$1,260,000,000,000 Tax Havens, Secrecy and Corruption

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1,260,000,000,000Tax Havens, Secrecy and
Corruption
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Avoiding Tax Havens Above October 7th 2011 One
criticism made of the Occupy Wall Street movement
. . . is that has not made its grievances clear.
Something the great unwashed might chant more
about is the damage done by offshore finance.

• Mission Statement
• In an era of globalisation, the Tax Justice
  Network is committed to a socially just,
  democratic and progressive system of taxation.
  TJN campaigns from an internationalist
  perspective for a tax system which is favourable
  for poor people in developing and developed
  countries, and finances public goods and taxes
  harmful activities  which pollute and cause
  unacceptable inequality.

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Dirty Money Flows Distort Our Economy And Corrupt
Democracy John Christensen - 30th May 2007

• For each dollar of aid that goes into Africa,
  at least five dollars flows out under the table.
  The time has come to confront the tax haven
  monster.

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insider trading market rigging avoiding
disclosure of conflicts of interest illicit arms
trading illicit political donations contract
kickbacks Bribery fraudulent invoicing, trade
mispricing and tax evasion
living of lax regulation Wall Street
Journal 17th September 1996
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• the openness of tax havens to proceeds from
  crime, corruption and tax dodging might explain
  why flows of capital have been from South to
  North, from the poor nations of the world to the
  wealthy ones, rather than the other way round, as
  economic theory would predict. This largely
  explains why so many developing countries lack
  the capital resources they need to finance their
  own development and instead increasingly rely on
  external debt and aid to finance services that
  tax revenues should pay for.
• ch.3 The Secret World of Offshore Banking, John
  Christensen

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• The economic transformation
• Since the 1970s
• exchange controls have been eliminated
• trade tariffs and taxes have been significantly
  reduced
• there has been a massive expansion of cross
  border trade and investment
• increased income from foreign sources
• Capital mobility now virtually unimpeded

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Financial Times - 26 September 2003  

• The economic transformation (contd.)
• rapid growth of intra-company cross order trade
  within multinational corporations
• fiscal incentives to attract foreign direct
  investment
• the promotion of export processing zones, tax
  holidays, tax deductibility of capital investment
  etc.
• technology change has revolutionised capital and
  information flows
• tax avoidance has become a profit centre for many
  companies and their advisers

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Financial Times - 26 September 2003  

• Fiscal consequences the end of taxation of
  capital?
• trebling of the number of tax havens and offshore
  financial centres, gt opportunities for trade
  mis-pricing and other corrupt activities
• substitution of (regressive) indirect taxes for
  (largely progressive (direct taxes)
• pressure on poorer countries to offer fiscal
  incentives to attract investment has cut revenues
• general shift of the tax burden from capital to
  labour and consumption
• significant increase in income and wealth
  inequality

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• Financial market secrecy
• Raises risk premiums
• Harms tax systems and public finance
• Facilitates economic free-riding
• Reduces the efficiency of resource allocation
• Increases the profitability of economic crime
• Encourages rent-seeking activities
• Damages trust and institutional quality

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• The sheer complexity, opaqueness and the
  systemic risks embedded in the new markets
  complexities and risks little understood even by
  most of those with management responsibilities
  has enormously complicated both official and
  private responses to this current mother of all
  crises.
• Simply stated, the bright new financial system
  for all its talented participants, for all its
  rich rewards has failed the test of the market
  place.

Paul Volcker, former chair of the US Federal
Reserve
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www.financialsecrecyindex.com
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Financial Times - 26 September 2003  

• Switzerland tops list of tax haven nations
• By Patrick Temple-West
• Tue Oct 4, 2011 508am EDT
• (Reuters) - Switzerland, despite bank settlements
  with the United States to disclose tax evaders,
  remains the top refuge for financial secrecy,
  according to a new international ranking of tax
  haven countries.
• Switzerland is the world leader in financial
  opacity, only grudgingly conforming with
  disclosure agreements among developed countries
  while courting tax evaders in developing nations,
  said a report released on Monday by the
  nonprofit, nonpartisan Tax Justice Network.

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A New Geography of Corruption
Exceptionally secretive
Moderately secretive
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15 financial secrecy indicators
Knowledge of beneficial ownership Knowledge of beneficial ownership Key aspects of corporate transparency regulation Key aspects of corporate transparency regulation Efficiency of tax and financial regulation Efficiency of tax and financial regulation International standards and cooperation International standards and cooperation
1 Banking secrecy 4 Public company ownership 7 Fit for information exchange 11 Anti-money laundering
2 Trust and foundation register 5 Public company accounts 8 Efficiency of tax administration 12 Automatic information exchange
3 Recorded company ownership 6 Country-by-country reporting 9 Avoids promoting tax evasion 13 Bilateral treaties
10 Harmful legal vehicles 14 International transparency commitments
15 International judicial cooperation
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Strengthening transparency and governance
We should endorse sharing information and
bringing tax havens and non-cooperating
jurisdictions under closer scrutiny Manmohan
Singh Prime Minister of India, 2009

• Replace the OECD black/grey/white list with TJNs
  Financial Secrecy Index (republished October
  2011)
• Adopt automatic information exchange as a global
  multilateral standard, and sanction
  non-cooperative jurisdictions
• Adopt an International Financial Reporting
  Standard on country-by-country reporting
• Require full public disclosure of beneficial
  ownership of trusts, companies, foundations and
  similar legal entities
• Adopt a General Anti-Avoidance Provision
  accompanied by purposive legislation

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Enhanced global cooperation
Action by the international community is
required to ensure that the potential tax base
of developing countries is not undermined through
tax evasion African Tax Administrators Forum,
Pretoria, South Africa, 2008

• Strengthen international cooperation with a
  primary objective of ensuring that national tax
  systems do not have negative external impacts on
  tax sovereignty elsewhere (UN Tax Committee
  proposals under Monterrey Consensus)
• Define tax evasion as a corrupt activity within
  the scope of the UN Convention Against
  Corruption, and as a predicate crime under AML
  regimes (currently under consideration by the
  Financial Action Task Force)
• Negotiate a multilateral framework to allow
  states to tax multinationals on a global unitary
  basis (using formulary apportionment) with
  appropriate mechanisms to allocate tax revenues
  across borders

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Financial Times - 26 September 2003  
Shaxson comes as close to anyone ever has in
getting to the crux of the tax haven conundrum,
which is to attempt to answer the question why
are they tolerated? Evening Standard Shaxson
combines meticulous research with amusing
anecdotes, resulting in a very readable account
of the murky world of offshore and a strong moral
message that the system needs to be
changed. Financial Times This excellent book
breathtaking and terrifying. Irish Times
..the most important booksince the Spirit
Level. OpenDemocracy Shaxson is an
imbecile Tony Travers Cayman Islands Financial
Services Authority