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Thursday’s Daily News Digest

Nathan Williams

Study: Big corporations use loopholes, dodge taxes
The Washington Post, November 3, 2011

Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010
Citizens for Tax Justice and the Institute on Taxation and Economic Policy, November 3, 2011

Greek Turmoil Set to Stress G20 Leaders
The Jakarta Globe, November 3, 2011

G20 summit and bribery: Is the anti-corruption effort for real?
The Christian Science Monitor, November 2, 2011

Arms dealer Viktor Bout convicted
The Washington Post, November 2, 2011

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Concrete Steps for Cannes

Ann Hollingshead

Mountaintops provide a convenient symbol for anything from achievement to power.  So it doesn’t come as a surprise that the meeting of the world’s twenty most powerful leaders is called the G20 “summit.”  Actually, the copycat nomenclature runs far deeper.  For instance: the diplomats who lay the groundwork for the G20 leaders’ trip to the summit? They’re dubbed “Sherpa,” with a dash of self-aware irony, after the Nepalese guides who help mountaineers scale peaks inNepal.  And with what may be a move to thrash the symbol to death, the G20 Sherpa’s aides are called “yaks.”

It was just over two years ago that the G20 started seriously talking about illicit financial flows. It was then that a leaked letter from Michael Froman, the U.S. Sherpa, ahead of the G20 Summit in 2009, read: “As we take these steps to increase the flow of capital to developing countries, we also need to prevent its illicit outflow. We should work with the World Bank and others to stem these flows and to secure the return of stolen assets to developing countries.”

At the time, I expressed optimism, but noted that the declaration was only a midway point; the real work was still ahead. I wrote: “G20 summits, much like their namesakes, are often self-admiring [and] short lived…the summit is the halfway point. The descent is often equally, if not more, dangerous than the ascent. After all, once a group of climbers has committed to a project (and by my count there is nothing more committing than climbing a mountain or signing a declaration issued by the world’s most powerful), they have to follow through.”

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Wednesday’s Daily News Digest

Nathan Williams

Reveal names of black money account holders to public: L K Advani to govt
The Economic Times, November 2, 2011

Is Switzerland Losing Its Status As An International Tax Haven?
PolicyMic, November 2, 2011

LEVIN: Want to cut the deficit? End offshore tax abuses
Argus-Press, November 1, 2011

Tax Evaders Face Greater Scrutiny as National Debts Pile Up
The New York Times, November 2, 2011

Shell game: Hidden owners and motives
CNN, October 26, 2011

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Offshore Crime Inc Wins Daniel Pearl Award for Investigative Journalism

Tax Justice Network


Cross-posted at the Tax Justice Network blog.

TJN is delighted that a long term investigation into how Eastern European criminals and politicians have been using secrecy jurisdictions to hide the proceeds from their crimes has been selected as one of the two overall winners of this year’s Daniel Pearl Award for cross-border investigative journalism. TJN has been involved in this investigation, along with our colleagues at Global Financial Integrity and Global Witness, and our Financial Secrecy Index, which placed the USA at the top of the ranking, and drew specific attention to how Delaware, Nevada and Wyoming provide offshore secrecy, is also cited in the report.

We have always argued that secrecy induces criminality and secrecy jurisdictions provide a supply side environment that encourages criminal activity. In social science terms, secrecy jurisdictions create a ‘criminogenic’ economy, in which criminal behaviour is significantly more profitable than productive activity. The markets adapt accordingly, which explains why so many major banks have been under investigation for supporting criminal clients. The journalists behind this project came to similar conclusions about how secrecy jurisdictions shape market behaviour:

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Monday’s Daily News Digest

Nathan Williams

Read of the Week: The Uphill Battle Against Money Laundering
The Council on Foreign Relations Blog, October 28, 2011

SC to hear plea for recovery of looted wealth today
Dawn.com, October 31, 2011

The Corruption Trap
INSEAD Knowledge, October 24, 2011

100Reporters Launches — Groundbreaking New News Organization with Focus on Exposing Corruption in Governments, Politics and Business
PRWeb, October 30, 2011

“The U.S. Already Has Blood On Its Hands”
Citizens for Tax Justice, October 28, 2011

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Easing Greeks’ Debt, One Yacht at a Time

Ann Hollingshead

flickr / linz_ellinas

Although most people don’t know this, the tailspin that Greece’s economy is in now did not begin in 2008, but rather in 2001, when it joined the euro. Although that statement doesn’t necessarily imply causality. The problem was there, but festering. When the financial crisis did get going, it didn’t so much create Greece’s problems, as it revealed them. At the beginning of 2010,Greece found itself on a precipice of financial ruin, driven by years of excess spending and borrowing and insufficient revenue.

To prevent the country from defaulting on its debt, in May of 2010 the International Monetary Fund and the European Union promised to provide Greece with a €110 billion rescue package. But in the terms of this agreement, Greece was to meet certain deficit goals: including reducing the budget deficit to 7.6% of GDP.

To meet this challenging goal, Greece has implemented a series of austerity measures, including spending cuts in the public sector, mainly in the form of pay cuts, pension cuts, and privatization, and also increases in taxes, whether they are indirect, like those levied on alcohol and tobacco, or the VAT. Every step of the way, Greek citizens have greeted these prospects with protests, which have sometimes turned violent. And despite the government’s efforts, the response from the international community has largely been “not enough.” In January, Moody’s and Standard’s and Poor downgraded Greece’s debt to junk status.

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Friday’s Daily News Digest

EJ Fagan

India’s export surge doesn’t add up
McClatchy-Tribune Information Services, October 28, 2011

Graft report urges states to act
Mail and Guardian Online, October 28, 2011

Latest Round in Tax Evasion Fight Pits Banks Against IRS
Financial Planning, October 28, 2011

Mauritius to help in tracking, checking black money
Hindustan Times, October 27, 2011

Measure to stop tax evasion draws more criticism
The Telegraph, October 28, 2011

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House Hearing on Non-Resident Alien Deposits Regulation

EJ Fagan

flickr / slangvei

Today, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing on a proposed IRS regulation which would allow the IRS to track the deposits of non-resident aliens in the United States. The United States functions as a tax haven for many non-resident aliens, as the IRS is unable to determine how much money is hidden in US banks. The IRS is seeking the regulation as part of a global effort to increase tax information exchange, and eventually collect revenue from more US tax evaders. Video is available here.

Here’s how it all works. The IRS collects information on all interest payments paid by banks to depositors from residents in the United States, and uses this information to tax the depositors. However, the United States does not tax non-resident aliens, so that information is not collected. These non-resident aliens have about $4 trillion in deposits. The IRS would collect that information, and share it with countries which have tax information exchange agreements with the United States. We already do this for Canadian citizens, but not others.

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EU corporate tax base harmonisation proposal may actually increase tax competition

Alex Marriage

The EU could adopt a Common Consolidated Corporate Tax Base by early next year. Regrettably, participation will be optional for both member states and companies and no minimum tax rate will be applied, leaving the door open to increased tax competition.

The Commission’s proposal is commendable for introducing a form of formularly apportionment which seeks to establish where real economic activity takes place by looking at staffing levels, sales, assets, etc. meaning that companies cannot simply cherry pick the location where rates are lowest. This would be a crucial step forward in the fight against transfer pricing abuse by companies that use subsidiaries in low tax jurisdictions in order to minimise their tax bills. Secondly this is a move towards increased tax cooperation.

However, as Walter Defraa of DG Tax stated in a recent meeting the reform could lead to more tax competition as it would be easier to assess effective rates. But another reason for this is that the commission’s proposal will be a voluntary initiative only. Ludo Vekemans of the European Trade Union Confederation rightly argued that in order to avoid this enhanced competition there should be a common or at least minimum tax rate as well, adding that the CCCBT should be made compulsory.

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Swiss-UK tax deal: good news coverage, lame responses

Markus Meinzer

We have had good press coverage for yesterday’s UK-Swiss tax deal analysis, which reveals how the UK government’s claims that it will net 4-7 billion pounds in tax revenues are fatally flawed. See, for example:

We are told that we also got a good discussion on the BBC’s flagship Today programme yesterday.

Of course (of course!) we have had some predictably lame responses to it. The first thing we note is that nobody so far has picked any holes in it, technically speaking. It is early days, of course, and there’s not much space in a newspaper to do so, but we are confident in our analysis.

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Wednesday’s News Digest

Nathan Williams

Is this the end of the tax haven?
The Telegraph, October 25, 2011

EU proposal helps curb corruption but fails to tackle tax dodging
EURODAD, October 25, 2011

New UN report says criminals may have laundered $1.6 trillion in 2009
The UN News Centre, October 25, 2011

Exports to tax havens increased from 2004-05 level
The Hindu Business Line, October 25, 2011

Governments must address corporate corruption, says report
The Guardian, October 24, 2011

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Consistency in Morals, Messaging, and Policy

Ann Hollingshead

flickr / Axion23

Teodoro Nguema Obiang has controlled Equatorial Guinea since he executed his uncle in a bloody coup d’état in 1979. Equatorial Guinea is a country in Middle Africa on the coast.  It is one of the smallest and wealthiest countries in the continent, in large part because it holds Africa’s largest oil reserves.  Yet the wealth is extremely concentrated in the hands of the government and the ruling elite. As a result over 75% of the population lives below $2 per day, 35% of its citizens do not live past the age of 40, and nearly 60% do not have access to safe drinking water.

Over Obiang’s three decades as president, Equatorial Guinea has witnessed many disappointments. The IMF and World Bank have both withdrawn aid programs, citing massive government corruption and theft.  The International Red Cross has accused Obiang of human rights violations. The Alliance of Professional Africans in the Diaspora has called Obiang one of Africa’s “worst dictators,” along with Zimbabwe’s Robert Mugabe and Angola’s Jose Eduardo dos Santos.

In 2009 campaign group and Task Force member Global Witness uncovered documents showing Obiang’s son, Teodorin Obiang, purchased a $38 million Gulfstream private jet, a $35 million Malibu mansion, speedboats and a fleet of luxury cars in the United States. Then, earlier this year, Global Witness revealed that Teodorin Obiang, the son of the dictator, “commissioned plans to build a superyacht worth $380 million.” That’s nearly three times the amount Equatorial Guinea spends annually on both health and education programs.

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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 ...