Switzerland’s so-called “Rubik” tax deals with Germany and the United Kingdom are effectively defunct, following robust challenges from the European Commission recently which require the deals to be watered down so drastically that they will be functionally almost useless.
Switzerland’s new clean money strategy is little more than smoke and mirrors.
TJN has been long been a critic of the OECD’s Arm’s Length system for addressing transfer pricing shenanigans (see TJN’s summary of what is involved here). A system that might have worked well enough 70 years ago is not fit for purpose today. About a year ago TJN published two articles summarising longer papers in […]
The new site Tackle Tax Havens is now live. Aimed at the non-expert, we expect it to become a key tool.
Click here. And watch the video.
From the Tax Justice Network blog:
Misha Glenny has a good article in the FT today:
As the new Greek government struggles to convince Europe of its resolve to cut the country’s bloated public sector, it also has to decide whether to face down the real domestic threat to Greece’s stability: the network of oligarch families who control large parts of the Greek business, the financial sector, the media and, indeed, politicians.
The oligarchs have responded predictably: by accelerating their exports of cash. In the last year, the London property market alone has reported a surge of Greek money. And then there’s this, of course, not strictly a core tax justice issue, but these things are all intertwined:
ActionAid have produced another fine report, this time about the use of tax havens by multinational corporations listed on the FTSE 100. The statistics are staggering: for example more than half of the financial sector’s overseas subsidiaries are in tax havens. More precisely:
- The FTSE 100 largest groups registered on the London Stock Exchange comprise 34,216 subsidiary companies, joint ventures and associates.
- 38% (8,492) of their overseas companies are located in tax havens.
- 98 groups declared tax haven companies, with only two groups, Fresnillo and Hargreaves Landsdown, who did not.
- The banking sector makes heaviest use of tax havens, with a total of 1,649 tax haven companies between the ‘big four’ banks. They are by far the biggest users of the Cayman Islands, where Barclays alone has 174 companies.
- The biggest tax haven user overall is the advertising company WPP, which has 611 tax haven companies.
- The FTSE 100 companies make much more use of tax havens than their American equivalents.
- There are over 600 FTSE 100 subsidiary companies in Jersey (more than in the whole of China), 400 in the Cayman Islands and 300 in Luxembourg – all tiny tax havens.
Financial Secrecy Index – the G20’s broken promise
October 4, 2011. Today we launch our 2011 Financial Secrecy Index, the biggest investigation of global financial secrecy in world history. It combines a secrecy score with a weighting to create a ranking of the countries that most aggressively provide secrecy in global finance.
The new FSI, which follows our inaugural index of 60 jurisdictions published in 2009, considers 73 jurisdictions to reveal a world where most of the biggest suppliers of secrecy are either OECD countries, EU members, or their dependencies. Britain plays an especially prominent role.
Secrecy is alive and well
World leaders at a G20 summit meeting in April 2009 promised that “the era of banking secrecy is over” and put the OECD, a club of rich countries, in charge of implementing its wishes. Many people hoped this marked the start of a serious crackdown on tax havens, or secrecy jurisdictions.
But they have let us down. The rhetoric is trillions of dollars away from reality. The Financial Secrecy Index (FSI) reveals that financial secrecy is as entrenched as ever.
On September 9th the Cayman Islands introduced a bill for the establishment of new Special Economic Zones. The most Alice-in-Wonderland part of the bill is this bit, on page 14:
“A special economic zone shall be deemed to be outside of the Islands and not in the Islands.“
Emphasis added. So where will this zone be? It seems that it will, for the relevant purposes, effectively be ‘elsewhere’ – which, in practical terms, means ‘nowhere.’ This ‘it’s elsewhere, don’t-blame-us, we-can’t-regulate-this’ approach is what a lot of the activity of secrecy jurisdictions is designed to do – it’s not so common, however, to see this being made quite so explicit. This is tax havenry, pure and simple.
Who is responsible for this legislation, and who will be implementing it?
The UK has initialed an agreement with Switzerland which we recently wrote up on the Task Force blog. In short, UK tax evaders using banks in Switzerland will have to start paying some tax – but the UK will allow those (criminal) tax evaders to avoid penalties and retain their anonymity. The UK will have to trust that Switzerland will keep its part of the bargain, even though it will be impossible to conduct any comprehensive checks. There are reasonable fears that this model may spread widely to other countries.
We at TJN think this is a thoroughly rotten and corrupt deal. For the following reasons.
By TJN staff and Mark Herkenrath, Alliance Sud
We already blogged about the signing yesterday of the Swiss-German tax deal, and TJN’s opposition to it. This blog goes into a little more detail than before, and outlines some of the salient points of the deal. This is something that matters a great deal – because several other countries are believed to be considering doing something similar. Which, in TJN’s view, would be a grave mistake.
(Our last blog also highlights the strange, even fishy-looking timing of this deal.)
A similar agreement with the UK will follow soon, probably within just days or weeks. It is important that civil society and parliamentarians in the UK and elsewhere understand the treaty and its implications. They will soon be facing a similar deal.
On p28 of the UK edition of Treasure Islands, I write:
Almost no official estimates of the damage exist. The Brussels-based non-governmental organisation Eurodad has a book called Global Development Finance: Illicit flows Report 2009 which seeks to lay out, over a hundred pages, every comprehensive official estimate of global illicit international financial flows.
Every page is blank.
It’s a gimmick, but an important and telling gimmick. (Take a look at the picture: if you’re interested, the book’s cover looks like this). Now, for something I wrote yesterday on the TJN blog:
The Swiss government is about to conclude new tax deals with Germany and the UK. As was reported on the Task Force blog recently, and updated on the Tax Justice Blog, the Swiss withholding tax proposal poses a major threat to the EU’s struggle for tax transparency. In the meantime, reliable Swiss sources have revealed further details of the impending deals.
1. Germany and the UK will no longer require their citizens to declare their Swiss income.
It’s noteworthy that under the bilateral Swiss-EU Savings Tax Agreement, in force since 2005, Switzerland already charges a withholding tax (currently 35%) on savings income of EU citizens and returns the tax anonymously to the respective home country. What’s new about the impending deal is that this extends the withholding tax beyond mere savings income to all kinds of capital income. Also, crucially, Germany and the UK will consider this withholding tax as ‘final’: that is, capital owners will no longer have the legal obligation to declare their Swiss income to the tax authorities in their home country. Unbelievable.