Page 92 – Tax Justice Network

Quote of the day: taxes and economic growth

From U.S. tax expert Ed Kleinbard, and his forthcoming book We are Better Than This (p159):

“There is no meaning to the growth effects of taxes as such, only to fiscal policy taken as a whole.”

It is another way of explaining that taxes are not a cost to an economy: they are a transfer within it.

Kleinbard is alluding to the myriad ‘independent’ studies out there that seek to attribute all sorts of ‘deadweight’ costs to taxation, without taking into account the other side of the ledger: those often productive things that taxes are spent on. Huge sections of the academic literature on this topic are effectively without merit.

Top UK politician compares banking divide to African oil separation

Nigeria's Bonny Terminal: insiders and outsiders

Nigeria’s Bonny Terminal: spot the insiders and the outsiders

We’ve written plenty about the similarities between a ‘resource curse‘ afflicting mineral-rich countries in Africa and elsewhere and what we have termed a ‘finance curse‘ afflicting economies that are overly dependent on the financial sector. Britain is a case in point, with offshore activity a substantial part of the sector.

Now Vince Cable, the U.K.’s business secretary, has made another explicit comparison which resonates with our analysis. As the Wall St. Journal reports:

“Business Secretary Vince Cable said the British banking system outside the City of London finance district is “primitive” and similar to Africa, where he used to travel to visit oil and gas refineries owned by Royal Dutch Shell, his former employer.
Speaking to lawyers and bankers in a room overlooking the City of London, Mr. Cable said the contrast between the sophisticated technology of the finance district and the rest of the country’s banking system is extreme. He said it reminds him of the gulf between oil and gas installations in Africa and the rest of the continent.”

And he added:

“in Nigeria, “you could go to these world-class liquefied natural gas institutions, you know, the best technology in the world, and then there would be a barbed-wire fence around it and outside you would have Africa.”

Today’s blogger has spent much time in and around these oil-fueled African ‘pampered paradises’ – especially in Angola: read this New York Times article describing just how stark (and, to be honest, bizarre) the divide can be in the northern oil-rich Angolan enclave of Cabinda.

Leaving aside the unfortunate connotations of the word ‘primitive’, we would wholly agree with Cable. He has put his finger on one important aspect of the Finance Curse: a heavily protected and subsidised sector failing to link appropriately to the domestic economy and serving more as an ‘offshore island’ producing some jobs directly, but also wreaking a range of other harms elsewhere.

Tax avoidance: a note to editors

Tax practitioner Noel Hodson has just issued the following notes to editors about the term ‘tax avoidance’:

Most media, even the BBC, persist in quoting notorious professional tax-planners, embedded in the establishment, that “tax avoidance is completely legal”. My 50+ years of practical, hands-on case work tells me that elaborate tax schemes, particularly via the 74 tax-havens are illegal in all OECD and most other tax regions – including the UK. Continue reading “Tax avoidance: a note to editors” →

How developing countries can take control over their tax destinies

Krishen Mehta, a Senior Adviser to TJN, has written a short document with ten pointers offering ways that developing countries can take control over their tax destinies. We reproduce the introduction of his article below: please click on the full article for the ten points. We hope to produce more of these in due course, in collaboration with other experts.

How Developing Countries can take Control of their own Tax Destinies
By Krishen Mehta
July, 2014 Continue reading “How developing countries can take control over their tax destinies” →

How will Juncker, tax haven candidate, handle his conflicts of interest?

Next week we expect Jean-Claude Juncker, the former long-standing prime minister of Luxembourg, to be nominated to the powerful role of President of the European Commission. The man who for many years defended one of Europe’s nastiest and biggest secrecy jurisdictions (or tax havens) now faces an important question.

Will he continue discreetly to find ways to represent the interests of Luxembourg against the ordinary citizens of Europe? Time will tell. For now, the Financial Times investigates a recent European investigation into the tax arrangements of various large multinationals Continue reading “How will Juncker, tax haven candidate, handle his conflicts of interest?” →

Kansas/Missouri: local ceasefire in U.S. tax border war?

The state boundary runs through Kansas City

Last year the St. Louis Post-Despatch published an editorial entitled Missouri Senate declares class war against citizens, looking at tax subsidies being showered on businesses in an effort to lure them away from neighbouring Kansas – which, in turn, has been showering subsidies on businesses to cross the line to its side.

There are probably fewer places in the world where this senseless race to the bottom is most evident. The process is widely known as tax competition but we prefer to borrow from the Brazilian term Guerra Fiscal (tax war, or tax wars) – partly because it is the more economically literate term, and partly because it conveys the harm more accurately. Continue reading “Kansas/Missouri: local ceasefire in U.S. tax border war?” →

Quote of the day: opium and competitiveness

From a book called The Opium Wars, one of Britain’s less honourable (to put it mildly) historical escapades, a statement that was prompted by moves in Britain towards stopping the opium trade:

“Her Majesty’s government should do nothing to place in peril our opium revenues. As for preventing the manufacturing of opium, and the sale of it in China, that is far beyond your power.”
– Lord Ellenborough, 1843

Do those arguments sound familiar?

Doubtless they were wielded in the name of ‘competitiveness,’ or its equivalent at the time. Around the time, some ten percent of Britain’s revenues came from the opium trade – and, needless to say, the British government capitulated to the opium traffickers.

Quote of the day: Christine Lagarde

As reported by Tax-News, IMF Managing Director Christine Lagarde said:

“There would be more revenue for all if countries resisted the temptation to compete with each other on taxes to attract business. By definition, a race to the bottom leaves everybody at the bottom.”

Interestingly enough, she was speaking in the Caribbean, which contains more than its fair share of tax havens. See more on the race to the bottom on our Tax Wars page, here.

Barclays sheds some light on its financial affairs, country by country

Richard Murphy, who pioneered the concept of Country by Country reporting, has produced an important analysis of the data revealed in one of the first such published reports, from UK-based Barclays bank.

Among many other things, he says:

“This analysis suggests that Barclays is massively under-declaring profit in the UK at cost to all of us. I estimate that the loss to the UK could easily exceed £150 million.” Continue reading “Barclays sheds some light on its financial affairs, country by country” →

Press Release: European Commission hires transparency opponent to assess corporate transparency

TJN is a signatory to the following letter, and this press release:

Press Release: CSOs protest as European Commission hires opponent of corporate transparency to assess corporate transparency

After strongly opposing any publication of data from corporate country by country reporting, PricewaterhouseCoopers (PwC) has been hired by the European Commission to do an impact assessment of public country by country reporting for banks in the EU. Continue reading “Press Release: European Commission hires transparency opponent to assess corporate transparency” →

Over 95% of Britons want a more progressive tax system

From The Equality Trust, in a report on the United Kingdom:

“Public support for a more progressive tax system is high. Over eight in ten (82%) believe that households in the highest 10% income group should pay a greater proportion of their income in tax than those in the bottom 10%. An even greater majority (96%) would like the tax system to be more progressive than it currently is.”

Ninety six percent: a number to make your eyes water. Read the report, or read this summary in The Guardian.

See also this recent report from the Equality Trust looking at top tax rates in the UK. They find, among other things, that

“There is little or no relationship between tax rates and economic growth. There is only a proven relationship in the case of very high taxes of above 80%”

As we have noted before, many times. And it’s hardly surprising that this is so, given that tax is not a cost to an economy but a transfer within it, from one productive sector to another.

Quote of the day: big accountancy firms have a human rights problem

From Prem Sikka our quote of the day comes from an article entitled Big accountancy firms have a human rights problem:

“In many other organisations such subversion of the human rights would be considered to be a badge of shame. At major accountancy firms it is increasingly considered to be a sign of business acumen.”

This follows news that the Big Four firms of global accountants clubbed together officially to publish an advertisement denouncing the Hong Kong pro-democracy movement in the name of competitiveness. We are delighted to see now that the South China Morning Post is reporting that Big Four employees have now taken out an advertisement of their own disowning the advertisement. Continue reading “Quote of the day: big accountancy firms have a human rights problem” →

Manhattan real estate: a little tax haven in America

Image: Javier Gil

From New York Magazine, a long article about the high-end New York property market, echoing recent stories (such as this one) about One Hyde Park and the British tax haven.

“Those with less reflexively hostile reactions to foreign buying competition might still wonder: Who are these people? An entire industry of brokers, lawyers, and tight-lipped advisers exists largely to keep anyone from discovering the answer. This is because, while New York real estate has significant drawbacks as an asset—it’s illiquid and costly to manage—it has a major selling point in its relative opacity. With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account. And that makes the city an island haven for those who want to stash cash in an increasingly monitored global financial system. Continue reading “Manhattan real estate: a little tax haven in America” →

Quote of the day on the OECD’s tax project: “let’s hope nothing happens”

From the Financial Times, in a story about a conference on the OECD’s much-discussed BEPS project to reform international tax rules for transnational corporations:

“The gameplan is to be positive but hope as little as possible happens,” is how Paul Oosterhuis, a tax partner of Skadden Arps, the US law firm, described the attitude of US corporations to government proposals to amend its global arrangements.

Big Four firms officially sell out Hong Kong’s democracy movement

[vc_row][vc_column][vc_column_text]Updated with commentary from the Financial Times and Bloomberg: see below

CNBC is reporting:

“As a pro-democracy movement gains steam in Hong Kong, some worry the campaign could hurt the city’s competitiveness and rattle its financial market.”

One could unpack that short sentence and probably find five or ten nonsenses and fallacies coiled up inside it. So democracy is the enemy of ‘competitiveness,’ is it? In that case, what is the meaning or the point of ‘competitiveness,’ if it stands against the wishes of the people it is supposed to benefit? Pray do tell, CNBC. Continue reading “Big Four firms officially sell out Hong Kong’s democracy movement” →

The Swiss commodity black hole: a bizarre new government proposal

From the Berne Declaration backgrounder.
Click to enlarge

From the Berne Declaration and Swissaid:

“The Federal Council today announced its wish to close the Swiss gaps in transparency for the global commodity industry. But the entire commodities trading business may well be excluded from any future regulation.”

Continue reading “The Swiss commodity black hole: a bizarre new government proposal” →

IMF: tax havens cause poverty, particularly in developing countries

The IMF has a major new Policy Paper out entitled Spillovers in International Taxation, looking at the effects that one country’s tax rules and practices can have on others.

Of course this is a Staff Report and the IMF would never be so rude to some of its most powerful member states as to explicitly say what is in our headline – but that’s what we read between the lines. “Spillovers” in international tax are all about tax haven activity, particularly when those spillovers are deliberately crafted.

Now that we’ve read it, we conclude that this is a really important document. It tears apart much of the prevailing OECD tax consensus that has dominated international tax for the last century.

We are delighted to see that it convincingly takes the side of developing countries: not only taking sides in big current political fights (such as India vs. Vodafone) Continue reading “IMF: tax havens cause poverty, particularly in developing countries” →

The UK’s ‘open for business’ tax regime: investment falls

We were going to do a job on this report but Tax Research got there first, so we’ll cut and paste:

UK corporation tax policy fails to attract new business as Foreign Direct Investment falls
From the time that the current government came into power corporation tax reform has been one of their key objectives. The result has been a cut in the tax rate from 28 % to 21% now with 20% to follow, and a cut in the tax base, meaning that whole swathes of income have fallen out of the scope of the tax. Continue reading “The UK’s ‘open for business’ tax regime: investment falls” →

Why big time tax dodgers love Jean-Claude Juncker

On the plus side, he is quite the joker

From Private Eye, a commentary on Jean-Claude Juncker, and our quote of the day:

“Supporters of would-be European Commission president Jean-Claude Juncker should perhaps pause to examine the great man’s record of wreaking fiscal havoc across the continent.”
. . .
[under his tutelage] the Grand Duchy became the member of the economic club that pilfered from the club’s funds.

Our quote of the day in bold. Now read on.

The Impacts of Illicit Financial Flows on Peace and Security in Africa

From Alex Cobham of the Center for Global Development, a paper for the Tana High-Level Forum on Security in Africa 2014. It’s called, as our title suggests, The Impacts of Illicit Financial Flows on Peace and Security in Africa.

Published in April, it’s an important contribution to the literature on this large topic, and it teases out many of the subtleties in the arguments and analyses that very often get lumped together into one large topic. Continue reading “The Impacts of Illicit Financial Flows on Peace and Security in Africa” →

New report: developing countries want automatic information exchange

From the International Tax Review:

“The Tax Justice Network (TJN) has accused the OECD of not consulting developing countries about the design of the framework for Automatic Information Exchange (AIE), which the G20 has endorsed as the global model for information exchange.”

Our new report was prompted partly by comments from OECD tax boss Pascal Saint-Amans that

“Most (developing countries) are not yet ready and most of them don’t want it.”

So we conducted a survey to find out what developing countries genuinely thought. And the results clearly contradicted Saint-Amans’ pessimistic and strange view.

Read our in-depth report here.

The June 2014 Taxcast: Piketty, the World Cup, and capital flight

[vc_row][vc_column][vc_column_text]In the June 2014 Taxcast: the guillotine v progressive tax?

The Taxcast looks at Thomas Piketty’s book Capital in the 21st Century. Also: welcome to the temporary tax haven of World Cup Brazil; the EU Commission begins investigations into illegal state aid for tax havens; and are developing countries really not interested in tracking illicit outflows from their countries via transparency? Plus more scandal.

Produced by @Naomi_Fowler for the Tax Justice Network.

“it’s impossible for nation states and democracy to survive in an era of totally globalised markets where capital can quite simply evade and avoid taxes” John Christensen

Featuring: Journalist and Treasure Islands author Nick Shaxson, Economist and author of Capital in the 21st Century Thomas Piketty, Director of the Tax Justice Network John Christensen, head of the Bank of England Mark Carney, head of the IMF Christine Lagarde, MEP Martin Schulz.

Download from this link here: http://traffic.libsyn.com/taxcast/Taxcast_June_2014.mp3[/vc_column_text][vc_column_text]Remember the Tax Justice Network app is free and available on Android and Apple: just search for Tax Justice Network…

www.tackletaxhavens.com/taxcast

www.taxjustice.net/taxcast

Happy listening![/vc_column_text][/vc_column][/vc_row]

Thank you!