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Aug
28

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

Christian Freymeyer

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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.

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Aug
26

TaxCast: August 2014

Christian Freymeyer

In the latest Tax Justice Network podcast:

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When was the last time you used a $100 bill, a 500 euro note or a 1,000 Swiss Franc note? We look at how Western banks and Treasuries are facilitating crime through high denomination bills. Also, tax haven reputation damage-management, Switzerland pulls a fast one on India, the European bankers raking in the bonuses from sanctions against Russia and how the tax haven of Mauritius is…erm…expanding its portfolio.

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Aug
22

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.

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Aug
14

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.  

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Aug
12

Walgreens feels the heat, reconsiders tax flight

Porter McConnell

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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.

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Aug
8

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

Stefanie Ostfeld

This post originally appeared on the blog of Global Witness, a member of the FTC.

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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.

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Aug
6

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 be involved in the process, too. On Monday, the State Department hosted a forum for civil society organizations that featured Secretary of State John Kerry and Vice President Joe Biden.

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Aug
1

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.

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Jul
31

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.

U.S. 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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Jul
28

INFOGRAPHIC: Automatic Exchange of Information Shouldn’t Leave Countries Behind

Christian Freymeyer

The Organization for Economic Cooperation and Development (OECD) is moving towards implementing a new tool for catching tax evaders: automatic exchange of financial information (AEOI). While the name might sound a bit confusing, the idea is pretty simple. Governments in the system will share financial information with each other at designated intervals, enabling authorities to find individuals and corporations that are stashing assets in foreign countries.

While it’s a welcome initiative, we have serious concerns about the OECD’s efforts thus far to include developing countries. Developing countries are some of the hardest hit by tax evasion and other types of illicit financial flows, and much of the money that leaves often finds its way into bank accounts in the US or Europe. It’s imperative that a global information exchange is written with all countries in mind.

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Jul
25

Debate in Delaware on Tackling Anonymous Companies

Mark Hays

This post originally appeared on the blog of Global Witness, a member of the FTC.

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Last November, a former special agent for the Treasury Department, John Cassara, wrote an op-ed for the New York Times with the headline “Delaware, Den of Thieves?” Cassara described how the state of Delaware (along with Wyoming and Nevada) has become “nearly synonymous with underground financing, tax evasion and other bad deeds facilitated by anonymous shell companies”. He told of his frustration as a law enforcement officer trying to get information out of Delaware about the real owners and controllers of companies registered in the state.

This week, a debate has started in Delaware about its role as a corporate secrecy haven. One-half of the members of the Delaware State Legislaturehave sent a letter to the Delaware Congressional Delegation, urging them to support bipartisan federal legislation introduced by Senators Levin (MI-D) and Grassley (IA-R) to deal with anonymous companies.

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Jul
25

Nigeria Has Potential, But Needs to Stomp Out Illicit Financial Flows First

Christian Freymeyer

2363479089_f08f0f2033_zA new report out from the McKinsey Global Institute claims that Nigeria could be the next hotspot for economic growth and development. The firm says that, by 2030, the west African nation could become one of the world’s leading economies.

And it’s true; Nigeria has seen an economic surge in recent years, thanks to massive oil exploitation, a burgeoning financial sector, and Africa’s largest population. In April, Nigeria even leapfrogged South Africa on its way to becoming the continent’s biggest economy.

But even with annual GDP growth at 7%, millions of Nigerians suffer from poverty. With an average life expectancy of just 52 years and 46% of the population living below the national poverty line, a huge undertaking lies ahead if Nigeria wants to not only grow, but grow equally.

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Latest Press Releases

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

Global Financial Integrity · August 20, 2014

WASHINGTON, DC – As New York regulators announced that British bank Standard Chartered ...

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

Global Financial Integrity · August 7, 2014

WASHINGTON, DC – Global Financial Integrity (GFI) welcomed the announcement from the White House and African leaders today regarding the establishment of a ...

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

Christian Freymeyer · August 5, 2014

WASHINGTON, DC – As African leaders descend on Washington this week for the historic U.S.-Africa Leaders Summit, Global Financial Integrity (GFI) called ...