Page 83 – Tax Justice Network

Christian Aid campaigners outside the Foreign and Commonwealth Office in London today. Photo: Christian Aid

Just over a year ago the British Prime Minister David Cameron, whose family has had tax haven interests for many years, tried to whitewash Britain’s Overseas Territories and Crown Dependencies with a statement saying:

“I do not think it is fair any longer to refer to any of the Overseas Territories or Crown Dependencies as tax havens.”

The BBC, and a number of other outlets that should also have the budgets to do some basic background research on the subject, lapped up his words. The tax havens proceeded to stir up a whole new theatre of probity on the subject.

Not long afterwards we pointed out, based on an enormous weight of painstakingly marshalled evidence, that his claims were nonsense.

Well, now we have an update, courtesy of Global Witness and Christian Aid. Continue reading “A scorecard on UK tax havens: promises, but little progress” →

In the wake of the “Luxembourg Leaks” scandal, more than 30 organisations from the Tax Justice Europe network have written to members of the European Parliament strongly supporting a proposal from Green MEPs to set up a stand-alone investigative committee of the European Parliament to tackle corporate tax avoidance across the union.

Continue reading “European Parliament must set up a committee of inquiry on tax avoidance” →

Two more, in an occasional series. You can find plenty more on our quotations page.

“They’re so broke that they’ve actually cut essential services. In many places, they’ve cut policemen, because, who the fuck needs them? Or firemen, son of a bitch, it’s much more fun watching something burn down.”
Lewis Black, U.S. stand-up comedian

And, on the fine art of tax and politics:

To tax and to please, no more than to love and to be wise, is not given to men.”
– Edmund Burke, 18th Century Irish political philosopher and British statesman

From Christian Aid, via email (see also this Christian Aid / ActionAid poll (details here) showing that huge majorities think tax avoidance is wrong and that the UK government isn’t doing enough about it):

Tuesday 2 December: 8:30 am – 9:30 am
Christian Aid protest calling for end to tax haven secrecy
Outside Foreign and Commonwealth Office main building, King Charles Street, London SW1A 2AH
A year after Britain’s tax havens agreed to consider the lifting the secrecy around who really owns the hundreds of thousands of companies they host, they have made alarmingly little progress. Continue reading “London protest on Dec 2 to end tax haven secrecy” →

Read The Professions Issue of Tax Justice Focus here.

Take part in the survey here.

From the Corporate Observatory Europe, an important article entitled Commission gets advice on tax policies from LuxLeaks tax dodgers. It begins:

“LuxLeaks documents recently revealed that the consultancy PricewaterhouseCoopers (PwC) has created questionable strategies enabling big businesses to avoid tax payments. Our research now shows: PwC is represented in numerous EU-Expert Groups advising the commission on tax policy issues. Moreover, the Expert Groups for tax policies are biased. Consultancies and corporate lobbyist are dominating, while other civil society interest groups are under-represented.
. . .
We ask Commission President Jean-Claude Juncker to finally balance the interests in the Expert Groups of the Commission.”

Continue reading “CEO: EU Commission gets advice on tax policies from #LuxLeaks tax dodgers” →

Tax Justice Focus: The Professions Issue

The latest edition of TJN’s newsletter, Tax Justice Focus, is available for download here. Continue reading “Tax Justice Focus: The Professions Issue, volume 9, number 3” →

Alex Cobham: joining the squad in January

It is with great excitement that we share the news that we have signed Alex Cobham to joining the TJN squad in early January 2015, taking the position of Director of Research. Continue reading “TJN signs Alex Cobham to join the squad in January 2015” →

A fascinating little European story emerged yesterday, which the Guardian covers like this:

“Jean-Claude Juncker’s fitness to head the EU’s executive for the next five years came under lacerating attack in the European parliament on Monday evening, with British, French and Italian far-right and populist leaders denouncing his record in facilitating massive corporate tax avoidance when governing Luxembourg for almost two decades.
. . .
“Mr Juncker, you are the worst image of this Europe. If you had a crumb of dignity you would resign,” said Marco Zanni, an MEP from Beppe Grillo’s Five Star movement, which organised the motion, backed by a tenth of the parliament including Ukip and France’s Front National.”

Now this is all well and good, and we’d agree with their analysis.

But the point we want to make here is this: why is it often the far-right parties that have been the ones banging the drums most loudly on this? Continue reading “How Luxembourg Leaks highlight Europe’s broken politics” →

A month ago we published a preliminary report entitled ‘The end of bank secrecy?’Bridging the gap to effective automatic information exchange, looking at the OECD’s new system of automatic information exchange.

We have now completed our final technical analysis of the report. It is not very different from the preliminary version: the main updates are to the timeline section and the main Annex about the signatories to the multilateral agreement (M-CAA) and commitments by others to join AIE later, following the G20 summit of world leaders in Australia this month and an earlier meeting in Berlin.

The new report is here, and will replace the old version in our reports section.

Here’s an interesting new map of corruption and illicit financial flows. In this blog titled Is it time for a Different Look at Mapping Corruption, James Cohen, picks up on work by TJN, Global Witness, and Washington-based Global Financial Integrity, and suggests that the time is ripe for leading anti-corruption NGO Transparency International to expand its mapping of corruption (based upon its Corruption Perceptions Index) to bring the secrecy jurisdictions which provide anonymous legal vehicles into their focus. Continue reading “Corruption behind closed doors” →

Luxembourg is entirely occupied by the offshore financial consensus. . . . well, not entirely: small bands of indominatble Luxembourgers still hold out . . .

We have often remarked on how easy it is for financial services interests to “capture” small tax havens or secrecy jurisdictions. It’s a common pattern and a woefully under-studied phenomenon where the capture by global offshore finance extends beyond the policy-making apparatus and successfully neutralises democratic dissent against the offshore finance industry.

This capture is achieved through creation of a financial consensus, the fruit of a sophisticated, loosely coordinated (or uncoordinated) long-term political, cultural and economic project (such as this one) which sees the broad spectrum of media, police and entire societies buying wholesale into a see-no-evil, we-like-the-money, screw-you-foreigners approach to tax havenry. The whole thing is sewn together by a carefully constructed theatre of probity and culture of denial that the jurisdiction in question is doing anything wrong, and that the critics ‘don’t understand’ and are out to get them. Continue reading “Not In My Name: remarkable, rare voices of remorse and mortification in Luxembourg” →

This new study by the Arab NGO Network for Development (ANND), in collaboration with Christian Aid and Social and Economics Policy Monitor Palestine, explores how the tax systems of Arab countries have contributed to the lack of opportunity, growing inequalities, marginalisation and exclusion suffered by the majority of people living in the Arab region. Continue reading “A comparative study of tax systems in six Arab countries” →

Harold Crooks’ new documentary on how tax dodging and tax havens imperil democracy will have its first European cinema release in France in January 2015. Ahead of the release, the French distributors are arranging special screenings in Paris in mid-December 2014. Full details are here: Continue reading “Le Prix à Payer – The Price we Pay – screenings in Paris” →

So we have this announcement from the OECD.

“Switzerland has today become the 52nd jurisdiction to sign the Multilateral Competent Authority Agreement [MCAA], which will allow it to go forward with plans to activate automatic exchange of financial account information in tax matters with other countries beginning in 2018.”

Which all sounds jolly good, and it is certainly an improvement from a sordid past: we generally like the OECD Common Reporting Standards that this is referring to, though we’ve pointed out a number of loopholes too.

This is Switzerland, though, and you won’t be surprised, dear readers, to discover that there’s a catch. Two catches, in fact. Continue reading “Switzerland signs up for automatic info exchange. But there’s a catch” →

From Robert Goulder of Tax Analysts, in the wake of the Luxleaks scandal involving the exposure by the International Consortium of Investigative Journalists (ICIJ) of large numbers of secret Luxembourg tax deals for multinationals, a reminder that Luxembourg isn’t alone in its secrecy:

“The IRS [the U.S. Internal Revenue Services] still operates a secretive process whereby multinationals can negotiate bespoke transfer pricing outcomes. They are called advance pricing agreements, and they have never been publicly disclosed since the program’s inception in the early 1990s. Once they’ve finished busting on Luxembourg, maybe the good folks at the ICIJ can try to crack that nut.”

Now he’s not saying that Advance Pricing Agreements (APAs) are in themselves a bad thing. But his comment about disclosure is spot on.

On November 30 Swiss people will vote in a referendum on the so-called “lump-sum taxation” system, a preferential tax regime for certain wealthy foreigners who are resident in Switzerland but don’t work there. To simplify, the 5,000-odd people who qualify for this special tax regime get taxed according to their living and spending costs in Switzerland, rather than on their income. It is a very cushy regime for some. Continue reading “Swiss to vote on “millionaires’ tax.” Cue scare stories” →

The Laffer Curve, spotted last week in Kansas

The Laffer Curve, not spotted last week in Kansas

From a new paper by Paul Caron of Pepperdine University and Joseph Bankman of Stanford University:

“The conventional wisdom in California two years ago was that raising taxes on the wealthy would harm the economy and doom any politician who dared touch this third rail. Instead, the public embraced this approach at the ballot box and, after enjoying the fruits of an economic turnaround, appears poised to reward the Governor with a landslide re-election.”

It seems that the absurd Laffer Curve, which is often used to make the ridiculous proposition that tax cuts increase revenue, didn’t work in this case.

Now in Kansas, they went the other way. From the New York Times a few days ago:

“The tax cuts were the leading issue in the Kansas governor’s race this year, and in addition to re-electing Governor Brownback, voters expanded the Republican supermajority in the state’s House of Representatives. This was a clear mandate for the policy of deep tax cuts.”

How has Kansas fared?

Well, the article starts with this:

“Kansas’ budget problems keep getting worse. . . . state revenues dropped 11 percent in the fiscal year 2014 (which ended in June) after the tax cuts took effect. But that may not even be the whole picture. A close look at the state’s new revenue projections makes clear they are highly optimistic, even after this week’s cut in the forecast.”

You get the picture. Tax cuts reduce revenue. As you’d expect.

Are these just anecdotes, though? Well, there’s all this to consider, for starters.

There is certainly a prevalent idea out there that tax hikes on the rich will compel rich people to leave in droves, and make your state ‘uncompetitive’ (whatever that means).

But will they? In fact the United States, with its high potential mobility of people and large number of states with different tax systems, makes a great petri-dish for studying these things. And the general consensus is: taxes don’t really have much bearing on where people want to live. Higher taxes generally mean better public services, and vice versa. A meta-analysis by Michael Mazerow last May, entitled State Taxes Have a Negligible Impact on Americans’ Interstate Moves, concluded:

“A number of sophisticated statistical studies of the impact of state and local taxes on interstate migration of individuals and households have been conducted over the last 25 years or so. Taken as a whole, the research strongly refutes the claim that state and local taxes have a significant impact on migration. Seven economists (or groups of economists) have published studies on state taxes and migration in peer-reviewed economics journals since 2000. Six of the seven concluded that taxes were not a major driver of interstate moves. . . . Eight additional studies on the impact of state taxes on migration that were not published in academic journals have been released since 2000. Six of the eight find either that state income taxes have no effect or that the effect is small and/or inconsistent.”

Which is probably as much agreement as you’re going to get among bickering academics in this viciously polarised, politicised terrain.

Back to the Caron / Bankman paper, which does an unusual and welcome thing for academics.

Get this: it urges scholars to take their heads out of the sand and get stuck into the real world. In fact, this is the central argument of the paper (which is entitled California Dreamin’: Tax Scholarship in a Time of Fiscal Crisis.)

“We have found that the need for more revenue is a common conversation topic among tax scholars. However, it is not a common topic in tax scholarship. Indeed, it is not even clear that it “qualifies” as scholarship, as that term is commonly defined. In law, at least, highly praised scholarship is generally marked by a masterful description of the law that suggests the need for change.”

Quite so, and strong and unusual medicine.

Now here is some discussion that we at TJN and quite a few others have been saying for years. It’s worth quoting at length.

“In recent years, legal tax scholars have made normative claims based on those arguments. However, those normative claims are quite limited and explicitly apolitical . . . . writing about the fiscal crisis, in contrast, throws the scholar directly into the political world. . . . Legal tax scholars who write on this subject run the risk of being dismissed as political, or lacking requisite knowledge.

Unfortunately, scholars in allied fields face similar problems. Economists are also reluctant to write on subjects so entwined with politics and often have less knowledge of specific tax provisions than legal tax scholars. Political scientists lack economic sophistication and knowledge of the tax law, and know less about the politics of tax preferences than either lawyers or economists. The fiscal crisis thus falls between at least three disciplines. As a result, scholars in each of those disciplines are reluctant to write on a subject they believe is central to the nation’s health.”

We are, indeed, better than this. Or we could be.

They cite honourable exceptions, such as this highly recommended book by Ed Kleinbard, if you’re interested in the U.S. tax system.

And they conclude:

“Two years ago, both California and the nation were imperiled by long- term, structural, budget imbalances. California has reduced that peril by raising (already high) personal tax rates on the wealthy. The political success of that approach suggests that at the national level, Americans might be willing to support higher rates to maintain government services and move toward fiscal solvency.”

Continue reading “California’s tax hikes versus Kansas’ tax cuts: early results now in” →

Prof. Sol Picciotto

We’ve written quite a bit about patent boxes in the last few days. A Patent Box is a tax incentive that reduces effective corporation tax rates on income attributable to patents, subject to certain conditions. We at TJN think they are generally a terrible idea.

In two patent box blogs last week (here and here) UK tax barrister David Quentin and others questioned a rather cryptic new Anglo-German deal (or should we call it a stitch-up?) which appears to get rid of patent boxes, but then may be opening the ground to bring them in through the back door. We briefly asked how this might fit in with a new global scheme by the OECD, a club of rich countries, to tackle corporate tax abuses and abusive tax systems. Quentin subsequently wrote in a blog entitled What will Son of Patent Box look like? noting that these supposedly “competitive” tax policy structures are harmful and result in “highly uncompetitive chaos.”

Now, developing these themes in more detail, we have a guest blog from Prof. Sol Picciotto, a Senior Adviser to TJN. Continue reading “Patent boxes: progress, or more racing to the bottom?” →

This isn’t a guest blog but something a little similar: a substantial section translated from an important Thomsonreuters article in Spanish by Antonio Figeroa, a former president of the UN Tax Committee and a top Argentine tax official. The headline is ours.

Why is the OECD only now cracking down on corporate tax abuses?
What has happened for the G20 to decide to confront the corporate strategies that produce significant erosions of the tax base and enable profit shifting to jurisdictions where tax is low or zero?
Nothing more nor less than a belated political reaction of the governments of the developed countries, to the fair and growing claims from important parts of their population affected by a global situation – the financial crisis – that produced very negative social consequences and a grotesque worsening of the distribution of income, which puts at risk the basis of the social and political systems of these countries.
The decision of the developed countries in the G20 (since the remaining ones only nod in agreement) was to refer the problem to their “organisation”, the one that they have been trying to position since 2001 as the main – and tending to become the only – centre for defining global tax rules, as part of a strategy to produce global order.
Yet it was this very same organisation that played a central role in the globalising scheme which produced these very consequences.
Those of us who have participated in the UN Group of Experts for International Tax Cooperation from the end of the 1970s to the first part of the 2000s, cannot ignore the fact that the OECD, since the beginning of the ’90s, supported without reservation – even more: it boosted – the adoption of measures tending to free financial capital from taxes, due to the “relevant importance” attributed to the unrestricted mobility of such capital.
In effect, it supported the need to eliminate all sorts of obstacles for financial capital, including supporting special tax arrangements (exemptions) for various instruments, to “facilitate the expansion of international economic activity”.
The Action Plan presents some proposals that need to be deeply analysed by the developing countries involved in it, except for those already participating in the organization, which follow its guidelines without question.
In truth, the BEPS project is a sort of “remake” of an old film with new scenery and new actors – except for one which has always been there. Since the 1920’s, first through the “League of Nations”, then its successor the United Nations (in the 1950’s), to what finally became the OECD in the 1960’s, there has always been one same institutional actor, which is the International Chamber of Commerce.
The intention is to advance the universalisation of the criteria and concepts applied by developed countries; basically, the attempt is to ensure that all other countries should adopt the fiscal ideas and parameters of those who consider themselves the “world”.

This is just a taster of the long article, which is rich in history and detail.

Antonio H. Figueroa was Director of International Fiscal Relations in the Ministry of Economics of the Argentine National Government (1972-1989). National Tax Director in the Argentine National Government (1979-1997). Member of the UN Group of Experts in International Tax (1979-2004). President of the UN Group of Experts in International Tax Cooperation (1997-2004).

From Corporate Governance, a news release basically taking a series of core tax justice positions ahead of the G20 summit meeting in Brisbane this weekend:

Investors Back Global Tax Reform and Transparency

In a global first, a group of institutional asset owners and managers are jointly calling for comprehensive transparency and disclosure to be adopted as core principles in reform of the international taxation system to be put before the G20 Leaders Summit in Brisbane this weekend. Continue reading “Global Investor Groups Support Tax Justice and Transparency” →

A scorecard on UK tax havens: promises, but little progress

European Parliament must set up a committee of inquiry on tax avoidance

Tax quotes of the day – Lewis Black, Edmund Burke

London protest on Dec 2 to end tax haven secrecy

CEO: EU Commission gets advice on tax policies from #LuxLeaks tax dodgers

TJN signs Alex Cobham to join the squad in January 2015

How Luxembourg Leaks highlight Europe’s broken politics

Update: report on the OECD’s information exchange standard

Corruption behind closed doors

Not In My Name: remarkable, rare voices of remorse and mortification in Luxembourg

TJN’s monthly Taxcast – November 2014

A comparative study of tax systems in six Arab countries

Le Prix à Payer – The Price we Pay – screenings in Paris

Switzerland signs up for automatic info exchange. But there’s a catch

Quote of the day: secret U.S. tax deals

Swiss to vote on “millionaires’ tax.” Cue scare stories

California’s tax hikes versus Kansas’ tax cuts: early results now in

Patent boxes: progress, or more racing to the bottom?

The OECD’s corporate tax project: a remake of an old film?

Global Investor Groups Support Tax Justice and Transparency

Investors Back Global Tax Reform and Transparency

Investors Back Global Tax Reform and Transparency

Thank you!