Globalisation: almighty clash of ideas has reached its zenith over tax

Guest blog: Meesha Nehru, Fair Tax researcher:

Tax is not just about morality: it’s about the battle for our future

Last Thursday Margaret Hodge said that ‘Google is evil’ when it comes to its tax avoidance. By cleverly twisting the company’s own ethically-motivated slogan, the leader of the Public Accounts Committee made it clear that pushing the law to the extreme to avoid contributing millions of pounds worth of tax to governments is not only immoral but also just plain wrong.

Over the last couple of years, the call for a moral crusade against tax avoidance and evasion seems louder with each passing day. In the face of increasing financial pressures, concerned citizens are waking up to the Injustice of how companies and wealthy individuals flagrantly flout the rules, as well as to the impact that such behaviour is having on both developed and developing countries.

Yet despite the mounting outrage, representatives of big business are adamant that tax has nothing to do with morality. Facing daily revelations about the tax avoidance of Apple, Google, Amazon, Starbucks and others, business leaders have shown that they are as quick to shift the blame, as they are their profits. Sir Roger Carr of the Confederation of British Industry insists that tax avoidance isn’t the fault of business but of the broken rules. Governments must fix the system. Tax cannot be about morality “there are no absolutes”, he says.

Sir Roger is right yet he still misses the point. Tax avoidance is not about morality in the sense that some in media like to portray it – as greedy immoral fat cats engorging themselves on all the cream whilst the morally-upright and scrupulous yet financially downtrodden taxpayers suffer the consequences. Capitalists have morals too – how else do we think they sleep at night – they just operate within a different framework.

More than being a matter of principle, tax provides the most important focal point for the defining ideological battle of our age. This almighty clash of ideas, bubbling away during the last thirty years of accelerated globalisation but as old as capital versus labour, has reached its zenith with the current debate over taxation. Underneath the rhetoric about morals is the issue that business leaders and zealots alike are missing (or choosing to ignore). We are at a crossroads and there is no going back.

Our dysfunctional economic system is creaking and whilst finance and big business try to carry on as usual - and pull all their powerful strings in order to do so - there is also an increasingly vocal movement working on the ground to build a new, more equitable future less reliant on finite resources. Taxation, and the government that collects it, is nothing less than the key battleground where control over the direction of the coming transition will be contested and won.

Far from being as simple as getting companies to pay what they owe or closing certain loopholes, what is at stake is the very nature of our democracy: from the global to the local and all of the institutions in-between. Nation-states must attempt to reassert some power over rampant global capital – creating new regulations may stem some of the financial flows but it will be taxation that reins in the unfettered and highly unequal accumulation.

History has shown us that governments won’t do this alone. For the last thirty years they have gone in the opposite direction for both ideological and practical reasons. Wealthy career politicians faced with the problem of administering an increasingly complex global society happily defer to the so-called efficiency and experience of their friends in the private sector. Now is the time that the rest of us get a look in.

This means continuing pressure to get companies to pay their fair share of tax and to get governments to close down the schemes and locations that facilitate its avoidance. But more importantly, it means holding businesses to account for the way in which they are run and holding the nation-state to account for the way in which the newly collected revenue is spent. It is not enough to rely on elections and weak mandates to make all the decisions during a time of momentous change.

The issue of fair taxation requires a different kind of moral crusade – one that insists that government is invigorated and that all taxpayers, regardless of their financial standing, are empowered with the tools, space and voice to have real say in how their money is spent. Whether we like it or not, tax as a topic is here to stay, the sooner we recognise it as fundamental to our future transformation, the better.

If you're in Amsterdam over the summer . . .

A Dutch politician will be taking a tax-free tour of Amsterdam:

SP takes you on TAX FREE TOUR

Always wanted to know where those companies are that barely pay taxes? The SP will take you this summer along on Tax Free Tour through Amsterdam. On May 24, June 15 and August 24, SP MP Arnold Merkies will tell you all about the letterbox firms and trust companies where tax is evaded.

Merkies: "Many people have no idea how many companies are involved and where they are. It is high time that we explained that. " Also SP leader Emile Roemer and MEP Dennis de Jong will be present at the Tax Free Tour.

You can sign up for the tour now, here.

Hat tip: Sam from Amsterdam

Links May 24

EU wants big companies to reveal national tax bills Reuters
See also: From January 2003 to May 2013 – progress with country-by-country reporting Tax Research UK, and EU on verge of "historic breakthrough" for tax justice Christian Aid, and The good, the bad and the indecisive: EU leaders put tax centre stage at summit Eurodad

HSBC faces court threat as deal on money laundering charges stalls The Guardian
A very important development - a move that could leave HSBC facing a criminal prosecution and the threat that its charter to do business in the US could be revoked.

How to take a serious bite out of corporate tax avoidance The Guardian
Prem Sikka: A new system of unitary taxation must be debated at the next G8 meeting. It isn't perfect, but it would be a huge step forward.

James S. Henry: The Bizarre Economics of Tax Havens and Pirate Banking TEDxRadboudU
TJN Senior Adviser James Henry is lead researcher of The Price of Offshore Revisited

Tax havens most dangerous scam in world economy – Professor Jeffrey Sachs Ghana Business News

Uganda: No tax holidays for investors under EAC New Vision
The Government will not offer tax holidays to firms seeking to invest in Uganda as the country joins the rest of East African countries in harmonising taxes in the region.

The Caribbean - Treasure islands in trouble The Economist
Britain’s Caribbean dependencies have been hurt by economic stagnation, the war on tax havens and their own fiscal recklessness and corruption

The G8 can eliminate hunger by ensuring tax fairness TJN Germany Blog (In German)
The UN Special Rapporteur on the right to food, Olivier De Schutter, has sent an open letter to the current chairman of the G8, UK Prime Minister David Cameron

Senate Hearing Demonstrates How U.S. Tax Rules Allow Apple (and Many Other Companies) to Use Offshore Tax Havens Citizens for Tax Justice

Companies and tax - Cook lightly grilled The Economist
The testimony on Capitol Hill by Apple’s boss made the case for corporate tax reform in more ways than one

Jersey, Guernsey Reply To Cameron Over Tax Info Exchange Tax-News

Austria: Offshore leaks claims another scalp

This time, it's the head of Austria's Raiffeisen bank (not to be confused with Switzerland's Raiffeisen Bank, which is different.) From Bloomberg:

“He [Herbert Stepic] is offering to resign his position as CEO of Raiffeisen Bank International due to personal reasons,” the Vienna-based lender said today in a statement.

The CEO had UBS set up an offshore account used to manage properties in Singapore. This story snakes out to the British Virgin Islands (BVI,) Hong Kong, Liechtenstein, and Cyprus, according to a report in Suddeutsche Zeitung.

With more ICIJ-based revelations to come, we expect.

Swiss Bankers Favor Automatic Information Exchange?

Update: this isn't entirely fresh news after all, it turns out: see expanded story below.

That's the headline from Taxnews.com:

President of the Swiss Private Bankers Association (SPBA) Nicolas Pictet has urged the Federal Council to abandon its "white money" strategy, and to opt instead for an automatic information exchange regime, in particular with the European Union (EU).

The Swiss Private Bankers' Association is an incredibly influential organisation inside Switzerland. It should also be noticed in this context that whenever Switzerland has made any kind of retreat on banking secrecy in the face of international pressure, it has almost always been when that pressure has been directed at the banks, rather than at Switzerland itself. So even if we don't usually like the SPBA's message, we do listen to them.

We see, in fact, that Pictet was in fact quoted as saying this a few days ago:

"The Swiss private bankers are pushing for a rapid solution to the tax dispute. Their President, Nicolas Pictet, pleaded beginning of May in interviews for a departure from the white money strategy towards an automatic information exchange with the EU.

It continues:

"Underlining the significance of Austria and Luxembourg’s decision to support plans for an automatic information exchange at EU level, to ensure a level playing field and to combat tax evasion, Pictet pointed out that their u-turn has dramatically changed the situation for Switzerland.

Pictet insisted that automatic exchange of information with the EU is a better solution than the Federal Council’s white money strategy, currently being debated in the Swiss parliament. Switzerland’s white money strategy is unique to the Confederation, and not recognized at international level, Pictet explained.

Given that it makes absolutely no sense to adopt two different solutions to ensure tax conformity, and in view of the fact that the EU intends to begin negotiations with Switzerland shortly on information exchange, there is a clear need to change tack, the SPBA president stressed. Bankers need Switzerland to clarify its position rapidly, to remove current uncertainties that will ultimately prove damaging to businesses and endanger jobs in Switzerland, Pictet added."

Even though nothing has actually changed here, this, on the face of it, appears to be welcome news.

Hat tip: Tax Research

Mythbusters: “There’s nothing we can do about tax havens”

Oh yes there is. Richard Murphy and Dan Hind have published the latest in the TJN/NEF Mythbusters series. Here is a summary version (download the full version here):

Tax havens play a key role in facilitating tax avoidance, yet so far, few serious measures have been taken to prevent their operation. Fuelling this inertia are not one, but several myths: a book of fairy tales and fantastical claims telling us there’s nothing we can do to tackle the glorified accounting functions that are tax havens.

Let’s take a moment to clear these up.

Sub-myth 1: “There’s no such thing as a tax haven”

The lobby for tax havens tries to convince us that because there’s no universally accepted definition of what a tax haven is, no one can be accused of being one.

But even in the absence of clear-cut definition, facts are stubborn things. The Tax Justice Network has produced the Financial Secrecy Index that uses a raft of data from a variety of official sources to rank tax havens. Not only do tax havens exist, they can be compared and contrasted with considerable precision.

Sub-myth 2: “Financial secrecy is a basic human right”

Lobbyists further tell us that tax havens safeguard basic human rights. Dan Mitchell of the Cato Institute declares that “there is even a moral case for tax havens. They play a critical role in protecting people who are subject to religious, ethnic, sexual, political or racial persecution.”

In reality, having your money stashed offshore does not protect you from persecution. And since tax havens exist to protect property rights to the fullest extent possible, their impact on even more fundamental rights is disastrous: Christian Aid estimates that $160 billion leaves the developing world illicitly via tax havens each year.

Clearly, the right of the wealthy to guard themselves from hypothetical dangers must be weighed against the right of everyone else to secure the minimum necessary to sustain life.

Sub-myth 3: “There’s nothing to do – the offshore sector has already reformed”

When it seems appropriate lobbyists tell us that the tax havens have substantially reformed. Only last month Anthony Travers of the Cayman Island Stock Exchange assured the world that “the Overseas Territories already demonstrate full tax transparency.”

This will come as news to tax authorities around the world, including HM Revenue and Customs. As Christian Chavagneux noted on the OECD blog in March 2012: “France made 230 requests for information to 18 countries in the first eight months of 2011. The reply rate was only 30 per cent and the quality of the information supplied wasn’t always of the highest quality.”

Sub-myth 4: “Leave us alone, or else!”

Last but not least we come to the ‘You’ll regret it if you interfere!’ myth. This is the threat, made often by tax havens, that if measures are taken against them by any other country then the wealthy people and large corporations located in that country will up sticks and leave permanently - taking the tax they currently pay with them.

For corporations, this threat has now become completely hollow. The UK’s territorial tax system taxes profits arising in the UK, and it is not possible for corporations to take this tax away with them. Meanwhile, few individuals would wish to suffer the social upheaval of moving country simply to save on tax – as shown in our recent mythbuster debunking the idea that “A competitive tax system is a better tax system”.

An end to the havens

Even a casual glance at the arguments that the offshore lobby use to defend tax havens reveals the glaring inconsistencies between them. They want us to believe that these ‘non-existent’ jurisdictions are both the helpless victims of bullying by large economies, and capable of bringing these same economies to a standstill at the first sign of effective regulation.

Tax havens say there is nothing that can be done about them. But that’s not true. Some steps have been made already. The US Foreign Account Tax Compliance Act (FATCA) now requires tax havens to maintain all the information needed for full automatic information exchange on all individuals and schemes they operate. The EU’s new rules for banks have set a precedent for all companies operating internationally.

While there is much more that needs doing, we are nearing a tipping point. It seems the ‘little people’ are keen for the rich to pay their tax, too, and the evidence is that we can tackle the havens.

The May Taxcast: Google, Apple, anti-EU sentiment, and the arm's trade

In the May 2013 Taxcast: Google and Apple are forced to defend their tax affairs in public, how anti-EU sentiment serves offshore interests; and tax havens and the arms trade: how secrecy kills. The Lord of War makes an appearance.

Produced by @Naomi_Fowler. Also available on iTunes

http://traffic.libsyn.com/taxcast/May_Taxcast_13.mp3

Tax competition: "it's exactly like a trade war"

Professor Ed Kleinbard, a top U.S. tax expert, in the Washington Post:

"It’s exactly like a trade war . . .  We’ve never had any progress in multilateral tax agreements. But that’s really what we need right now. … We need a cease-fire.”

Quite so. Brazilians talk of "guerra fiscal" - tax war - to describe the pernicious process that is going on within the Brazilian federation. Tax competition is always harmful, both to the world as a whole and to individual participants. As the UK's Independent newspaper reports this morning, citing TJN,

“tax competition” or “tax shopping”, as the practice is known, damages not only the budgets of nation states but also their efforts to persuade the people at large to pay their taxes."

See more about why tax competition is so harmful, here.

The Washington Post article goes on to explore the concept of Unitary Taxation, where TJN appears to have exerted quite an influence, and is involved in key ongoing research.

Almost half of all investment into developing countries goes through tax havens

From ActionAid, another important report:

Almost half of all money invested in developing countries is channelled through tax havens, a new ActionAid report revealed today.

The report, How Tax Havens Plunder the Poor, shows how tax havens can often allow companies and investors to avoid tax on the resulting profits and gains and deprive the world’s poorest countries of much-needed tax revenue.

The research also shows that foreign investments into developing countries are more likely to be routed through a tax haven than investments into developed countries.

Mike Lewis, ActionAid’s tax expert who carried out the research, said: “As we have seen with recent cases like Google and Amazon, tax avoidance is a huge issue in developed countries. But evidence shows that poor countries are losing even more from tax avoidance, and are least equipped to protect fragile public revenues.

“Developing countries are being deprived of billions of dollars of tax revenue by wealthy corporations and investors using secretive tax havens. Tax havens are one of the main obstacles in the fight against global poverty. Their secrecy and harmful tax regimes leach money out of developing countries that could be used to end hunger and provide hospitals, schools and clean water.”

In one case a single - entirely legal - transaction through UK-linked tax havens would have provided $2.2 billion in tax if it had not taken place offshore, according to the Indian government. This is almost enough money to provide every Indian primary school child with a subsidised midday meal for an entire year.

In another example, one major mining firm gets 84 per cent of its revenues from Africa, yet has just four of its 81 subsidiaries registered in African countries, and 47 registered in tax havens.

Using tax havens is not illegal or proof of tax avoidance, but can often allow companies to minimise taxes and keep financial transactions opaque.

ActionAid’s report comes shortly before the G8 Summit in June when world leaders, including David Cameron, have an historic opportunity to call time on tax havens.

The UK is currently responsible for one-in-five of tax havens globally – more than any other country. Recent research by ActionAid has also demonstrated the heavy involvement of British companies in tax haven-use with 98 of FTSE 100 companies using tax havens. G8 countries are collectively responsible for 40 per cent of tax havens.

The OECD estimates that developing countries are losing three times more money to tax havens than they currently receive in aid each year.

ActionAid is now calling on the Government and G8 leaders to put their words into action and mark the end of tax havens by ensuring tax havens share tax information will the poorest countries, and that the real ownership of all companies and trusts are placed on public record.

Ends For more information or to arrange interviews contact Anjali Kwatra, ActionAid UK Head of News, on +44 (0) 203 122 0633 or +44  (0) 7941 371 357

 In addition, ActionAid have put together an outrageous website entitled Sod the Poor - go Offshore!. It's got a petition, which we'd encourage everyone to sign.

Dear Senator Rand Paul

From Professor Victor Fleischer, tax specialist at University of Colorado Law School, after libertarian U.S. Senator Rand Paul (pictured) expressed hyperventilating outrage that the U.S. Senate Permanent Subcommittee on Investigations should have the temerity to expose the fact that Apple, Inc. has been shoveling billions of dollars through (among other things) Irish subsidiaries that are not tax resident anywhere:

Apple Inc.
One Infinite Loop
Cupertino, CA
United States of America
Or maybe Ireland

Dear Mr./Ms. Apple,

I am writing to you at the request of Senator Rand Paul, who suggested that I apologize to you for investigating your offshore tax planning.

I should note at the outset that I wasn’t sure how to address this letter. Mr. Paul said to apologize to Apple, but I’m not sure if Apple is a person, and if so if you are a boy or a girl. I thought you were a company, but after hearing Mr. Paul tell the story of how you recovered from near death in the 1990s, maybe you are some kind of superhero.

I’m also not really sure where you live. You have an address in California, but your tax returns also claim residency in Ireland, except not really. So I hope this letter gets to you.

I have to say, the whole Ireland thing kind of sounded like a scam. I was relieved when your CEO, Timothy Cook, explained that you don’t use any tax gimmicks. A professor testifying at the hearing yesterday said that he nearly fell off his chair when he read Mr. Cook’s statement, but that’s probably because tax professors are known for being silly and theatrical. You should see what their conferences are like.

So, I apologize. In order to improve our service to you in the future, we are implementing two new changes in our customer service policy.

The first is a promise to do a better job of scheduling. If we have to mention taxes again, I’ll be sure to just add it to the agenda when your lobbyists drop by for a closed-door meeting. And I don’t mean to badger you, but Google and Microsoft spend a lot more money on lobbying, and we do offer special treatment for regular donors.

The second is a promise to stop holding Congressional tax investigations. The IRS never has enough to do, and they are pretty entrepreneurial. I’m sure they are competent to handle all of this on their own without our help or oversight.

Finally, I want to emphasize just how much we appreciate your willingness to comply with your legal obligation to pay taxes. If you think about it, taxes are really just a form of charitable giving. Our goal is to reach a high level of participation from both American and Irish corporations, and your donation in any amount makes a difference. We also welcome any in-kind donations in the form of iPhones and iPads.  My daughter knows how to use them.

I hope you can forgive us. In hindsight, we were cavalier in our efforts to find out more about how our tax system is or isn’t working. We know now that it’s not really any of our business, and promise to base any future tax legislation on naïve intuition and wild rhetoric instead of facts.

Your humble servants,

The United States Senate

P.S. At your earliest convenience, please let us know what stance we should take on immigration policy.

Annual “Taxes” Giving Pledge Form
☐ I wish to support the United States Government with a gift/pledge* of
☐ 35%   ☐ 15%   ☐ 5%   ☐ 0%   ☐ Other _____
* This gift may or may not be tax-deductible. Please consult your tax advisor.

Hat tip: TaxProf.

Further reading:

• Senator Rand Paul's Fight for Offshore Tax Havens.
  
• What Rand Paul Fails to Understand about Apple’s Tax Dodging

Quote of the morning: bright minds in the tax labyrinth

From Gary Silverman, U.S. columnist in the Financial Times:

"So many of the best minds of my generation spend way too much time thinking about the US tax code.
. . .
The code runs for millions of words and for many of our best and brightest it has become a labyrinth. Their lives are spent inside it, routeing offshore cash flows or structuring financial products to lower tax rates."

We've taken a couple of words out of the middle of that for the sake of elegance, but it's a completely accurate reflection.

It is just not healthy for so many Americans to spend so much of their lives being so furtive, he says, But more importantly, what is happening is a giant brain drain from the productive economy into the destructive economy. And it's a global phenomenon.

Links May 23

France's Hollande: EU Savings Directive Will Be Adopted By Year-End Nasdaq
See also: EU Tackles Tax Evasion as Luxembourg Resists Speedy Pact Bloomberg, and Europe Pushes to Shed Stigma of a Tax Haven The New York Times, and Italy PM slams 'hypocrisy' over tax fraud

International Centre for Tax and Development hosts research meeting on Unitary Taxation
Report on the first meeting earlier this month of the research group on Unitary Taxation with Special Reference to Developing Countries, in which several TJN members/advisers are involved. Hat-tip Sol Picciotto

Companies could 'apportion profits within EU' BBC
Interview with Prem Sikka on unitary taxation

From Google to FedEx: The Incredible Vanishing Subsidiary The Wall Street Journal

Apple Tax Rate Ignores Profit Shifting Offshore Bloomberg
Tim Cook told Congress that Apple's tax rate was 30.5 percent. He ignored offshore profit-shifting: real rate was 14%

Republic of Ireland calls for international tax action BBC
Fox calls for action on henhouse security. See also: Ireland denies it’s a tax haven, which is the surest sign that it is one Tax Research UK, and Apple defends routing profits through Irish companies The Irish Times, and The world’s wealthy ‘could be hiding €707 billion in Ireland’ the journal

Yes, What Apple's Doing in Ireland May Well Be Legal -- and That's the Problem Citizens for Tax Justice

The Finance Curse, and an Insider View on Tax Havens L'Economique Politique (In French)
On new TJN book blogged earlier

Cabinet drafts unique law on dictators’ assets swissinfo

The trail leads to Austria Sueddeutsche Zeitung (In German)
More fallout from the ICIJ Offshore Leaks, a story of a top Austrian banker and shell companies. See also: Raiffeisen CEO Stepic under scrutiny for property deals Reuters

South Korean ‘paper companies’ found in tax haven the hankyoreh
More developments from the ICIJ investigation. See also CJ Group comfirmed to have made millions in illicit gains story involves slush funds, tax dodging, BVI and Hong Kong Shell companies and a contract killing; see also: Civil groups urge thorough probe into tax-haven users Yonhap News Agency

HSBC Client Avoids Prison for Hiding Offshore Accounts Bloomberg

The Finance curse - new TJN book

TJN this morning publishes a short new book entitled The Finance Curse: how oversized financial centres attack democracy and corrupt economies. It's an important new publication of ours, which we'll be referring back to on several occasions.

The book, co-authored by TJN's Director John Christensen and Nicholas Shaxson, is available for free here, in pdf format. It is also available on the Kindle e-reader, for a nominal fee, here.

This book emerges from our long-running work on tax havens, and differs from much of the work that we've done in the past. Our work on tax havens has generally focused on the global impact of tax havens or secrecy jurisdictions: that is, the impact that one haven has on the citizens of other countries, elsewhere. The Finance Curse, by contrast, looks at the domestic impacts of hosting an oversized financial centre. We find that finance is beneficial to an economy up to a point, but once it grows too large a range of harms start to emerge. Much of the damage, and the underlying processes at work, are similar to those found with a Resource Curse that afflicts many countries that are overly dependent on natural resources.

The graph here (click to enlarge it) provides a taster illustrating just one of many aspects of the issue. The press release is pasted below.

The Finance Curse

How oversized financial centres attack democracy and corrupt economies
A resource curse casts a shadow over certain mineral- and oil-rich nations damaging their economic growth and development.  Now a new e-book by Nicholas Shaxson, author of the acclaimed Treasure Islands, and John Christensen, Director of the Tax Justice Network, shows that countries with oversized financial services suffer similar fates.

As the resource curse stalks Nigeria, Angola and the Democratic Republic of Congo; so a finance curse has captured the UK, Cyprus and Jersey.

The new work argues oversized finance sectors harm their host countries by, among other things:

• weakening long term growth and development;
• acting like cuckoos crowding out productive, sustainable industrial sectors;
• exaggerating and routinely overstating their economic contribution to gain distorting tax subsidies, lax financial regulation and influence crucial political decisions;
   
• playing a key role in creating a “spider's web” of tax havens;
   
• capturing whole political systems, in some cases leading to authoritarianism; and
   
• generating and extracting unproductive and harmful economic ‘rents’.

For decades, the expansion of a country’s financial sector was widely thought to benefit its economy. But The Finance Curse presents the first comprehensive analysis of the many harms that flow from hosting oversized financial centres.

Symptoms of the Finance Curse
Despite the trillions flowing into and through the City of London and Wall Street, Britain and the U.S. perform worse in inequality, infant mortality and poverty than Germany, Sweden, Canada and most of their rich peers.

Several new studies from the IMF and Bank for International Settlements show when finance gets too big – such as when credit to the private sector reaches 100% of GDP or more – growth suffers. The U.S Ireland, the UK, Spain and Portugal and Cyprus, all hit hard by the financial crisis, were all close to or above 200%.

Claims that the UK’s finance sector contributes over £63bn in tax annually are wildly exaggerated and disingenuous. The true figure policymakers should reflect on is at most £20bn, and could be as low as £2.7bn.

Likewise, policymakers must disregard claims the UK finance sector employs two million people. The relevant figure is a fraction of that. Against these smaller gross ‘contributions’ are a host of tax losses, not only from the bailouts. The true net tax ‘contribution’ of  finance in the UK is negative.

The near total ‘capture’ of politics in small island states lead to authoritarian tendencies that aggressively scapegoat dissenters. The British tax haven of Jersey, as one former minister puts it, is run by a “gangster regime” and a “crypto-feudal oligarchy captured by the international offshore banking industry.” In the UK, critics of the City establishment are subtly ostracised, and financial law enforcement is strongly discouraged.

Finance has severely worsened imbalances between regions in Britain, with the “metropolitanisation of gains and the nationalisation of losses.” The financial lobby’s insistence on new transport infrastructure focused on London means more money is spent lengthening platforms at one London train station than on all the upgrades to Manchester’s rail network and the all-important link to Liverpool.

In Jersey, where finance makes up over 50% of GDP, finance has decimated other industrial sectors and dramatically increased inequality. House prices grew by a stunning 29% annually in the 25 years to 2010. In Cyprus, well over 40% of all student enrolments feed its tax haven sector.

In larger jurisdictions like Britain or the U.S these issues are clouded by background noise from large, complex democracies. But in small financial centres and tax havens like Jersey or the Cayman islands, the Finance Curse is much easier to understand because finance is more dominant, and the issues are easier to spot. Tax havens therefore carry strong lessons – and warnings – for Britain and the United States in particular.

As the well-remunerated finance sector recruits ever more graduates, in technical disciplines in the United States, there has been a steep decline in science, mathematics, engineering and technology – and a reduction in “entrepreneurial intentions” among skilled workers.

The “financialisation” of large parts of the British economy has undermined business stability, productivity and employment prospects for large sections of the workforce, creating an ever-deepening economic trap that will be hard to escape.

Quotes   

John Christensen, director of the Tax Justice Network, said:

"The economic collapse in Cyprus highlighted how the Finance Curse hollows out the domestic economy of small islands and corrupts their entire political systems.  I’ve seen exactly the same processes at work in my former home of Jersey.

Alarmingly, the City of London is having similar effects on Britain. The Finance Curse presents a clear and present danger to social and economic development."

Nicholas Shaxson, author of Treasure Islands, said:

"After spending 14 years living in and studying the Resource Curse in oil-rich countries in Africa, I was astonished to find the very same things happening in rich countries with big financial centres.

Having an oversized financial centre in your neighbourhood is a bit like striking oil. It may well bring lots of money. But it will bring huge problems. And the evidence is overwhelming: too much finance is bad for you. Britain, the United States and many other countries need to shrink their financial centres dramatically.

This goes way beyond the damage caused by the latest global financial and economic crisis. Once our politicians understand this, they will see that they can tax and regulate our financial sectors appropriately, with no loss of ‘competitiveness’ - even if other countries don't.

When the financiers cry: ‘We will run away to Geneva or Hong Kong’ then that is to be welcomed. For if they do so, the financial sector will shrink and many benefits are likely to ensue."

For further comments, please contact:
Nicholas Shaxson: +41 79 477 10 70 shaxson (at) gmail.com
John Christensen: + 44 (0) 7979 868 302 john (at) taxjustice.net
Nick Mathiason: +44 (0) 77 99 348 619 nmathiason (at) financialtaskforce.org

For Online News Media - free standalone Finance Curse Podcast
 
Finance Curse Podcast available for easy download free and reposting to accompany your Finance Curse web coverage here. Produced by the Tax Justice Network's @Naomi_Fowler

Podcast Summary
A big finance sector is good for an economy - isn't it? Actually, no.

In this Tax Justice Network podcast we discuss the Finance Curse - how an oversized financial sector can weaken growth, slow the economy, erode democracy, foster corruption and increase inequality. Produced by @Naomi_Fowler

For monthly Taxcasts go to www.tackletaxhavens.com/taxcast

Finance Curse Podcast

[i] Nicholas Shaxson is author of Poisoned Wells, a book about the Resource Curse based on 14 years’ research in West Africa; and also author of Treasure Islands, a book about tax havens and financial centres.

John Christensen is the former economic adviser to the British Crown Dependency of Jersey, a pre-eminent British tax haven. He is now the director of the Tax Justice Network.

ICTD hosts research meeting on Unitary Taxation

From the International Centre for Tax And Development (ICTD)

"On 2 and 3 May, the ICTD hosted the first meeting of its new research programme on Unitary Taxation of Transnational Corporations (TNCs).

This follows the ICTD's announcement to provide funding for the research programme for a 12-month period starting from April 2013. The programme has special focus on developing countries to ensure that recommendations to international tax rules also takes into account the needs of developing countries.

The meeting was attended by researchers and experts from the IMF Tax Policy Division, OECD’s Transfer Pricing section, UN Tax Committee, as well as civil society organisations, Christian Aid and ActionAid."

This research is being co-ordinated by Professor Sol Picciotto, author of a seminal TJN paper last December on Unitary Taxation.  

The research programme is outlined here, and the notes for the first coordination meeting are here. This will be added to our Transfer Pricing page.

Links May 22

What does it take to be an anti-corruption hero? Integrity Awards 2013 Transparency International

EU Tackles Tax Deal, Again The Wall Street Journal
"Leaders at Summit May Set Deadline for Tax Transparency Deal as Opposition Softens"

Google Joins Apple Avoiding Taxes With Stateless Income Bloomberg
See also: One Tax Loophole Apple's Tim Cook And Lawmakers Didn't Talk About Huffington Post, and Ireland: We’re Not Apple’s “Holy Grail of Tax Avoidance” All Things Digital

Russian roulette: Luxembourg new offshore hotspot, Cyprus abandoned RT

India, other FTA members to share 'offshore leaks' tax info Business Standard
On "The Forum on Tax Administration (FTA), during the last meeting in Moscow which saw participation of representatives from 45 nations"

South Korea: Online press unveils list of suspected tax evaders Yonhap News Agency

Greek Offshore Companies Audited Greek Reporter

Soccer: Monaco under fire over tax Team Talk
Monaco have this week launched legal action against the French football authorities following threats to refuse them admission to Ligue 1 in a simmering row over taxes.

Manager magazine: DAX 2500 companies have huge investments in tax havens TJN Germany Blog (In German)

UK: First, David Cameron should bring his own tax havens to book The Guardian

Jersey: Treasure island caught in the searchlight presseurop / El Pais
Cites TJN's Nicholas Shaxson “All the tax havens say the same thing ... They only pull out the OECD listings to try to show how clean they are."

Swiss banks facing huge fine over US assets Economic Times / AFP

France launches public inquiry into tax fraud scandal France 24

Renewed call for global crackdown on tax evasion and tax havens The Socialist International
Statement by SI president George Papandreou

G8 Opens Up to Your Community With G-everyone Meetups Mashable
Crowd-sourcing ideas for G8 leaders happening for 24 hours on June 10

Oxfam: Tax on $18.5 offshore trillions could end world poverty

From Oxfam International:

At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide, representing a loss of more than $156 billion in tax revenue, according to new figures published today by international agency Oxfam.
. . .
Oxfam has found that two-thirds of this global offshore wealth – more than $12 trillion – is hidden in EU related tax havens, such as Luxembourg, Andorra or Malta. These havens are facilitating the loss of over $100 billion in tax revenues worldwide. A third of offshore wealth is sitting in UK-linked tax havens where it is undeclared and untaxed."

 This research, which we haven't yet analysed in any great detail (although the overview of their methodology is on this link, we can't find the full report), is compatible with our widely publicised research last year, estimating that there are between $21 and 32 trillion sitting offshore, out of reach of tax (and other) authorities. Oxfam, like TJN, call theirs a conservative estimate.

There are other reasons why their (and our) estimates of taxes lost are conservative. Their estimate appears not to include various taxes including inheritance taxes, which in our experience is often among the most important or the most important consideration for wealthy people structuring their offshore tax affairs.

Today's blogger isn't quite sure how one calculates potential inheritance tax revenues -- comments welcome -- but one would have to consider average inheritance tax rates, and death rates and so on. Let's imagine an average offshore stash exists for 25 years in the hands of one owner before they die, and assume an average inheritance tax rate of 40%. That would work out as the equivalent of a one percent annual wealth tax on the value of the assets.

So take Oxfam's $18.5 trillion, take one percent of that to get $185 billion - and we are looking at double Oxfam's estimates for the tax losses.  And then there are (in some countries) wealth taxes, and more.

The headline of the Oxfam's press release is: "Tax on the “private” billions now stashed away in havens enough to end extreme world poverty twice over." Add in inheritance taxes, and you would, on this hasty back of the envelope calculation, make that "four times over."

TJN beats OECD, Big 4 to be voted leading force in global transfer pricing

From International Tax Review:



Wowsers. It's not often that we get to defeat the massed pinstripe ranks of the Big Four accountany firms in open combat. It comes with all the usual provisos about the representativeness of online polls, but still.

This result, ITR says, is because of our unitary tax campaign, spearheaded by Professor Sol Picciotto, which is behind the result. ITR continued:

"This year's poll acknowledged that not everyone agrees with the concept of unitary taxation, but the campaign is strong all the same."

Links May 21

The seven craziest findings in the US investigation of Apple’s tax avoidance practices Quartz

See also: Apple Holds Billions of Dollars in Foreign Tax Havens Citizens for Tax Justice, and Apple’s Web of Tax Shelters Saved It Billions, Panel Finds NY Times

Google faces new pressure over tax claims The Guardian

Gloves coming off in row over taxes Irish Independent

Luxembourg versus Ireland: tax havens competing to be more rotten than each other Treasure Islands

EU tax: Barroso urges full automatic exchange of data BBC

Clock ticks on Swiss banking secrecy BBC

Global Witness calls on Shell to drop support for anti-transparency lawsuit
Global Witness is attending Shell’s AGM in The Hague to ask the company to drop its support for a lawsuit that aims to kill off vital a U.S. transparency law - the Dodd-Frank Act.

Anonymous companies: A Global Witness briefing

Argentina: Homeless people were used to launder $ 36 M and create shell companies infobae (In Spanish)
Hat tip: Jorge Gaggero

Multinational CEOs tell UK Prime Minister David Cameron to rein in tax avoidance rhetoric Guardian

U.S.: Pritzker-as-Romney Reverses Parties on Offshore Havens: Taxes Bloomberg Businessweek
"Republicans defended Mitt Romney against criticism from Democrats that he avoided taxes by keeping money stashed overseas. Those roles are now reversed with the disclosure that President Barack Obama’s pick to run the Commerce Department does the same thing."

Banks Win Big as Regulators Refuse to Rein in $700 Trillion Derivatives Market The Real News
Bill Black: Weakness of financial regulators shows you can not "tame the scorpion"

“Who Is Too Big to Fail: Are Large Financial Institutions Immune from Federal Prosecution?”  United States House of Representatives, Committee on Financial Services
Committee Memorandum for the Hearing on Wed 22 May

Transparency International: EU leaders must end financial secrecy

Transparency International EU have issued an important statement:

EU leaders must end financial secrecy

In three steps, the European Council can end financial secrecy and take decisive action on corruption and tax evasio

Brussels, 21 May 2013 – EU leaders meeting tomorrow have an opportunity to end the financial secrecy that facilitates corruption and tax evasion. As many cases of proven corruption have shown, anonymous shell companies and other opaque legal structures based in secrecy jurisdictions are the favoured vehicles to hide illicit financial gain. Finding out who ultimately profits from these legal structures - the question of beneficial ownership - is central to efforts to close down this avenue for ill-gotten gain.

Building on recent international developments, EU Member States can help stop the flow of corrupt funds with three simple steps:

• Unanimously agree to the proposed reforms of the EU Savings Tax Directive [1]. The proposed reforms would address major loopholes in the legislation, for example by obliging trustees and directors of shell companies to collect and transmit information on the beneficial owners of these legal entities. 

• Agree that automatic exchange of financial information should be the global ‘gold standard’. Corruption and tax evasion are not just problems in the EU. Developing countries suffered $586 billion per year in illicit outflows in the first decade of this century [2]. EU leaders should recognise their obligations to citizens in the developing world by committing to a global, multilateral system for the automatic exchange of financial information, based on the model that 10 EU countries have agreed to pilot [3]. EU legislation should also reflect this commitment. 

• Agree to mandatory public registers of beneficial owners. To help banks and other financial institutions do their work properly, EU leaders should agree to revisions of EU anti-money laundering legislation that would require Member States to establish and update public registers of beneficial owners of companies and other legal entities. Today, information on beneficial ownership is provided by business registers in only four EU Member States (Estonia, Italy, Romania & Slovenia).

“At a time when citizens are going through the toughest economic crisis in years, EU leaders have an opportunity to clamp down on illicit financial flows”, said Carl Dolan, Senior EU Policy Officer at the Transparency International EU Office. “Effective action has been prevented before by Member States putting narrow national interests before doing the right thing. It is time to end the squabbling over perceived competitive advantage and recognise that by facilitating corruption everyone loses”.

Transparency International has also demanded action from G8 and G20 governments against financial secrecy in order to prevent corruption and illicit financial flows.

[end]
 
Notes to editors:
[1] The 2003 Savings Tax Directive requires EU Member States (as well as Andorra, Liechtenstein, Monaco, San Marino and Switzerland) to automatically exchange information on bank accounts held by residents of these countries. Exemptions were granted to Belgium, Luxembourg and Austria. Proposed amendments to the Directive would require banks and other financial institutions to establish whether the beneficial owner of certain entities or legal arrangements established in secrecy jurisdictions are EU residents or residents of the participating countries. It would also require legal entities such as companies and trusts to automatically transmit information about their beneficial owners to competent authorities in EU member states. The amendments also address loopholes relating to the beneficial owners of certain financial instruments such as investment funds.

[2] A report by Global Financial Integrity has estimated that developing countries lost at least $586 billion per year in illicit outflows between 2001 and 2010.

[3] In April 2013, Belgium, Czech Republic, France, Germany, Italy, Netherlands, Poland, Romania, Spain and UK agreed to a pilot multinational initiative for reciprocal exchange of tax information. The pilot initiative will be based on a model agreed with the U.S. government following the passage of the Foreign Account Tax Compliance Act (FATCA). FATCA requires non-US financial institutions to report directly to the Inland Revenue Service (IRS) information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.



Media Contacts:

Carl Dolan, Senior EU Policy Officer (Private Sector Policies)
T: +32 (0)2 23 58 603
M: +32 (0)488 563 435
E: Brussels@transparency.org

Benjamin NorsworthyEU Policy Officer (Anti-Money Laundering)
T: +32 (0) 2 23 58 645
E: bnorsworthy@transparency.org

Stand with Kenyans for tax justice

Kenya’s poorest are about to be hit with a staggering 16% tax increase on basic goods, while large corporations enjoy huge tax breaks that only benefit the richest.

Kenya loses over US$ 1.1 billion a year from tax incentives, avoidance and exemptions,^[1] more than the total budget for health and sanitation. But rather than crack down on corporate tax cheats, the government is proposing this huge increase tax on basic commodities like maize flour (Unga), bread and milk.
To make matters worse, talks have recently come to light between the City of London and the government, aimed at modelling Kenya’s financial system on the City: Tax Haven Capital of the World ^[2]. This is a worrying signal of the future direction of the country. People in Kenya know this, and are mobilising to reject the ‘Unga tax’ and demand a fairer, transparent tax system that drives development for everyone. They need your support.

Will you sign now and help stop the attack on Kenya’s poorest?

Thousands of people in Kenya are coming together to protest this outrageous new tax. Stand with us in solidarity by signing this petition. The petition will be delivered to the Kenyan government.
Everyone in Kenya wants the country to develop as fast as it can; inequality and poverty are far too high. But if the new Kenyan government does this by copying the values and model of the Tax Haven Capital of the World, they will be handing over power, and the country’s future prosperity, to the global financial elite. Even the IMF says tax havens, and the system of tax avoidance and theft undermine development ^[3]. Kenya’s future can be built on the strengths and ingenuity of all of its people, not the secrecy and greed of the City of London.
Call on Kenya’s parliament to make Kenya truly the pride of Africa, setting an example of tax justice, rather than financial greed.

Stand with Kenyan citizens to fight for tax justice.  

In hope,

/The Rules Team

Notes:

[1]http://www.gfintegrity.org/index.php?option=com_content&task=view&id=149&Itemid=70

[2] http://allafrica.com/stories/201303080621.html?page=2

[3] IMF (2006): ‘Kenya, Uganda and the United Republic of Tanzania: Selected Issues’, 1, p.11

Big 4 accountancy firms: a truly shocking statistic

From Prem Sikka:

Anyone looking at the websites of accountancy firms will see claims of ethics, integrity, and a burning desire to serve the public interest and uphold the law. Yet, following a briefing from a former PwC insider the PAC chairperson said (see page Ev4) that the firm “will approve a tax product if there is a 25% chance – a one-in-four chance – of it being upheld. That means that you are offering schemes to your clients where you have judged there is a 75% risk of it then being deemed unlawful”.

Our emphasis added.

That is quite appalling.

Partners from other firms claimed their threshholds were 50%, which is almost as bad.

"The firms know that in the age of austerity the tax authorities will never have sufficient resources to challenge them."

In the United States, Ernst & Young paid a fine of $123 million to the US tax authorities to resolve allegations of tax fraud; KPMG paid a fine of $456 million after admitting “criminal wrongdoing” over the sale of avoidance schemes and a number of its former personnel also received prison sentences. But in Britain:

"A large number of tax avoidance schemes have been declared illegal by the UK courts. The UK Ministers have referred to the schemes marketed by the big accountancy firms as “blatantly abusive avoidance scams”, but this has not been followed up with any investigation, inquiry, prosecutions or fines. No accountancy firms has ever been fined or disciplined by its professional body for selling unlawful tax avoidance schemes. In fact, there are no negative consequences for the designers of such schemes."

The rule of law, and the economy, is being progressively undermined and subverted by some of the best-paid people in the country. It's time to throw the book at them.

Links May 20

Fury at corporate tax avoidance leads to call for a global response The Guardian

Tax avoidance: how to change corporate behaviour The Guardian

UK: Cameron Urges On Crown Dependencies Over Tax Info Exchange Tax-News
"There is no point in dealing with tax evasion in one country if the problem is simply displaced to another," David Cameron has claimed in a letter. Which, as we just noted, is an unfortunate choice of words.

High Marginal Tax Rates are Associated with High GDP Growth, Angry Bear Blog

U.S.: Apple, Senate Panel Gear Up for an Offshore Tax Showdown Industry Week

Report: Tranparency and Accountability in Africa's Extractive Industries - The Role of the Legislature  National Democratic Institute


East Africa’s mineral paradox: Want among plenty The East African

Luxembourg vs: Ireland: competing to be more rotten than each other Treasure Islands

Nigeria: Federal Government Decries Tax Evasion By Companies allAfrica
Business in the Democratic Republic of Congo: Murky minerals The Economist

Argentina mulls opening its banks to money launderers Quartz

Monaco go to French courts to contest ruling forcing them to pay tax The Guardian

Swiss Minister says end to US tax dispute in sight Swissinfo.

Senior Venezuelan bank official stole funds via Swiss acounts: FBI The Local

Swiss banks are not suspicious enough Le Temps (In French - subscription)

Is EVERY market rigged? The Big Picture

UK Prime Minister writes to British tax havens. How serious is he?

Today Britain's Prime Minister wrote to the UK's Crown Dependencies and Overseas Territories, reading them the riot act - sort of.

Headline summary from us: this contains much that is positive. But the devil and devilry will lie in the detail. This follows on from a blog we wrote recently entitled Will the UK's tax haven agreements be an exercise in missing the point?

Here are a few take-outs from the letter, dealt with in order.

"I respect your right to be lower tax jurisdictions. I believe passionately in lower taxes as a vital driver of growth and prosperity for all."

This raises several questions. First, whatever happens on transparency, these jurisdictions' zero-tax status create gigantic opportunities for global abuse, from transfer pricing shenanigans to offshore trusts. So there is a massive lack of coherence here, right from the get-go. Second, Cameron believes in lower taxes. But lower than what? In the case of the tax havens, he cannot mean lower than zero. So what is he talking about here? Second, why does he think that 'lower taxes' are a driver of growth and prosperity. Where, exactly, is the evidence?

Next:

"There is no point in dealing with tax evasion in one country if the problem is simply displaced to another."

On the face of it, this is a nonsense argument. Defenders of the status quo often say that cracking down is like squeezing a balloon: activity is displaced elsewhere, while the volume of the balloon stays unchanged. Cameron's words "there is no point" seem to lie firmly in this belief system. But that isn't at all how things work in the real world. It's more like squeezing a sponge: you squeeze in one place, and you catch some and you lose some. Tax evaders, deprived of the easy options, will go to more exotic, risky and difficult locations. Many won't go to the trouble, and they will instead choose to obey the law. That's imperfect, but it's called progress. Still, Cameron's point that greater international cooperation and coherence here makes it easier for everyone is a good one.

Next:

"We also need to ensure information exchange works effectively for all, particularly the poorest countries in the world. That is why we strongly support the Multilateral Convention on Mutual Assistance in Tax Matters. I know many of you have been considering joining and I ask you all to commit to do so in the run-up to the G8 Summit."

That's good, as far as it goes. As is this one:

"I very much welcome the commitments you have made to automatic tax information exchange, both on a bilateral and multilateral basis."

Yes, and this is good to see. Though one question that this begs is: just how 'multilateral' will this be? Will this only help rich countries, or will it be rolled out to those vulnerable countries that need it most? What will be the position inside Europe on the EU Savings Tax Directive? This is the opportunity to put into place the improvements, the amendments to the Directive, and hopefully this week Luxembourg and Austria will be called to account on this by European leaders. It's too early to tell, but this important recent paper from Itai Grinberg plays a crucial role in addressing these questions.

Next:

"Dealing with tax evasion is not just about exchanging information. It is also about improving the quality and accuracy of that information. Put simply, that means we need to know who really owns and controls each and every company. This goes right to the heart of the ambition of Britain’s G8 to knock down the walls of company secrecy.
. . .
[Tax havens' action plans on beneficial ownership] will need to provide for fully resourced and properly managed centralised registries, that are freely available to law enforcement and tax collectors, and contain full and accurate details on the true ownership and control of every company.

Now that stuff in bold is very good to see. We like it, as far as it goes - but a reminder from Robert Palmer of Global Witness.

"It's only really meaningful if accompanied by transparency eg open registries of beneficial ownership of companies & *trusts*"

Even this does still, however, beg a number of questions.

First, why only companies? These are important, for sure, but what about trusts? These are a gargantuan part of the British offshore system, and there's nothing specific about them. (Very often, trusts are higher up the ownership tree than companies: the companies are typically owned by a trust.) An earlier statement only said information exchange "also includes information on certain accounts held by entities, such as trusts" - which, as we blogged recently, raises all sorts of other questions.

Second, which countries' law enforcement agencies will get access to to these registries? Will it only be those rich countries with sufficient political muscle to be able to intimidate the small tax havens into shaping up? Or will the books be opened to, say, Tanzania's tax authorities? Will it be possible for them to search the registries for evidence of what their citizens are up to, without having to find the evidence first? Or will information from these registries be available only once you have the smoking gun on a particular criminal or taxpayer? Who will police this, and make sure that tax havens don't make a business model out of 'accidentally' failing to do the proper due diligence?

Third, what about 'ownerless' assets - such as those held in discretionary trusts or Liechtenstein foundations? How will they be tackled?

We're not saying that this statement doesn't reflect progress: it does, albeit from a pathetically low base. But we know from long experience that tax havens' core business models involve the creation of loopholes - and how serious is the UK government in ensuring that the loopholes are plugged?

Questions, questions.

Independent Scotland open to Cyprus-style bank risks, says Britain

May 20: updated with further details

From Reuters:

"An independent Scotland would have a vastly oversized financial sector that would leave it vulnerable to a Cyprus-style banking crisis, Britain's finance ministry says.

And from the Wall St. Journal:

"In an analysis paper, the third in a series the U.K. government is releasing ahead of the independence referendum, the treasury estimated that an independent Scotland would have banking assets worth more than 1,250% of Scottish gross domestic product.

The scale of Scotland's banking assets dwarfs those of Iceland and Cyprus, which had banking assets around 880% of GDP and 800% of GDP respectively. Both countries suffered severe financial problems due in part to the disproportionate size of their banking sectors.

"The experience of financial crises shows that countries with a large banking sector compared to the size of their GDP are significantly more vulnerable," the report says."

Wow. To us, that huge 1,250% number screams "tax haven" and, as our recent blogging on Cyprus reminds us, "captured state". We will have a whole lot more on that kind of vulnerability very soon.

And as the example of Luxembourg shows us today, tax havens aren't the kinds of places that tend to be trustworthy when it comes to relying on them to step in when things get out of hand. More from the Reuters Scotland story:

"The Treasury report will say any future bank rescues would place a heavy burden on Scottish taxpayers, and could generate concerns about state finances that might discourage firms from basing their operations there."

Now, from the UK Treasury, we can provide an update with more details, including the following:

• the total support provided to RBS in 2008 would have been the equivalent of 211 per cent of Scotland’s GDP.
• The Scottish banking sector would be extremely large in the event of independence. It currently stands at around 1254 per cent of Scotland’s GDP
• "Overall, the experience of financial crises shows that countries with a large banking sector compared to the size of their GDP are significantly more vulnerable."

Indeed. We don't take a particular general view on whether Scotland should become independent - that's a matter for voters to decide - but we do definitely take a view on countries that have disproportionately large financial sectors: they always end up adopting the 'captured state' and 'tax haven' model of development. And so we take this particular Treasury report quite seriously.  

Tax and the Civilised Society: Action Day in London, June 8

Tax and the Civilised Society
Saturday 8th June, London, 10.30am-5.30pm

The Tax Justice Network and Tipping Point Film Fund are jointly organising a day of activity in London on Saturday 8th June designed to engage all those – public and campaigners alike – who would like to know more about why tax matters to society and therefore the need  to intensify the spotlight on tax avoidance. The day will include two film screenings with panel discussions, a ‘revelatory’ walking tour of the City of London and a great list of contributors to the day’s events.

PROGRAMME OF EVENTS – SATURDAY 8TH JUNE

10.30am-12.20pm St Ethelberga’s Centre, 78 Bishopsgate, London EC2N 4AG
Tax and the Global Good

Film: ‘We’re Not Broke’. (80 mins)
Award-winning director-producer team Karin Hayes and Victoria Bruce tell the story of how U.S. corporations have been able to hide over a trillion dollars from Uncle Sam, and how seven fed-up Americans from across the country, take their frustration to the streets [Screening in the beautiful Nave of the Church].   Trailer here

Panel Discussion: tax avoidance, evasion and impact on global south.

Speakers: Nick Dearden, Jubilee Debt Campaign; Liz Nelson, Tax Justice Network, Pablo Navarette, film-maker and founder of Alborada, a website covering Latin America related issues; and Tom Pursey, activist and founder member of UK Uncut. Chaired by TPFF

Special Thanks to St Ethelberga’s Centre for their hosting of this event

12.45-2.15pm The City of London (as you’ve never seen it): A walking tour into the financial heart of darkness [Please arrive 12.30 for 12.45 start. Come to Bank Station, Exit 3 and cross to our meeting place: The Royal Exchange]

Locations: Bank of England, Mansion House,  HSBC Corporate Banking Centre, Goldman Sachs and TheCityUK (advocates for UK financial services industry).

Speakers: Lord Maurice Glasman, John Christensen (Tax Justice Network), Nick Mathiason (investigative journalist), Robert Palmer (Global Witness); John Hilary (War on Want) . Learn some interesting, perhaps less well known, facts and information about the operations and activities of these major players.

3pm-5.30pm Ken Loach’s ‘Spirit of 45′ & panel discussion at the Barbican

Film: Ken Loach’s ‘Spirit of 45’ shows how the post-war Attlee government undertook the most extensive and radical overhaul of industry and public services, despite the economy being in dire straits. The ‘Spirit of 45’ legacy lives on in the NHS, but it and many other public services are under attack;  the divide between the rich and the rest, has become greater; and the nation’s political and financial power resides again, within a very small circle of decision-makers.   So what stands in the way of reviving the ‘common good?’ And how do we pay for it?  Trailer here http://www.thespiritof45.com/Watch-The-Trailer

Panel Discussion: The ‘Spirit of 45’ – reviving the ‘common good’ and how to pay for

Charity is a cold grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim’. Clement Attlee, 1920.

The ever growing public awareness of the tax avoidance and evasion issue is central to how we put ‘austerity’ in context and challenge the prevailing orthodoxy that there is ‘no money’ available to protect public services and the most vulnerable in our society.  Can we achieve a more equitable society without tax ‘justice’?

Speakers: John Hilary, War on Want (Chair); John Christensen (Tax Justice Network); Polly Courtney (author Golden Handcuffs, a biting semi-autobiographical exposé on life in the Square Mile and a regular commentator in the press as well the BBC and Channel 4 News); Jeremy Hardy (TBC)

Special thanks to Dogwoof and the Barbican.

We hope there is something here to whet your appetite and that we’ll see you at one or more of the events on the day!

Booking Information:

1. The morning film & discussion ‘We’re Not Broke’ at St Ethelberga’s is free of charge.
To reserve, please email info@tippingpointfilmfund.com Email subject:  RSVP St Ethelbergas

2. The lunchtime walk in the City of London is free of charge.
To reserve, please email info@tippingpointfilmfund.com Email subject  RSVP City Walk

3. The afternoon screening & panel discussion, Ken Loach’s Spirit of 45 at the Barbican is ticketed and can be booked directly at the Barbican Box Office.

Do feel free to join us for one, two or all three events!
Best wishes,

TPFF and TJN

For more information please email either:
Deborah@tippingpointfilmfund.com
Liz@taxjustice.net

www.tippingpointfilmfund.com
www.taxjustice.net

Links May 17

Tax evasion declaration backed The Guernsey Press
'Finance ministers from 17 EU countries have backed a declaration calling for global action to counter tax evasion. They signed a joint statement at talks in Brussels warning that only a comprehensive worldwide system of exchanging tax information between national authorities will beat corporate tax dodgers. “Tax evasion is a global problem and we should look for a global solution, otherwise the problem is simply displaced,” said the statement.'

Communiqué from 8th Meeting of the Forum on Tax Administration, 16-17 May 2013, Moscow OECD
Disappointingly, calls for automatic information exchange within existing treaties instead of demanding a multilateral platform.

EU finance ministers talk tough on tax evasion, but agree on little Eurodad

ECOFIN Agrees On Savings Tax Directive Tax-News

Liechtenstein open to bank data exchange talks with EU Reuters
"We have signalled that we are ready for talks although we can't conceal that automatic exchange of information is not our favourite solution," Liechtenstein's new Prime Minister Adrian Hasler told Reuters in an interview in the capital Vaduz.

Luxembourg PM downplays swift tax evasion deal BloombergBusinessweek

Tax Haven Germany TJN Germany Blog

Massive failure by Cypriot banks on ‘dirty money’ Cyprus Mail
Deloitte said that 70 per cent of “the most complex ownership structures” have nominee shareholders and an average of three layers between the customer and beneficial owner.

Inter-American Development Bank: Latin American Tax Reform Needed The Latin Times

UK, U.S. and Australia investigating tax evaders from the 'offshore leaks' scandal TJN Latin America and Caribbean (In Spanish)

The great tax charade: Amazon plays the system while businesses like ours suffer The Independent
UK Independent bookstore owners write about their campaign against Amazon.

After Google, Amazon to be grilled on UK tax presence Reuters

Apple CEO Tim Cook to propose tax overhaul The Washington Post

Stash your cash in Switzerland? US and Europe push to make it harder. Yahoo News
Includes an overview of the Falciani affair.

Vatican Bank To Begin Publishing Annual Financial Reports Economy Watch

U.S.: Senator Rand Paul's Fight for Offshore Tax Havens Citizens for Tax Justice

Resource Governance Index Revenue Watch Institute
80% of countries fail to achieve good governance in their extractive sectors. Note remarks on the way forward.

Bitcoin exchange shut in online money-laundering crackdown Independent

Bermuda moves up to second in offshore deal volume The Royal Gazette

Austerity and growth: how is it going? Treasure Islands