British Prime Minister, David Cameron, has announced the appointment of Kenneth Clarke as the Cabinet member who will champion Britain’s anti-corruption efforts.
The appointment of such a prominent politician comes at a time when Britain’s international reputation remains badly tarnished by issues including the festering BAE Systems scandal, politically embarrassing connections to the attempted coup in Equatorial Guinea, London’s prominence as a tax haven, and the malignant role of London’s satellites in encouraging and facilitating corrupt practices.
Britain’s report card reveals systemic deficiencies and calls for urgent political action. All too often, however, Britain plays a blocking role in trying to water down international efforts to tackle corrupt practices. This has included past attempts to water down the European Union’s Savings Tax Directive to exclude trusts and other legal entities used extensively for tax evasion, not to mention warning foreign governments against probing too deeply into deals involving British companies.
Global concerns about corruption have moved on considerably since Mr Clarke last held a ministerial portfolio in the mid-1990s. As a starting point in preparing for his new role, he should read this and this.
Illicit money is not just leaving Africa, but is also coming in to the United States, Global Financial Integrity Director Raymond Baker explained at a briefing this morning on the 2010 African Economic Outlook (AEO). Congresswoman Sheila Jackson Lee (D-TX) unexpectedly listened in during Baker’s comments and recognized that something needs to be done.
“Certainly I’m going to take a really serious look at the dollars that come in to the United States wrongly because I do think we have a responsibility, and we have to take ownership of it,” Congresswoman Jackson Lee said.
She also recognized a need for “transparency in the financial system” as Africa continues to develop. She stressed the importance of ensuring that the money in Africa, be it through aid or other sources, is used effectively for the people.
Congresswoman Jackson Lee sits on the House Judiciary, Homeland Security, and Foreign Affairs committees. She chairs the Homeland Security Subcommittee on Transportation Security and Infrastructure Protection. Also, she is the Senior Whip for the Democratic Caucus and the Whip for the Congressional Black Caucus.
Watch Congresswoman Jackson Lee’s full comments below:
On Monday 14th, the European Council adopted conclusions on tax and development, giving its support to last April’s Commission Communication “Cooperating with Developing Countries on Promoting Good Governance in Tax Matters”. Eurodad welcomes these conclusions, which put capital flight, including tax avoidance and tax evasion high on the EU and Member States’ agenda. The Council acknowledges that tax avoidance and tax evasion are “a major obstacle to domestic resource mobilization” for developing countries and that capital flight “requires efforts from both developed and developing countries”. The Council conclusions include the following:
Support for a Country by Country (CBC) reporting requirement for Multi National Companies (MNCs):
We regret that the Council has not been more assertive and explicit in this point and limits itself to exploring CBC reporting as a standard for MNCs. Yet, it is very positive that the Council calls on EU Member States to “support ongoing consultation by the IASB on a country-by-country reporting requirement in IFRS 6 for the extractive sector” and beyond. The fact that the Council encourages IASB to go beyond the extractive sector is a significant step forwards and will be particularly relevant during the forthcoming IFRS 8 review, to be conducted by the European Commission in 2011.
Promote an international framework for exchanging information on tax matters:
Such a framework would include a multilateral and automatic information exchange instrument and the availability of the beneficial ownership of all legal structures. This is a very welcome step. Nonetheless, while the conclusions consider the three options: automatic information exchange, spontaneous and on request models, we regret that the Council does not differentiate between these models, and importantly, that it does not make explicit how the automatic model is the most effective to combat cross border tax evasion.
Reduce incorrect transfer pricing practices:
While this is a very welcome objective, the proposals to do so are excessively vague and weak. The Council supports research on innovative approaches to tackle this problem, which is welcome, but at the same time it supports the implementation of the OECD guidelines on transfer pricing, which CSOs consider very inadequate to effectively address the problem and excessively complex to be implemented by poor countries.
Address IFI use of tax havens:
The Council states that International Financial Institutions (IFIs) should avoid “that EU funds are being used directly or through Offshore Financial Centers (…) for the purpose of evading tax payment”. This is a very welcome step that should be closely monitored. The Council also calls on the IMF to look, within the Reports on Observance of Standard and Codes, at whether a country is committed to the exchange of tax information and whether it treats “fraud” as a criminal offence that should be treated as money laundering. While this is very welcome, we regret that it only considers the term “fraud” and did not include “evasion”, in accordance with the spirit of the conclusions.
Support of greater participation of developing countries in international fora dealing with tax issues:
This is a positive step, but the conclusions here lack a more detailed explanation on how the EU and its Member States will proceed on this at the international level. Moreover, we deplore that while the Council encourages the Commission and Member States to financially support initiatives such as CIAT and ATAF, it does not at all financially support the UN Tax Committee, as CSOs have long been calling for.
Overall, the Council conclusions are an important step forward in addressing key issues related to tax evasion and development. These recommendations should now be endorsed by EU heads of State in their forthcoming European summit on June 17. But overall, they should be followed by a swift and practical translation into concrete measures. This will be the acid test of the commitment and leadership of the EU and its Member States in the fight against tax evasion, and in its commitment to stronger international cooperation with developing countries on tax matters.
Find here the full Eurodad response to the Council conclusions on tax.
EU Council summit: action now will make or break MDG 8
Eurodad, June 15, 2010
Swiss Lawmakers Hold Up Agreement on UBS Tax Deal (Update1)
Bloomberg, June 16, 2010
Surgeon Avoids Prison for Plotting to Hide HSBC Cash (Update1)
Bloomberg, June 15, 2010
Crocodile Dundee Paul Hogan’s off-shore tax accounts to be published
Telegraph, June 16, 2010
ZRA probe multinational cotton company over $3 m tax evasion
Zambian Watchdog, June 16, 2010
Gold mining in Mali: Who really profits?
Eurodad, June 16, 2010
Corruption Risks Abound For ‘Frontier Market’ Investors
Wall Street Journal, June 15, 2010
Canada seen as free of bribery, corruption
Vancouver Sun, June 16, 2010
MACC Detains Four People For Bribery
Bernama (Malaysia), June 16, 2010
Rwanda: Fight Against Corruption to Bring in Private Sector, NGOs
The New Times (Rwanda), June 16, 2010
Nigeria: NSE Charges Abuja Engineers Against Corruption
The Daily Trust (Nigeria), June 15, 2010
In May 2010, Christian Aid published a report entitled ‘Tax of Life’ highlighting the impact of tax dodging on Irish Aid programme countries. It’s a somewhat obvious point. Why would a country in times of austerity give aid to a country without considering the impact of international policies on the ability of that country to develop.
Tax is something that is growing in importance in the development world. The European Council recently published conclusions which approved a paper emphasising the importance of tax for development and the need to explore transparency standards such as Country-by-Country reporting and Automatic Exchange of Information – recommendations which taskforce members have been pushing for some time.
Back in Dublin, the government’s committee on Foreign Affairs were so struck by Christian Aid’s report that they called in the relevant government departments to give an account of what they were doing about the problem of tax dodging.
This led to a somewhat humorous exchange where Senator David Norris accused the Department of Finance Official of sitting on the fence when it comes to Country-by-Country:
Senator David Norris: Mr. Tobin may have slightly misunderstood the question, although it may well be the case that I am thick. While he gave a useful historical account of the current position and the role Ireland plays in this area, he hedged his bets. I am curious to ascertain whether Ireland is actively in favour of country-by-country reporting and if this support is expressed at international levels.
Mr. Gary Tobin: I can honestly say that it is rare for the Department of Finance to sit on the fence. We tend to take either a black or white position on issues. Irish Aid views country-by-country reporting as a multilateral issue. Ireland can and does contribute to the debate but the issue is essentially being driven at—–
Senator David Norris: Mr. Tobin is sitting on the fence.
Mr. Gary Tobin: No.
Senator David Norris: Of course he is.
Mr. Gary Tobin: If the Senator would let me finish—–
Senator David Norris: I would be very pleased with a “Yes” or “No” reply.
Mr. Gary Tobin: We have absolutely no objection to country-by-country reporting. We are participating in the OECD and EU processes that are trying to drive it forward. Having said that, if country-by-country reporting is agreed and implemented, then we want it to work.
So there we have it – Ireland has “absolutely no objection to country-by-country reporting.“ With a growing number of governments in support and businesses recognising the value of transparency if feels to me like the tide is turning.
Column: Saudis act aggressively to denounce terrorism
Washington Post, June 13, 2010
Swiss close to final approval of UBS-U.S. deal
Reuters, June 15, 2010
Police Confiscated $6.5 Million from Tax Official Gayus
Jakarta Globe, June 15, 2010
Nigeria: Greed, Corruption Our Biggest Problems – Jonathan
Leadership (Nigeria), June 14, 2010
PM appoints Ken Clarke to be “anti-corruption chamption”
The Times (UK), June 15, 2010
Too many businesses neglecting human rights, corruption concerns – UN survey
UN News Centre, June 14, 2010
OECD:Only 13 Nations Have Punished Bribery Of Foreign Officials
Dow Jones, June 15, 2010
Money Laundering Law To Be Strengthened, Says MACC Director
Bernama (Malaysia), June 15, 2010
Mexico To Limit US Dollar Cash Transactions To Combat Crime
Dow Jones, June 15, 2010
Aeropostale Ex-Merchandising Chief Charged With Fraud
Bloomberg, June 14, 2010
Stephen B. Young, Esq., Global Executive Director of The Caux Round Table, will discuss the financial crisis, the Caux Round Table Principles for Responsible Business, and pending federal financial regulatory legislation. An open floor discussion will follow.
Full event details below:
You are cordially invited to a reception and discussion regarding the ethical, economic, and policy dimensions of the global financial crisis with Stephen B. Young, Esq., Global Executive Director of The Caux Round Table.
Monday, 21 June 2010
6:00 to 8:00 p.m.
The Stewart R. Mott House
122 Maryland Avenue, N.E.,
Washington, D.C. 20002.
(The Mott House is on Capitol Hill next to the Supreme Court.)
Mr. Young will be discussing the financial crisis, the Caux Round Table Principles for Responsible Business, and pending federal financial regulatory legislation. After his remarks, the floor will be open for discussion. We shall serve light hors d’oeuvres and drinks and there will be opportunities during the evening for networking with colleagues from corporate, governmental, nongovernmental, professional services, academic, and other organizations.
Stephen B. Young has served as the chief executive of the Caux Round Table since 2000, working with globally prominent executives, government leaders, scholars, clergy, and others to promote integrity and responsibility in public and private organizations; encourage transparency and accountability in corporate and civic institutions; fight grand corruption through civil and criminal actions, including corrupt asset recovery; encourage productive dialogue between Eastern and Western religious and cultural traditions; and advance the scholarship and impact of organizational integrity and responsibility in the context of global integration.
Mr. Young worked for the U.S. Agency for International Development during the Vietnam War, and later served as assistant dean at the Harvard Law School and dean of the Hamline Law School. As an attorney, he has served corporate clients in business transactions and litigated in state and federal courts. He has published widely on legal, political, and economic policy issues in law reviews, prominent editorial pages, and in other venues. He is the author of the book, Moral Capitalism, now available in Japanese, Spanish, Croat, and Polish. His work for the Caux Round Table takes him to major conferences and universities around the world for frequent lectures on organizational integrity and responsibility.
In her book, The Difference Makers, Professor Sandra Waddock of Boston College named Mr. Young as one of the 23 leaders who developed the modern organizational responsibility movement.
Mr. Young is a graduate of Harvard College and the Harvard Law School. While an undergraduate at Harvard, he discovered the site of the ancient Bronze Age culture of Ban Chiang in Thailand, which UNESCO later declared a World Heritage Site. His full biography is available here.
This event is free of charge.
RSVP by Friday, 18 June, to Mr. Jed Ipsen, Associate Director for Washington, D.C. The Caux Round Table, at email@example.com.
The Caux Round Table is a global network of senior leaders in business, government, and other fields that promotes integrity and responsibility in public and private organizations. Fast Company recently named the Caux Round Table site as one of the 51 best on the Internet for information on organizational responsibility
Pictet sees change as an ‘evolutionary process’
Financial Times, June 13, 2010
UBS faces Luxembourg forgery probe over Madoff funds
Reuters, June 10, 2010
Accounts of 500 UBS clients already sent to U.S.: report
Reuters, June 13, 2010
Governor signs anti-secrecy agreement with Germany
Turks & Caicos Weekly News, June 14, 2010
HK-Shenzhen police crack down on illegal gambling on soccer World Cup
Xinhua, June 13, 2010
Corruption robs developing nations of $40 billion annually: World Bank
The Times of India, June 13, 2010
Revealed: Japan’s bribes on whaling
The Sunday Times (UK), June 13, 2010
Hanoi police seek bribery charges against bank officials
Thanh Nien News (Vietnam), June 10, 2010
Corruption still rife in SA
The Times (South Africa), June 12, 2010
Kingfisher Airlines VP arrested for bribery
PTI (India), June 12, 2010
Guatemalan attorney general sacked
BBC News, June 11, 2010
Top China food, drug official under investigation
AFP, June 14, 2010
U.S. Intelligence Puts New Focus on Afghan Graft
The New York Times, June 12, 2010
Members of the Task Force on Financial Integrity and Economic Development and other signatories identified three key points for the Financial Action Task Force (FATF) to consider at its upcoming plenary meeting this month in a letter sent on June 11.
First, the Task Force on Financial Integrity and Economic Development offered suggestions on how to respond to FATF Recommendations 33 and 34, which are still debated. Recommendation 33 states the following:
Countries should take measures to prevent the unlawful use of legal persons by money launderers. Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities. In particular, countries that have legal persons that are able to issue bearer shares should take appropriate measures to ensure that they are not misused for money laundering and be able to demonstrate the adequacy of those measures. Countries could consider measures to facilitate access to beneficial ownership and control information to financial institutions undertaking the requirements set out in Recommendation 5.
Recommendation 34 similarly states that preventive measures should be taken against the “unlawful use of legal arrangements by money launderers” [emphasis added]. The Task Force explains that public registries of beneficial ownership of companies is the “only meaningful option” to prevent misuse.
The second point by the Task Force calls for a list of jurisdictions that are failing to meet the FATF’s standards. In addition, a revised measure of the implementation of this legislation should be used for the fourth round of evaluations.
Finally, the Task Force would like to be involved in the open review process.
Task Force coordinating committee members Gavin Hayman, Campaigns Director, Global Witness; Raymond Baker, Director, Global Financial Integrity; John Christensen, Director, Tax Justice Network; Richard Murphy, Tax Research LLP; Alex Cobham, Chief Policy Adviser, Christian Aid; Francois Valerian, Head of Private Sector Programmes, Transparency International; and Marta Ruiz, Senior Policy and Advocacy Officer, Eurodad signed the letter, as well as 20 other signatories.
To view the letter in PDF or full text format, click here.
These days it seems as though word of a country’s economic crisis is commonplace. The world watched as Greece unexpectedly veered toward bankruptcy, and then other European Union (EU) countries—namely Portugal, Ireland, Italy, and Spain—were eyed with suspicion. Dr. Dev Kar, Global Financial Integrity‘s lead economist, writes that “Portugal lost a total of about US$138 billion through illicit transfers over a five-year period ending 2009″ in an article published today in The Portugal News. Here it goes again…
With the global economy already on unstable ground, Greece’s economic crisis created doubt in the EU and spurred fears that the crisis might spread to other EU countries and even, possibly, the United States. Few saw Greece’s downturn coming, but as the true magnitude of their government debt has been released, few can avoid the seriousness of the issue. But how did we get here? And where did all of Greece’s money go?
In a blog post last month, Dr. Kar wrote that illicit financial flows “cost Greece an estimated US$160 billion over the last decade.” With Greece unable to tax the illicit money coming and going, the money needed for their consumption boom came in the form of external debt. Within the past decade, this debt jumped from a manageable 73% of GDP to almost 160% of GDP.
Dr. Kar explained, “The need of the hour is that Greek policy makers must not only ensure that the economy is placed on a sustainable path to debt solvency and economy growth, they must improve governance and implement economic reform so that Greeks would favor licit domestic, over illicit foreign, investments.”
Greece may have received the largest bailout in both IMF and EU history, but the common denominator for economic struggle is still largely unchecked. Case in point: illicit financial flows are also playing a role in Portugal’s troubled economy. Over the course of five years, Portugal lost about US$138 billion. Considering this and the US$160 billion lost by Greece over a decade, and it seems evident that illicit financial flows have some connection to economic crises.
“Research at Global Financial Integrity (GFI) confirms that deteriorating economic conditions have been fueling massive illicit flows from Portugal over several years,” according to Dr. Kar.
So what exactly are these illicit flows? Model estimates indicate that Portuguese traders over-invoiced exports and under-invoiced imports. Dr. Kar suggests that traders over-invoiced exports to gain value added tax (VAT) refunds and under-invoiced imports to evade duties or VAT on imports.
To avoid such issues, the Task Force on Financial Integrity and Economic Development advocates that “the parties conducting a sale of goods or services in a cross-border transaction sign a statement in the commercial invoice certifying that no trade mispricing in an attempt to avoid duties or taxes has taken place.” In March, GFI released a report, which found that over the past 40 years African nations lost between US$854 billion and US$1.8 trillion in illegally transferred funds. Today, we see that Portugal is facing a high debt linked with trade mispricing as well.
With Spain, Italy and Ireland also under watchful eyes, the implications for the future of the Euro and other economies remain up for debate.
Woes of the Euro Zone: Can Portugal be far behind?
The Portugal News, June 11, 2010
Where the money went
Africa Confidential, June 11, 2010
Higher taxes, says the OECD
Africa Confidential, June 11, 2010
UPDATE 1-UBS CEO sees politicians backing U.S. tax deal
Reuters, June 11, 2010
Africa: OECD Report Calls for Radical Tax Reform Across Continent
Pambazuka News, June 10, 2010
German tax crackdown may yield 1.5 bln eur -union
Reuters, June 11, 2010
Sars’s opportunity to “come clean” on assets hidden offshore
Moneywebtax (South Africa), June 11, 2010
Legislation dogs govt in tax evasion issue
Mail Today (India), June 11, 2010
Legal pulse: Major transfer pricing dispute settled, offers relief to some Indo-US businesses
Legally India, June 11, 2010
EFCC blames judiciary for delay in corruption trials
Next (Nigeria), June 10, 2010
Ex-president offers to wire more money back in return for release
Focus Taiwan, June 11, 2010
Nigeria: Ibori’s Bail Revoked, Re-Arrested in Dubai
Daily Trust, June 11, 2010
Governor-elect in Gangwon loses bribery appeal
JoongAng Daily (SK), June 11, 2010
Witnesses in Olmert graft case take the stand
Haaretz, June 11, 2010
Corruption Allegations Hit Slovak PM Fico on Eve of Election
Wall Street Journal, June 11, 2010
27 charged with drug smuggling in Operation Burrito Grande and Operation Imperial Strikes Back
Los Angeles Times, June 10, 2010
Bogota soccer team linked to money laundering
Colombia Reports, June 10, 2010
Investors, governments, tax authorities, the IASB
Call to action: We have a unique chance to make new global rules for company reporting
A new global standard for extractive company reporting is under development right now. It has the potential to make oil, gas and mining companies:
This new standard is called an International Financial Reporting Standard (IFRS). It is being developed by the International Accounting Standards Board (IASB). A formal Discussion Paper has been published. This contains discussion of some of the proposed requirements for country-by-country reporting that Publish What You Pay and the Tax Justice Network have been pushing for a number of years.
But there are big gaps and weaknesses in the proposals and opposition from industry actors risks turning this crucial moment into a missed opportunity. A lot is at stake. Powerful interests are opposed to reforms and will likely pressure the IASB to maintain the status quo.
We are in the middle of the consultation period on these proposals. This is a big opportunity. But it cannot be missed. The deadline for comments to the IASB is July 30th.
Our top target, the IASB, formally prioritises the views of investors and companies, but we also think it will listen to government agencies and the media. We think it should also listen to civil society. So you will make a huge contribution to the campaign if you can:
There are other possible targets, like extractive companies and national associations of accountants. But these are best investigated case-by-case so we haven’t included them in this general Campaign Action Pack.
1. Companies should be required to report for each and every country in which they operate
We do not accept the current proposal to allow companies in the extractive industries to establish a cut-off point for country-specific reporting. We are particularly concerned by the proposal to allow the threshold to be set in terms of what is material for the company based on the size of national reserves relative to their international operations. This ignores the fact that reputational and legal risks are unrelated to the scale of operations. We also believe that the proposal to leave the decision on where to set the cut-off to the discretion of the company will reduce comparability of data, a key principle of international standards. Combined, we are convinced that this will leave the data on many countries still aggregated and inaccessible.
2. Information on specific payments to individual governments is essential
The current proposal recognizes that capital providers/investors have stated that they would find country-specific information on payments to governments useful to their decision-making. Other users of financial reports – like civil society and tax authorities – also anticipate significant benefits in assessing the appropriateness of payments and holding governments to account for their use. Companies should already have this country-specific information to comply with host government taxation reporting. Many will also need it to address anti-bribery and corruption legislation in their home countries. Therefore, additional costs should not be significant, making the proposal for further cost-benefit analysis unnecessary.
3. A minimum set of information is needed to ensure the coherence and credibility of what is reported by a company for operations per country
PWYP has identified six reporting types which would provide the minimum integrated set of data that should be disclosed to ensure accounting credibility. The IASB Discussion Paper treats this minimum package of data as a set of options by rejecting country-specific reporting requirements related to production revenues, subsidiaries and properties, and by failing to give a clear recommendation relating to payments to governments. But all elements must be required to allow meaningful judgments and comparisons.
Therefore the minimum package must include:
4. There should be no reporting exemptions, as these are unnecessary, would undermine comparability and would increase pressure on ethical companies seeking to be transparent
The current proposal to give companies the option to exempt themselves from reporting payments to particular governments undermines the whole added value of an IFRS. It would remove the protection of a standard reporting requirement, leaving companies to explain to untransparent host governments why they were not using the exemption. Resulting non-reporting would reduce the comparability of company reports. Such exemptions are not needed since regulations like IFRSs would override restrictions of confidentiality clauses if applied in a uniform manner.
5. There are many legitimate users of company financial reports other than investors and other capital providers and their needs must be considered by the IASB in the design of standards
The constitution governing the IASB states that it must act in the public interest and address the needs of the various users of company financial reports. In spite of this, the Discussion Paper explicitly rejects specific consideration of the needs of any users except capital providers/investors.
We’ve created some other materials to help you get into action vital for the campaign:
GUIDANCE FOR ENGAGEMENT: As described above, this section will help you identify specific targets and how to contact them, frames our issues in ways that will appeal to their agendas and provides 2 page summary/letters to help your communications with these priority groups. This has four sub-sections, to help you:
1. Getting investors to support what we’re asking for
2. Getting governments and tax authorities to support what we’re asking for
3. Getting the IASB to listen to your voice
4. National contact points – people acting as country focal points in particular countries
BACKGROUND BRIEFING: This is a source of detailed information and sources, relating to issues like:
a. The potential benefits of a new accounting standard – why it will have such reach
b. Global context for country-by-country reporting: mechanisms, precedents, progress
c. The IASB (International Accounting Standards Board): how it’s structured, how it operates, and debates on its accountability
d. Process and timeline for the creation of a new reporting standard
e. Key issues and gaps in Discussion Paper proposals – detailed analysis and references
A number of people have agreed to be focal points for the campaign in their particular countries. Their names and contact information are listed in section 4 of the Guidance for Engagement. If there is no one listed for your country, you can contact the international contacts. They are:
Joseph Williams, PWYP international office
Information & Advocacy Officer
+44 (0) 20 7031 1616
+44 (0) 77 7575 1170
Vanessa Herringshaw, Revenue Watch, London office
Director, Training and Capacity Building
Tel: +44 (0)7900 492631
Søren Kirk Jensen, Independent Policy Analysis
Tel: +45 5015 5783
Richard Murphy (Tax Research LLP) has been providing a lot of technical support. But please note he is a freelance consultant, so there are limits on what support he can provide without remuneration!
Work: +44 (0) 13 66 383 500
Mobile: +44 (0) 77 7552 1797
Your support is critical in our effort to mobilize stakeholders to endorse country-by-country reporting. Please keep us updated on developments – We’re looking forward to hearing from you!
Please click here to download the pdf version.
January 29, 2015·
ADDIS ABABA— As African leaders are meeting in Addis Ababa to discuss growing threats from extremist groups, instability, and poverty, Heads of ...
December 18, 2014·
Developing countries are losing twice as much money as they earn because of issues like tax evasion, profits taken out by foreign ...
December 17, 2014·
WASHINGTON D.C.—The Financial Transparency Coalition congratulates two members of its Coordinating Committee who were named to the International Tax Review’s “Global ...