A good letter in the Guardian today from one of my co-authors of this report:

Given that the "gagged" Barclays documents are now widely available, the bank’s continuing attempts to ban publication are laughable and their arguments for non-disclosure indefensible (Judge upholds bank’s attempt to gag Guardian, 20 March). Having read the seven documents, I am astonished at the scale of human and financial resource dedicated to conjuring profits from a systematic abuse of loopholes between different tax regimes. This is where global businesses plunder national treasuries. Legal it may be; responsible it certainly is not.

As co-author of a report on responsible corporate tax policies and practice, I have promoted "active tax responsibility", a concept that includes being "true to the spirit of the law and avoiding exploitation of loopholes". Alistair Darling proposes to include this in a new code for banking standards. But this will only be effective through a wholesale change in attitudes towards accountability and transparency in boardrooms. Now, if ever, is the time for principles and values to be counted above the pursuit of value at any cost.

Barclays are clearly not alone in this unprincipled activity. The Barclays documents prove that the combination of human intellect and greed is a powerful driver of economically irresponsible behaviours. This is not something laws alone can address: it requires business leaders to ask themselves whether they would feel comfortable if the hidden aspects of their business decisions were open to public scrutiny. If the answer is no then principles should overrule profits. In the longer term, the trusted and responsible corporation is the one where employees, customers and investors will choose to spend their time and money.
Geoff Lye
Vice-chairman, SustainAbility Ltd

Geoff and I are of an age where Barclays was automatically a dirty word top all those of good conscience.

It looks like it’s trying to regain that status.

 

The Tax Justice Network has published a report with the above title. It is available here.

This publication details the findings of research into where 97 major European companies have their tax haven subsidiaries and compares this with the findings of the US report on this issue published last December.

The most important finding is by far the simplest: tax havens are an integral part of the business system. 99% of all European companies surveyed had a tax haven subsidiary. Most had many.

They are also a cancer that is helping destroy it from within, as John Kay suggested in the Financial Times this morning.

This is important: the effort to both expose the use of tax havens and to limit their use is driven by a desire to increase the well being of the people of the world. But that motive is not linked to anti-market sentiment. It is linked to a desire that we have efficient markets that work as well as possible to deliver maximum well-being for all participants, wherever they are, and that we can prove it. That is not possible when tax havens are part of the system, as I have argued elsewhere.

This survey has shown just how far we are from understanding how our markets work, how money flows, and why businesses are structured as they are. We cannot deliver optimal results in that case.

The case for reform of accounting so we know who is where, and of tax havens so that the massive market imperfections they create are eliminated is compelling.

I hope the G20 are up to tackling the issue.


Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

For more information see http://www.taxjustice.net/cms/upload/pdf/Country-by-country_reporting_-_080322.pdf

NB: New report version posted 27-4-09 changes some of the conclusions in the text due to clarifications in the Dutch source data

 

Great article by John Kay under the above title in the FT today. He makes the point havens only exist because we tolerate them:

People are willing to make agreements under the laws of Bermuda, not just because they know that the laws of Bermuda are not very different from the laws of England, but also because they also know that the consequences of agreements made under the laws of Bermuda will be enforced by the courts of England. Such formal recognition is the essential difference between dealing with a haven and dealing with smugglers, and a difference that exists because we choose to facilitate it.

That needs to end, not least because:

When the haven falls into disrepute – as recently in the Turks and Caicos Islands – it falls to the British government to sort it out.

If you operate in the penumbra of legality, as havens do, it is easy to slip outside the bonds of legality altogether. Where there is legal avoidance of tax and regulation, illegal avoidance of tax and regulation is rarely far behind, and often hard to distinguish: where there is secrecy the motive is frequently impropriety; where there is impropriety, criminality is rarely far behind, and hard to distinguish. To turn a blind eye to avoidance of the law is to undermine all law.

Today’s political outrage is humbug. Havens exist only because larger states allow them to exist, and larger states allow them to exist because the customers of havens are the rich and powerful. In the 1860s, the typical client of a haven was a patron of Blanc’s casino: in the years after 2000, the typical client of a haven was a hedge fund registered in Grand Cayman. Plus ?ßa change, plus c’est la m?™me chose.

He’s right.

We’re seeing it in the EU protecting its own.

But let’s be unambiguous: this is the political elite protecting the financial elite in pursuit of reward.

This is corruption at the heart of the system.

My concern is a simple one. Can the system survive with this degree of corruption within it? If it can’t then mayhem and worse will ensue.

It’s not at all clear that our politicians understand that.

That’s what really worries me about the back-tracking going on right now.

 

Outright disaster from the EU

Switzerland, Luxembourg and Austria all blatantly promote tax evasion

They hide criminals

They are secrecy jurisdictions: places that intentionally create regulation for the primary benefit and use of those not resident in th eir geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

And they’re not on the G20 list.

It is discredited as a result.

I hope this report is wrong.

I suspect it is right.

If we can’t win on tax havens we have no hope on climate. I despair for the future of my children: are we reallhy seeing greed beginning to destroy civilisation?

Mar 202009
 

Commenting on blogs is often considered the preserve of the eccentric. Evidence from this blog would suggest that to be buy and large true.

But, every now and again someone offers persistent welcome comment.

Right now there is such a person on this blog. I’ve never met or spoken to him. He comments as ‚ÄòJames from Durham’. He provides a voice of sane reason in the face of the offshore onslaught defending the indefensible that most comments represent on this site.

James – whoever you are, I thought I should offer a public note of thanks.

Mar 202009
 

From the New York Times:

The House overwhelmingly approved on Thursday a near total tax on bonuses paid this year to employees of the American International Group and other firms that have accepted large amounts of federal bailout funds, rattling Wall Street as lawmakers rushed to respond to populist anger.

90% tax in the US? Amazing.

Sanctions work.

Sanctions can be created.

They will change behaviour.

Let’s use them.

 

These are my links for March 16th through March 20th:

 

As the Guardian has noted this morning:

The Guardian today lost a high court challenge to lift an emergency gagging order imposed on the publication of Barclays bank documents alleged to detail huge tax avoidance schemes.

I’m not surprised. It is a repeat of the stupidity of the British judiciary when faced with issues of substance of importance to their chums in the hierarchy of society. It also makes a mockery of the law. As the Guardian also notes:

There are two aspects of the decision to ban publication of these documents which look decidedly odd. The first is to do with freedom of expression and the law of confidence. … There is something almost comic about a high court sitting in camera in the Strand ordering a blanket of confidentiality over something which, even as they secretly ruminate about secrecy, is being discussed around the world.

The second matter is whether or not the widest possible public scrutiny of the tax avoidance schemes of a major bank should – now, of all times – be prevented by court order.

As they continue:

While the judge agreed the Guardian’s tax coverage was important he seemed to think there was no merit in allowing a wider public to read the detailed documents in which Barclays employees discussed how they planned to structure these schemes and how they would argue their legitimacy with the taxman. It is better, in his view, that banks, tax advisers and lawyers should be allowed to have private conversations with Her Majesty’s Revenue & Customs without any kind of wider scrutiny. This ignores widespread concerns – articulated by the Barclays whistleblower among others – that it is precisely the private nature of these conversations that has allowed banks and corporations to get away with such rampant tax avoidance over so many years.

But this is the key point

This is not an arcane dispute between a newspaper and a bank over marginal tax- dodging at the fringes. If Barclays were to be forced to follow RBS into abandoning its tax avoidance adventures, many hundreds of millions would be removed from its annual profits and leave the bank. Shareholders and government need to know what is going on. And the public should be allowed a glimpse into the cosy world of secret negotiations between bankers, lawyers and tax inspectors over who can get away with what. It is a worrying day when a judge thinks he knows better.

This whole Barclays scam is, to put it quite unsubtly, a fraud on the public in the sense that it relies upon a  deception (albeit legitimate, assisted here by the Courts) to secure a financial advantage for Barclays executives at cost to the taxpayer and Barclays shareholders.

The Court thought Barclays’ human rights would be abused by publication. My question is simple: what about the rights of the rest of us?

Barclays is abusing us all. That has to stop.

Tax havens facilitate that abuse. That also has to stop.

Both have to happen now.

 

The Times reports:

Has HM Revenue & Customs backed off from an investigation into a controversial but widespread form of tax avoidance, involving the use of the Gift Aid rules? In 2006 it was revealed that HMRC had been interviewing tax experts at a number of accountants, including the AIM-quoted Vantis, about schemes that allowed their clients to claim tax breaks on shares gifted to charities.

Several Vantis employees were later reported to have been interviewed under caution, and their offices and homes searched by HMRC. The share price fell as a result. I understand, though no one is saying anything officially, that two senior tax experts at Vantis, whose names I have been given, were interviewed again under caution in January this year.

There is no indication that HMRC plans any further action. The schemes were not illegal, but they had angered genuine charities, which claimed they were against the spirit of Gift Aid. Vantis refused to comment and HMRC tells me: “We aren’t able to discuss the details of any named individual or business – our legal duty of confidentiality simply doesn’t allow it.”

The Vantis schemes were horribly abusive.

Why are they getting away with it?

And yet again the ‚Äòveil of secrecy’ hides abuse from view.

It is sickening to honest taxpayers.

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