2009 October » Tax Research UK

Financial Secrecy Index – Delaware tops the leader board

Oct 312009

The Tax Justice Network blog notes this from the Financial Times:

Leading economic centres including the US, UK and Singapore are among the countries most to blame for promoting international financial secrecy, according to a new index comparing the harm allegedly done by tax havens and rich nations.

The league table to be published on Monday by the Tax Justice Network, a respected campaign group, is led by the US state of Delaware and includes Luxembourg, Switzerland and Hong Kong in its top 10.

The fill Index is published tomorrow, but as TKN notes:

We should stress by way of background, however, that we are measuring something slightly more complicated than the state of Delaware in isolation. As with our closely related Mapping the Faultlines project, we refer to USA (Delaware.)

More precisely, the FSI (Financial Secrecy Index) is designed to identify the key contributors to global financial secrecy on a jurisdiction-by-jurisdiction basis. However, in some important cases, different level of secrecy prevail in different sub-jurisdictional entities. Since financial flow data are only systematically and comparably available at a jurisdictional level, this creates a potential problem. To deal with this, and recognising the impact that even marginal secrecy differences can have on the volume of illicit flows, we treat the most secretive sub-jurisdictional entity as representative of the potential for opacity of the whole jurisdiction, and therefore base its Opacity Score on this. The most obvious case where we have applied this technique is with the US state of Delaware, which is taken as representative of the maximum secrecy available within the whole jurisdiction (the USA.)

So please don’t yell and shout: we know the issues, and address them openly and honestly.

Which is a lot more than I can say for some.

What’s happening at Vantis?

Accounting Comments Off

Oct 312009

Vantis is a rare stock exchange listed form of accountants. It files accounts to 30 April. Those to 30 April 2009 had to be filed by today of its stock exchange listing was to be maintained. There is no sign of them on the web site today. Last data is to October 2008. They must be at risk of de-listing.

The firm is in dispute with its auditors over the accounts.

There are also legal and disciplinary disputes hanging over the firm.

Any surprise then that the FT reports:

Vantis (VTS:LSE) outperformed the FTSE 100 index during the last week. Over all other time periods it underperformed the index.

That seems an optimistic analysis to me.

The Financial Secrecy Index – published on Sunday

Financial Secrecy Index Comments Off

Oct 302009

As readers of this site know, I have directed a project for the Tax Justice Network called Mapping the Faultlines. The output of this project, funded by the Ford Foundation, has now been published, in part on the SecrecyJurisdictions.com web site.

That site, published a few weeks ago, set out a methodology for selecting 60 secrecy jurisdictions to study, redefined the language of offshore, and delivered a ranking of each of the 60p locations surveyed showing in both detail and summary just what facilities they offered and how we ranked them. The work is not yet complete yet – there are a number of significant papers still to be added to the site, but an important spin off will be published on Sunday.

This is the Financial Secrecy Index – to be made available on the web site of the same name, here.

As that site notes:

Secrecy is a central feature of the global financial system. Jurisdictions compete with each other to provide it, in order to attract financial flows – with appalling effects elsewhere. It is essential to identify the worst culprits in providing this secrecy. But nobody has ever tried to do this in a systematic, objective way – until now.

The Financial Secrecy Index (FSI) creates a ranking which identifies the jurisdictions that are most aggressive in providing secrecy in international finance, and which most actively shun co-operation with other jurisdictions. It attaches a weighting to each jurisdiction, according to the scale of cross-border financial services activity that it hosts.

The two measures – the opacity score, and the weighting, are combined to create the Financial Secrecy Index. Nothing like this has been done before.

The site is a joint effort between the Mapping the Faultlines team and Christian Aid, directed on this occasion by John Christensen. Econometrics was largely by Alex Cobham of Christian Aid.

The result is out on Sunday, and for those who like to criticise our research there may be some surprises in store‚Ä¶..

One report – two very different reactions

Guernsey, Jersey Comments Off

Oct 302009

The Guernsey Press reaction to the Foot Report:

GUERNSEY has been told to tax islanders more in a report commissioned by Chancellor of the Exchequer Alistair Darling.

The Foot Review, while largely positive for the island, will also be seen as further evidence of a UK Treasury with the islands firmly in its gaze.

The Jersey Evening Post reaction:

JERSEY’S finance industry has been given another welcome boost by the Foot Review, according to the head of the finance industry marketing body.

Geoff Cook, the chief executive of Jersey Finance, says that the independent report published yesterday is another endorsement of the Island’s regulatory standards.

Two islands, one publisher of both papers, two very different reactions.

As usual, Jersey has it most wrong. And neither offers any critical analysis, or any perception that the world view they promote is failing fast.

Foot’s told them the future will be tough: it will be much tougher than they think is my forecast.

Deloittes “ludicrous” analysis of “aberrant year”

Deloittes, Tax avoidance, Tax Havens 3 Responses »

Oct 302009

FT.com / UK – Ministers face call to act on tax havens.

FT comment on the Deloittes report on tax avoidance:

The report on corporate tax avoidance – prepared by Deloitte, the accounting firm – calculated its £2bn maximum figure by analysing the financial results for last year for 50 of Britain’s biggest businesses.

But Richard Murphy, author of a report last year which put avoidance at more than £10bn, said it was “ludicrous” for Deloitte to base its sample on an “aberrant year” of “enormous shocks to the financial system”.

That about sums it up.

Too big to fail? Too good PR more like

Accountancy Comments Off

Oct 302009

Too big to fail? Too good PR more like.

Dennis Howlett adds valuable insight on the possibility of at least one of the Big 4 failing.

He’s seen something I did not – and it’s well worth the read.

Belize

Tax Havens Comments Off

Oct 302009

Ashcroft & Belize: ‘The only thing he respects is dollars’ – Americas, World – The Independent.

A tax haven turns against its sponsor.

It will become a familiar tale. Local people in many places are going to be increasingly resentful at the cost to them of facilitating tax haven activity.

Isle of Man reaction to Foot

Isle of Man 11 Responses »

Oct 292009

Foot Report gives Isle of Man praise – Isle of Man Today .

On the face of it Mr Foot appears to have produced a fair and balanced report that reflects well on the Isle of Man.

Whether that will please the UK Treasury, which seems determined to put the squeeze on the Isle of Man and other offshore jurisdictions, is a matter for debate.

Hard to see how these comments can be reconciled.

The Foot Report says diversify your tax base and raise more of it yourself.

The UK takes action to ensure the IoM has to do that. And it gets tetchy.

Not a fair and balanced response, I’d say.

Would any of this have happened without the Tax Justice Network?

Development, Secrecy jurisdictions, Tax Havens, Tax Justice Network 1 Response »

Oct 292009

I made a claim in a comment earlier today that the Foot Report would not have happened without the work of the Tax Justice Network.

I’d also go so far as to say the problems with zero-ten would not have been found without that work. And the Isle of Man would still be subsidised but for what we’ve done.

An idle boast? I don’t think so – look at this list of the reports reviewed by Deloittes in the course of preparing their report:

Appendix 1 – Studies reviewed

‚ÄòFalse profits robbing the poor to keep the rich tax free’, Christian Aid, March 2009

‚ÄòDeath & Taxes: The true toll of tax dodging’, Christian Aid, May 2009

‚ÄòThe morning after the night before: The impact of the financial crisis on the developing world’, Christian Aid, November 2008

‚ÄòTax Havens: releasing the hidden billions for poverty eradication’, Oxfam, June 2000

‚ÄòThe Missing Billions’, Trade Union Congress, February 2008

‚ÄòWhere on Earth Are You: Major corporations and tax havens’, Tax Justice Network, April 2009

‚ÄòThe direct tax cost of tax havens to the UK’, Tax Research LLP, Richard Murphy

‚ÄòThe tax gap series’, The Guardian, February 2009

‚ÄòProfit Shifting in the EU: Evidence from Germany’, IFS, Alfon Weichenrieder, April 2006

‚ÄòThe Impact of Non-Profit Taxes on Foreign Direct Investment: Evidence from German Multinationals’, IFS, Thiess Buettner and Georg Wamser, April 2006

‚ÄòTaxes and the size of foreign owned capital stock: which tax rates matter?’, IFS, Michael Devereux & Ben Lockwood, April 2006

‚ÄòCapital Structure and International Debt Shifting in Europe’, IFS, Harry Huizinga, Luc Laeven and Gaetan Nicodeme, April 2006

‚ÄòTax Havens and the Financial Crisis’, Oxford University Centre for Business Taxation, Geoffery Loomer and Giorgia Maffini, April 2009

‚ÄòMind the Tax Gap’, Tax Justice Network, 2006

‚ÄòClosing the Floodgates: Collecting tax to pay for development’, Tax Justice Network, 2007

‚ÄòTax evasion, tax avoidance and tax expenditure in developing countries: A review of the literature’, Oxford University Centre for Business Taxation, Clemens Fuest and Nadine Riedel, June 2009

‚ÄòEconomic growth and the role of taxation – theory’, OECD – Gareth D. Myles, Exeter/IFS, 15 July 2009

‚ÄòTax and Economic Growth’, OECD – Asa Johansson, Chrisopher Heady, Jens Arnold, Bert Brys and Laura Vartia, 11 July 2009

‚ÄòThe Impact of Taxation on the Location of Capital, Firms and Profit: A Survey of Empirical Evidence’, Oxford University Centre for Business Taxation, Michael P Devereux, April 2006

‚ÄòThe Price of Offshore’, Tax Justice Network, March 2005

‚ÄòMagnitudes: dirty money, lost taxes and offshore’, Tax Justice Network, March 2009

That’s 21 papers. Those in red are by TJN or me. That’s seven of them: one third. That in blue basically deals with issues TJN and its partners raised. Papers by close allies or influenced by TJN are in green – that’s five of them. That leaves just 8 others. In other words 12 can be directly related to TJN or its partners, one is the consequence of its work and just eight come from elsewhere.

If as a result of Foot the Crown Dependencies have to tax, be more transparent and automatic information exchange don’t doubt that, whatever else is said, the Tax Justice Network had a major role in that process.

And I’m delighted to have directed much of the research work noted here. I’m well aware that many will be crowing after Foot: I’m not sure why. It is an inadequate report, and Deloittes part I will deal with soon – and I’ll signal now I consider it profoundly unethical – but that report would not have happened but for the Tax Justice Network. We are changing the world for the better. And I’m pleased to have played a part in that – and salute all those others – and most especially John Christensen at TJN and Alex Cobham at Christian Aid who have also played big roles in all this, not forgetting (with apologies to any I miss) Prem Sikka, Nick Shaxson, Markus Meinzer, Matti Kohonen, the whole team in Jersey led by Pat Lucas, Raymond Baker, Tom Cardamone, Jack Blum, Sarah Lewis at TJN USA, the Global Witness Team, the Action Aid team, and many friends in the media and behind the scenes.

It’s easy on occasion to feel the pressure of being under-resourced to take on the task we have of removing the abuse of tax havens / secrecy jurisdictions that imposes such enormous cost on the less well off and outright poor of the world. But we are making progress for them. And I see no harm in saying so.