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Don’t sign OECD tax treaties: the case of Uganda

Update, Dec 9: Martin Hearson adds his own updated analysis of Uganda’s tax treaties in a Powerpoint presentation here.

A while ago we quoted U.S. tax expert Lee Sheppard excoriating OECD model tax treaties, in a fiery presentation which included such gems as:

For multinationals, “there are countries for which there is extraction, and countries where there are customers, and these are all countries from which income has got to be stripped. And the rubric that allows this is the international consensus. It is the whole treaty network. The treaties protect multinationals primarily. That’s all they were ever for: to make life comfortable for multinationals”

Background on tax treaties: Continue reading “Don’t sign OECD tax treaties: the case of Uganda” →

Cayman Compass: Public registers would foil tax criminals

Cayman Compass has just published the following letter from TJN and Transparency International in response to an article by Carlyle Roger: Continue reading “Cayman Compass: Public registers would foil tax criminals” →

BEPS – minor victories but we risk losing the war

The following are detailed thoughts on the OECD BEPS year one outcomes prepared by friends and colleagues at Eurodad (the European Network on Debt and Development). Continue reading “BEPS – minor victories but we risk losing the war” →

Links – Sept 19

We’ve not had links for a week, for capacity reasons. Here is a somewhat quirky selection:

Alibaba’s corporate structure: just look at those British tax havens FT Alphaville

The Life and Times of John Fredriksen – Putin’s “Bagman” in London Fredriksen Watch
Part 3. The first English translation of an investigation by Norway’s Dagens Næringsliv (Daily Business) into John Fredriksen, the London-based billionaire. See also Parts 1 and Part 2.

Time we scrutinised China’s tax treaty practice, too Martin Hearson
From July, but important. See also the earlier UN transfer pricing manual: what Brazil, India and China do differently

Inverting Corporations Should Be Required to Pay Taxes Owed on Profits Held Offshore Citizens for Tax Justice
A simple, obviously good idea, now drafted as legislation.

Big economies take aim at the firms running circles around their taxmen The Economist.
On the OECD’s BEPS project for taxing multinational corporations. Cites TJN. See also our earlier coverage.

British Virgin Islands suffers amid push against money laundering FT
Poor suffering facilitators of dirty money. A Guernsey official says it’s “quite a telling story” that HSBC was refusing to open BVI accounts.

Appleby: offshore deals continue to rise – Bermuda News
some go up, some go down

California Bans a Tax-Break Commission Good Jobs First
California enacts the U.S.’ first ever ban on tax-break consultants receiving percentage of awards. A good idea for others to copy

Australia to adopt common reporting standard Australian Financial Review
Helped by the work of our indefatigable campaigning colleagues down under

Continued Struggle in Bangladesh: VAT is Regressive to Poor Equity BD
See also:
Who Will Bell the Cat? Revenue Mobilization and MNC’s Tax Evasion in Bangladesh
Whose money and whose interest? Illicit money flys off Bangladesh

A Quality of Growth Index for Developing Countries: A Proposal IMF

Letter to Thomas Donohue – Americans for tax fairness.
Objecting to the U.S. Chamber of Commerce’s deceptive advertising campaign defending corporate inversions

Have economists been captured by business interests? Harvard Business Review
Obviously they have, despite the denials, but here’s an entertaining study looking at just what’s going on

On today’s tax naughty step. Jolyon Maugham.
On how a UK subsidy for the arts turned into a tax subsidy free for all

OECD tax boss says OECD tax haven is a victim

Pascal Saint-Amans, the OECD’s head of tax, has made some rather ill-advised comments in an otherwise interesting interview with the Irish Times. This concerns the OECD’s so-called BEPS (Base Erosion and Profit Shifting) project to try and crack down on some of the more egregious loopholes in international tax rules that let multinational corporations get away with such abuses such as the Double Irish. It’s a project that we have broadly welcomed as an improvement on a very poor situation, but we (of course) have several gripes with it too Continue reading “OECD tax boss says OECD tax haven is a victim” →

How many people in a democracy want lower taxes?

Well, that clearly depends on the country, and the time of day. Britain is reputed to be one of the more conservative, lower-tax ones, at least among OECD countries. But this graph, from Oxford economics professor Simon Wren-Lewis about UK attitudes on the size of the state, should certainly give its politicians pause for thought.

The graph, which draws on data from the British Social Attitudes Survey 2014, kind of speaks for itself, but he summarises:

“The interesting result is how few people want lower taxes – always below 10%. The changes involve shifts between more spending and taxes to no change, rather than to lower spending and taxes.”

Rather like TJN, in fact. It’s not correct to say that we generally advocate “higher” taxes (which begs the question, ‘higher than what?’) We just like to push back steadily against the evidence-free assertions, routinely peddled by corporate shills and politicians, that tax cuts are the route to a brighter future, always.

Just saying.

Quote of the day: shareholder value and economists

A book by Lynn Stout

From a fascinating long article about the genesis of high executive pay in the United States, a quote from French financial economist Jean-Charles Rochet:

“Everyone knows that corporations are not just cash machines for their shareholders, but that they also provide goods and services for their consumers, as well as jobs and incomes for their employees. Everyone, that is, except most economists.”

We have written at length about the shareholder value movement, which has been one of the driving forces behind aggressive tax avoidance.

No Role for Public Scrutiny in OECD Plan to Curb Corporate Tax Dodging

From the Financial Transparency Coalition, of which TJN is an active member:

No Role for Public Scrutiny in OECD Plan to Curb Corporate Tax Dodging
For Immediate Release
September 16, 2014
WASHINGTON, D.C. — The Organization for Economic Cooperation and Development’s (OECD) new recommendations to fight multinational corporate tax avoidance look robust from the onset, but there’s something missing. Since the most vital reporting information will remain out of the reach of ordinary citizens, the recommendations don’t do enough to bring transparency to a global financial system badly in need of it. Continue reading “No Role for Public Scrutiny in OECD Plan to Curb Corporate Tax Dodging” →

Petition: tell the UN to stop tax abuse

We recently noted an open letter to Ban Ki-Moon, by the group Academics Stand Against Poverty, calling on the United Nations to put an end to tax abuse.

Now here’s the Avaaz petition. Please sign, and pass it on. Continue reading “Petition: tell the UN to stop tax abuse” →

Anatomy of a tax haven: how the finance curse strikes Jersey

The investigative newspaper Médiapart, which is fast gaining a reputation in France for hard-hitting reporting, has a special report on Jersey, Britain’s (and to a lesser extent France’s) favourite tax haven. It is fascinating, not least because it explicitly references our work on the Finance Curse, where countries that become over-dependent on financial services activity suffer many symptoms similar to those that are over-dependent on minerals like oil or gas. Continue reading “Anatomy of a tax haven: how the finance curse strikes Jersey” →

Country by country reporting: here it comes

From Tax Research, reposted in full, with a few key links added:

The era of country-by-country reporting is arriving
The OECD has announced its 2014 outcomes from the Base Erosion and Profits Shifting process this afternoon. As far as I am concerned the key issue is country-by-country reporting, which is the subject of BEPS Action Plan 13. The summary on this issue, just published (sent to me by mail, a link will follow) is: Continue reading “Country by country reporting: here it comes” →

Quote of the day – on tax laws and corporate partners

From Marty Sullivan (pictured), a top U.S. tax expert, speaking last year:

“What politicians keep forgetting is that you can’t ‘partner’ with the corporate community when it comes to writing the tax laws,” Sullivan explains. “They’re not partners — they are adversaries.”

Someone ought to send a memo to every government in the world. Such as this one.

Three Illicit Flows Targets for the Post-2015 Framework

Alex Cobham

From Alex Cobham at the Center for Global Development, with hat tip to Tax Research. For an earlier article about the post-2015 framework, please click here.

Three Illicit Financial Flows Targets

There is broad consensus on the need for the post-2015 successor framework to the Millennium Development Goals to respond to the challenge of illicit financial flows (IFF). Typically IFF involve the hidden movement of profits, hidden transfers of ownership, or hidden income streams. The main motivations are tax evasion (corporate and individual); laundering the proceeds of crime (largely human trafficking and drug trafficking); and corruption (including the theft of state assets and the bribery of public officials). Continue reading “Three Illicit Flows Targets for the Post-2015 Framework” →

UNCTAD: the time for tax justice has come

Image from the UNCTAD report

A press release about the latest UNCTAD Trade and Development report 2014:

“Governments, from rich and poor countries alike, should be able to finance the investment and other public spending required to meet the demands of their citizens for a more prosperous and secure life. Mobilizing domestic fiscal revenue is key, as in the long run it is more reliable than aid and more sustainable than debt, and less subject than either to conditions that restrict policy space.” Continue reading “UNCTAD: the time for tax justice has come” →

On the human rights of bad guys

There’s been a lot of talk recently in the human rights field about tax justice issues – and rightly so. Now a new academic book to add to the collection, considering things from a different angle. It’s called The human rights of bad guys: corruption, asset recovery, and the protection of property in public international law, and the blurb goes:

“In recovering assets that are or that represent the proceeds, objects, or instrumentalities of grand corruption, do states violate the human rights of politically exposed persons, their relatives, or their associates? Continue reading “On the human rights of bad guys” →

Will the UN take serious action to stop the loss of trillions of dollars to tax abuse?

Image from High Level Panel on Illicit Financial Flows

From Prof. Thomas Pogge:

“Intense negotiations are going on at the United Nations about the formulation of the new sustainable development goals (SDGs) and the targets and indicators to be used for specification and measurement. Starting 11 September, the president of the general assembly will host a key event that will feed into the secretary-general’s synthesis report. This is an important opportunity to complement the present SDG draft text with specific reforms against tax abuse, which constitutes a huge headwind against development.” Continue reading “Will the UN take serious action to stop the loss of trillions of dollars to tax abuse?” →

Corporate Deadbeats: How Companies Get Rich Off Taxes

A nice cover story in Newsweek from David Cay Johnston, worth remarking on because it’s written so clearly and is a powerful indictment of what’s going on in the corporate U.S. at the moment.

A sample from the article:

“How can a tax burden become a boon? Simple. Congress lets multinationals earn profits today but pay their taxes by-and-by. In effect, Uncle Sam is loaning these companies all that money they do not immediately turn over as taxes. And all of these loans come with the same attractive interest rate: zero.
Imagine how your bank statement would look if, instead of having taxes taken out of your weekly paycheck, Congress let you keep that dough in return for your promise to pay your taxes years or decades from now—and sometimes, never.
That’s the extraordinary deal Congress gives many big American companies now sitting on hundreds of billions of dollars of what are, essentially, interest-free loans.”

Now read on.

Basic income: the world’s simplest plan to end poverty

From an article on Vox, explaining the concept:

“Basic income” is shorthand for a range of proposals that share the idea of giving everyone in a given polity a certain amount of money on a regular basis. A basic income comes with no categorical eligibility requirements; you don’t have to be blind or disabled or unemployed to get it. Everyone gets the same amount by virtue of being a human with material needs that money can help address. Continue reading “Basic income: the world’s simplest plan to end poverty” →

Do Britain’s super-wealthy non-doms bring in huge tax revenues?

Britain’s antiquated “non-domicile” rule is a relic from an age of empire. It involves defining a person’s tax residence according to, in essence, their tribal affiliation. It’s not the same as nationality or tax residence. As the UK government defines it:

“broadly speaking you have your domicile in the country that is your ‘real’ or permanent home which, if you have left, you intend to return to.”

So people with some deep-rooted allegiance elsewhere (or so they might claim) can live in the UK and enjoy all its public and private services and amenities, and yet be treated as if they are not tax resident in the UK like everyone else who enjoys and pays for those same amenities. If you are a ‘non-dom’ then (to over-simplify) you are taxed only on the income earned domestically, and not on your income earned overseas. Of course, if you’re a wealthy person too, the trick then is to shift all your income overseas so you escape tax altogether.

One set of rules for the wealthy, another set for the rest of the UK’s citizens – and it also means that a lot of people who would live in other (often poor) countries and pay taxes there, live in London and effectively pay tax nowhere. All this is profoundly damaging, as we’ve remarked before.

“Ah, but!” cry the defenders of non-dommery. “Just look at all the tax revenues that the non-dommers pay in the UK! Don’t kill the golden goose!.”

And it’s true – in so far as it goes. Private Eye reports:

“Latest figures, for 2011/12, show that non-doms paid £6.3 billion income tax, which sounds a fair bit and is used by tax advisers to support the “golden goose” argument: that if the non-doms were fully taxed they would stop paying this useful amount.”

But here’s the catch. There are non-doms and there are super-wealthy non-doms. Private Eye continues:

“What they don’t say is that non-doms also paid £2.1bn in national insurance, proving that the money comes not from the entrepreneurs and ultra-wealthy who dominate the top of the rich lists, but mainly from those earning salaries from UK jobs, largely bankers but not the footloose ultra-wealthy – who, while they buy up the British property market, evidently pay little income tax.”

Martin Wolf, the Financial Times’ chief economics correspondent, pursued the non-dom logic, reminding us that the race to the bottom in getting poorer people to subsidise the super-rich does not stop when their tax reaches zero: the logic of the race turns it negative.

“Non-doms, we are told, make a gigantic contribution to the economy. If they are taxed too heavily, they will depart and the economy will suffer. Again, why not pursue this argument a little further? Should the UK not subsidise the inflow of human capital, just as many countries subsidise inflow of foreign direct investment? What about a negative tax (a subsidy) on all UK income earned by non-doms above, say, £100,000 a year?
Yet this, too, ought to be extended to highly paid citizens who, presumably, also provide big benefits to the economy. Why should the country wish to subsidise people to employ foreigners instead of citizens. So why not give everybody who earns about £100,000 a year a negative tax rate or at least a nice juicy lump sum?”

This reveals the nonsense at the heart of the UK vision of ‘competitiveness’, where the poor subsidise the rich in order to win some sort of ‘global race.’

Also note that those salaried people who are paying the lion’s share of the non-doms’ six billion pounds’ worth of taxes, as we well know, don’t up sticks when asked to pay tax (see here, here or here – just for instance; with evidence that the top destination for people who flee the UK is . . . high-tax France.)

And let’s be honest, the lion’s share of those super-wealthy non-doms are predominantly in London, and for mostly non-tax reasons: that it’s a global city with fabulous schools and amenities, where they can do their deals and speak English, and so on. Tax is a factor, but at the margin.

So what this non-dom tax system is doing is reaping dubious peanuts in terms of the relatively small numbers of houses they buy and other bits and pieces – which they may well own even if they weren’t resident in Britain – but at an enormous tax cost, not to mention the costs to democracy and the rule of law.

And that’s what being ‘competitive’ has come to mean in modern Britain.

KPMG offers generous advice that will help tax cheats

One of the most important live initiatives currently in the field of tax justice and international financial transparency is the OECD’s Common Reporting Standards (CRS,) a system of automatic information exchange which we have broadly welcomed – though with some gripes – here.

Now it turns out that KPMG, that avuncular global accounting and “professional services” giant, is monitoring the CRS and its moves towards better financial transparency, and in a long document is offering this to its clients: Continue reading “KPMG offers generous advice that will help tax cheats” →

The Price We Pay — more praise for Harold Crooks’ film documentary

“It’s not often that something as dry as tax theory can result in an engrossing night at the movies, but credit Harold Crooks and his team for providing an exceptional articulation about the vagaries of “off shoring” in an accessible, engaging way with The Price We Pay.”

Continue reading “The Price We Pay — more praise for Harold Crooks’ film documentary” →

Academics Stand Against Poverty report on illicit financial flows

Academics Stand Against Poverty have published the results of a survey of experts views on how to tackle illicit financial flows. TJN took part in this survey and we are pleased (though not surprised) that so many of our core campaign demands rank high on the list of policy recommendations listed below.

The study used the Delphi technique, in which a group of experts respond anonymously to a series of questionnaires, and after each round, a summary of the results is sent back to the group. Participants were encouraged to revise their original responses in light of others’ answers, and over a series of rounds, group judgment was derived. 27 experts from academia, NGOs, multilateral organizations, and the private sector took part in the study.

In the study, 10 policy options were identified as being highly desirable for inclusion in the SDG framework. They are, in order of desirability:

1) Require disclosure of the ultimate beneficial owners of companies, and of the controlling parties of trusts and foundations;

2) Reform international tax rules so that the taxable profits of multinational corporations are aligned with the location of their economic activity;

3) Require public reporting of funds paid to governments for the sale of natural resources such as oil, gas, metals, and minerals, and the use of those funds;

4) Significantly increase developing country tax authority capacity;

5) Implement automatic exchange of tax-relevant financial information on a global basis;

6) Implement public country-by-country reporting for multinational corporations;

7) Require that all governments carry out clear, reliable, frequent, and timely public fiscal reporting and that governments’ fiscal policy-making process be open to public participation;

8) Increase capacity building, training, and resources for law enforcement for work on financial sector investigations;

9) Impose tougher sanctions, including jail time, on professionals who facilitate illicit financial flows, e.g. senior officers from global banks, accounting firms, law firms, insurance firms, and hedge funds;

10) Harmonize anti-money laundering regulations internationally.

Other study results include participant’s assessment of the likelihood of various policies being included in the SDG framework.

The study was funded with donations raised during ASAP’s crowdfunding campaign, Stop IFFs 2015, which was carried out last summer.

The report is available for download here.

Thank you!