Alter Planet

Press Release from the FACT Coalition:

Washington – With corporate tax rates at their lowest point in decades courtesy of legal tax loopholes, Senators Carl Levin (D-MI) and Kent Conrad (D-ND) have introduced a comprehensive bill to permanently close them and keep much-needed jobs and revenues here in the U.S.

The Cut Unjustified Tax Loopholes Act or ‘‘CUT Loopholes Act,” would put new restrictions on the use of offshore tax havens to avoid and evade federal taxes as well as close other corporate tax loopholes. The bill would address some key offshore tax loopholes by:

• Taxing foreign corporations that primarily do business in the U.S. as domestic corporations;
• Greatly reducing the tax incentives for corporations to move operations and profits offshore;
• Requiring annual country-by-country reporting by SEC-registered corporations related to their employees, sales, purchases, financing arrangements, and taxes; and,
• Increasing reporting requirements for foreign banks and U.S. taxpayers on offshore accounts.

The bill would also close the loophole whereby taxpayers subsidize stock options for corporate executives.

For a full summary of the bill click here.

The CUT Loopholes Act is supported by the Financial Accountability and Corporate Transparency (FACT) coalition, which includes a broad range of small business, faith-based, labor union, anti-corruption, government transparency, tax policy and public interest organizations.

The Joint Committee on Taxation and the Office of Management & Budget estimate that the bill would result in an additional $155 billion in revenue over 10 years.

“This bill would assure that big corporations are no longer able to use loopholes to avoid taxes that small businesses have to pay. It would stop the awful practice of rewarding multinational companies that offshore profits and jobs over those who create jobs and invest in communities across America," said Scott Klinger, Director of Tax Policy for Business for Shared Prosperity.

The bill addresses many of the loopholes that provide an advantage to individuals and corporations with the ability to take advantage of offshore accounts. Some key figures driving support for this bill include:

• 12%: average corporate tax rate according to the Congressional Budget Office, far from the statutory rate of 35%;
• 87%: those individuals surveyed in the Des Moines Register’s Iowa Caucus poll who said corporate tax loopholes should be closed so that every U.S. business pays some taxes;
• 91%: small businesses surveyed in an independent poll that agree that U.S. multinational corporations’ use of accounting loopholes to shift their U.S. profits to their offshore subsidiaries to avoid taxes is a problem, and
• $100 billion: revenues lost each year due to tax haven use according to the Senate’s Permanent Subcommittee on Investigations.

“As long as these loopholes exist, taxpayers will continue to pick up the tab for large corporations that clearly do not need our help,” adds Nicole Tichon, Director of Tax Justice Network USA and a founder of the FACT coalition.

###

For more information on the FACT coalition and its members, click here.

For a FACT sheet on tax haven abuse by the numbers, click here. For a comprehensive report on corporate tax dodging by Citizen's for Tax Justice, click here.
CONTACT: Nicole TichonExecutive DirectorTax Justice Network USAnicole@tjn-usa.org202-758-9552
CONTACT: Rebecca WilkinsSenior Counsel, Federal Tax PolicyCitizens for Tax Justicerwilkins@ctj.org202-299-1066 x 32

A Fair Tax Summit will take place March 29 and 30, 2012 at the Lord Elgin Hotel, in Ottawa. The conference aims to build a movement for progressive taxation in order to protect social programs and build a better Canada.

Canadians for Tax Fairness is organizing this conference for activists, researchers, labour and NGO leaders, students, environment group members, beneficiaries of social programs, journalists and elected officials in collaboration with the following co-sponsors: Canadian Labour Congress, Canadian Centre for Policy Alternatives, National Union of Public and General Employees, KAIROS, Citizens for Public Justice, Halifax Initiative, Inter Pares, and Canadian Health Coalition. (We expect more organizations to join us.)

The goals of the conference include:

• facilitating a sharing of research and learnings from the experience of campaigns in other countries;
• clarifying choices and policy options and developing a common platform for action on fair taxes; and,
• developing public education, advocacy and action campaign plans including figuring out how best to communicate our message.

Simultaneous interpretation will be provided in French and English.

The program includes workshops on:

• Fair taxes and the environment
• Making taxes more progressive
• How to make corporations pay for all the services they get
• Getting value for your money
• Reforming municipal taxes
• How the tax system could help to reduce poverty and inequality,
• Tackling tax havens, and
• Provincial tax fairness campaigning.

​Plenary sessions include:

• Tax cutting and austerity budgets or tax fairness and better government services and social programs? The political and economic context for fair tax campaigning.
• Framing the tax debate
• Beyond our borders, learning from global tax justice campaigns
• A call to action

​ The key note address will be by Linda McQuaig, well known author and journalist, who has most recently co-authored with Neil Brooks the best selling book, The Trouble with Billionaires. She will speak about Building a Better Canada.

Other confirmed speakers include:

• John Christensen, Tax Justice Network International, UK
• Alvin Sindiga Mosioma, Tax Justice Network - Africa
• Neil Brooks, Professor, Osgoode Law School, York University
• Armine Yalnizyan, Canadian Centre for Policy Alternatives
• Toby Sanger, Canadian Union of Public Employees
• Andrew Jackson, Canadian Labour Congress
• Alain Deneault, Échec aux paradis fiscaux
• Sheila Block, Wellesley Institute
• Trish Hennessey, CCPA
• Nicole Tichon, Tax Justice Network USA
• Shannon Daub, CCPA BC Office
• Laurel Rothman, Campaign 2000
• Marc Lee, CCPA BC Office
• Kathleen Lahey, Queen's University Faculty of Law
• Nadia Lévesque, Public Service Union of Quebec

The event fees for the Fair Tax Summit are:

Regular (sponsored by an organization)$ 175.00Individual or small organization$ 75.00Student or unwaged$ 25.00

The conference will be held at the Lord Elgin Hotel in Ottawa. A block of rooms is being held at a special discounted rate of $144 a night.

The conference will be limited to 150 participants so register early to be sure to get a spot.

For more information contact Sofia Samper at: sofia.samper@taxfairness.ca

Unsafe haven? New IFC tax haven policy questioned Bretton Woods Project
Feb 8 - Guest analysis by María José Romero, LATINDADD, on a new report that "finds widespread use of tax havens by clients of the World Bank’s private sector arm, the International Finance Corporation (IFC), while the new Bank policy is criticised for having major loopholes." Hat tip: Juan O'Farrell.

See also:
The World Bank and extractives: a rich seam of controversy Bretton Woods Project
Feb 7 - "As World Bank projects fail to reduce corruption in the mining sector in the Democratic Republic of Congo (DRC), International Finance Corporation (IFC) investments in extractive industries are provoking complaints and protests around the world."

Oil companies lobby for less transparency as Global Witness exposes the need for more Global Witness
Feb 8 - See the press release and read the report. "Despite ‘big oil’ calling for a global ‘level playing field’, it appears to be fervently undermining efforts to create just that – a new global standard for transparency of revenue payments."

Philippines: Taxing Corruption BusinessWorld
Feb 9 - "The term "ill-gotten wealth" has again become a buzzword in the recent days mainly due to the ongoing impeachment proceedings against the Chief Justice..."

Ghana Sets Up Team To Review, Re-Negotiate Agreements With Mining Firms Borneo Post
Feb 2 - “Given that the country’s mining sector consists mostly of gold mines, one would have expected a higher fiscal take by the government. Unfortunately, the phenomenal increase in gold price has not sufficiently benefited the people of Ghana.” Hat tip: Sandra Kidwingira.

Strengthening Sierra Leone’s revenue mobilization efforts for the good of its people Cocorioko
Feb 2 - "Another institution that also needs public support insofar as Sierra Leone’s development could be discussed is the National Revenue Authority. Not only public support ... the NRA should be constantly watched with close eyes by the government, because it is the life blood of the nation and no government will want to toy with that."

How to do business offshore in Mauritius The South African
Jan 31 - On new legislation that has " long been awaited by professionals in the funds industry ... General Partners have the ability to manage operations from locations other than Mauritius ... a Mauritian LP may hold a global business licence and may elect to be taxed in Mauritius and thus take advantage of the Mauritius tax treaty benefits."

United tax evasion defences start to crumble swissinfo
Feb 5 - “Most net new money growth has been generated in Asia and Latin America. Growth has been flat or slightly negative in Europe and the US.” As TJN asserts, global cooperation is crucial to redress tax injustice.

UK: Liechtenstein tax amnesty extended Financial Times
Feb 7 - The amnesty for UK tax dodgers for previously undeclared assets held in Liechtenstein has been extended for another year. Apparently, some "investors" have been sitting on the fence while waiting to see what happens with the shabby Swiss tax deal. Hat tip: Markus Meinzer.

Swiss Bank Wegelin Charged in U.S. With Aiding Tax Evasion Bloomberg Businessweek
Feb 8 - An update on this case linked several times recently. Note: "Prosecutors said that Wegelin and the three bankers wooed U.S. clients fleeing UBS AG, the largest Swiss bank."

UBS Employee Tax-Evasion Probe Dropped by German Prosecutors Bloomberg Businessweek
Feb 8 - "German prosecutors dropped a probe into three employees at UBS AG, Switzerland’s biggest bank, over allegations they helped clients evade taxes by hiding money in Switzerland."

Police raids highlight Italy's fight against tax evasion Reuters
Feb 6 - "The two-man workshop close to the Vatican had been busy when tax police raided it last week, seizing about a million religious articles and souvenirs ranging from rosaries to images of Pope John Paul II ..."

We don't have time to do this justice right now - but we will do when we have some time. This joint statement from the UK Treasury is a corker:
the United States, France, Germany, Italy, Spain and the United Kingdom wish to intensify their co-operation in combating international tax evasion.What do they envisage?
"An intergovernmental approach to FATCA implementation . . . the United States, France, Germany, Italy, Spain and the United Kingdom have agreed to explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange and based on existing bilateral tax treaties."We have written a fair bit about FATCA in the past - it's a major transparency initiative spearheaded by the U.S. We need to analyse the statement, and other things that have been happening with FATCA today (e.g. see here and here and here); we'll write more about this in due course.

Hat tip: David McNair

When the G20 signed the Convention on Mutual Administrative Assistance in Tax Matters in November 2011, amid great fanfare, the OECD, a club of wealthy countries, set out to promote it as the 'gold standard' of international tax cooperation. As is often the case (see here or here), the OECD's viewpoint is not quite the full story. While the Convention definitely provides various positive things -- most importantly a tacit assertion that automatic information exchange must be part of effective information exchange -- it also includes clear downsides.

Taken together, our fresh analysis provides no clear black or white recommendation to any interested party as to whether or not it is a good idea to push for and ratify this Convention.

The introduction notes:
4. The Convention embodies various legal improvements over Tax Information Exchange Agreements (TIEAs). Its multilateral nature is an important improvement over the bilateral processes that dominate the field of cross-border information exchange. It is also much broader than TIEAs: it provides differing mechanisms for exchanging information (‘on request’, ‘spontaneous’ and ‘automatic’ information exchange) and allows for joint tax audits of multinational corporations. This may be particularly useful for developing countries struggling to untangle complex multi-jurisdictional tax structures.

5. The Convention nonetheless has major weaknesses: secrecy jurisdictions face little or no incentive to adhere to it, and it is unclear whether the Convention will require secrecy jurisdictions to obtain the information that needs to be exchanged. Current signatories (let alone those that have actually ratified it; see Annex A) exclude secrecy jurisdictions such as Switzerland, Luxembourg and the Cayman Islands. In addition, there are no mechanisms for assessing how well the Convention is performing in practice*, and consequently no evidence as to how well it performs.

These risks are particularly relevant for developing countries deciding whether to commit scarce resources to it. Furthermore, unlike recent guidance issued by the UN, there is no provision to allow wealthier countries to bear more of the costs involved in complying with the Convention. The Convention also fails to refer to the UN as an appropriate forum for advancing international tax cooperation and instead jealously guards this role for the OECD and for parties to the Convention.Read more here.

This paper will be permanently available on our "Information Exchange" webpage and on our "Briefing Papers" page.

The drafting of this briefing was a team effort and the author wishes to thank Eurodad, Martin Hearson (Action Aid), Sarah Knott, David McNair (Christian Aid), Sol Picciotto, Nicholas Shaxson, and David Spencer for valuable contributions.

* Such a mechanism is hardly ever available in the context of international conventions/treaties and represents a major obstacle in creating effective international cooperation. Such mechanisms should be developed.

C'est quoi, un paradis fiscaux? Good question. What exactly is a tax haven, and how do you explain their existence to young people who, quite reasonably assume that the grown-up world would protect its people from such predatory places?

In this new book (in French), professeur Gamberge explores the strange world of tax havens and answers some of the questions that might occur to children wanting to know what all the fuss is about:

Kodi Katika Africa ATAF
A reminder to check into this newsletter that provides "a weekly news update on tax issues in Africa and beyond."

A fair economy is not radical – it’s common sense! New Internationalist
Feb 6 - Naomi Fowler explains why TJN's Taxcast is so important.

Treasure Islands at Guardian Open Weekend, London, Zurich Treasure Islands
Feb 6 - Nick Shaxson will be speaking in London and Zurich - check out this post for details.

The offshore banking nightmare Canadian Lawyer
February Edition cover story - A very useful article providing some classic examples of how "for those lawyers representing victims of fraud, offshore banking havens pose a legal nightmare."

Swiss Will Tighten Rules on Foreign Assets, SonntagsZeitung Says Bloomberg
Feb 5 - "Proposed regulations, to be put forward by Finance Minster Eveline Widmer-Schlumpf, will require banks to demand a declaration from non-Swiss clients that all their assets are properly taxed". See commentary on Tax Research UK: I guess the Swiss think we’re stupid.

Julius Baer expects to deliver client data in U.S. probe Reuters
Feb 6 - More erosion of the illusion of reliance on banking secrecy.

US moves are "aimed at tax cheats", not banks swissinfo
Feb 5 - Fulvio Pelli, the chairman of the Swiss centre right Radical Party is cited: " ... he accused the US of doublespeak, saying Delaware was an “oasis” for tax evaders, and Florida a “stomping ground” for money launderers and weapons dealers."

U.S. The Buffett Rule Is an Imperfect Form of Tax Justice, but an Important Step in the Right Direction Justia
Feb 3 - Another useful article debunking the arguments of those who argue for Romney and co to get special privilege.

Independent polling in the United States has an important new report out:

• 92% of U.S. small business owners surveyed agree that U.S. multinational corporations’ use of accounting loopholes to shift their U.S. profits to their offshore subsidiaries to avoid taxes is a problem.
• 81 percent of small business owners favor hedge fund managers paying taxes at the ordinary income tax rate, which currently tops out at 35 percent, rather than the 15 percent capital gains rate they pay now.
  

And much more. A most important piece of research. The summary is here; the full report is here. Hat tip: Nicole Tichon.

From the Treasure Islands blog
The UK's Telegraph has reported:

Bruce Packard, an analyst at Seymour Pierce, said Barclays risks "a fierce customer backlash" if it does not reduce its exposure to offshore tax havens or limit legitimate tax avoidance, and focus instead on service.

Now Seymour Pierce is an investment bank and stockbroker, and it's excellent to these hard-headed investors judging their peers like this.

Mr Packard said: "At Seymour Pierce we are rather sceptical of companies that operate in offshore tax havens, believing companies generate shareholder returns by performing services or making products their customers value, rather than through complicated financial structures."

Goodness gracious! Brilliant to see hardened bankers saying this: an idea that's straight out of Treasure Islands. Tax dodging has nothing to do with productive efficiency, and everything to do with transferring wealth away from shareholders. Not wealth creation, but wealth extraction. Not only that, but I have explained how I believe it highlights an entire management ethos - see my comments about the Vesteys and the internet giant Amazon here. Anyway, well said that man Packard.

In the interests of balance, of course, I should add this:

Barclays stressed that it has signed up to the UK code of practice on tax, is entirely transparent with HM Revenue & Customs, and pays "all the tax due in all the countries we operate".

Sigh. Now read the whole article and make your mind up. Or read this. Or this. Or this.

And on a related but important matter, the Telegraph provides a powerful argument in favour of country-by-country reporting:

In 2010, Barclays generated £591m of so-called "deferred tax assets" by making about £2bn of losses in subsidiaries in the UK, US and Spain, despite reporting £6bn of pre-tax profits at group level. The bank has declined to disclose where the losses were incurred.

Country-by-country reporting, if designed correctly for the financial sector, could bring that crucial information right out into the open.

Article hat tip: Chris Jordan.

Veronique de Rugy is a prominent defender of tax havens - no less than a member of the board of directors (alongside our old friend and adversary Dan Mitchell) of the Center for Freedom and Prosperity, the world's most vocal defender of offshore secrecy and tax havens and so on. Before watching this interview, read the interviewee's background here.

We missed this comment when it was published by The Guardian last month (and hat tip to Michael Melville for drawing it to our attention), so here's a fascinating insight into how Ecuador - the classic banana republic - has re-cast its tax system to achieve pro-poor and sustainable development.

As Jayati Ghosh reports, a key part in the turnaround lies with the determination of President Rafael Correa (pictured) to capture a larger share of the rents from oil extraction, rather than allowing oil multinationals to walk away with super-high profits:

"Consider just some economic changes brought about in the past four years, beginning with the renegotiation of oil contracts with multinational companies. Ecuador is an oil exporter, but had benefited relatively little from this because of the high shares of oil sales that went to foreign oil companies. A new law in July 2010 dramatically changed the terms, increasing the government's share from 13% to 87% of gross oil revenues."

The successful renegotiations were an extraordinary achievement, not least since the negotiating team faced instransigent foreign operators who were eventually bid a polite adios. Companies including China's CNPC, Brazil's Petrobras, Korea's Canada Grande and the U.S. Bellwether, were amongst those who refused to accept the revised terms and were ushered to the exit. And, other developing countries please note, despite this departure of foreign "wealth-creators", the remarkable thing is that the country's public finances have strengthened and the President's approval ratings are in the region of 70 per cent. This is a powerful demonstration of how countries can free themselves from state capture by powerful foreign corporations

But the reforms went further than renegotiating oil contracts. President Correa's economics team set out to restore public finances by strengthening revenue collection while also increasing tax progressivity. This has largely focused on increasing direct tax collection through better enforcement, especially of corporate tax payments (remember this was a banana republic where rich people and powerful corporates felt themselves above paying tax). As Ghosh reports:

"Second, and possibly even more impressively, the government managed a dramatic increase in direct tax receipts. In fact, this has been even more important in revenue terms than oil receipts. Direct taxes (mainly corporation taxes) increased from around 35% of total taxes in 2006 to more than 40% in 2011. This was largely because of better enforcement, since the nexus between big business and the public tax administration was broken."

And it gets better still. While some countries - the United Kingdom being a sad example - frittered away their hydrocarbon wealth in tax breaks for powerful corporate interests and a 40 year orgy of consumerism, the Ecuadorian government has invested the additional public income in infrastructure and human capital:

"Third, these increased government revenues were put to good use in infrastructure investment and social spending. Ecuador now has the highest proportion of public investment to GDP (10%) in Latin America and the Caribbean. In addition, social spending has doubled since 2006. This has enabled real progress towards the constitutional goals of free education at all levels, and access to free healthcare for all citizens. Significant increases in public housing have followed the constitution's affirmation of the right of all citizens to dignified housing with proper amenities."

This blogger has warm memories of visiting Ecuador in the 1980s and these reforms sound too good to be true (especially for those of us living in a Europe currently gripped both by freezing temperatures and unimaginative austerity programmes which demonstrate that our politicians have learnt nothing from the Latin America experience of financial crises). As Ghosh herself concludes:

". . . what is happening in Ecuador provides inspiration and even guidance. The rest of the world has much to learn from this ongoing radical experiment."

Read the full article here.

Swiss Bank Wegelin Charged With Helping U.S. Clients Evade Taxes Bloomberg Businessweek
Feb 2 - “It’s symbolic in that the United States is saying that if a Swiss bank doesn’t cooperate, it will be indicted. It puts pressure on other Swiss banks to cooperate.” This development is exceedingly important, in the context that in the world of private banking such activity is considered normal. Not a big criminal heist - just normal, in serving your client - so this case helps towards a possible shift in culture.

See also:
Swiss Bank Indicted on U.S. Tax Charges The U.S. Department of Justice
Feb 2 - "IRS Commissioner Douglas Shulman said, ' ...Through our efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax evasion, and you can expect us to pursue all avenues to stop this abuse.” Hat tip: Lucy Komisar.

See also:
Wegelin charged with aiding tax evasion Financial Times
Feb 3 - " Prosecutors allege the bankers took unusual steps to hide transfers ..." Er, no. As we note above, such efforts to serve the client are not unusual in the world of private banking - as explained in Nick Shaxson's Treasure Islands.

Australia: Turning the tax haven tide Australian Financial Review (Subscription needed)
Feb 3 - "For the first time since the multi-agency investigation into offshore tax havens, the $300 million Project Wickenby, was established in 2006, more illegal funds have flowed back into Australia than have moved overseas." See recent blog post on Project Wickenby here.

Austria hindered the fight against tax evasion Der Standard (In German)
Feb 2 - An interview with the EU Tax Commissioner, Algirdas Šemeta. He is cited as stating that Austria is blocking effective tax collection by EU states and that this is unacceptable. See references to Austria in earlier blogs here and here. Hat tip: Markus Meinzer.

Breaking the mould - How Latin America is coping with volatile capital flows TJN Latin America
Feb 2 - New report by LatinDADD and the Bretton Woods Project, available via this link in Spanish and English, on measures and techniques applied to regulate the flows of capital. The report concludes: "Greater regional coordination of these measures could boost their effectiveness while limiting unwanted side effects." Hat tip: Jorge Gaggero.

U.S. How We're Changing the Conversation on Corporate Taxes Across America Citizens for Tax Justice
Feb 2 - "Grassroots groups throughout the country have used Citizens for Tax Justice's report "Corporate Taxpayers & Tax Dodgers," to pressure lawmakers to clean up the tax code."

UK: IFS backs land value tax Guardian
Feb - "The idea is to cut income and business taxes while introducing a land value tax to end our obsession with property and to encourage paid work." Hat tip: Carol Wilcox, Labour Land Campaign. See Tax Justice Focus - Taxing Natural Rents edition.

UK: HMRC launches contractual disclosure facility Financial Times
Feb 2 - "Taxpayers who are not under investigation but want to admit to tax fraud can come clean in exchange for not being criminally investigated under a new HMRC arrangement which came into force this week."

Tide Turning In Italian Tax Evasion Fight Tax-News
Feb 3 - "It is foreseen that the greatest leap forward in the Agency’s combatting of tax evasion will arrive from the Agency’s new “redditometro”... The new system will, after it becomes operational before the middle of this year, be able to trace individuals' expenditure in more than 100 different categories to find disparities between spending and declared incomes."

Is Kim Kardashian Really Guilty of Tax Evasion? GoBankingRates
Feb 3 - Commentary on celebrity tax dodging. "Wealthy individuals have long been able to benefit from various tax loopholes that lower their liability — and it may seem like celebrities get all the special tax breaks due to their popularity in the public eye. But with a savvy financial consultant in their corner, just about any wealthy individual can navigate the fiscal landscape and pay a lower tax rate each year." But that's not fail-safe, as our links above help demonstrate.

Would You Cheat on Your Taxes? Motley Fool
Feb 2 - The author notes: "Last week, I cited IRS data and noted that tax evasion has likely added somewhere between $3 trillion and $5 trillion to the national debt over the last decade -- more than the Bush tax cuts, the wars in Iraq and Afghanistan, and the Obama stimulus combined." Check out the poll by the IRS Oversight Board asking taxpayers how they feel about tax evasion, and the author invites you to take the Motley poll ...

From the Treasure Islands site:
Excellent report by Faisal Islam on Channel 4 last night on the UK-Swiss tax dispute, featuring yours truly, and questioning the fantasy numbers put out by the UK's tax authorities, HMRC.

Take a look.

In case you doubt my statements in this interview, take a look at the Tax Justice Network analysis of the Swiss-UK tax deal (of which I was the main author). Have a go and see if you can fault our analysis. We have sent this analysis to HMRC, to the Swiss authorities, to a number of private practitioners, and nobody - anywhere - has been able to knock down our numbers. The only responses we have had (apart from 'this looks solid to us') are along the lines of 'why would HMRC not want to do the right thing?' (pray, under the leadership of 'Handshake' Hartnett, would they ever do the wrong thing?)

We also asked HMRC to provide us with the basis of their calculations - they say the UK-Swiss tax deal will yield £4 - £7 bn, which understandably has got a number of politicians behind the deal. Our analysis of the original deal suggests they will be lucky to get ten percent of that. HMRC have refused our request for the calculations that back their £4 - £7 bn figure, and they even refused a Private Eye freedom of information request on this.

Now there's a newish wrinkle in all of this. Since the original deals were signed and our analysis done, the European Commission has intervened to say (as we predicted, see Section 4.4 in our analysis) that the deals conflict with European law and cannot go ahead. What is happening now is that the Swiss, the UK and the Germans (who have a similar deal with Switzerland) are trying to work out a fudge to find a way to carve out those bits of the deal that conflict with EU law, and still go ahead. I asked an EC spokeswoman for details of this on January 30th, and she replied as follows:

"There has certainly been very constructive engagement by DE and UK in resolving the problems that we have with these bilateral agreements, and they have agreed to carve out of the bilateral agreements the parts that are not in conformity with EU law. Commissioner Semeta met with Germany's Finance Miinsiter in the margins of the ECOFIN last week, and certainly there was consensus on what needs to be done for these agreements to be compliant."

The EC hasn't approved the deals - far from it. But the three parties think they can see a way to salvage something of them. What we now know - and I don't have time or space to go into it here - is that the bits that will have to be carved out are the bits that matter. The rest, if any deal does come to fruition, which is in serious doubt, will be a ridiculous and pointless dog's breakfast - great for tax advisers to cream off some fees for 'advice' - but particularly unpleasant for beleaguered UK (and EU) taxpayers.

In addition to all this, there is considerable resistance inside Germany to these deals, notably by the powerful SPD (Social Democratic Party) and even some opposition inside Switzerland (though it's the EC position that is the one that matters here). If some shabby deal (even shabbier than the one we analysed) were to be pushed through, it would be primarily pushed by the Swiss as part of a complex chess game to try and scupper some brilliant EU legislation that is coming through soon - which would enable the UK, Germany, and many other EU countries to get serious about tax evasion for the first time ever. And raise far more from Switzerland than these deals ever could. The TJN analysis contains some discussion of this political chess game, and there is more here and here.

The whole thing is a failure and a disgrace, from top to bottom. It's a zombie deal: in effect, it's already dead, but it still seems to be kicking and flailing around, at least for now.

Endnote 1: At one point, Islam said 'avoidance' when he ought to have said 'evasion.' This is quite common among journalists, and one of the biggest reasons is UK libel law. If you say 'evasion' then you're accusing someone of committing a crime, and if you say 'avoidance' you are much safer. Probably necessary in some stories, though not in this case. For information: evasion is by definition illegal, while avoidance is by definition not illegal (although it also by definition involves getting around the law). There's a huge grey area between the two poles.

Endnote 2: a couple of people have said that I looked cold while being interviewed. It was freezing. Brrrr!

Money laundering - tax evasion as a predicate offense Handelszeitung (In German)
Feb 1 - Reporting on how the proposed revision of Financial Action Task Force (FATF) Recommendations for combating money laundering and terrorist financing will include tax evasion as a predicate offense for money laundering. This is an exceedingly important development. See here and here for responses by The Task Force on Financial Integrity and Economic Development to FATF Consultation Papers. Hat tip: Markus Meinzer.

See also:
Philippines: BIR: Tax evasion a money-laundering crime Business Mirror
Dec 2011 - An article from a few weeks back, but relevant to the story above: "If the Bureau of Internal Revenue (BIR) had its way, tax evasion would be among the “predicate crimes” punishable under the Anti-Money Laundering Act (Amla), alongside kidnapping for ransom, plunder and drug trafficking and others."

What Really Happened To The Oldest Bank in Switzerland? - Wegelin: Death Throes of Swiss Banking Secrecy & Asymmetric Risk to Swiss Banks mig2
Feb 2 - On the fire sale by Swizterland's oldest private banking institution further to investigations by U.S. authorities. Note: "Remarkably, Wegelin bank neither had offices nor employees in the United States. They were 100% Swiss, and violated no Swiss law whatsoever. However, this was not enough to protect them."

Court rules against stolen Swiss data use swissinfo
Feb 1 - "France’s top court has ruled that bank data taken from a Geneva branch of the HSBC bank was illegally obtained and could not be used in a crackdown on tax evaders."

Bank data sharing lands on cabinet agenda swissinfo
Feb 1 - "The Swiss cabinet has discussed a tax dispute with the United States and the handing over of bank data to US justice authorities at its latest meeting ...The spokesman for the cabinet said more information would not be given while discussions were underway, but he added that the government’s goal was to find a conclusive solution to the tax dispute."

Swiss “slow” to return Tunisia assets swissinfo
Feb 2 - "The Geneva lawyer heading attempts to recover Tunisian assets worldwide has said Switzerland is not acting quickly enough to deal with funds frozen in Swiss banks. Switzerland is holding onto SFr60 million ($65 million) belonging to former President Zine el-Abidine Ben Ali and his entourage."

Law firms announces Luxembourg expansion The BVI Beacon
Feb 1 - Interesting to read this view from the offshore industry - "The global recession has caused some major industrialised economies to label offshore financial centres like the Virgin Islands as “tax havens” while ramping up regulatory pressure against the financial services industry. That pressure and a desire to grow has led one offshore law firm with a VI presence to diversify the services it offers, opening an office in Luxembourg ..."

Received via email:
The Section for the Single Market, Production and Consumption of the European Economic and Social Committee (EESC) is pleased to invite you to a

Public hearing on Tax and financial havens: a threat to the EU's internal market
21 March 2012 │ 9.30 – 13.00
European Economic and Social Committee
Room VM3
Rue Belliard 99 – 1040 Brussels

The hearing is organised in the framework of the elaboration of the related EESC own-initiative opinion. It will provide for an exchange of views with key players on the topic of financial and tax havens. The goal of European coordination must be to promote fairer tax systems including the shutting down of financial and tax havens. The European Parliament has already demonstrated its willingness to combat these havens and the EESC wants to make sure that organized civil society takes part in this discussion. We believe that this event will be an important occasion for an exchange of views between key stakeholders.

You will receive an invitation with a detailed programme in due course.
In the meantime, please save the date.
European Economic and Social Committee
www.eesc.europa.eu

Building a Fair, Transparent and Inclusive Tax System in Sierra Leone Tax Justice Network - Africa
January 2012 - Read the latest version of the Sierra Leone country report on taxation here.

Sierra Leone: Standard Chartered wins most compliant large tax payer’ award at the National Revenue Awards 2011 Sierra Express Media
Jan 14 - "The National Revenue Authority Award acknowledges the rapidly transforming tax landscape in Sierra Leone by honouring tax compliance excellence, and by creating local visibility for the best practices in business." A point to note here is that the award demonstrates tax compliance being an important factor in corporate social responsibility.

Ghana: Govt Asked to Stop Revenue Loss Through Tax Laws Review allAfrica
Jan 23 - "Tax Justice Network (TJN) ... has called on government to review laws on tax exemptions in the extractive industry to halt the continual annual revenue loss ... These suggestions were made at a training programme organized by Christian Aid for trainers in tax justice in Accra last Wednesday. Participants were drawn from Ghana, Kenya, Sierra Leone, Nigeria and South Africa." Hat tip: Sandra Kidwingira.

New Mines Act should ensure Zambians benefit Zambia Daily Mail
Jan - "ZCTU secretary general Roy Mwaba said although there is a provision which allows the distribution of mining revenue to local communities, enforcement should be strengthened for Zambians to benefit from mining activities ... Mr Mwaba said transparency is important because it will bring an end to the culture of secrecy which surrounds the mining industry."

India: Tax heat on Mauritius shell firms The Telegraph
Jan 31 - On " 'an 'anti-abuse provision which disallows tax exemptions to shell companies set up merely to use provisions of the double taxation treaty to buy Indian assets but avoid tax payouts'. India has introduced such provisions in tax treaties with Singapore and the UAE."

Hogan fails in court battle to keep documents secret from Tax Office The Sydney Morning Herald
Jan 31 - Another story of international celebrity tax dodging - "The Crocodile Dundee star Paul Hogan has failed in his attempt to keep secret dozens of documents relating to his fight with the Australia Taxation Office over an alleged multimillion-dollar tax avoidance". See here for our earlier blog on the continuing successful efforts of Australian authorities to crack down on tax dodging.

U.S.: Is plan to tax global profits a campaign move? Politico
Jan 31 - “We are trying to discourage the race to the bottom,” explained White House economics adviser Gene Sperling. “We’re trying to discourage the notion that when somebody is thinking about where to locate production or services, that they should not believe that they can go to a tax haven as a way of having a tax advantage over a company that chose to stay in the United States.” The piece also cites Rebecca Wilkins of CTJ.

Romania: Emil Boc wants more measures to combat tax evasion The Diplomat - Bucharest
Feb 1 - "Emil Boc [Romanian Prime Minister] has asked the ministers of finance and the interior to come up with measures to combat tax evasion, focusing on high-level evasion and stepping up inspections by mixed teams made up of representatives of all institutions involved."

International Tax Review is carrying an exclusive interview with whistleblower Ruedi Elmer in which he talks about his experiences as chief operating officer for Swiss bank Julius Bär at their Cayman Island office. Elmer was dismissed in 2002 after he challenged the bank's senior management over their failure to enforce normal compliance procedures.

In the interview Elmer talks about his bad treatment by his former employers:

“I was abused as a compliance officer and some criminal clients were not disclosed to me by the local management,” says Elmer. “I was threatened by management and told if I took the bank to court, the bank would ‘finish me’.”

Astonishingly, the Swiss government sided with Julius Bär in trying to suppress Elmer, and to their great discredit, various parts of the Swiss media also aligned with the bank. According to International Tax Review:

"Elmer believes that after the Swiss authorities ignored the abusive practices he had brought to their attention and put him in prison instead, a campaign was run against him in the Swiss media.

“They called me a mentally sick person being full of revenge,” he says."

Elmer's actions have involved him in huge personal costs, not least imprisonment in 2010. He nonetheless seems confident that this has been worthwhile, though talk about the end of banking secrecy remains just that, talk:

"While Pascal Saint-Amans, the incoming OECD head of tax policy and administration, has declared that banking secrecy is over, Elmer believes this will only be true if automatic information exchange becomes the global standard procedure among nations. Elmer does agree that it is important that individual privacy is protected through local data protection laws, but argues this cannot be based on secrecy laws because they are mainly abused by financial institutions, multinationals and the rich who use trusts and companies as vehicles in tax havens."

You can access the full interview Ruedi Elmer gave to International Tax Review's Salman Shaheen here.

The Australian press is reporting today that the team behind Project Wickenby, an extended multi-agency crackdown on tax evasion, has called for fresh powers to combat abuse involving secrecy jurisdictions. These powers include enhanced information exchange, a wider definition of the range of predicate crimes defined under anti-money laundering laws, more extensive use of telecommunications interception powers, and stronger measures for international debt recovery.

Since being launched in 2006, Project Wickenby has investigated 62 cases involving serious tax avoidance, money laundering and fraud. Over A$1.18 billion of tax liabilities have been raised.

According to The Age, the Tax Office is now proposing to use the new measures to carry forward its anti-evasion drive beyond the scheduled completion of Project Wickenby in 2013, and the multi-agency approach is being sustained:
"The Tax Office has been working with the Australian Crime Commission, Australian Federal Police, Commonwealth Director of Public Prosecutions, the Australian Securities and Investments Commission, the anti-money laundering agency AUSTRAC and the departments of the Treasury, Attorney-General and Immigration and Citizenship to develop tax reform proposals."

The proposed new measures are expected to be considered by the federal government this year.

Hat tip: Dr Mark Zirnsak, Uniting Churches of Australia

See our recent blog post on Project Wickenby here.

Bank client emails in the hands of US swissinfo
Jan 31 - The recent developments being reported here are very significant. The perpetuation of Swiss banking secrecy (and secrecy offered by other jurisdictions), has relied on an assumption of impenetrability which is now being eroded.

See also:
Sensitive Swiss bank data handed to US swissinfo
Jan 31 - "The Swiss finance ministry has confirmed that encrypted data relating to Swiss banks’ clients in the United States has been transmitted to the US tax authorities ... Full access to the information, with names of client advisors, will only be provided on a case-by-case basis or when a tax agreement is in place between the two countries, the ministry said."

See also:
Swiss banks hand over encrypted data in U.S. tax row Reuters
Jan 31 - "Switzerland has handed U.S. authorities encrypted data on bank employees who served American clients suspected of dodging taxes, and will only provide the key to decipher them once a tax row is settled, the finance minister said."

See also:
Secrecy hampers money laundering fight swissinfo
Jan 30 - "The Swiss Money Laundering Reporting Office (MROS) is obliged by law to hold back information from its foreign counterparts. The government has now come under international pressure to change this situation..."

And for another view of Swiss banking:
Clean Money Please swissinfo
Oct 2010 - See this video on an alternative bank that "sets high standards for sustainable and ethical business". A director of the bank, formerly with UBS, says: "It's also up to the client to check how precisely a bank defines its sustainable policy, to make sure it's not just a marketing tool." The piece observes how names of clients with loans and their purpose are published, that is, no secrecy.

Offshore Accounts: Insider’s Summary of FATCA and its Potential Future Social Science Research Network
Jan - An article written by one of the architects of FATCA. Note:"The long-term success of FATCA may depend upon whether the US can convince other countries to adopt a similar system, or better yet, join with the US in developing a multilateral FATCA system."

Argentina: Jorge Gaggero, "Tax reform requires great political conviction, strong reformist spirit and ability to develop broad social consensus." Interview with renowned economist of the Phoenix Plan. Initiativa
Jan 27 - "Before you ask, 'What reforms do we need?', we must ask 'why?'. First, to redress levels of inequality in our society, then to give resources to strategic stability and sustainability. Therefore the costs are to be financed with the resources collected." Hat tip: Bruno Gurtner. See also recent piublication by Jorge Gaggero with José Nun on Inequality and Taxes.

U.S. Introducing the `Pay A Fair Share Act’ Washington Post
Jan 31 - "[Sen.] Whitehouse clarified that the proposal — the first concrete legislative vehicle for implementing the “Buffett Rule” — will not tamper with existing tax rates. Instead, under the proposal, those making more than $1 million a year would be required to calculate their overall tax rate, taking into account all their income and the full sum of what they pay in taxes. If that amount adds up to less than 30 percent, they would be required to make up the difference."

Amazon, fast-growing bully Treasure Islands
Jan 31 - Nick Shaxson observes: "again and again throughout history, we find that the most aggressive players in the field of anti-competitive behaviour always seem to be the ones that work hardest to reduce their tax bills through offshore shenanigans."

Lord Ashcroft: BBC on new tax haven scandal Treasure Islands
Jan 30 - On a BBC Panorama programme, "featuring the Turks and Caicos Islands, that financially unclean British Overseas Territory which was taken over by the British government a couple of years ago when the corruption spilled just too far out of control, it is a good in-depth investigation into an episode that raises uncomfortable questions about British parliamentary democracy." Nick Shaxson speaks in the programme.

European Soccer Ruling Body Asks U.K. to Probe Funding of Porto Transfer Bloomberg
Jan 31 - "European soccer ruling body UEFA is asking U.K. authorities to investigate two so-called letterbox companies that helped Porto (FCP) fund a player transfer ... 'We are urging state authorities to look into it,' UEFA Secretary General Gianni Infantino said. 'Because we are a private company, an association, we cannot go to a company when it is a letter box saying ‘please tell us who you are and what you’re doing.’ They will tell us: ‘Who are you to ask me?’”

The TJN's new podcast service is 'live' and ready for download and posting anywhere and everywhere! We'd be grateful for your help is spreading this link as far and wise as possible - your website(s), local radio stations, blogs, on-line newspapers etc.

Here's a short summary of the round-up of events at the end of this month of January:

In our inaugural TaxCast, we discuss the implications of the Vodafone vs India landmark tax case, compare Bill Gates and Mitt Romney's attitudes to taxation and visit the Occupy camp outside St Paul's Cathedral in London.

The TAXCAST is now available for download here. Feel free to post this link anywhere you like.