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The political mathematics of tech giants

Some political mathematics.

A + B + C + D + E = F.

Here’s A: US tech giants launch fierce fightback against global tax avoidance crackdown. Reforms “must be resisted.”

Now B: The libertarian Cato Institute, funded by the billionaire industrialist Koch brothers, said it had received support from Google in the form of free web advertising. Among the issues on which this lobby group campaigns is taxation; it expounds the virtues of tax havens and has described the G20-led efforts to reform international tax as a “global tax cartel” plot. The lobbying, the lobbying. Continue reading “The political mathematics of tech giants” →

Quote of the day: offshore enforcement as a career killer

From Jack Blum, a Senior Adviser to the Tax Justice Network, testifying to the U.S. Senate Committee on Finance:

“For years there has been very little offshore enforcement. There was a period in the 1970’s when IRS made some efforts in that direction. The cases were dismissed. The agents who were involved had their careers ruined and there was a 10-year hiatus in the 1980’s when offshore cases were simply not touched within IRS
….
it was a career killer… the cases were complicated and the cases always involved people who had access to the political system in a way that made the case not have a good future. So what happened was, not very much was done.”

Continue reading “Quote of the day: offshore enforcement as a career killer” →

Quote of the day: we are entering the age of tax wars

From Mark Textor, adviser to Australian Prime Minister Tony Abbott:

“We are entering the period of tax wars instead of trade wars,” he said. “People vote in governments to solve the problem, and giant multinationals not paying tax is a problem.”

One for the Tax Wars page. Hat tip: Mark Zirnsak.

Foreign exchange turmoil brings offshore centres into focus

Moves by the Swiss National Bank to remove the Swiss Franc’s currency peg to the Euro has prompted a new round of turmoil in global foreign exchange (FX) markets. We’ve already written about this from a tax justice perspective, but here’s something else.

Quite a few currency brokers have gone under in the latest storm, and several are under threat. Today’s Financial Times comments on this:

“it is the large number based in Cyprus and offshore that has thrown open a debate over one of the more shadowy areas of the City, which allows private individuals to use internet trading platforms to speculate on currency markets for slender stakes.”

Continue reading “Foreign exchange turmoil brings offshore centres into focus” →

Report: will top 1% have more wealth than the 99% in 2 years?

From Oxfam, a new briefing, based on updated Credit Suisse estimates. It contains the following factoids: Continue reading “Report: will top 1% have more wealth than the 99% in 2 years?” →

Do not listen to Big Oil’s whining for tax cuts

It’s all so tiresome and predictable. This blog focuses on the UK, but it could apply to any oil and gas producing country.

The Guardian has a headline that is more to the point: Oil industry calls for North Sea tax cuts. Meanwhile, the ~~lobbying arm of the British financial services industry~~ fine upstanding British newspaper City A.M. has an innocuous-sounding headline: Government commissions “urgent review” into North Sea oil after BP job cuts, making similar points. Continue reading “Do not listen to Big Oil’s whining for tax cuts” →

Will Antoine Deltour become a prisoner of conscience?

So the latest big tax haven whistleblower, Antoine Deltour, is facing the combined massed might of Luxembourg, one of the world’s biggest and most aggressive tax havens, and the Big Four accounting firm PWC, one of the biggest and most aggressive lobbyists for offshore tax and secrecy legislation.

Deltour faces up to ten years in prison. Continue reading “Will Antoine Deltour become a prisoner of conscience?” →

Is a financial sector like an oil industry? That graph, again

There’s been a bit of pushback (of course) to our Finance Curse analysis, which some people think is just an empty slogan. It isn’t.

Our basic proposition is that hosting a large financial services industry can be like hosting an oil industry: there are many penalties associated with doing so, and in some cases those penalties may well outweigh possible economic benefits. Either way, things are never as good as one might hope, given the amount of cash sloshing in.

This image below isn’t new: it’s drawn from the original document. We’re posting it as a reminder of our thesis, which is slowly but steadily seeping out there.

Of course correlation ain’t causation, and one can quibble with the “GNI minus HDI” measure (that’s a UNDP measure, not ours). But you’ll agree that it’s a pretty striking graph, which tells a pretty clear story in support of our proposition.

For just one current example of *how* the Finance Curse operates, see yesterday’s blog focusing on the exploding value of the Swiss Franc.

We at TJN have always seen our Finance Curse analysis as an important complement to our work on tax havens / secrecy jurisdictions. Our offshore work is about how one country’s financial sector transmits harm to other countries. Our work on the Finance Curse speaks to a domestic constituency instead: how one’s country’s financial sector can be harmful for one’s own country. The two fit together, naturally.

Now read on.

Tax wars: Europe lands blow against Amazon

From Bloomberg:

“The European Union said Luxembourg hastily approved a “cosmetic” tax deal with Amazon.com Inc. in 11 days, allowing the company to shift profits to a tax-free unit.
The EU told Luxembourg officials in a letter that the deal, based on a “cosmetic arrangement,” gives the Internet retailer an unfair advantage over competitors and doesn’t comply with global standards.”

Other cases are live against Fiat, Starbucks and Apple. From European MEP Sven Giegold, via email: Continue reading “Tax wars: Europe lands blow against Amazon” →

Quote 2 of the day – Big Banks, Credit Suisse, and financial crime

A second quote of the day, from U.S. Senator Elizabeth Warren, following our quote from Switzerland earlier:

“If large financial institutions can break the law and accumulate millions in profits, and if they get caught, settle by paying out of those profits, they do not have much incentive to follow the law.”

And so it goes. Continue reading “Quote 2 of the day – Big Banks, Credit Suisse, and financial crime” →

Quote of the day: Swiss Franc

Switzerland’s in for some colourful times now.

The value of the Swiss Franc exploded upwards this morning, after the Swiss National Bank (SNB) removed its fairly longstanding 1:1.2 peg against the Euro (that is, 1.2 Swiss Francs per Euro.) That is an astonishing currency move. Our quote of the day comes from Nicolas Hayek, the chief executive of watchmaker Swatch, via Reuters:

“Words fail me! Today’s SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country.”

Why is this a tax justice issue? Because it underscores one of the central points we make in our Finance Curse analysis. There is an inherent conflict between finance and industry. Inflows of capital have the effect of make everything relatively more expensive, either through changes in the exchange rate, or inflation, or both. In the case of oil-producing countries, this phenomenon is known as the Dutch Disease. But it’s the same with over-inflated financial sectors.

Switzerland had sought to protect its non-financial industries by printing Swiss Francs and selling them to buy foreign currency, in order to keep the value of the Franc down and protect its currency peg against the Euro. But after having built up hundreds of billions of dollars’ worth of foreign exchange reserves, it clearly decided enough was enough and released the peg. Swatchmakers and a host of other industrialists (and others, such as farmers) will feel the pain of a more costly manufacturing base.

Report: every U.S. state taxes its poorest at much higher rates than top 1%

From the U.S. Institute on Taxation and Economic Policy (ITEP), the 5^th edition of Who Pays, its signature report that examines tax systems in all 50 states and the District of Columbia. Now get the highlights:

Every state tax system (Washington D.C. excepted) taxes its poorest residents at significantly higher rates than the very wealthiest 1 percent of tax payers.

Continue reading “Report: every U.S. state taxes its poorest at much higher rates than top 1%” →

Quote of the day: offices of UK tax tribunal owned offshore

The offices of the UK tax tribunal, owned offshore. Courtesy of Google Maps

The quote of the day is from the British investigative and satirical magazine Private Eye:

“Buildings occupied by the Ministry of Justice, including Britain’s tax tribunal, are – almost unbelievably – owned offshore in a Mediterranean tax haven, while the attorney-general works from a London office that is owned in a tax haven in the British West Indies, the Eye has discovered.”

Continue reading “Quote of the day: offices of UK tax tribunal owned offshore” →

Slovak govt. to enact new anti-shell company law after scandal

A guest blog by Miroslav Beblavy, Member of Slovak Parliament for the opposition party Sie?, (who has been involved in drafting the legislation) and Silvia Hudackova, assistant to Miroslav Beblavy.

Slovak government committed to enact new anti-shell law after the healthcare procurement scandal

The legislative interest in shell companies in Slovakia increased in November because of a scandal involving the purchase of a greatly overpriced CT scanner in the public procurement in Pieš?any hospital, which was won by a shell company. Continue reading “Slovak govt. to enact new anti-shell company law after scandal” →

Credit Suisse’s U.S. public hearing on Wednesday

A guest blog by Heather Lowe of Global Financial Integrity, with thanks:

As many of you know, Credit Suisse AG (CSAG) was convicted in November of U.S. felony charges relating to assisting (and soliciting) tax evasion by U.S. taxpayers. A consequence of this felony conviction is that, according to Department of Labor (DOL) regulations, CSAG and its affiliates lose their privileged status as ‘qualified professional asset managers’ (QPAMs). Essentially, this means that CSAG and its affiliates would no longer be able to engage in higher-risk transactions with the pension fund money that they manage. Continue reading “Credit Suisse’s U.S. public hearing on Wednesday” →

Oil and mining contract transparency: is a tipping point approaching?

Some oil concessions yesterday

From Open Oil:

“a push towards universality – all contracts and all concessions in public domain – is only what is due to the public. Who are, after all, the legal owners of sub-soil resources in every country in the world bar one. What management of a company would be taken seriously if they published a partial profit-and-loss, or balance sheets from only some departments?”

We would not disagree. Oil contracts, as with many minerals contracts, have generally been kept secret. Every now and then, one popped into, say, a journalist’s hands, but in general terms they have been kept under wraps, usually for reasons of “commercial confidentiality”.

But transparency is beginning to emerge. Continue reading “Oil and mining contract transparency: is a tipping point approaching?” →

Event: Tax Justice to Promote Social Justice, Vienna, 24 Feb

The Global Alliance For Tax Justice (GATJ) and the European Association of Development Research and Training Institutes (EADI) are pleased to invite you to join us for an important conference to build closer cooperation between professional researchers and tax justice activists:

Tax Justice to Promote Social Justice

Research on Taxes for Development

Tuesday 24 February 2015, 9.00 to 18.00

University of Vienna, Austria

Hosted by the Vienna Institute for International Dialogue and Cooperation (VIDC) and the Department of Development Studies (IE) – University of Vienna

Continue reading “Event: Tax Justice to Promote Social Justice, Vienna, 24 Feb” →

Dynamic scoring: “deception, tax fraud, sleight of hand”

We’ve just posted a brief reminder of the economic voodoo peddled by a certain well known U.S. economist, Arthur Laffer. Now we bring you a second, related example of economic prestidigitation: a devious and increasingly popular wheeze known as “dynamic scoring.” It emerged in the United States but has been seeping into the United Kingdom and other countries.

The basic idea is, in essence, that when you put together a tax policy plan you need to consider its “dynamic” effects on the economy. If you expect your plan to make the economy grow faster than it would otherwise have done, then tax revenues will presumably be higher than they would otherwise have been. And that feedback needs to be taken into account in the ‘dynamic’ model.

It all sounds so reasonable, right?

Wrong. And it’s so horribly wrong that we’re going to spend a bit of time discussing how and why it’s wrong.

We at TJN are a non-partisan organisation but even so we’re going to quote from this short, partisan video from U.S. Congressman Lloyd Doggett, because he lays it out in such clear terms. Via e-mail, a press release from Doggett notes: Continue reading “Dynamic scoring: “deception, tax fraud, sleight of hand”” →

Did Arthur Laffer kill Kansas?

Art Laffer. The Messiah.

For over three decades politics in some countries has been overshadowed by the theological views of a quirky U.S. economist called Arthur Laffer, whose belief system centres on the notion that if you cut personal and corporate income taxes, tax revenues will rise. The idea is that wealthy people will work harder, invest more, employ more labour, and as a result more taxes will flood in. Continue reading “Did Arthur Laffer kill Kansas?” →

Financing for Whose Development? How Official Development Finance Institutions support Tax Havens

This is an extract from an article by Eurodad’s Mathieu Vervynckt, in which he discusses the Third UN Conference on Financing for Development (FfD), set to take place in Addis Ababa next year as a crucial opportunity to discuss both the use of scarce public resources to leverage private sector finance, and the fight against international tax avoidance and evasion. Continue reading “Financing for Whose Development? How Official Development Finance Institutions support Tax Havens” →

Poorer Countries Lose More from Corporate Profit-Shifting

By Alex Cobham. This post was originally published by the Center for Global Development, where I was a research fellow until leaving this month to join TJN as Director of Research. Reproduced, with CGD’s permission.

Poorer Countries Lose More from Corporate Profit-Shifting

Lower-income countries in general suffer the greatest shrinkage of the tax base as a result of corporate profit-shifting. In a new working paper, Simon Loretz and I find that the multinational tax bases of some lower-income countries could even be double their current size. We also find that some of the ‘tax haven’ jurisdictions that benefit most have received surprisingly little attention. Any guesses? Continue reading “Poorer Countries Lose More from Corporate Profit-Shifting” →

George Monbiot and Russell Brand: TJN and Uncut’s role as mythbusters

One of the biggest myths of the modern era is the self-attribution fallacy: I became rich thanks to my extraordinary personal qualities and hard work, while the poor are poor because they’re drunk and lazy. Comedian Russell Brand and writer George Monbiot discuss this myth in the following extract from Brand’s Trews series.

A + B + C + D + E = F.

Poorer Countries Lose More from Corporate Profit-Shifting

Thank you!