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Loophole USA: the vortex-shaped hole in global financial transparency

Nicholas Shaxson

If people stash their wealth or earn income overseas, that is fine with us — just as long as their tax authorities get the information they need to tax that wealth or income according to the law, and as long as money laundering and financial crimes can be effectively tracked, and so on. Where there are cross-border barriers to the instruments of democratic societies, then there is an offshore problem.

The only credible way to provide the necessary information is through so-called automatic information exchange (AIE), where governments make sure the necessary information is available across borders, as a matter of routine.

For years we at the Tax Justice Network were ridiculed for advocating AIE: pie in the sky, many people said. The OECD, the club of rich countries that dominates international rule-making on tax and tax-related information sharing, was for years pushing its so-called Internationally Accepted Standard which was, well, the internationally accepted standard for cross-border information exchange, despite being only slightly better than useless. The message was that we should just accept this, and move on.


TaxCast January 2015: How Offshore Havens are Infiltrating Football and More

Christian Freymeyer

In the January 2015 Taxcast: how offshore is ruining the ‘Beautiful Game’: the Taxcast scrutinises football’s own goal. Also: how banks with criminal convictions are being allowed to continue to handle our money, how people may be allowed to apply for anonymity in the UK’s new register of beneficial owners of companies to be introduced in 2016, and the meeting of the world’s most powerful in that bastion of transparency, Davos, Switzerland. Plus more scandal and unique analysis.


Closing Tax Loopholes is Great, But Tackling Anonymous Companies is Just as Important

Christian Freymeyer

President Obama wants to stop the billions of dollars that are moving offshore from U.S. companies.

Or he at least said so much during his State of the Union address last night:

As Americans, we don’t mind paying our fair share of taxes, as long as everybody else does, too. But for far too long, lobbyists have rigged the tax code with loopholes that let some corporations pay nothing while others pay full freight.

This year, we have an opportunity to change that. Let’s close loopholes so we stop rewarding companies that keep profits abroad, and reward those that invest in America.

The topic of moving money to low tax jurisdictions has become a hotly debated issue over the last few months, following the LuxLeaks scandal that brought light to hundreds of secret tax arrangements between multinational corporations and Luxembourg.


How Country by Country Reporting Could Have Made LuxLeaks Unnecessary

Carl Dolan

The lux leaks saga moved up a couple of gears last week. First of all, a large number of MEPs broke ranks with their leadership to publicly back a European Parliament committee of enquiry into the so-called ‘sweetheart deals’ that Luxembourg concluded with hundreds of multinational companies to minimise their tax bill. The Parliament’s political decision-making body, the Conference of Presidents, has yet to formally approve the enquiry but the genie seems to be well and truly out of the bottle now, even if there are reports that EPP deputies are being put under pressure to withdraw their signatures.  The enquiry will range more widely than the Luxembourg deals  – many other EU countries have similar tax rulings  in place – but there is the tantalising prospect of Jean-Claude Juncker testifying in front of MEPs on what he knew when he was Prime Minister.

Secondly, and perhaps more significantly, the Commission announced its preliminary findings into the state aid case it launched into Luxembourg’s tax deal with Amazon, indicating that the Grand Duchy had indeed breached EU state aid rules by giving favourable treatment to the tech company over its transfer-pricing policy.

The case focuses on the Luxembourg company that served as the headquarters of Amazon’s European operations, LuxOpCo, and in particular the royalties it paid to another Luxembourg company, Lux SCS, that were not subject to Luxembourg tax.

The net turnover of LuxOpCo in 2013 was 13.6 billion euros – about a fifth of Amazon’s total worldwide sales.


Will Antoine Deltour become a prisoner of conscience?

Nicholas Shaxson

So the latest big tax haven whistleblower, Antoine Deltour, is facing the combined massed might of Luxembourg, one of the world’s biggest and most aggressive tax havens, and PWC, one of the biggest and most aggressive lobbyists for offshore tax and secrecy legislation, the Big Four accounting firm.

Deltour faces up to ten years in prison.


Major economies move on money laundering, but what about the Cayman Islands?

Maggie Murphy

The final two months of 2014 saw a surge of positive news for civil society whose collaborative and consolidated efforts over recent years to push for greater corporate transparency measures are now seeing the light.

Civil society has called for greater light to be shed on the real living people who ultimately own or control companies – the beneficial owners. Current levels of secrecy mean that global detection rates for illicit funds by law enforcement are as low as 1 percent for criminal proceeds.


Should Convicted Felon Credit Suisse be granted a Department of Labor Waiver?

Christian Freymeyer

5042453005_88181ee344_zNot that long ago, Credit Suisse AG (CSAG), the multinational financial services giant, pleaded guilty to felony criminal charges and paid fines of US$2.6 billion for aiding and assisting U.S. taxpayers “in filing false income tax returns and other documents with the Internal Revenue Service (IRS)”.

In other words, Credit Suisse helped Americans evade taxes and showed them how to take advantage of the international financial system’s inherent secrecy, even brining secret airports and elevators into the picture, according to a U.S. Senate report.

But now that they’ve admitted to criminal actions, it seems CSGA wants a waiver to avoid some of the very baggage that comes with being convicted of felony charges.


The New Year Wrapper

George Turner

The Mafia Capitale scandal has been gripping Italy over the last few months. It involves the corrupt award of public sector contracts in Rome to a network of people associated with extreme right-wing and neo-fascist movements. To find out more listen to last month’s Taxcast.

One of the latest and most bizarre revelations to emerge from the scandal has been publication of an intercepted phone conversation between Massimo Carminati, the alleged boss of an organized crime group, and Paolo Pozzessere, a senior manager at Finmeccanica, the leading Italian arms manufacturer.

Pozzessere, the former commercial director of Finmeccanica, was telling Carminati about his experiences working in Iran.


Progress and Momentum on Transparency: 2014 Year in Review (Part 2)

Ann Hollingshead

This blog post is the second in a two-part blog series. In this post, I survey this year’s progress and momentum in global policy on transparency issues. In the first post, I examined several of the year’s biggest global trends and their relationship to financial transparency.

The European Union has made huge policy progress this year. From anti-money laundering to country-by-country reporting, when it comes to transparency issues, the EU was an all-star.

In perhaps the biggest news out of the EU this year, after months of deliberations, EU nations agreed to national-level registries to collect information on the beneficial owners of companies incorporated in EU nations in the 4th European Anti-Money Laundering Directive. In response, Koen Roovers of the Financial Transparency Coalition commented that “The amount of progress made over the last year and a half is encouraging, and the fact that all EU nations agreed to centralized registers is a significant step.”

Another event of significant importance in the EU also happened late this year: the EU finance ministers agreed on two taxation measures aimed at combating corporate tax avoidance and aggressive tax planning. Those strategies are the anti-abuse clause of the Parent Subsidiary Directive and the mandatory exchange of information between EU tax authorities. Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, noted that these decisions “open up a new front in our fight against corporate tax avoidance and aggressive tax planning.”

Finally, in October the EU Commission released a report in favor of country-by-country reporting. The report notes that CBCR is not expected to have significant negative economic effects


Global Trends and Transparency: 2014 Year in Review (Part 1)

Ann Hollingshead

This blog post is the first in a two-part blog series. In this post, I observe several of the year’s biggest global trends and their relationship to financial transparency. In the second post, I will examine this year’s progress and momentum in global policy on transparency issues.

Rising Income Inequality

In the United States, policymakers across the political spectrum have become increasingly vocal about the rising income inequality. They include Senator Bernie Sanders (I-VT) who called this the “issue of our time,” Senator Paul Rand (R- KY) who admitted income inequality is a problem, and Senator Charles Schumer (D-NY) and President Obama who have lamented our nation’s dwindling middle class, particularly with the growth of the super-rich.

This issue is a global problem, not unique to the United States. The world’s current wealthiest individual is Carlos Slim Helu, a telecom mogul from Mexico—the same nation where nearly half of the population lives in poverty, including 11.5 million men, women and children in extreme poverty.  Likewise, India’s Mukesh Ambani net worth totals $21.5 billion, where nearly one third of the population lives below the poverty line. Meanwhile, income inequality has been on the rise in China. According to Oxfam, the world’s richest 85 people hold as much wealth as the poorest 3.5 million people combined.

Income inequality has bombarded the public consciousness through official reports and the popular media. Of course, this conversation begins with Thomas Piketty’s wildly successful book, Capital in the Twenty-first Century. But others have contributed to a wide discourse, as well. In a successful documentary, Inequality for All, former Labor Secretary Robert Reich called income inequality the civil rights struggle of our time. Meanwhile, the OECD released a report at the end of this year concluding that rising income inequality has weakened economic growth in most developed countries.

The international financial system is both a driver and consequence of inequality. Rising income inequality creates more individuals with the resources and opportunities to send funds abroad, contributing to increasing concentrations of wealth among wealthy tax evaders. Meanwhile tax evasion reduces government revenues and compromises governments’ ability to make investments that alleviate poverty. Illicit financial flows erode governance, constrain domestic investment and economic activity, and reduce governments’ ability to provide social services, such as healthcare and education.


The Last FTC Newsletter of 2014 is here!

Christian Freymeyer

As the year comes to a close, we’ve taken a long look at all that has been accomplished in 2014, and there’s been a lot of change! We’ve released our final newsletter for 2014, which will give an overview of what’s happened on the financial transparency front over the past 3 months. Some of the […]


TaxCast: December 2014

Christian Freymeyer

TJNlogoDecember’s installment of the Tax Justice Network‘s TaxCast has arrived. The podcast, produced by Naomi Fowler, covers all things related to corruption and tax.

In the December 2014 Taxcast: how Mafia is corrupting democracy at the heart of Europe in Italy’s capital city of Rome. Also: the #LuxLeaks whistleblower is arrested and makes his first public statements on why he did it, the UK Chancellor’s new ‘Google Tax’, is the EU Commission President Jean Claude Juncker backing away from making a register of real owners of companies and trusts public? And more scandal and unique analysis.

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