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South Africa’s Deputy President: Tax Evasion a Crime Against the State and its People

Christian Freymeyer


The Deputy President of South Africa, Cyril Ramaphosa, has issued some strong words against individuals and corporations funneling money out of the country to avoid taxes. Speaking at the National Council on Provinces, Ramaphosa called on citizens to report cases of tax evasion.


TaxCast: August 2014

Christian Freymeyer

TJNlogoThe latest edition of TaxCast, the podcast produced by the Tax Justice Network, is out! In this edition, you’ll hear about a tug of war between Switzerland and India for information on tax evaders, how Russian sanctions are affecting business in Europe, and much more.


Why Tax Inversion Is Wrong

Ann Hollingshead

This week the Treasury Department began assembling administrative options for deterring or preventing U.S. companies from inverting—or reorganizing overseas to avoid paying federal taxes. This move follows on the heels of a strong statement from President Obama who accused inverting firms of “cherry-picking the rules.” As he put it: “My attitude is I don’t care if it’s legal, it’s wrong.”

Particularly common among pharmaceutical and life-sciences companies, inversions are primarily a means for U.S. companies to avoid corporate taxes. In an inversion, a smaller foreign company “acquires” a large U.S. firm, allowing the domestic firm to reincorporate overseas and pay a lower foreign tax rate. Usually, this process does not change the operational or functional structure or location of the company – it just changes the way that company has to pay taxes.

Historically, these tax inversions haven’t been all that common. In fact, according to the Congressional Research Service, only been about 76 companies have inverted or planned to do so since 1983. The practice has become much more frequent, however, which is why inversion has garnered the spotlight from Treasury. Of the 76 inversions since 1983, 47 occurred in the last decade, and 14 occurred just this year.

Press Releases

New Standard Chartered Settlement Underscores Insufficiency of Fines & Monitoring in Deterring Illicit Activity at International Banks

Global Financial Integrity

GFIWASHINGTON, DC – As New York regulators announced that British bank Standard Chartered PLC will pay a fine of $300 million for failing to rectify anti-money laundering deficiencies as required by the bank’s August 2012 settlement with New York regulators, Global Financial Integrity (GFI) warned that the agreement underscored the fact that fines and monitoring are insufficient for deterring illicit activity at international banks.

“As I noted in August 2012 when the original Standard Chartered settlement was first announced, monitoring and paltry fines are not an effective response in this case,” said Heather Lowe, GFI’s legal counsel and director of government affairs.  “In 2004, Standard Chartered was forced to submit to monitoring by regulators for significant anti-money laundering deficiencies.  The illicit activity covered in the August 2012 settlement was happening while the first round of monitoring was already in place.  Now it appears that the monitoring and fines imposed in 2012 did little to rectify the situation at Standard Chartered.  They say that the definition of insanity is doing the same thing over-and-over-again and expecting a different result.  The settlement today is a prime example of that.”


The U.S. Africa’s Leaders Summit and Illicit Financial Flows

Ann Hollingshead

Last week the White House wrapped up the three-day U.S.-Africa Leaders Summit, which President Obama convened to strengthen and enhance relations between the United States and African nations. One of the stated missions of the Summit was to advance America’s “commitment to Africa’s security, its democratic development, and its people.”

As such, a core promise of the Summit was more American investment in the African continent. Specifically, the Summit set the stage for more than $33 billion in new commitments to support economic growth across Africa. President Obama pledged $7 billion in new financing; U.S. companies announced $14 billion in deals in a variety of sectors, including energy and construction; and alongside the World Bank and Sweden, the United States also promised an additional $12 billion in investments for the President’s Power Africa initiative.

Foreign investment can play an important role in economic development. One study, for example, found that foreign direct investment (FDI) promotes economic growth in developing countries by increasing the transfer of advanced technology and creating higher productivity in those nations. Other studies suggest that recipient nations of FDI can also benefit from increases human capital as their residents receive employee training through the investing company. Finally, and perhaps most importantly, several studies note that host nations benefit from FDI to the extent that it contributes to increased corporate tax revenue.


Walgreens feels the heat, reconsiders tax flight

Porter McConnell


It all started last month when Walgreens, the iconic American pharmacy chain, announced that it would move its headquarters to Switzerland as part of a merger with the European chain Alliance Boots. The move, known as an “inversion”, essentially involves a company merging with another company that is based in a jurisdiction with lower taxes.

Once they merge, the newly formed group will usually move its headquarters to the lower tax jurisdiction to avoid paying taxes in their home country. However, this move is usually a pure technicality, meaning that while the address may change, not much else does.


Calling All Money Laundering Wonks – U.S. Treasury Seeks Comment on Rule to Keep Dirty Money Out of U.S. Banks

Stefanie Ostfeld


The U.S. Treasury is in the process of taking a big step toward making it harder for corrupt politicians, drug traffickers and terrorists to make use of the U.S. financial system, by forcing banks to know who their customers actually are.

This is something we have been advocating for five years. Treasury recently released a proposed rule and is seeking comment until October 3, 2014. There’s info on how to do that here.

It’s worth explaining precisely what we think the problem is, and what the rule should look like if it is going to do its job properly.

Press Releases

GFI Welcomes New U.S.-Africa Partnership to Combat Illicit Finance

Global Financial Integrity

WASHINGTON, DC – Global Financial Integrity (GFI) welcomed the announcement from the White House and African leaders today regarding the establishment of a bilateral U.S.-Africa Partnership to Combat Illicit Finance, but the Washington-DC based research and advocacy organization cautioned that any effective partnership must be sure to address deficiencies in both the U.S. and in Africa that facilitate the hemorrhage of illicit capital from Africa.

“We welcome the move by President Obama and certain African leaders to form this partnership on curbing illicit financial flows from African economies,” said GFI President Raymond Baker, who also serves on the UN High Level Panel on Illicit Financial Flows from Africa. “Illicit financial flows are by far the most damaging economic problem facing Africa. By announcing the creation of the U.S.-Africa Partnership to Combat Illicit Finance, President Obama and African leaders have taken the first step towards tackling the most pernicious global development challenge of our time.”


US-Africa Summit: One Day Left, Where Does Financial Transparency Fit In?

Christian Freymeyer

obamaThis week, almost 50 Africa heads of state are in Washington to meet with President Obama for the largest summit ever between the US and Africa governments. But civil society leaders often are the ones holding their governments accountable, so it’s imperative that they are involved in the process, as well. On Monday, the State Department hosted a forum for civil society organizations that featured Secretary of State John Kerry and Vice President Joe Biden.

Press Releases

GFI Urges Obama, African Leaders to Prioritize Curbing Illicit Financial Flows at U.S.-Africa Summit

Christian Freymeyer

WASHINGTON, DC – As African leaders descend on Washington this week for the historic U.S.-Africa Leaders Summit, Global Financial Integrity (GFI) called on the Obama Administration and Heads of State from across the continent to prioritize efforts to curtail illicit financial flows from Africa, which GFI estimates cost the continent roughly US$55.6 billion per year over the past decade.

“Illicit financial outflows are by far the most damaging economic problem facing Africa,” said GFI President Raymond Baker, who sits on the UN High Level Panel on Illicit Financial Flows from Africa.  “In 2011 alone, US$76.9 billion flowed illegally out of Africa.  That’s nearly US$77 billion that could have been invested in local businesses, in healthcare, in education, or in infrastructure.  It’s money that could have been used to help pull people out of poverty and save lives.  This Summit provides an historic opportunity for the United States and for leaders across Africa to focus their efforts on curtailing this hemorrhage of illicit capital.”


Join the Discussion: Next Week’s US-Africa Summit

Christian Freymeyer

obamaMonday marks the start of the US-Africa Summit, a three-day event hosted by President Obama that will bring 50 African heads of state together in Washington. While there will be ample opportunities for government officials to interact, it’s vital that civil society organizations (CSO) are heard, as well. On Monday, in addition to a CSO event held at the State Department, Open Society Foundations, in partnership with a number of other CSOs, will be hosting an afternoon event to explore how financial transparency and good governance are vital to helping finance future development.


Recent Efforts to Regulate Bitcoin Fall Flat

Ann Hollingshead

This week several analysts reported that the European Union is considering regulating and taxing the digital currency, Bitcoin. Specifically, the EU is looking to impose a Value Added Tax (VAT) on trades in bitcoin. Meanwhile, its plans to regulate the digital currency—whether imminent or not—are still unclear.

Bitcoin presents short- and long-term risks to financial crime. Like tax havens and other jurisdictions with lax laws on beneficial ownership, Bitcoin presents criminals with an opportunity to keep their money and their transactions secret. Specifically, Bitcoin users don’t need to present an ID to receive a Bitcoin address—or key—so they are not necessarily tied to a flesh and blood person. This means Bitcoin transactions unidentifiable as long as the user takes care to anonymize his or her IP address.

In the United States law enforcement officials have early and often expressed deep concerns about the digital currency. Both the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury and the U.S. Department of Justice have released official statements regarding the regulation of virtual currencies. FinCEN has also already imposed money laundering controls on Bitcoin usually reserved for traditional wire transfer services, like Western Union. These controls include bookkeeping requirements and mandatory reporting for transactions of more than $10,000.

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