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Offshore tax havens, spread by new computing and telecommunications, provide an unprecedented tax shelter, enabling rich citizens and corporations to escape the national tax system. Wealthy tax evaders save millions, while public services and infrastructure in their home countries, as well as on the small island havens, remain drastically underfunded.
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2014
Earlier than expected, the Organisation for Economic Co-operation and Development (OECD) published comprehensive details on the common reporting standard for automatic exchange of financial information this week. The new reporting standard could actually mark a big step towards “a world in which tax cheats have nowhere left to hide” – as an OECD official puts it. In reality, it leaves enough loopholes to exclude developing countries from the benefits of such an agreement. Since the automatic exchange of information will be based on reciprocity, many developing countries that do not have the capacity to provide the required information will not be allowed to participate. However, precisely these countries lose billions every year through tax evasion channeled to anonymous bank accounts in tax havens and would be in dire need of their rightful tax revenues. (Christian Aid)
„Secrecy is not the exception but the norm […]” is the major finding of a report published by Christian Aid analyzing the disclosure of economic and financial information of almost 30,000 subsidiaries of the 100 largest companies whose shares are traded on the London Stock Exchange (the FTSE100). More than 90% of these subsidiaries are based in secrecy jurisdictions, only a quarter of them fully reveal information on turnover, assets, shareholder funds and number of employees. Data that is vital for investors, tax authorities as well as civil society to hold companies accountable. Even though, in the last months, UK’s Prime Minister David Cameron showed some willingness to finally tackle this issue the new evidence shows that current efforts are only scratching the service of company secrecy, says Christian Aid. (Christian Aid)
MPs of the European Parliament from the Economic and Monetary Affairs (ECON) and Civil Liberties, Justice and Home Affairs (LIBE) Committees voted in favour of public registries which would provide information on the real, or ‘beneficial’, owners of companies. The long-awaited vote, which recommends significant improvements to the EU’s Anti-Money Laundering Directive (AMLD) and would make it much harder for criminals to launder their money using European companies. (Financial Transparency Coalition, Eurodad, Global Witness, Oxfam)
Today the OECD presented its report on a new global standard for countries and tax havens to exchange information with each other, a new tool for fighting the scourge of tax evasion. The report contains many positive elements but falls far short of what the world’s citizens desperately need – especially citizens in poorer countries. (TJN)
Close relatives of China’s top leaders have held secretive offshore companies in tax havens that helped shroud the Communist Party elite’s wealth, a leaked cache of documents reveals. The confidential files include details of a real estate company co-owned by current President Xi Jinping’s brother-in-law and British Virgin Islands companies set up by former Premier Wen Jiabao’s son and also by his son-in-law. (ICIJ)
2013
Crime, corruption, and tax evasion drained US$946.7 billion from the developing world in 2011, up more than 13.7 percent from 2010. These findings by Washington based Think Tank Global Financial Integrity, which peg cumulative illicit financial outflows from developing countries at US$5.9 trillion between 2002 and 2011 are part of a new study. "As the world economy sputters along in the wake of the global financial crisis, the illicit underworld is thriving – siphoning more and more money from developing countries each year," says GFI President Raymond Baker. (Global Financial Integrity)
European leaders should use their meeting this week to agree further action against tax dodging by multinationals, CSOs urge in a new report. The report: ‘Giving with one hand and taking with the other: Europe’s role in tax-related capital flight from developing countries 2013’ reveals the state of money laundering, tax avoidance and tax evasion, and the extent of government action against them, across 13 EU Countries. (Eurodad)
In a feature South-African organization L4BB deals with the subject of growing anger at corporate tax dodging. Adrienne Margolis poses the question: How can commercial lawyers respond to demands for tax justice? In order to improve revenue raising from multinationals operating in developing countries, L4BB demands a legal aprroach that sidesteps technical distinctions between legitimate tax planning, tax avoidance and tax evasion and focuses instead on a more widely defined notion of 'tax abuse'. (L4BB)
Tax avoidance and tax evasion by transnational companies and the role played by tax havens have recently received much media attention, when it transpired that prominent companies such as Starbucks and Apple pay virtually no income taxes on their massive international profits. The case of the world’s largest commodity trader, Glencore, demonstrates that tax evasion by multinationals also affects developing countries. Tax issues and the detrimental role played by tax havens are now firmly on the international policy agenda, for example at the G20. (Friedrich-Ebert-Stiftung)
On June 12, European Parliament adopted two new directives in a plenary session, which contain disclosure requirements for the extractive industry and forestry businesses. After the guidelines implementation in the EU member countries, these companies must disclose which payments they make to governments – in fact, disaggregated in terms of countries and projects. With this move, the European Parliament is pursuing similar guidelines as the ones adopted in the US in 2010 as part of the Dodd-Frank Act, which come into effect this year. Combined with US legislation the directives will cover around 70% of the value of the global extractive industries, creating the basis for a new global transparency standard. (Global Policy Forum)
In a recent article for the Financial Transparency Coalition, an organization focusing on accountability and transparency, Gathoni Blessol and Mark Kirk explain how the City of London is planning to shape Kenya into what would be Africa's first mainland tax haven. According to the article, in its quest to expand its shadow economy, the City may look to transform Kenya into a so-called "International Financial Center". (Financial Transparency Coalition)
Almost half of all money invested in developing countries is channelled through tax havens, says a new report by ActionAid.
The report, How Tax Havens Plunder the Poor, shows how tax havens can often allow companies and investors to avoid tax on the resulting profits and gains and deprive the world’s poorest countries of much-needed tax revenue. (ActionAid)
A report by the Congressional Research Service reveals that losses from corporate tax evasion are estimated at nearly $90 billion a year, while US corporate profits reported from Bermuda grew 5 times in the last decade, indicating its growing popularity with companies. Citizens for Tax Justice points out that businesses over-report billions in profits from countries like Bermuda, which blatantly lack the economic output to support such a claim. Tax reforms in the US and EU - including the Netherlands, which is a major hub for illicit financial flows - is nowhere close to seriously addressing the use of Tax Havens, as political support still remains weak. Today, countries in both the Global North and South are losing trillions in tax revenue as a result, reducing public funds available for essential services like infrastructure, health etc. To put things in perspective, while $32trillion is invested in tax havens globally, only $50.2 billion is needed to help combat global hunger. (IPA)
Several Swiss banks have paid millions in charges following US crackdown on banks fostering tax evasion by US clients. First, it was the larger UBS that paid $780 million in tax evasion related charges and more recently, Wegelin, which pleaded guilty to tax evasion on $1.2bn from over 100 US citizens over the last decade. Wegelin paid US authorities $57.8m and has since shut down its operations by selling their Swiss and non-US businesses. It is evident of the US Justice Department’s active pursuit of both large and small-sized Swiss banks involved in evading billions of dollars in tax revenue. UBS also agreed to disclose the names of US citizens involved to penalize account holders. Several other Swiss banks including the large Credit Suisse are now under investigation. US action if replicated in other countries can successfully curb the use of offshore accounts for tax evasion. (BBC)
2012
Reuters found that Starbucks reported 13 years of losses in the UK while it told investors that the unit was among the best performing of its overseas operations. Despite controlling almost one-third of the UK coffee-shop market, Starbucks paid tax only once in the past 15 years. The US-based global coffeehouse announced that it will make changes to its UK tax practices. Starbucks however is only one of many multinational companies that are avoiding taxes overseas while local businesses pay their fair share. (Aljazeera)
The UK government is planning to force tax havens to reveal the names of account holders, according to this Guardian report. Similar to the US Foreign Account Tax Compliance Act, the new changes would push the UK’s crown dependencies such as Jersey, Guernsey and the Isle of Man and the Cayman Islands to give up what was previously secret information. There is skepticism about the implementation of the plan, but if taken up, the UK’s tax transparency move could act as a stimulus for other governments restricting the billions in tax avoidance. (Observer)
The UK and Germany are taking preparatory steps to tackle the issue of multinationals profiting from the legal loopholes that allow tax avoidance. The US based coffee company Starbucks is one of the many multinational corporations that are accused by the UK business secretary of “taking from the British economy and putting very little back.” International tax laws have trouble keeping up with the practices of developing electronic commercial activity. To this regard, the steps taken by these two states will be useful for more states to tackle this evolving issue. (Guardian)
This article shows how US corporations use foreign subsidiaries in low-tax jurisdictions to minimize tax on their global income. The subsidiaries hold their profits overseas indefinitely without being taxed in the US as repatriated income. US parent companies abuse this legal “grey area” when they organize buy-backs, acquisitions and deployment of their working capital. To avoid taxes, corporations are deliberately organizing their finances in a complex, wasteful and abusive way, which seriously decreases oversight and transparency as well as emptying the national treasury. (New York Times)
A new report by Tax Justice Network titled “The Price of Offshore Revisited” reveals that financial assets worth at least $21 trillion are held offshore- belonging to fewer than 10 million people worldwide- with the help of private banking and the legal, accounting and investment industries. Depriving governments of tax revenues, the off shore financial wealth of the super-rich has increased inequality by unbalancing the distribution of tax burden. The UK government has announced the plan to “name and shame” tax avoiders in order to raise public awareness. (Left Foot Forward)
In sub-Saharan Africa, more than 50% of foreign borrowed money illegally leaves the borrower country within the same year, demonstrate Boyce and Ndikumana, authors of Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent. The authors argue that the strong correlation between foreign borrowing and capital flight suggests an all but institutionalized “revolving door,” facilitated by the international financial system. Bank-secrecy and lax rules allow, for instance, provision-hungry bankers to provide loans to African government officials whom they know will redirect funds to personal bank accounts outside their home countries, but leave the country’s citizens responsible for servicing the debt. (YaleGlobal Online)
The US crackdown against offshore tax evasions has led to criminal charges against many banks, bankers, advisers, attorneys and at least 40 US taxpayers. Wegelin & Co., the 270-year-old private bank, became the first Swiss institution to face criminal charges. Wegelin helped Americans hide more than $1.2 billion in assets and evade US taxes. Wegelin’s case is symbolic in that it shows the US governments’ willingness to indict a bank if it does not cooperate, thus pressuring other banks to disclose accounts. However, it remains to be seen whether Wegelin’s indictment will lead to stricter regulation or whether “it’s just a question of the US functionally pounding its chest.” (Bloomberg Buisnessweek)
Tax evasion and the offshore jurisdictions that facilitate it, have come under increasing scrutiny of late as governments search for money to deal with the consequences of the world financial and economic crisis. The fact that governments have played key roles in establishing these “secrecy jurisdictions,” however, clearly demonstrates their opportunism. In this article, journalist Bruce Livesey relates stories that show how difficult it is to retrieve "offshore funds," if at all. The cases make apparent that governments must work together to undo the deliberate incongruence of non-offshore and offshore laws. (Canadian Lawyer Magazine)
2011
At a summit in London in 2009, G-20 leaders agreed to bolster efforts against off-shore tax evasion through the Global Forum on Transparency and Exchange of Information for Tax Purposes. Two years later, this OECD-hosted forum that includes both OECD and non-OECD members, has collected nearly 14 billion euros from tax-evading individuals. According to OECD Secretary General Angel Gurria, the multilateral agreements used to track down tax-evaders can and should also be used to scrutinize the corporate sector. It is true that the forum’s efforts make more citizens pay their share of taxes and enable governments to ease fiscal pressures on citizens affected by austerity measures. However, its initial achievements have been only modest at best, and point to the need for greater and more effective action. (Chicago Tribune/Reuters)
Public opinion is now starting to focus on tax avoidance. When corporations avoid taxes, they simply try to pay as little of them as possible; whilst not necessarily illegal, doing so is often unfair. NGOs like Action Aid note that developing countries are the main victims, because they do not possess the know-how necessary to close tax loop-holes. According to the OECD, losses can be up to three times the amount received in aid. Despite many promises, world leaders have not acted to stop tax avoidance, even as they are willing to increase austerity measures. (BBC News)
The Obama administration is seeking to implement a US-Panama free trade agreement (FTA) that will effectively “normalize” Panama’s function as a tax haven for American corporations. The FTA will make it easier for corporations to register the tax-heavy parts of their businesses in Panama, yet retain the benefits of being based in the US: access to a high-skilled workforce and courts that protect their (intellectual) property. The US government is paving the way for tax-dodging as it slashes benefits for the unemployed. (Foreign Policy in Focus)
African governments have been setting up offshore tax havens, following Western financial sector advice that liberal financial flows can improve development. States like Mauritius and Botswana have been considered tax havens for quite some time, but there now seems to be a widespread movement towards creating tax havens, partially out of a misguided belief that it would “modernize” African finance. Alvin Mosioma, of Tax Justice Network Africa, says the financial instability and corruption that come with tax havens would only increase the insecurity of the region. (IPS)
Foreign Direct Investment (FDI), long held up as a panacea for world poverty, has been failed to create jobs in the poorest countries. Economists working for UNCTAD have issued a report that voices concern over the overall lack of integration in global “value chains” for the least developed countries (LDCs). FDI should aim to diversify economies and train skilled workers. Additionally, projects should focus on solving social and environmental issues, and not mere profit taking. (stuff.co.nz)
The offer of $15bn in exchange for Icelandic citizenship made by ten Canadian and US investors has sent shockwaves throughout Iceland. Although an attractive offer, considering Iceland’s debt to Europe, Icelandic citizens are voicing concerns over the concept of citizenship for sale- especially when many genuine citizenship applications are rejected. This article investigates the tax evasion behind such citizenship requests and the implications cash for citizenship has on national identity. (Guardian)
Israel has purposely relaxed its tax laws in an attempt to attract new residents and citizens. With new residents enjoying a ten year tax exemption amongst other fiscal perks, this article arguesIs Icelandic Citizenship for Sale? (April 7, 2011)
that Israel has turned itself into a limited tax haven and could see the rise of high net worth individuals transferring offshore funds into Israel. (Asset Protection and Offshore Living)
Swiss bank accounts have often provided a haven for the funds of dictators. However, Europe will no longer offer security for the finances of leaders such as Zine el Abidine Ben Ali and Hosni Mubarak, as new laws will reduce the historical secrecy of private Swiss accounts. This article highlights how increased transparency allows for dictators' ill-gotten gains to be returned to legitimate governments in their country of origin. Additionally, these new laws seek to prevent further corruption and embezzlement in developing countries. (Terraviva)
Corporations, using loopholes in the tax system, pay well below the 35 percent US corporate tax rate, which strains revenue at a time of massive budget shortfalls. President Obama and leading Republicans are calling for major reforms to the corporate tax code to eliminate murkiness. This article suggests that corporate interests will not back a reorganization of the tax code, because they stand to lose significantly if the current system is altered. (The New York Times)
Tax havens play a vital role in the global financial architecture, used by institutional investors and drug kingpins as a way to mask their assets and cheat the system. They also function as conduits to the large financial centers in New York, London, and Hong Kong. Despite the pivotal role they play in terms of managing money for the wealthy, surprisingly little is understood about how these areas function. (The Guardian)
2010
The Cayman Islands charge no income tax, no corporation tax and no stamp duty, making them an offshore haven for large sums of money. The Caymans' political ties to Great Britain result in the UK losing between £7bn and £25bn each year, revenue which the UK can ill afford to ignore considering the struggling economic climate. This article analyses why, despite significant losses in public finances, the coalition government still has not addressed the issue of offshore funds, even though they lie within government jurisdiction. (Prospect)
In 2010, revelations about Michael Ashcroft's tax status demonstrated how the wealthy undermine national tax systems through tax havens - and how government is often complicit. Lord Ashcroft is one of the UK's richest people and a dual citizen of the UK and Belize, a tax haven. He has held public office in both countries; in Belize as ambassador to the UN, and in the UK as a life-peer of the House of Lords. Yet, in March 2010, Lord Ashcroft admitted that he is non-domiciled in Britain for tax purposes. Income that he generates in Belize has been channeled into major donations to the UK Conservative party, as well as the conservative Australian Liberal party. (The Guardian)
The Brazilian Ministry of Finance published a list of 74 secrecy jurisdictions, replacing a previous list of 52. Interestingly, many of the world's countries are acting as secrecy jurisdictions. The first part of the lists contains 65 jurisdictions that do not tax income or have a tax rate below 20% and the second part lists nine "privileged fiscal regimes." While many of the countries on the list are predictable, one of the notable omissions is the United Kingdom. (Tax Research UK)
When it comes to taxes, there are two sets of rules - one for the wealthy and one for everyone else. Every year in the US, corporations evade around $100 billion through offshore tax havens while others must fill the gap of the missing tax money. Corporations in the United States paid a tax rate of only 2.3 percent in 2004. Subsidiaries in tax havens are a major means of corporate tax avoidance. (Huffington Post)
The case of British Billionaire Lord Ashcroft who is registered "non-domiciled" for tax purposes, yet holds a seat in the House of Lords, has incited scrutiny over UK tax laws. Although the use of offshore tax havens is legal under UK law, Lord Ashcroft should not be able to cast ballots in a country where he is exempt from tax payments. This article argues that in order to restore public faith in the parliamentary system the law should be changed to forbid anyone from sitting in parliament who is not a full resident of the UK. (Guardian)
Under the terms of the Lisbon Treaty, the European Parliament can decide whether or not to share EU bank transfer information with the US. US Treasury Department official, Adam Szubin, is pushing hard to convince the EU to go ahead with information sharing previously agreed. US National Security Advisor, James Jones, has also said that transparency in trans-Atlantic transfer data have prevented and will prevent terrorist attacks. (Der Spiegel)
Diplomatic relations between Germany and Switzerland soured up since last year, after German Finance Minister Peer Steinbrueck said that the Swiss tax regime encouraged tax evasion. The current German government is now trying to restore friendly relations with its neighbor, but recent information on approximately 1300 German account holders in Swiss banks may damage relations anew. (Business Week)
The finance and development ministers of OECD countries plan to reform the way multinational corporations present their accounts to tax authorities. One important proposal will require country-by-country financial reports rather than the aggregate reports that MNCs get away with now. This proposal is likely to meet stiff opposition from the corporate world, but the OECD ministers are confident that this step would lift a “veil of secrecy” that currently makes it very difficult for governments to trace how companies evade taxes. Tax evasion greatly exceeds the amount developing nations receive in aid each year. (The Nation)
"Offshore tax evasion is the biggest theft among societies and neighbor states in this world," says Rudolf Elmer, a former employee at Swiss bank Julius Baer. Elmer has disclosed internal bank and client documents to foreign tax authorities. Wealthy American, European, and South American clients use secret Swiss accounts to evade taxes. While this dispute unfolds like a modern spy thriller, the liberalized financial system that allows firms to aid their clients in this way remains unreformed. (The New York Times)
2009
The European Investment Bank (EIB), despite officially recognizing the link between tax evasion and global poverty, continues to finance banks known to stash away money in tax havens. Recipients of EIB loans include BNP Paribas and ING, the French and Dutch Banks with the largest presence in tax havens. Further, most of the EIB's assistance to Africa's financial sector over the past five years has gone to one firm that concentrates its African activities in Mauritius - widely considered the continent's premier tax haven. (TerraViva)
The US is chasing tax evaders. After forcing Swiss banks to provide information about 4700 suspicious clients, US prosecutors are probing Hong Kong banks. Many tax evaders have used Hong Kong corporations as account holders so their personal names would not appear in Swiss bank records. Debriefings of tax evaders have brought to light other tax havens such as Liechtenstein, Mexico and Panama. (Bloomberg)
Many US citizens used to keep their money in Swiss banks to evade taxes. But in August 2009, the US government asked Swiss banks to provide the names of suspected US tax dodgers. Afraid that European governments might do the same, European clients - a third of Switzerland's lucrative private-banking - are bringing their money back home. This could permanently change the secretive world of offshore banking. (The Wall Street Journal)
Christian Aid and Tax Justice Network have compiled a global Financial Transparency Index. The most secretive tax havens are the US, Luxembourg, Switzerland, the Cayman Islands and the UK, a result which dispels the stereotype of tax havens as consisting mainly of palm fringe islands. The researchers singled out the UK in particular, as half of the world's secrecy jurisdictions are in the commonwealth countries, Crown dependencies and British Overseas Territories. (Christian Today)
Christian Aid estimates that the world's poorest countries lose $160 billion dollars every year due to tax havens. Yet laws targeting these offshore centers have only been helpful to rich states, as only they have the necessary leverage to force compliance. (The Guardian)
Today, offshore tax havens have to comply with transparency rules, so a growing number of wealthy US citizens are handing in their passports. Under US tax law, the worldwide income of any US citizen or resident is subject to tax. The offshore centers have been a safe haven for the wealthy Americans trying to escape taxes, but now that’s about to change. When giving up their citizenship, the US citizens expect to buy a passport elsewhere, where the tax rate is low. (Wealth Bulletin)
Hedge fund assets in offshore tax havens such as the Cayman Islands and Bermuda represent more than two thirds of the roughly $ 1.3 trillion industry. The Internal Revenue Service is demanding that hedge funds and private equity investors disclose hundreds of billions of dollars they have invested offshore. Investors keep funds offshore for a variety of reasons including tax evasion. It's clear that new disclosure requirements will lead to additional taxation of these hidden funds.(
The Wall Street Journal)
Off shore tax havens are infamous for money laundering, secrecy and criminal activities of many kinds. A new report reveals the scale of illegal money flows to these havens from developing countries. Such transfers reduce tax revenues and hinder economic growth. The report argues that nations should strengthen international tax regimes to bring an end to these damaging effects.
The Obama administration's plan to crack down on US tax evasion not only targets corporations but also powerful lobbies that helped draft the legislation which made it easier for big businesses to evade taxation. Groups including the Business Roundtable, the US Chamber of Commerce, and the National Association of Manufacturers, formed a lobbying coalition called Protect America's Competitive Edge. This lobby aims to defeat the President's tax proposals, and openly threatens the government with outsourcing jobs if such legislation is enacted. Earlier, business lobbyists successfully ruined an important housing bill that could have "prevented 20 percent of foreclosures, at no cost to taxpayers." (Huffington Post)
With the financial crisis and the bailout of banks, tax payers have realized that tax havens are a major cause of financial disruption. The Organization for Economic Co-operation and Development (OECD) has threatened countries with blacklisting unless they agree with its standards. Nevertheless, the agreement is not binding until a country signs a tax information sharing agreement (TIEA) which incorporates the OECD principles into domestic law. Nonetheless, account holders can either pay a withholding tax that allows them to remain anonymous or shift their account to countries, such as Panama and Samoa, which have not agreed to share any information with foreign authorities. (Times Online)
The OECD has released its report on countries that agreed on tax standards. The OECD blacklisted Costa Rica, Malaysia, the Philippines and Uruguay as uncooperative tax havens as they had refused to adopt new rules on financial openness. In addition, 39 jurisdictions have committed to the internationally agreed tax standard (some since 2000), but have not yet substantially implement those standards.
The corruption perception index ranks Switzerland and the UK among the least corrupt nations in the world. Unfortunately, it does not show that the UK hosts one quarter of the tax havens and that Swiss bank secrecy policy prevents the tracking of laundering money. Developing countries, mainly in Africa, are deemed the worlds most corrupt countries. But the index only examines the 3 to 5 percent of total outflow emanating from the African political elite and fails to monitor the 60 percent of capital outflow that multinational corporations declare as profits in tax havens, instead of declaring this money as profit in the country where they make it. (Thought Leader)
The OECD reported that multinational corporations have hidden some 5 to 7 trillion dollars offshore to avoid being taxed by their respective government. In order to discourage corporations from using those financial centers, a leaked French working paper proposed that G20 members punish “uncooperative� countries by breaking off state-to-state tax conventions and by reporting accounts of customers located in tax havens. Concerns remain about the US which promised to endorse the Stop Tax Haven Abuse Act, but did not provide any details on key issues. Another ambiguous country is the UK with about a third of the world's tax havens being British dependences. (Inter Press Service)
The OECD threat to blacklist tax havens has pushed Switzerland, Austria, Luxembourg, Liechtenstein and Andorra to review their rules on identity secrecy. Although tax havens are not a direct cause of the financial crisis, they deprive countries from revenues needed of domestic investment and economic stimulus. The OECD estimates that tax havens hold assets between USD$1.7 and USD$11.5 trillion. An Oxfam study reveals that tax evasion also affects developing countries whose citizens hold more than USD$6.2 trillion abroad and whose governments are facing capital evasion amounting to USD$300 billion a year. (Reuters)
This Guardian articles examines the secrecy surrounding the legal tax avoidance maneuvers of the largest UK companies. Think-tanks have estimated that the Exchequer will lose between £8.5bn and £12bn in taxes for the 2008 fiscal year. The majority of FTSE 100 companies registered their brand in virtually tax-free countries so as to be liable to their tax regulation and pay a little more than 2% of [their] overall profits. The National Audit Office points out that in 2006 more than 60% of Britain's 700 biggest companies paid less than £10m corporation tax, and 30% paid nothing.
The Washington Post reports that eighty three of the biggest one hundred corporations in US operate multiple subsidiaries in offshore tax havens that allow them to evade their US tax bills. The Government Accountability Office report lists bail-out beneficiaries such as AIG, Bank of America, Citigroup, Morgan Stanley, and Goldman Sachs. Their fiscal operations are legal but unethical, given the economic crisis. The Treasury estimates that offshore tax havens cost the US government at least USD$100 billion annually in lost tax revenue.
2008
In December 2008,the United States Government Accountability Office released a report revealing that many bailed-out firms have tax havens. (GAO)
The EU has decided to extend its tax havens directive which impedes individuals from opening bank accounts abroad to avoid interest taxes to include legal entities. Only Luxemburg disagreed, claiming that it sees "no loopholes in the current rules." But every year, EU countries are loosing billions of euros through tax evasion. It took fourteen years of negotiations to implement the current rules and some fear that making amendments will also be a slow process. (International Herald Tribune)
This article provides a list of countries labeled as tax havens by the Organization for Economic Co-Operation and Development (OECD), the International Monetary Fund (IMF), taxresearch.org and the US Stop Tax Havens Abuse Act. The OECD marked Andorra, Liechtenstein and Monaco as ncooperative because they lack tax transparency. Many of the off-shore tax havens are small countries and dependent territories of the UK, the US, New Zealand and the Netherlands. (Reuters)
The European Union wants to tackle tax havens by strengthening the 2005 savings tax directive. Skeptics say closing down these tax havens will not stop tax evaders from placing their money outside of Europe. Some estimate that tax havens around the world hold between $7 and $12 trillion. If this money was taxed, it would yield enough revenue to pay for many of the UN's Millennium Development Goals,the author states. Tax havens are the ideal means for criminals to launder money obtained by illegal practices such as drug trade and terrorism. (Independent)
Liechtenstein, one of Europe's most secretive tax havens, shelters £ 130b of other people's money. Heinrich Kiebel, employee of lucrative private bank LGT, sold to the German Authorities a CD-ROM containing the names of over 1,250 clients. European states are trying to crack down on tax havens such as Liechtenstein, where tax evasion is not a crime but merely an administrative issue. (Observer)
In the 1970s and 80s, politicians in the island of Jersey turned the British Chanel territory into a center for offshore financial services. The financial services industry created impressive economic growth for the last three decades. But the dark sides of this growth are now starting to show. Locals live in poverty and tourism is decreasing. (Tax Justice Network)
The island of Jersey, located in the English Channel, has long been an offshore hedge fund haven, with funds totaling US$ 81 billion. But from January 2008 officials will introduce a "zero-regulation regime" on the island, removing all restrictions on financial transactions. According to the director at Jersey Finance, a legislative institution, demands from the hedge fund community directly resulted in the new deregulation. Offshore havens, which reached a total of US $1.17 trillion in July 2006, could see competition for deregulation result in widespread fraud, financial crises and monopolies. (The Wall Street Journal)
Responding to pressure from the Norwegian government, the World Bank has agreed to publish a report on offshore financial centers as part of the Bank's anti-corruption work. Preceding the World Bank decision, the Tax Justice Network and other NGOs had actively campaigned Norway and other members of the "Leading Group on Solidarity Levies to Fund Development" to address the problem of tax evasion and offshore centers. The NGOs pointed out that every year, countries loose "hundreds of billions of dollars" through tax evasion and rich countries bear "at least as much [of] the responsibility" as poor countries do.
The Bank of International Settlements, the International Monetary Fund and the Organization for Economic Cooperation and Development estimate that a total of US$5-7 trillion is held offshore. This Globalist article warns of the threat that tax evasion has on sovereign governments and argues that offshore tax evasion has broader implications to the lost profits of the tax evaded.
This Inter Press Service article highlights the increasingly common practice by high technology and pharmaceutical industries of registering patents and licenses in tax havens to avoid paying high taxes while conducting the majority of their operations in other countries. The author states that countries are beginning to pursue corporations that engage in these practices, but governments such as the US have failed to adopt "tough measures to combat such royalty-shifting."
Tax Justice Network reviews the scale and extent of the problem of tax havens. This report assesses the damage caused by lost taxation revenues and criticizes governments for not taking appropriate steps to prevent such abuse. The report concludes that the amount diverted would be sufficient to finance the UN Millennium Development Goals.
This Christian Aid report examines the scale, nature and problems of illicit capital flows. Capital flight reduce the funds available for health and other public services in several countries. Further, tax havens and tax evasions erode the rule of law and encourage corruption. The report estimates that every year international investors move US$500 billion from developing countries. In comparison, global aid flows amount to roughly US$100 billion per year.
This Wall Street Journal article calls attention to offshore tax-dodging US citizens. The article discusses the case of the Wyly brothers, who have parked large sums in trusts on the Isle of Man, a British tax haven in the English Channel. Lawmakers and US prosecutors see the base as an example of how rich individuals evade taxes and break securities laws through the use of offshore shell companies and compliant "trustees."
The borderless world of international banking has facilitated Singapore's rise as an offshore tax haven for the world's rich. In response to pressure from the European Union, Switzerland, a longtime center of offshore assets, has agreed to stiffen laws against tax evasion. As a result, many banks have relocated their operations to Singapore, which has passed laws to strengthen account secrecy and attract foreign depositors, enabling the world's richest citizens to continue evading taxes. (The Wall Street Journal)
Tax revenue is an important source of government funding for basic services like health and education. Yet competition over foreign investment, trade liberalization, and the establishment of off-shore tax havens have eroded the ability of states to perform these functions, contributing to their impoverishment and weakness. Along with aid and debt cancellation,
Christian Aid argues, better tax strategies provide an effective way of alleviating poverty.
The Inspector General of Justice for Buenos Aires has banned offshore shell companies from doing business in Argentina's capital, in "a step that is the first of its kind, anywhere in the world." Shell companies, sometimes called "International Business Companies" or "mailbox" companies, conduct their business from the safety of tax havens where their beneficiaries can remain anonymous. In a country with a "huge history of tax evasion," the Buenos Aires ban helps prevent tax fraud and money laundering by not allowing owners of assets to hide their true identities by going offshore. (
CorpWatch)
Research by the Tax Justice Network suggests that "approximately US$11.5 trillion" in assets are held offshore by "high net-worth individuals." Furthermore, the taxes not paid as a result of these funds being held offshore "might exceed US$255 billion each year."
