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Apr
2

Friday’s Daily News Digest

Clark Gascoigne

Africa may have lost £1tn in illegal flows of money, researchers say
The Guardian, April 1, 2010

What The Top U.S. Companies Pay In Taxes
Forbes, April 1, 2010

Switzerland seeks law change to hand details of UBS ‘tax evaders’ to United States
Times Online, April 1, 2010

US judge OKs settlement in Daimler bribery case
Reuters, April 1 2010

Sentencing delayed for producers in bribery case
Associated Press, April 1, 2010

FACTBOX-Major recent U.S. corporate bribery cases
Reuters, April 1, 2010

5-Year Jail Term Sought for Former PM
The Korea Times, April 2, 2010

Pakistan attorney general quits amid graft dispute
The Associated Press, April 2, 2010

Nigeria corruption fighter Nuhu Ribadu may return
BBC News, April 1, 2010

Prime Minister: Haiti Committed To Transparency
NPR, April 1, 2010

Bulgaria steps up its crackdown on government corruption
The Christian Science Monitor, April 1, 2010

U.S. government takes steps toward extraditing Ohio investment manager Eric Bartoli
The Plain Dealer, April 2, 2010

Russia To Waive Transfer Pricing Penalties
Tax-News.com, April 2, 2010

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Apr
2

GFI’s Africa Report Covered by Democracy Now!, Several Influential Media Outlets

Clark Gascoigne

Democracy Now!, a national, daily, independent, award-winning news program, covered Global Financial Integrity’s new report on Illicit Financial Flows out of Africa today. Since its release last Friday, the report has gained coverage in several influential news outlets including Bloomberg, The Guardian, and Reuters among others.

Download a copy of the report here (PDF)…

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Apr
1

Thursday’s Top Stories

EJ Fagan

Hong Kong Plan Raises Tax Concern
Dow Jones Newswire, April 1, 2010

Swiss, US agree to upgrade UBS tax information deal
AFP, April 1, 2010

UBS Germany operations probed by regulator
Reuters, April 1, 2010

Corruption cases cannot be re-opened against Zardari : Swiss Prosecutor General
ANI, April 1, 2010

Daimler bribes: a blown chance to clean up its act
AP, April 1, 2010

18 bank accounts involved in terror financing frozen
PTI News, March 31, 2010

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Mar
31

Wednesday’s Top Stories

EJ Fagan

Africa Has 27 Million More People in Poverty Following Crisis
Bloomberg News, March 30, 2010

‘Nigeria lost 165billion to fraud in 39 years’
Next (Mali), March 31, 2010

ECA: Illicit Financial Flows Ruining Development”
Nam News Network (Brunei), March 31, 2010

British island tax havens seek eastern promise
Reuters, March 31, 2010

Rare Discord Upsets Usual Swiss Calm
The New York Times, March 31, 2010

Pakistan to ask Switzerland to reopen Zardari cases
BBC News, March 31, 2010

Mullen calls for ending Afghan corruption
UPI, March 31, 2010

Transparency urged for nascent oil sector
The Phnom Penh Post (Cambodia), March 31, 2010

Nigeria: It’s Amazing That We Can’t Tell How Much Oil is Pumped Daily- Peterside
The Independent (Lagos)

NJ bank penalized for not reporting transactions
BusinessWeek, March 30, 2010

Nigeria: Tax Collection – Ekiti LGs to Engage Consultants
Daily Independent (Lagos), March 30, 2010

Rio Tinto sacks four employees jailed in China for taking bribes
The Financial Times, March 30, 2010

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Mar
30

Death of a loophole

Tax Justice Network

We recently reported on the disclosure provision to combat tax evasion incorporated into the Hiring Incentives to Restore Employment (HIRE) Act, a new job creation bill signed by President Obama on 18th March. A contact in Miami now draws our attention to another provision in the same bill which closes off a sneaky little tax avoidance device which, according the US Government Accountability Office is losing American taxpayers billions of potential revenue through the use of so-called dividend equivalent strategies.

Under US tax laws, dividends paid by US companies to foreign shareholders should be taxed at 30 per cent. For decades, however, US banks have structured deals using derivatives that allow clients to turn their dividends into “dividend equivalents.” These have the appearance of a dividend, but by being embedded into a derivative they don’t generate a tax liability.

According to the New York Times, here’s how they work:

Say a hedge fund holds shares in General Electric. By entering into a swap agreement with a financial institution, the fund can simultaneously sell its G.E. shares a few days before the dividend is issued and receive a derivative tied to the value of the shares and the dividend payment.

After G.E. pays the dividend, the swap is canceled and the investor gets back the shares plus the dividend equivalent payment. The bank that did the trade typically charges a fee linked to the amount of tax savings the hedge fund reaps.

The new law eliminates the tax-free aspect to this transaction, because it treats the swap payments as dividends.

The NYT article reports that this particular wheeze was dug up by the ever-vigilant staff of anti-avoidance crusader Senator Carl Levin, the Michigan Democrat who heads the Senate Permanent Committee on Investigations. Yet again, we raise our hats in their direction.

Interestingly, the same article carries a comment by Lee Sheppard of Washington-based Tax Notes, saying that while the new provisions embedded in the HIRE act will go some way towards tackling the tax evasion culture in America, the radical route to closing down the tax evasion industry would be to make tax evasion a predicate act under anti-money laundering provisions:

“If you really wanted to stop this, you would define tax evasion as a predicate act to money laundering. Currently the money-laundering information the banks give the government is not given to the I.R.S. for civil tax enforcement.”

This is a proposal that TJN has been campaigning on for several years. For too long, a vast (and vastly overpaid) army of lawyers, bankers, accountants and other camp-followers, have been allowed to play the wilfully blind professional when it comes to advising their tax evading clients. Requiring them to raise a suspicious transaction report each and every time they have grounds to suspect that a client is evading tax, will make it far less easy for them to get away such monkey-business. We know that this matter is currently under review by the International Monetary Fund, and we say bring it on.

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Mar
30

Tuesday’s Top Stories

EJ Fagan

IlIicit cash outflows cost Africa $1.8trn in 38 yrs – GFI
The Champion (Lagos), March 30, 2010

Side events to the AUC/ECA Committee of experts meeting focus on illicit financial flows and regulatory models in the knowledge economy
UNECA-AU Joint Press Release, March 29, 2010

Q&A: Exposing the “Clandestine Passengers of Globalisation”
IPS, March 29, 2010

Havens for Stolen Funds Otaviano Canuto ?& Janamitra Devan
The Khaleej Times (Dubai), March 29, 2010

Stricter Rules Eliminating Transfer-Pricing Schemes
Reuters, March 26, 2010

Nato will fail unless you end corruption, US commander tells Karzai
The Times, March 30, 2010

UN report: Afghans plagued by poverty, corruption
The Associated Press, March 30, 2010

Corruption in SA ‘endemic’
ioL (South Africa), March 30, 2010

Pakistani Supreme Court ups pressure on government
The Associated Press, March 30, 2010

Italians express their disgust at corruption by withholding votes
The Sydney Morning Herald, March 31, 2010

Tony Blair under pressure to explain if he is avoiding UK taxes
The Telegraph, March 30, 2010

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Mar
30

British cross-party support for transparency measures

Tax Justice Network

Responding to Christian Aid’s campaign on transparency, taxation and international development, British Conservative Party leader David Cameron has issued the following statement:

“Just as Conservatives believe that aid needs to be more effective and accountable in order for it to have the maximum possible impact on global poverty, so there is no doubt that more needs to be done to increase transparency in tax affairs.

The UK Government has a responsibility to work with other countries, including overseas territories, to ensure that information on the tax position of individuals and companies is exchanged between tax authorities. This is vital in addressing tax evasion and also money laundering.

Ultimately, an international accounting standard on country-by-country reporting may well address many of the problems currently created by a lack of transparency. We need to ensure that any such reporting regime provides the relevant information and does not deter multinationals investing in developing countries.

In the shorter term, the UK Government must continue to press for further exchange of information agreements, greater monitoring of the use of transfer pricing and the use of complex structures and greater transparency.”

This is good news. UK tax justice campaigners now find themselves in a situation where, in the run-up to imminent elections, all three major parties have issued statements that broadly support TJN’s call for effective tax information exchange and corporate accounting transparency in the form of a country-by-country reporting standard. Yes, we can quibble over the working of the statement, which does not specify automatic information exchange, and uses weak language (“may well address many of the problems”), but the degree of cross-party alignment is welcome. These issues are too important to be treated on a partisan basis, and all political parties, whether on the Left or the Right, need to recognise that the corrupt practices facilitated by financial secrecy are incompatible with market economies and democratic forms of government.

Well done to our colleagues at Christian Aid.

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Mar
29

U.S., Mexico Declare Need to Tackle Illicit Financial Flows in Fight Against Drugs

Clark Gascoigne

The United States and Mexico released a joint statement on the Merida Initiative today—following up on the high-level rendezvous between senior U.S. and Mexican authorities which took place last week in Mexico City.  With drug-related violence in Mexico at abhorrently high levels and rising, both governments clearly recognize the need to tackle this issue.

Moreover, the scale of the problem seems to have forced them to consider alternative solutions. Indeed, the joint statement expresses both governments’ intent to tackle illicit financial flows—directly linking these flows to violence and corruption for the first time.

From the statement:

13. Our governments intend to establish a bilateral work program to combat illegal weapons and illicit financial flows, crimes that contribute to spread violence and corruption. This scheme will have concrete objectives and progress indicators that will be periodically reviewed. It will seek to identify new areas of cooperation and actions that each State can take within its jurisdiction.

GFI’s long advocated addressing illicit financial flows as a way to significantly curtail drug trafficking between Mexico and the United States.  Indeed, while the U.S. government’s been reticent, the Mexican government has previously acknowledged this. In a February ’09 letter sent to then-recently-confirmed Treasury Secretary Tim Geithner, Mexican Finance Secretary Agustin Carstens linked this issue directly to the drug trade:

Soon after the Obama Administration took office, Mexico sent Treasury Secretary Tim Geithner a letter complaining about the de facto secrecy U.S. banks offer Mexicans holding accounts by not reporting to anyone the names or interest income paid on those deposits. “The exchange of information on interest paid by banks will certainly provide us with a powerful tool to detect, prevent and control tax evasion, money laundering, terrorist financing, drug trafficking and organized crime,” said the Feb. 9 letter from Mexican Finance Secretary Agustin Carstens, who also noted that the two countries do not have a “solid and reliable mechanism to verify actual residence of the foreign depositors.”

Indeed, this is a serious issue for Mexico.  Robert Goulder at Tax Analysts goes a step further in explaining the importance of this matter:

“If you are a Mexican drug lord, you can put as much money as you want into U.S. banks. We ain’t going to tax it, and the Mexicans can’t tax it because they are never going to know about it. It’s the financial equivalent of ‘Don’t ask, don’t tell.’ “

Unfortunately, as far as I know, the United States has yet to respond to Mr. Carstens’ letter—something which makes today’s joint statement an important evolution in U.S.-Mexico relations.  Now let’s hope that the U.S. follows through with their language by implementing real reforms to curtail illicit financial flows.

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Mar
29

Monday’s Top Stories

EJ Fagan

Illegal capital outflows undermine Africa – study
UK Reuters, March 28, 2010

Afghan corruption: How to follow the money?
The Washington Post, March 29, 2010

Barack Obama presses Hamid Karzai on graft
The Australian, March 30, 2010

Murky world of corruption in China
BBC News Beijing, March 29, 2010

Pakistan being denied aid over corruption worries
The Daily Times (Pakistan), March 29, 2010

Philippines changes law, wants off tax-haven blacklist
Reuters, March 26, 2010

Death of a Loophole, and Swiss Banks Will Mourn
The New York Times, March 26, 2010

Crackdown on offshore tax dodgers
The Times Online, March 27, 2010

45 percent bribe-seekers in Mexico police officials
Sify, March 28, 2010

Bribes ‘forced China to overpay for iron ore’
The Australian, March 30, 2010

‘Absence of database frustrating auditing of Nigeria’s oil, gas industry’
The Sun (Nigeria), March 29, 2010

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Mar
29

EU Parliament Votes in Favor of Country-by-Country Reporting

Clark Gascoigne

Richard Murphy reports that the EU parliament has passed a resolution in support of country-by-country reporting. From his blog:

The EU Parliament has voted by 283 votes to 278 votes for a resolution on development issues that called for:

a new binding, global financial agreement which forces transnational corporations, including their various subsidiaries, to automatically disclose the profits made and the taxes paid on a country-by-country basis, so as to ensure transparency about sales, profits and taxes.

Good news.

This is indeed good news.  However, as this is an EU Parliament resolution, it is not a law. Therefore, it is non-binding; member countries can choose to heed or ignore EU Parliament resolutions as they wish. Which means we still have work to do.

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Mar
26

Friday’s News Round-Up

Clark Gascoigne

COLUMN – Drugs, terrorism and shadow banking: Bernd Debusmann
Reuters, March 26, 2010

Germany, Switzerland agree double taxation deal
Reuters, March 26, 2010

Swiss-German tax deal does not cover stolen bank data
Reuters, March 26, 2010

IRS Shifts Enforcement Focus To Asia
The Wall Street Journal, March 25, 2010

Op-Ed: Taxman missing the boat on offshore income
The Globe and Mail, March 26, 2010

Philippines changes law, wants off tax-haven blacklist
Reuters, March 26 2010

Tax Plans Could Hit India Investors
The Wall Street Journal, March 25, 2010

Cayman Furthers Transparency Drive
Tax-News.com, March 26, 2010

British lawyer faces US extradition over bribery case
BBC News, March 26, 2010

Fraud detectives step up searches in Alstom bribery inquiry
The Times (of London), March 26, 2010

SFO Shouldn’t Strike Plea Deals, Judge Rules in Corruption Case
Bloomberg, March 26, 2010

British chemical firm Innospec fined for Indonesia bribes
The Independent, March 26, 2010

Sinopec Admits Worker Took Daimler Bribes
The Wall Street Journal, March 25, 2010

Rio Tinto Executive Admits to Taking Two Bribes
The New York Times, March 26, 2010

3 ex-Siemens execs charged in corruption case
Associated Press, March 25, 2010

Marcos, 80, seeks comeback in Philippine elections
Associated Press, March 26, 2010

Lawyer accuses Sao Tome’s govt of corruption over oil
AFP, March 25, 2010

Commentary: Russia, International Economic Crime and the Rule of Law
The National Law Journal, March 26, 2010

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Mar
26

GFI: $854 Billion Removed from Africa by Illicit Financial Flows from 1970 to 2008

Clark Gascoigne

Hundreds of billions that could have been used for poverty alleviation and economic development lost, finds new report from Global Financial Integrity

WASHINGTON, DC — Africa lost $854 billion in illicit financial outflows from 1970 through 2008, according to a new report to be released today from Global Financial Integrity (GFI).  Illicit Financial Flows from Africa: Hidden Resource for Development debuts new estimates for volume and patterns of illicit financial outflows from Africa, building upon GFI’s ground-breaking 2009 report, Illicit Financial Flows from Developing Countries: 2002-2006, which estimated that developing countries were losing as much as $1 trillion every year in illicit outflows. The new Africa illicit flows report is expected to feature prominently at the 3rd Annual Conference of African finance ministers in Malawi, which is currently underway.

“The amount of money that has been drained out of Africa—hundreds of billions decade after decade—is far in excess of the official development assistance going into African countries,” said GFI director Raymond Baker.  “Staunching this devastating outflow of much-needed capital is essential to achieving economic development and poverty alleviation goals in these countries.”

Examining data for a 39-year range from 1970 to 2008, key report findings include:

  • Total illicit financial outflows from Africa, conservatively estimated, were approximately $854 billion;
  • Total illicit outflows from Africa may be as high as $1.8 trillion;
  • Sub-Saharan African countries experienced the bulk of illicit financial outflows with the West and Central African region posting the largest outflow numbers;
  • The top five countries with the highest outflow measured were: Nigeria ($89.5 billion) Egypt ($70.5 billion), Algeria ($25.7 billion), Morocco ($25 billion), and South Africa ($24.9 billion);
  • Illicit financial outflows from the entire region outpaced official development assistance going into the region at a ratio of at least 2 to 1;
  • Illicit financial outflows from Africa grew at an average rate of 11.9 percent per year.

“This report breaks new ground in the fight to end global poverty with analyses and measurements of illicit financial outflows never before undertaken,” said Mr. Baker.  “As long as these countries are losing massive amounts of money to illicit financial outflows, economic development and prosperity will remain elusive.”

“The drivers of illicit financial outflows vary from country to country but overall transparency in the global financial system would curtail all forms of outflows by making it harder for money to disappear once it exits the country,” commented Mr. Baker.  “When the G20 meets in Canada this June, the problem of illicit financial flows must be at the top of the agenda.”

GFI recently launched the G20 Transparency campaign to enable people around the world to take action on the problem of illicit financial flows.   To sign the G20 transparency petition, which will be presented at the G20 meetings in June, go to www.G20Transparency.com or visit www.GFIP.org.

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Latest Press Releases

TED Prize Winner Charmian Gooch Announces Global Campaign to Abolish Anonymous Companies

Global Witness · March 19, 2014

Vancouver, Canada, March 18, 2014 –This year’s TED Prize winner – Charmian Gooch of Global Witness – has announced that she will use the prestigious million-dollar award “to make it impossible for criminals and corrupt dictators to hide behind anonymous companies.” The announcement was made live and online from the TED stage in Vancouver, with support from leading members of the business, political, law enforcement and campaigning community.

European Parliament Gives Overwhelming ‘yes’ Vote to End Secret Corporate Ownership

Financial Transparency Coalition · March 11, 2014

Joint NGO Media Reaction Financial Transparency Coalition – Eurodad – Global Witness – Transparency International EU Office – Oxfam Brussels, March 11, 2014 – Today, the European Parliament endorsed the creation of public registers of who really owns companies, trusts and other legal structures. This will make it much harder for criminals, tax evaders, corrupt politicians and other money launderers to hide their identity, and their illicitly-acquired assets, behind anonymous companies and trusts.

NGOs welcome MEPs’ vote for ground-breaking changes to fight money laundering

Financial Transparency Coalition · February 20, 2014

Joint NGO media reaction Financial Transparency Coalition – Eurodad - Global Witness - Oxfam A cross political party agreement in the European Parliament ...