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Sep
30

How Shell Corporations Undermine Schools in California

Ann Hollingshead

California spends about $8,500 per year to educate its public school students. That’s about $3,300 less than the national average. In fact, according to Education Week in a national ranking of states and D.C., California ranks near the bottom, at 49th, in terms of per-pupil spending. There are reasons to believe that one cause of this problem is the system of property taxation in California—and its loopholes.

The biggest player in property taxation and its policy in California is Proposition 13. Approved by California’s voters in 1978, Proposition 13 sets limits on the annual increases of assessed value of real property by an inflation factor. Proposition 13 also prohibits the government from reassessing a property’s new base year unless that property changes ownership. Broadly speaking, this means that in California, unless you sell your home, your property taxes cannot increase by more than a fixed percentage each year.

In fact, the market value of properties in California has significantly outpaced this fixed percentage, leading to a discrepancy between what Californians would have paid in property taxes without Proposition 13 and what they actually pay.

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Sep
30

The “Big Mo” in the Drive to Address Illicit Financial Flows

Tom Cardamone

This post originally appeared on the blog of Global Financial Integrity, a Coordinating Committee member of the FTC. 

tomOn September 24th, tucked away in a quiet conference room in the basement of the UN General Assembly building, an extraordinary conversation took place on the future of global development.  But, despite the gathering of representatives from the OECD, UN, World Bank, USAID and the Mexican, Australian, and Nigerian governments, the event received exactly zero media coverage.

Titled “Curbing Illicit Financial Flows for Domestic Resource Mobilization and Sustainable Development in the Post-2015 Era,” the focal point of the two-hour discussion was how the international community could, as the program description put it, “identify concrete international actions needed” to curtail illicit financial flows out of developing country economies.  While other events were given more airtime and other issues may require more immediate attention, some ideas presented at the panel could be transformational in terms of how countries address the scourge of illicit flows and how the development agenda is funded.

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Sep
26

Exposed: Illegal gold, trade mis-invoicing and tax fraud in South Africa

Naomi Fowler

Artisana_mine_interior_near_Lows_Creek_Mpumalanga_01A powerful 20 minute film just out from Carte Blanche, a major South African investigative news programme lifts the lid on the country’s illegal mining sector.

The film takes us on a journey where “poor, desperate people” brave gunmen to go underground to look for gold in atrocious conditions. We witness illegal gold trades by a headteacher on his own school grounds during school hours and hear from gold traders making 10 million rand a month (about $900,000).

The film shows us the “new randlords” and organised crime syndicates who rake in billions buying black market gold. But the value of this gold is only part of the story. The real money-spinner from this activity is a massive tax fraud.

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Press Releases
Sep
25

Report reveals threat to U.S. interests from anonymous shell company owners

Global Witness

The Great Rip Off” shows range of crimes hidden by companies set up in U.S. 

Owners of anonymous companies registered in U.S. states are ripping off innocent people and businesses across America, says a new report by Global Witness. Drawing on 22 cases involving anonymous companies from 27 states, The Great Rip Off shows how fraudsters, mobsters, money-launderers, tax-evaders and corrupt politicians are able to use anonymously-owned American companies to cover their tracks and evade the authorities.

“We looked at all sorts of crimes across the U.S. and found two things in common. They were all carried out by anonymous owners of American companies, and the authorities are spending lots of time and money trying to stop them. These untraceable companies are the getaway cars for criminals – and it’s time to take away the keys,” said Charmian Gooch, Global Witness Director.

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Sep
23

OECD BEPS process: Minor victories in the battle against tax dodging, but we risk losing the war

Tove Ryding

This blog originally appeared on the website of the European Network on Debt and Development (Eurodad). Eurodad is a member of the Financial Transparency Coalition.

Our overall feeling is that we’re winning some minor victories in the battle against tax dodging, but we risk losing the war. We’ve gained a new template for country-by-country reporting, and some new anti-abuse provisions for tax treaties are emerging. But our political momentum to achieve a more fundamental change to the global tax system can be undermined by the fact that OECD sells these rather limited steps forward as a magic solution to tax dodging. Furthermore, some very concerning tendencies are developing:

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Sep
23

TaxCast: September 2014

Christian Freymeyer

TJNlogoThe September edition of TaxCast, the monthly podcast from FTC member Tax Justice Network, has arrived.

In September’s TaxCast, we look at U.S. corporate inversions, the recent Scottish referendum on independence, and efforts from the OECD to address tax evasion. The TaxCast is produced by Naomi Fowler for the Tax Justice Network. You can listen via the player below or on YouTube.

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Sep
22

How Tax Evasion and Avoidance Undermine a Good Tax System

Ann Hollingshead

In the United States, the overall noncompliance rate for all federal taxes and individual income taxes stands at about 14 percent. According to studies by the Taxpayer Compliance Research Program and the National Research Program, about 1 percent of wages and salaries are underreported and about 4 percent of taxable interest and dividends are misreported. A study of Germany found that the corporate tax base would have increased by 14% if no income-shifting had occurred. Developing countries lose about $900 billion in illicit outflows per year, which severely undermines these nations’ abilities to effectively raise revenue.

These activities are not merely an inconvenience for citizens and policymakers, but rather they undermine the very core of tax systems around the world. There are many things a good tax system should do, but all tax systems should have the three key goals: provide revenue, distribute costs fairly, and promote growth and efficiency. Tax evasion and avoidance, whether via an offshore tax haven or an anonymous corporation, undermine the world’s ability to achieve all of these goals.

Goal 1: Provide the appropriate level of revenue in a timely manner. The first and most obvious goal of any tax system should be generate revenue. Of course, the level of revenue produced by a tax system should not be arbitrary. The tax system should generate enough revenues to meet the needs of the nation with the appropriate level and in a timely manner.

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Press Releases
Sep
21

G20 Introduces “Transparency” Behind Closed Doors

Financial Transparency Coalition

WASHINGTON, D.C.—The G20’s recent focus on financial transparency is a welcome development, but instituting bare minimum requirements, or plans that allow for exclusion, simply give illicit flows an opportunity to continue their hazardous drain on the world’s most vulnerable economies.

Last Tuesday, the OECD released recommendations on Base Erosion and Profit Shifting (BEPS), which are aimed at cutting down on the ability of corporations to shift profits into tax havens. It’s well intentioned, but the execution leaves much to be desired.

“Apparently, transparency now takes place behind closed doors,” said Porter McConnell, Manager of the Financial Transparency Coalition (FTC). “From a small group of nations setting the standard for the rest of the world, to the OECD’s extreme measures to preserve total confidentiality in country-by-country reporting requirements, G20 Finance Ministers are ultimately getting flawed guidance.”

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Sep
18

FTC Members Call On G20 Finance Ministers to Act in Sydney Morning Herald Op-Ed

Christian Freymeyer

In an opinion piece that ran in the Sydney Morning Herald, Alvin Mosioma of the Tax Justice Network – Africa, Subrat Das of the Centre for Budget and Governance Accountability, and Oriana Suarez of the Latin American Network on Debt, Development, and Rights called on the G20 Finance Ministers to act on a number of vital financial transparency issues. The ministers will meet this weekend in Australia, ahead of November’s Leaders Summit.

The article focused on the need to address all aspects of financial transparency, including beneficial ownership, automatic information exchange, and public country-by-country reporting.

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Press Releases
Sep
16

Press Release: No Role for Public Scrutiny in OECD Plan to Curb Corporate Tax Dodging

Financial Transparency Coalition

No Role for Public Scrutiny in OECD Plan to Curb Corporate Tax Dodging

For Immediate Release
September 16, 2014

WASHINGTON, D.C. — The Organization for Economic Cooperation and Development’s (OECD) new recommendations to fight multinational corporate tax avoidance look robust from the onset, but there’s something missing. Since the most vital reporting information will remain out of the reach of ordinary citizens, the recommendations don’t do enough to bring transparency to a global financial system badly in need of it.

The OECD’s project on Base Erosion and Profit Shifting (BEPS) is intended to crack down on the ability of corporations to move profits overseas, through mis-invoicing trade transactions to avoid taxes, and other dubious practices. With nearly a trillion dollars leaving developing country economies each year in illicit cash, coordinated global action to plug the loopholes is desperately needed. But key elements of the financial data collected will be kept confidential, and out of the public’s view.

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Sep
15

Why Are So Many Tax Havens Islands? The View from Economics

Ann Hollingshead

We often think of tax havens as tropical islands or tiny nations nestled in the mountains. We know most of them are geographically and demographically small. Very small. Given their huge reputations, just how small they are just might surprise you.

Ireland, which is well known for its emerald hills and low tax rates, is about the same size as South Carolina. Luxembourg, a tax haven nestled in Western Europe between France and Germany, is about 2,500 square kilometers, or about a third of size of Rhode Island. Bermuda, a group of islands off the coast of South Carolina, is just over 50 square kilometers. That’s about one third of the size of Washington, DC. Singapore has about the same land mass as El Paso, Texas. Hong Kong is about the same size as Suffolk, Virginia. The notorious Cayman Islands have the same land mass as Shreveport, Louisiana.

These statistics might be surprising. How can nations so small garner such strongly negative reactions in the international community? Any why are so many tax havens so small? Is it coincidence? Or is there something else going on?

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Sep
2

State Department Panel on Corruption to Include GFI’s Heather Lowe

Christian Freymeyer

Tomorrow, Heather Lowe of FTC member organization Global Financial Integrity will participate in a panel discussion organized by the U.S. Department of State. The event, hosted at the OpenGov Hub in Washington D.C., will also include officials from the World Bank’s Stolen Assets Recovery Initiative, the State Department, and Transparency International USA. The discussion will focus on the inherent links between governance and corruption, and how to combat them.

If you aren’t based in Washington, or are unable to attend the event, there’s no need to worry, as a live stream will be available. You can submit questions to the panelists via Twitter using the hashtag #StateofRights, as well. 

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Latest Press Releases

Report reveals threat to U.S. interests from anonymous shell company owners

Global Witness · September 25, 2014

Owners of anonymous companies registered in U.S. states are ripping off innocent people and businesses across America, says a new report by ...

G20 Introduces “Transparency” Behind Closed Doors

Financial Transparency Coalition · September 21, 2014

WASHINGTON, D.C.—The G20’s recent focus on financial transparency is a welcome development, but instituting bare minimum requirements, or plans that allow for ...

Press Release: No Role for Public Scrutiny in OECD Plan to Curb Corporate Tax Dodging

Financial Transparency Coalition · September 16, 2014

WASHINGTON, D.C. — The Organization for Economic Cooperation and Development’s (OECD) new recommendations to fight multinational corporate tax avoidance look robust from ...