financing, in line with FATF Standards. We support the FATF’s efforts to speed up the implementation internationally of its standards for this sector and recommit to timely implementation of these rules, including the ‘travel rule’.”
While the travel rule is mentioned here in the context of money laundering risks relating to virtual or crypto assets, its mention in such a high-level policy document underlines its global and systemic relevance for countering illicit financial flows.
Another key future development is that, by 2025, SWIFT will have been phased out and replaced by a new financial messaging standard called ISO 20022, which opens a golden opportunity for reforming the global financial payment infrastructure to be better equipped to counter illicit financial flows. While the format appears to be much more structured, only global political standard setters like the United Nations, the G20, the Financial Action Task Force and/or the EU, will be able to decisively influence the suite of mandatory information to accompany transfers of funds in the decades to come. India’s chairing of the G20 could prove decisive in strengthening the minimal transparency requirements for legitimate cross-border financial transactions.
Recommendations
The main recommendations from the report include:
Requiring the mandatory inclusion of beneficial ownership data in transaction records for both the ordering and beneficiary customers.
Preventing the execution of any wire transfers if the identification and verification of the bank’s customers and their beneficial owners have not been fully completed.
Removing any exceptions and ambiguity about the necessity of including multiple identifiers on payers and payees, especially in the current recast of the EU transfer of funds regulation.
Treating all cross-border transfers equally irrespective of regional economic integration.
To enhance data quality and consistency, SWIFT should hard-code basic data requirements for customers in their message standards and ensure that only structured data is allowed in message fields.
Additionally, SWIFT should develop and monitor a data validation standard for all banks using the network.
Lastly, jurisdictions should centralise data on all transactions through a domestic institution.
In conclusion, the report highlights that the SWIFT message data is currently not being effectively utilised by law enforcement agencies and suggests a need for significant reform in the SWIFT message format and regulatory framework. This would enable far more successful investigations of financial crimes by revealing networks and connections that would otherwise remain invisible.
La falta de transparencia en la titularidad de empresas, fideicomisos, sociedades y fundaciones es un importante impulsor de los flujos financieros ilícitos. Esta opacidad tiene consecuencias negativas en las economías y sociedades de todo el mundo, lo que resulta en una mayor inestabilidad financiera, desigualdad, y erosión de la confianza en las instituciones, en el estado de derecho y en la democracia. En colaboración con Tax Justice Network Africa y Fundación SES, Tax Justice Network publica hoy dos informes sobre el estado actual de la transparencia de beneficiarios finales en África y América Latina. La transparencia de los beneficiarios finales requiere la divulgación pública de las personas que en última instancia poseen, controlan o se benefician de un vehículo legal, como una empresa. Nuestros dos informes se basan en datos del Índice de Secreto Financiero 2022 de Tax Justice Network, cubren los últimos desarrollos y avances, y profundizan en la situación de países específicos a través de estudios de casos. A continuación, se presenta un breve resumen:
Transparencia de beneficiarios finales en África y América Latina
Los gobiernos africanos y latinoamericanos son conscientes de que la transparencia de los beneficiarios finales es una herramienta poderosa para combatir el lavado de dinero y el abuso fiscal. Nuestra investigación demuestra que se están realizando progresos en ambos continentes.
En África, 23 de las 54 jurisdicciones han implementado leyes que exigen que los beneficiarios finales de las empresas sean declarados o registrados ante una autoridad gubernamental. Nuestro informe Transparencia de beneficiarios finales en África en 2022 incluye casos reales que ilustran los perjuicios que causa el secreto financiero. En Camerún, por ejemplo, la malversación de fondos públicos destinados a responder al Covid-19 generó un debate entre la sociedad civil, los medios de comunicación y las autoridades públicas. Uno de los casos de fraude involucró a familiares del comité gubernamental responsable de las adquisiciones. Desde entonces, el país ha reconocido la necesidad de beneficiarios finales en su Ley de Finanzas de 2023, que exige que las personas jurídicas registren a sus beneficiarios finales ante una autoridad pública.
En América Latina, 10 de las 16 jurisdicciones analizadas requieren que la información sobre los beneficiarios finales sea registrada ante una autoridad gubernamental, lo que representa un aumento significativo desde 2018, cuando solo cuatro jurisdicciones lo requerían. El informe sobre “El estado actual de los registros de beneficiarios finales en América Latina” incluye una sección que explica cómo se pueden fortalecer aún más los marcos institucionales nacionales a través de estudios de casos.
A pesar de los avances, siguen existiendo importantes lagunas. Las acciones al portador, que son acciones representadas por certificados físicos que otorgan la titularidad a quien las posee, representan un riesgo significativo para la transparencia. Recomendamos que los países prohíban el uso de acciones al portador y eliminen gradualmente las restantes. La falta de acceso público a los registros también es una gran debilidad.
Los estudios también revelan los compromisos de los gobiernos con la transparencia de los beneficiarios finales en sectores específicos. Algunos países se han comprometido a divulgar información sobre beneficiarios finales para las empresas de las industrias extractivas como parte de la Iniciativa de transparencia de la industria extractiva. También se han hecho compromisos similares para aumentar la transparencia y la rendición de cuentas en la adquisición de bienes y servicios durante la pandemia, cuando varios países se comprometieron a publicar los beneficiarios finales de las empresas adjudicatarias de contratos gubernamentales como parte del acceso a la financiación del Fondo Monetario Internacional.
El camino a seguir
El progreso en la transparencia de los beneficiarios finales varía ampliamente entre países y regiones. Incluso en aquellos países que han implementado marcos sólidos, existen lagunas que pueden ser explotadas. Por ejemplo, la legislación debe cubrir todas las entidades legales (no solo las empresas, sino también asociaciones, fideicomisos y fundaciones). Una definición clara y completa de quién califica como beneficiario final y métodos eficientes para mantener esta información actualizada también son componentes cruciales para establecer un sistema sólido para la transparencia de los beneficiarios finales. Además, en el caso de incumplimiento de estos requisitos, son necesarias consecuencias y la aplicación de sanciones para impedir el abuso.
Cualquier progreso en la transparencia que un país haga siempre corre el riesgo de ser socavado por la opacidad en otros países. Es importante destacar la gran responsabilidad que tienen algunas de las principales economías del mundo para mejorar sus propios marcos. El sur global enfrenta enormes desafíos para responsabilizar a sus elites, dado que estos importantes actores internacionales les brindan ayuda y les permiten evadir el estado de derecho en sus países de origen. Los países de bajos ingresos son las principales víctimas del sistema extraterritorial mundial y sufren de manera desproporcionada los flujos financieros ilícitos. Si bien en gran medida no son responsables de permitir estos flujos, los acontecimientos recientes muestran que los países de bajos ingresos necesitan importantes actores internacionales para brindar transparencia, pero no pueden confiar en que lo hagan. Si bien Estados Unidos presentó recientemente una ley que regula la transparencia de los beneficiarios finales, el progreso logrado a través de la Ley de Transparencia Corporativa en 2021 es insuficiente. Por otro lado, la Unión Europea, que anteriormente tenía un régimen de transparencia relativamente avanzado, dio un gran paso atrás con un fallo judicial a fines del año pasado que aceptó el argumento de que la transparencia de los beneficiarios finales viola la privacidad personal. Este fallo llevó a los países a restringir el acceso a sus registros en cuestión de horas. Este revés destaca la necesidad de que los países del sur global implementen sus propias medidas de transparencia de manera unilateral para protegerse en la medida de lo posible de los daños del secreto financiero.
Para ayudar a los países a lograr una transparencia óptima, Tax Justice Network ha publicado una hoja de ruta que describe los pasos hacia las mejores prácticas para la implementación de registros de beneficiario.
Welcome to our Spanish language podcast and radio programme Justicia ImPositiva 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 radiofónico! Escuche por su app de podcast. (All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here.)
En este programa con Marcelo Justo y Marta Nuñez:
El reino de los narcobanqueros en Ecuador: tambalea el gobierno de Guillermo Lasso
América Latina, la necesidad de un nuevo modelo y un pacto fiscal en entrevista con la CEPAL
La reforma impositiva de Gustavo Petro en Colombia y la pequeña y mediana industria
El debate sobre la moneda alternativa al dólar para los intercambios de América Latina
Invitadxs:
Andrés Arauz, economista y ex candidato a la presidencia ecuatoriana
Daniel Titelman, director de la división de desarrollo económico de la Comisión Económica para América Latina (CEPAL)
Oscar Ugarteche, Director del Observatorio Global Latinoamericano, OBELA, profesor de la Universidad Nacional Autonoma de Mexico, y autor de Historia Critica del FMI
~ Narcobanqueros, la reforma impositiva Colombiana, moneda alternativa
Welcome to the 63rd edition of our Arabic podcast/radio show Taxes Simply الجباية ببساطةcontributing to tax justice public debate around the world. It’s produced and presented by Walid Ben Rhouma and is available on most podcast apps. Any radio station is welcome to broadcast it for free and websites are also welcome to share it. You can follow the programme on Facebook, on Twitter and on our website. All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here.
في العدد #63 من بودكاست الجباية ببساطة استضاف وليد بن رحومة الباحثة مزن النيل لمناقشة ورقة بحثية بعنوان “السياسة اليومية للنظام الضريبي في السودان: تحديد ٱفاق الإصلاح” المنشورة ضمن مجموعة الصراع والمدنية البحثية التابعة لجامعة LSE بالمملكة المتحدة بالتعاون مع ماثيو بنسون ورجاء مكاوي. وتحدثت مزن النيل عن قصور النظام الضريبي السوداني في توزيع الثروة بشكل عادل سواء بين الأفراد أو الجهات زيادة على إعتماد الإقتصاد السوداني على الأنشطة الريعية دون إدماج لمختلف الفئات في العملية الإنتاجية.
In episode #63 of Taxes Simply podcast, Walid Ben Rhouma hosts researcher Muzan Al-Nil to discuss her recently published paper entitled “The Everyday Politics of Sudan’s Tax System: Identifying Prospects for Reform,” published within the Conflict and Civility Research Group of LSE University in the United Kingdom, in collaboration with Matthew Benson and Rajaa Makkawi. Muzan discusses the failure of the Sudanese tax system in distributing wealth fairly, and the dependence of the Sudanese economy on rentier activities.
~ السودان: سياسة الولاءات وتركيز الثروات عبر الضرائب
Secrecy surrounding ownership of companies, trusts, partnerships and foundations is a major driver of illicit financial flows. The negative consequences of this secrecy are felt across economies and societies worldwide and result in greater financial instability, increased inequality, and erosion of public trust in institutions, the rule of law and democracy. In collaboration with Tax Justice Network Africa and Fundación SES, the Tax Justice Network today publishes two reports on the state of play of beneficial ownership transparency in Africa and Latin America. Beneficial ownership transparency requires the disclosure of the individuals who ultimately own, control or benefit from a legal vehicle, such as a company. This data should be publicly available, free of charge. Our two reports draw on data from the Tax Justice Network’s Financial Secrecy Index 2022, cover some of the latest developments and progress, and dig deeper into the situation in specific countries through case studies. Here is a brief summary:
Beneficial ownership transparency in Africa and Latin America
African and Latin American governments know that beneficial ownership transparency is a powerful tool to combat money laundering and tax abuse. Our research shows that progress is being made on both continents.
In Africa, 23 out of 54 jurisdictions now have laws that require beneficial owners of companies to be declared or registered with a government authority. Our report Beneficial ownership transparency in Africa in 2022 includes real life cases of the damage financial secrecy causes. In Cameroon, for example, the misappropriation of public funds meant for responding to Covid 19 sparked debate among civil society, the media, and public authorities. One of the cases of fraud involved family members of the governmental committee responsible for procurement. Since then, the country has recognised the need for beneficial ownership in its Finance Act of 2023, requiring legal entities to register their beneficial owners with a public authority.
In Latin America, 10 out of the 16 jurisdictions analysed require beneficial ownership information to be registered with a government authority, a significant increase since 2018 when only four jurisdictions mandated this requirement. The report on the State of Play of Beneficial Ownership in Latin America includes a section explaining how national institutional frameworks can be strengthened further through case studies.
Despite progress, significant loopholes remain. Bearer shares, which are shares represented by physical certificates that grant ownership to whoever holds them, pose a significant risk to transparency. We strongly recommend that countries prohibit the use of bearer shares and phase out the remaining ones. The lack of public access to registries is also a major weakness.
The studies also reveal governments’ commitments to beneficial ownership transparency in specific sectors. Some countries have committed to disclosing beneficial ownership information for companies in the extractive industries as part of the Extractive Industry Transparency Initiative. Similar commitments have also been made to increase transparency and accountability in the procurement of goods and services during the pandemic, when several countries pledged to publish beneficial owners of companies awarded government contracts as part of accessing financing from the International Monetary Fund.
The way forward
Progress on beneficial ownership transparency varies widely across different countries and regions. Even in countries that have implemented strong frameworks, loopholes remain that can be exploited. For example, legislation should cover all legal entities (not just companies, but also partnerships, trusts and foundations). A clear and comprehensive definition of who qualifies as a beneficial owner and efficient methods for keeping this information up to date are also crucial components of establishing a strong system for transparency of beneficial ownership. In addition, consequences and enforcement of sanctions for noncompliance with these requirements are necessary to deter abuse.
Any transparency progress a country makes is always at risk of being undermined by secrecy in another country. It’s important to highlight here the great responsibilities on the part of some of the world’s major economies to do better. Given the help that these major international players provide in enabling elites in other countries to escape the rule of law in their home countries, the global south is faced with huge challenges in holding them all accountable. They are the primary victims of the global offshore system, suffering disproportionately from illicit financial flows. While they are largely not responsible for enabling these flows, recent developments show that lower income countries need major international players to deliver transparency but certainly cannot rely on them doing so. The US only very recently brought forward a law regulating beneficial ownership transparency, and even then, the progress made through the Corporate Transparency Act in 2021 is very weak. Meanwhile, the European Union, which previously had a relatively advanced transparency regime, has taken a major step back with a court ruling late last year that accepted the argument that beneficial ownership transparency violates personal privacy. This ruling led to countries restricting access to their registries within hours. This setback highlights the need for countries in the global south to implement their own transparency measures unilaterally to protect themselves as far as they can from the harms of financial secrecy.
To support countries in achieving optimal transparency, the Tax Justice Network has published a roadmap that outlines steps towards best practice for the implementation of publicly accessible beneficial ownership registers.
In the wake of the Covid-19 pandemic, the International Monetary Fund lent and gave money to governments to help save as many lives as possible. Governments bought equipment, drugs and test kits. Knowing that public procurement can be a hotbed for collusion and corruption in all countries, the International Monetary Fund asked governments to make special governance commitments. In Africa, 34 governments committed to register and disclose the real people behind companies awarded contracts.
Nevertheless, money meant for saving people had a funny way of growing legs in many places during the pandemic. Commitments to transparency may not have been put into practice or done so in time or effectively, given the ‘Covidgates’ that sprung up across the world – from Brazil to Malawi.
Cameroon’s ‘Covidgate’ sheds light on the problem of anonymous company ownership. In 2020, the government set up a Special National Solidarity Fund to finance the health sector to protect Cameroonians from the coronavirus. But social media users soon started to leak information about embezzlement and fraud involving the solidarity fund. The press picked these up, and President Paul Biya called for an investigation.
With over 120,000 recorded Covid-19 cases, the Audit Bench of the Supreme Court of Cameroon revealed serious problems with the procurement process for equipment and drugs needed to help Covid-19 patients. Irregularities resulted in inflated prices for Covid-19 test kits and stocks of drugs disappearing.
In many cases, the information about the real owners of companies that won government contracts was “uncertain”. The Ministry of Health had set up a working group to oversee procurement. The president of this group was Ousmane Diaby, who also headed a division in the ministry. According to the Audit Bench’s audit, companies owned by Diaby won contracts.
It turned out that Diaby and his younger brother owned MG & Company, yet they managed to hide behind the manager. The company received nearly US $5 million, but there was very little work to show for it. This situation “is likely to be classified as a criminal offence”, according to the Audit Bench.
Spreading the spoils among family members didn’t stop there. The working group also awarded six contracts to three companies managed by Diaby’s older brother. Diaby did not notify the working group of the relationship. Here, the Audit Bench stressed that there is a “high risk of criminal liability associated with the award of these contracts”.
Despite the audit, there have been no sanctions or actions taken so far. Cameroon’s commitments on beneficial ownership transparency to the International Monetary Fund were a step in the right direction. Yet they appear not to have been put in practice in time or effectively, based on the Audit Bench’s findings.
Cameroon has taken further action on beneficial ownership transparency since then though. The new Finance Law of 2023 requires the beneficial owners of legal entities to register with the tax authority. This is an essential tool in addressing government procurement fraud which ultimately robs people of good healthcare.
Africa’s commitment to transparency
Cameroon is not alone in introducing laws for beneficial ownership transparency. At the start of 2023, 23 of 54 African nations required the human beings behind companies to register with a government authority.
More than half of the continent has specific commitments for sectors prone to risk: the extractive industries and public procurement. Governments in 28 African countries committed to disclose and make public the beneficial owners of companies in mining, oil and gas as part of the Extractive Industries Transparency Initiative. This is important as people can hide behind opaque and complex company structures to win rights to extract Africa’s precious, finite resources. In many countries, commitments to beneficial ownership transparency first made in the extractive industries have also sparked the introduction of laws for all companies in every sector.
Beneficial ownership transparency in Africa in 2023 (as of January 2023)
Botswana, Egypt, Ghana, Kenya, Mauritius, and Tunisia require the beneficial owners of companies to register with a government authority and companies must notify authorities of any changes. What sets Botswana apart is that every single beneficial owner of a company must register. There is no threshold of ownership share below which a person becomes exempt. In contrast, Kenya, for example, has a threshold of 10 per cent. Hypothetically, this means that someone could set up a company with equal division of shares or voting rights between 11 people and not one of them would need to register, since individually the people would not meet the 10 per cent threshold.
The route to effective beneficial ownership transparency
In the extractive industries and public procurement in response to the Covid-19 pandemic, African citizens, journalists and law enforcement agencies have the best access to data. And, of course, the best data is not worth much if law enforcement agencies do not have the political space to act against wayward companies. Still, loopholes in beneficial ownership registration laws remain, which unscrupulous actors can exploit.
The Tax Justice Network has laid out its vision for effective beneficial ownership transparency in a Roadmap to Effective Beneficial Ownership Transparency. This is a blueprint for policy makers and citizens seeking to change legal frameworks. The roadmap sets out 10 targets that countries’ beneficial ownership frameworks should meet.
Scope. All legal vehicles should be subject to beneficial ownership registration requirements. This means any entity that is not a living and breathing person should disclose the natural person who owns, controls or benefits from it.
Definition of legal owners. All legal owners should register. This includes all who have a title or any direct interest in the legal vehicle.
Definition of beneficial owners.All beneficial owners should register. This includes any natural person who in any way owns, controls, or benefits from a legal vehicle.
Triggers for registration.All legal vehicles should be required to register beneficial ownership information if they seek to incorporate domestically, possess domestic assets, conduct domestic operations or have a domestic participant (eg a domestic legal owner, beneficial owner, settlor, director, etc).
Identification information for all owners. Legal vehicles should be required to provide all identification details about both legal and beneficial owners to ensure there is no confusion of identity. This includes full name, place and date of birth, address, national ID number, tax ID number, and nature of ownership. This also allows for special checks (eg status as a politically exposed person). Legal vehicles should also be required to disclose the full ownership or control chain (all intermediate layers). This illustrates how each beneficial owner benefits or has ownership or control over the legal vehicle.
Keeping information up to date. Legal and beneficial ownership registries should be updated annually, even if it’s just to confirm there were no changes, as well as updated when there is any change in the relevant information.
Access to information. Legal and beneficial ownership data should be available to the public for free. Ownership registries should be available online in open data format.
Verification of information. Beneficial ownership registries should automatically analyse data against other databases to check for consistency. For example, to confirm that all registered beneficial owners are alive. The online registry should introduce red flagging based on outliers and suspicious characteristics, such as a single person as a beneficial owner of thousands of companies.
Sanctions for non-compliance. Criminal and monetary sanctions are important alongside administrative sanctions. Administrative sanctions include removing non-complying legal vehicles from the registry and revoking any rights from non-complying beneficial owners (eg votes or dividends).
Special considerations. Countries should prohibit bearer shares, discretionary trusts and nominees. They should discourage complex ownership chains. Equally, countries should cover state-owned companies as well as listed companies and investment funds by applying even lower thresholds. In ideally, all countries should interconnect beneficial ownership registries with each other and with asset registries.
As the world commemorates this International Women’s Day, the Global Alliance for Tax Justice (GATJ) stands in solidarity with women’s rights organisations, movements, academics and activists, bringing the perspectives and contributions of the economic justice movement to advance the gender justice agenda. We are at a critical point in which a dangerous combination of fiscal policy and political choices continues to benefit a small yet exceedingly influential elite, increasing inequalities. Across the world, it is women who disproportionately bear the brunt of these fiscal policy failures through several layers of injustice.
In this scenario, GATJ invited eight women, who are members and allies of its Tax and Gender Working Group (TGWG), to reflect on the importance to call attention to the tax justice agenda as we commemorate the IWD, and how the demands for tax justice relate to women’s historical and present struggles for rights.
“Fiscal policy is shaped by the fallacy that revenue generated from monetized productive work within the market economy is mutually exclusive from women’s unpaid social reproductive work performed in the domestic sphere. And yet without the latter, the revenue from paid work with which macroeconomic policy preoccupies itself would suffer. This structuring of socio-economic relations has been a source of deep inequalities, such as limited economic opportunities for women, wage disparities, the devaluation of feminised labour, and women’s depletion. Organising around tax justice attempts to redress these inequalities by demanding a recognition of women’s indispensable labour. Recognition in this case not merely being the celebration of this unrewarded toil, but the actual rejection of the logics that construct social reproduction as women-only work, followed by appropriation of tax resources towards easing this burden.”
“International Women’s Day has its roots in women organising around labour. Women’s labour is inextricably linked to tax. When austerity and other failed measures defund and collapse public services, it is women who pay through increased unpaid care work, more precarious paid work and through out of pocket payments for privatised services. When you combine this with regressive tax measures such as high consumption taxes, it places extreme pressures on households. Tax raised and spent progressively can fund public services which are necessary to redistribute care, create decent jobs in the public sector and deliver on women’s rights. On this day, we need to amplify feminist calls for economies centred on care, and tax is a critical component.“
“Financing a country is a collective effort. Countries majorly finance their development through tax. This is why tax is an important tool for development. However, we operate within an unfair tax system in which those with the highest ability to pay do not pay their share, while those with the least ability to pay, pay over and above their ability. This is why as feminists, we demand a system change.
I have heard the world’s billionaires call on governments to tax them. For me, it feels like, particularly for governments in the global South, that they are being called to beard the lion in his den. Billionaires control the system. Through the global financial architecture they have determined whether they will pay their share of taxes or not; and when they choose to pay, how much they will pay. Thus, their call is only a mockery. If they had the willingness to pay, they would not need to ask to be taxed, they should pay! This is what tax justice is about.
African women have, because of systems such as colonialism, patriarchy, and imperialism historically been disadvantaged when it comes to access and control of productive resources. As such they have been marginalised within the economic and political field, and yet fiscal policies that govern revenue collection and distribution are influenced by and often favour powerful individuals and large companies, many of which are male, or male-owned respectively. To ensure tax justice, policy makers must be aware of how oppressive systems and policies can work against certain less privileged individuals and act as a barrier to their enjoyment of certain opportunities. Such differences include gender, socio-economic class (whether one is rich or poor), age, ethnicity, race, among others.”
The fight for tax justice is integral to the ongoing battles for women’s rights worldwide. Throughout history, women have faced various forms of exclusion from public life, including within decision-making processes related to the design and implementation of tax policies. This has contributed to women’s limited access to economic resources and created gender biases across tax systems that continue to ignore women’s lived experiences. Calls for tax justice aim to challenge these exclusions by advocating for equitable and transparent tax policies that benefit all members of society, including all women. Such policies have the potential to address the range of socio-economic and political barriers that women face and help to adequately resource gender-transformative public services and social protection programmes. Conversely, regressive tax policies can perpetuate gender inequalities and further undermine women’s rights. Therefore, demands for tax justice remain a critical site of struggle for women’s rights, connected to the need for equitable tax systems that eliminate both historical and ongoing barriers faced by women.
The subjugation of women is centuries old. The resulting inequalities have had, and continue to have, a profound impact on women and girls economically, socially and culturally. These persist today, in the fiscal and tax regimes and extractive economies and cultures that operate in high and low per capita countries. Not surprisingly, the burden and damage is disproportionately felt by women and girls in low income countries and in the households where regression and policy incoherence of unjust tax policies continue to marginalise by gender, race, disability and people of indigenous communities. The story of overlapping gender injustice must, then, turn its focus laser-like on the financial opacity and tax injustice that operates largely unfettered. Long awaited, much needed, is an intergovernmental agreement to ‘re-code’ international financial laws and tax policies to mobilise national revenue, redistribute revenue, and to use tax to incentivise or disincentivize public ‘bads’ , and establish greater representation between women and the state. The transparency, disclosure and enforcement needed to mitigate gender inequality depends on well-resourced institutions, and in turn such sustainable revenue requires ‘good’ taxes that target wealth. Both require a shift to inclusive and transparent governance of tax sovereignty.
“Women’s struggles for the right to the vote, equal pay, economic rights and bodily autonomy are historic, yet still very pertinent, as shown by the recent regression of hard-won women’s rights and gender equality since the start of the COVID-pandemic. For all women’s struggles how resources are used and who has the power to decide is critical. Women carry a disproportionate burden of unpaid care and domestic work, doing 76% of it worldwide. When public services are not available, inadequate or understaffed, this affects women most as shock absorbers of austerity and crisis; as we are most likely to pick up the gaps in care, lose the chance to decent work and have services cut that are relevant to us, such as maternal health or reproductive health rights. Tax systems and policies are at the heart of what resources are available for gender-responsive public services, but also shapes how resources are collected, used and (re)distributed – or as in the current system accumulated in the hands of a few. For all women to exercise choice and control over economic opportunities, outcomes and resources, and shape economic decision-making at all levels tax justice is key.”
“Women continue to be disproportionately negatively impacted by tax injustice, more so in the global South. Due to gendered norms in a patriarchal capitalist society, women shoulder much of the unseen work which capitalism cannot operate or thrive without. Despite this, they are still on the receiving end of increased austerity measures which impede their access to basic essential services such as health care and education. Women, historically, are the shock absorbers to the failed extractivist capital system, where tax injustice occurs women’s unpaid care work increases, the failures of the economic system, particularly a failure to implement progressive tax systems means the continuation of the externalisation of the gaps onto women’s work in the home and community. The demand for tax justice remains historically rooted in the demand for women’s rights.”
“The fight for women’s rights has always been closely linked to access to and control over economic resources. Historically, women were denied the right to vote because of their socioeconomic class and race. In the last thirty years, we know that the burden caused by the weakening of the fiscal state has been borne by women from lower income groups. How tax is raised and spent determines whether women fill the gaps in public services through unpaid or low paid care work and who accumulates wealth in a society. Higher rates of indirect taxes in countries or lack of funding for public services because of tax systems being poorly conceived or implemented have disproportionate impacts on women. Tax policies can also disincentivize women’s work and, along with a lack of adequate labour laws, force women into informal and precarious employment. Demands for tax justice must be based on and support the struggles for all women to realise their rights and achieve gender and racial equality.”
Global Days of Action on Tax Justice for Women’s Rights 2023
GATJ, its regional networks and partner organisations will hold, from 6 to 17 March, the 7th edition of the Global Days of Action on Tax Justice for Women’s Rights. The campaign coincides with the 67th session of the United Nations Commission on the Status of Women (UN CSW67), which is a key strategic advocacy opportunity and space to engage with policy-makers on tax justice issues affecting women.
This year, the campaign focuses on the call for the urgent adoption of wealth taxes to advance towards the realisation of women’s rights, gender equality, and the empowerment of women and girls. Throughout the two weeks of the campaign, there will be several virtual, in-person and hybrid events and activities across the world, calling on governments and multilateral institutions to make taxes work for women.
We’re sharing this excellent live discussion between Caribbean Economist and Advisor Marla Dukharan, Alex Cobham, Economist and Chief Executive of the Tax Justice Network, and Professor Steven Dean, Professor of Law at Brooklyn Law School, “to find out the truth about the world’s biggest financial secrecy jurisdictions, the racial bias behind the tax blacklisting of former European colonies and developing states, and the history behind the discrimination in a global tax system designed to favour wealthy states.”
You can read Marla Dukharan’s research on the EU Blacklist here and there’s more further reading on this below.
We’ve written many times about the farce of the EU’s tax haven (and other) blacklists and how, if you want an objectively verifiable ranking, you need look no further than the Tax Justice Network’s Financial Secrecy Index. As Alex Cobham writes here, “There’s a long and largely ignominious tradition of tax haven blacklists, mainly at the OECD and IMF.They’ve tended to be subjective efforts, naming economically smaller jurisdictions with less political power, and steering well clear of major financial centres – regardless of their behaviour.” And incredibly, the EU’s tax haven list only applies to non-EU member states – and tortuously manages to not identify the US as non-cooperative, despite its well-earned #1 position on the Financial Secrecy Index. Well, how convenient…
The European Union saw several scandals recently that demonstrate corruption is a persistent problem in need of better regulation. The ongoing Qatargate scandal has highlighted the potential for corruption in the European Parliament, making clear it is high time for the EU to take action.
In January 2023, the European Commission opened a public consultation on its plans to adopt EU-specific anti-corruption rules and establish an EU policy on corruption. Working with leading academics and members of civil society organisations[i], we have submitted a response to the consultation which is available to read in full here.
Our response to the European Commission’s public consultation on corruption identifies 10 points that should inform future policy:
A directive on anti-corruption is urgently needed for legal clarity and to ensure harmonisation of efforts on countering corruption. We argue that the directive should contribute the best ways to regulate corruption at the EU and national levels, not only by adopting rules on bribery but also on undue lobbying, conflicts of interests, revolving doors, elite capture and dishonest practices in the public and private sectors. The EU has been inactive on this issue, despite the new legislative possibilities given to it by the Lisbon Treaty (Article 83 TFEU), and it is now the right time to address this phenomenon which harms societies and economies.
2. Anti-corruption strategies and agencies. We call upon the European Commission to put forward a clear strategy for countering political corruption and to adopt rules for anti-corruption agencies at the national level. These anti-corruption agencies should be independent, reporting to Parliament, and not to the government in power. They should also be provided with adequate personnel, budget and enforcement powers to fight corruption.
3. Whistleblowers have proven to be instrumental in discovering and reporting corruption. The long-awaited Directive 2019/1937 on the protection of persons who report breaches of EU law (the so-called Whistleblowers Directive) has not yet been transposed in most member states legislation, even though the transposition deadline has passed. Despite several advantages of the directive, there is still room for improvement. The directive’s transposition should be carefully reviewed and amendments should be proposed to ensure an appropriate reward/protection for all persons whose reports lead to successful revelation of wrongdoings that has an adverse impact on EU budgets.
4. Beneficial ownership transparency. Disclosing the beneficial owners behind legal vehicles is considered to be one of the most powerful transparency tools for tackling illicit financial flows related to corruption, as well as money laundering, tax evasion and the financing of terrorism. The EU had become a transparency leader with its 2018 amendment to the fourth Anti-Money Laundering Directive. However, public access to beneficial ownership information was recently invalidated by the European Court of Justice in relation to the cases WM (C-37/20) and Sovim (C 601/20) v Luxembourg Business Registers.
We believe that an EU anti-corruption directive should also require public access to information without needing to make a specific legitimate interest request. In addition, in order to better detect corruption and other crimes, the directive should require countries to establish asset registries for unregistered assets. Asset registers should collect information on the beneficial owners of the registered assets and cover a comprehensive range of assets, from real estate, yachts and private jets to crypto-assets, art works and jewellery.
5. Improved collection, access and use of banking information. The directive should require the SWIFT messaging system or any inter-banking communication within the EU to include beneficial ownership information.
6. Better risk indicators. EU member states should publish lists of the individuals who are politically exposed persons (PEPs) and asset declarations of Members of Parliament should include a comprehensive list of assets. Member states should also establish red flags or directly ban certain entities from entering into procurement contracts based on risk indicators from the entities’ country of origin.
7. Statistics on investigations and prosecutions. The EU should also develop a mechanism for independent monitoring of corruption and criminal law enforcement in the context of the member states. As part of this mechanism, the EU could establish a Corruption Observatory, which should perform and promote original research on corruption, create an open public repository of data on corruption and represent the EU as an active voice in countering corruption.
8. Monitoring of activities on corruption. We recommend that European agencies develop cyclical monitoring and evaluation of their respective and joint activities on corruption. Relevant European agencies, such as European Anti-Fraud Office (OLAF) and Eurojust, could closely work with relevant national authorities to more effectively operationalise a monitoring and evaluation mechanism that publishes annual reports on measures to combat corruption in the EU.
9. Training and learning. The EU should finance European exchange programmes between public officials, and, above all, train the younger generation of law enforcement officers.
10. Research on corruption. The Commission should also continue to promote advanced research on the criminological, sociological, economic, legal and behavioural dimensions of corruption to enhance effective harmonisation and cooperation within the EU and across its member states on corruption matters.
To conclude, the EU needs a comprehensive anti-corruption directive that is multi-pronged, as shown in our 10 points above. We believe these measures are necessary to meaningfully stamp out corruption in the EU.
[i] Prof. Umut Turksen, Dr Dimitrios Kafteranis, Dr Adam Abukari (Centre for Financial and Corporate Integrity – Coventry University), Dr Markus Meinzer, Moran Harari, Andres Knobel (Tax Justice Network), David Wright (Trilateral Research), Dr Wouter Wolfs (University of Leuven, Belgium), Ass. Prof. Aikaterini Pantazatou (University of Luxembourg), Dr. Erik Láštic (Comenius University, Slovakia) Pawan Kumar Sinha (International Anti-Corruption Academy).
É possível extrair minérios sem extrair vidas? Sim, mas é necessário cumprir e fortalecer as regulações e fiscalização do setor mineral, inclusive via tributação. As empresas de mineração são as que menos contribuem com impostos e o setor que extrai combustíveis fósseis é o que mais recebe subsídios governamentais no mundo.
Sobre a importância da tributação: 3,250 é o número de ambulâncias que poderiam ser compradas pelo município de Parauapebas (PA), na região amazônica, apenas se a Vale não desviasse lucros para paraísos fiscais e pagasse o que deve em Compensação Financeira pela Exploração Mineral, a CFEM.
Este é um dos dados de um estudo a ser lançado neste mês de março de 2023 sobre os abusos fiscais da Vale no Brasil e que é um dos destaques do episódio #46 do É da Sua Conta, que mostra que a tributação pode contribuir para que a mineração seja mais justa para as populações e o meio ambiente.
Tádzio Coelho, professor da Universidade Federal de Viçosa, coordenador do Estudo a ser lançado em março de 2023, em parceria com associação Justiça nos Trilhos e Rede Igrejas e Mineração.
~ É possível extrair minérios sem extrair vidas? #46
“Aqui no Malawi gostamos de falar que os minerais não são como milho ou mangas, porque não voltam a crescer. E é por isso que temos apenas uma chance de acertar os sistemas.” ~ Rachel Etter-Phoya, Tax Justice Network
“Pela Vale, houve um sub faturamento de CFEM de 1,8 bilhão de reais, o que vai dar, em dólares, 352 milhões de dólares. Mas a gente tem também as perdas que foram causadas à União, ao Estado do Pará, ao Estado de Minas Gerais e aos municípios das prefeituras onde a Vale mantém algum tipo de atividade mineradora referente à extração de minério de ferro.” ~ Tádzio Coelho, UFV
“O debate da CFEM é importante para pensar como essa contribuição se transforma em despesa e como ela pode estimular atividades econômicas que não são predatórias com os biomas onde esses territórios estão.” ~ Giliad de Souza Silva, Unifesspa
“A fiscalização, a monitoria, o controle são fundamentais em todas as fases – a descoberta, produção e exportação. Tem se garantir a presença do Estado e que haja monitoria nessas atividades.” ~ Inocência Mapisse, economista
Welcome to our monthly podcast in French, Impôts et Justice Sociale with Idriss Linge of the Tax Justice Network. All our podcasts are unique productions in five different languages every month in English, Spanish, Arabic, French, Portuguese. They’re all available here and on most podcast apps. Here’s our latest episode:
Pour cette 47ème édition de votre podcast en français sur la justice fiscale et sociale en Afrique et dans le monde produit par Tax Justice Network, nous partageons avec vous quelques réflexions qui ont été soulevées lors de la conférence alternative de la société civile africaine au Mining Indaba 2023. Il aura été question de transparence sur les bénéficiaires effectifs, ceux qui en dernier ressort profitent des retombés de l’exploitation des ressources minières. Il a aussi été question de la prise en compte des intérêts des communautés riveraines des projets miniers. Pour en discuter nous vous proposons une conversation avec deux acteurs importants de la société civile d’Afrique francophone
Maitre Jean-Paul Mulyanga : Directeur du Bureau de Liaison avec le Parlement pour la Conférence National Episcopale de RDC
Et pour ceux qui ont l’application Stitcher et iTunes ect
Si vous souhaitez recevoir cette production ou être média partenaires ou simplement contribuer, vous pouvez nous écrire à l’adresse Impô[email protected]
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
