Tax Research UK

Sol Picciotto is is an emeritus professor at Lancaster University and, like me,  a senior adviser to the Tax Justice Network. He had an article in the FT yesterday in  which he said:

Banks employ large teams of highly paid people to devise transactions mainly for the purpose of avoiding tax. These activities seem to be far more profitable than the humdrum business of managing payments and channelling savings towards investment. Why?

The answer shows the close link between tax avoidance and the speculation that has fuelled financial instability for 30 years. There were clearly other causes of the current crisis but the faults of the international tax system were a big contributory factor.

And he, with care and precision then explains why, before noting:

For multinationals and rich investors the point is the same: returns on financial transactions are ultimately taxed at a low or zero rate, making them far more profitable than genuine business endeavours. This distortion of the tax system has greatly fuelled the excess of liquidity channelled into largely speculative financial transactions. The offshore secrecy system has been a main element of the opacity that has undermined corporate and financial regulation.

As he notes:

The remedies lie in fundamental reforms of international fiscal and financial regulatory co-operation, and their co-ordination. International tax co-operation requires a comprehensive, multilateral system for both obtaining and exchanging information for all tax purposes, with proper safeguards for taxpayers. Requiring multinationals to break down their accounting information by each country in which they do business would inject much-needed transparency into the system. Reform should include a shift towards unitary taxation, which most international tax specialists recognise is long overdue. This would be preferable to the Obama administration’s new proposals to tinker with US rules on tax deferral.

Then we might have a better tax system. But this level of systemic reform is required to ensure fairness, progressive taxation, a proper deal for developing countries, the elimination of the abuse tax havens cause and the prevention of the waste of human talent now aimed at tax avoidance.

Richard Murphy Tax Justice Network, Tax management

 Offshore Asset Protection BLOG - Bob Bauman: G-20: Hypocrisy at Its Worst.

Amused to note the above says:

The organized hard core nihilists at Tax Justice et al and the college kids who are their dupes oppose free trade and capitalism, claiming these hurt the poor of the world.

When you have to weave double works of fiction  (  a) that TJN opposes trade when we don’t - we just argue that tax havens not be allowed to distort it and b) that unfettered trade through tax havens does not harm developing countries when it is so clear that it does) you know the opposition are rattled. 

It’s very obvious now that they really know the game is over.

Richard Murphy G20, Tax Havens, Tax Justice Network

Date: 15 April 2009
Time: 18:00 - 19:30
Where: TUC, Great Russell Street, London WC1B 3LS

A major rally organised by Compass, Tax Justice Network, the Fabian Society and the Other TaxPayers’ Alliance.

While the government focuses its energy on benefit fraud through its ‘We’re Closing In’ campaign, it is the wealthiest and most privileged who cost us the most and exacerbate inequality.

In the run up to the 2009 Budget, we’ll be calling on the Chancellor to use every means at his disposal to close in on tax avoidance and deliver greater tax justice.

Speakers include:

- Richard Murphy of Tax Justice Network UK
- Jon Cruddas MP
- Kate Green of Child Poverty Action Group
- Adam Lent of the TUC

And we’re pleased to announce that Treasury Minister Angela Eagle MP has agreed to come along and listen to our concerns.

Richard Murphy TUC, Tax Justice Network

This has been an extraordinary afternoon – and one where it has been hard to blog.

Gordon Brown declared the end of the Washington Consensus this afternoon. I’m not sure that’s true – it has many devotees still. But on tax havens we have the following:

• to take action against  non-cooperative jurisdictions, including tax havens.  We  stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information

Good enough? Let’s put it like this. We have a list (although no one has seen it – it seems to have taken the OECD by surprise). I’m told it’s long and Switzerland is on it.

We have a commitment to ending banking secrecy. I do think they mean it. We have a commitment to information exchange.

We have sanctions. These are vital.

Let’s say what we also have but which is not in there but which is on documents Downing Street has shared with me:

1. A call from Gordon Brown to the OECD to include tax avoidance as well as evasion in this process. That is important. Tax information exchange agreements cannot deliver that. He intends to go further. His letter will, I’m told, be issued tonight.
2. A G20 commitment in the communiqué annexes to extend this process to developing countries. That is new.
3. Gordon Brown is calling for an extension beyond OECD processes.

I asked the PM a question about tackling tax avoidance and helping developing countries at his press conference. I am at present convinced there is intention to tackle both.

So what’s the big disappointment? No mention at all of automatic information exchange. Not a hint. But, and I think this important, it’s hard to see how after this the EU cannot commit to the revised EU STD now – and that is the prototype for automatic information exchange of the sort we want.

I am pleased, and I am disappointed. But overall I’m more pleased than disappointed. The tax haven initiative has been dead for eight years. It is not now. It is very alive, it is delivering real change and the environment for more change still has been created.

I and the Tax Justice Network will of course be demanding more, and will be pushing for all that is promised now. But, this is an historic day. Don’t doubt it.

Richard Murphy Secrecy jurisdictions, Tax Havens, Tax Justice Network, Tax evasion whitebandradar

I have seen reliable evidence this morning that UK government spokespeople are saying that I have stated that automatic information exchange is not important at the G20, and may not be in future.

They are linking this comment to Tax Justice Network and it has certainly gone to NGOs.

This is about as far removed from the truth as it is possible to be.

It is essential that we move to automatic information exchange of information earned by the residents of one country from financial institutions located in another country. This is the only way, as the EU knows and has proven to really tackle tax evasion.

It is also essential, as the EU is now proposing that legal entities and trusts be looked through for this purpose so that the ‘warm bodies’ – the real human beings who control these entities be taxable on the benefit of the ownership of such structures if they are used to avoid or evade tax in their place of residence.

There’s another advantage – almost all corruption leads to tax evasion at the end of the day. If governments are the agency responsible for exchanging this data (and they would be) then they would be in possession of much better information to fulfil Mutual Legal Assistance requests to tackle corruption and criminality.

So, whatever HMG says I and the Tax Justice Network are completely committed to automatic information exchange because in the end nothing else will do.

We won’t get it today. I know that. But that does not in any way alter our commitment to having it, or the fact that it is essential.

Richard Murphy OECD, Secrecy jurisdictions, Tax Havens, Tax Justice Network, Tax evasion

The Guernsey Press is reporting the usual gibberish from local spokespeople:

Guernsey is ready to confront those who label it a tax haven, according to the Guernsey International Business Association.

Vice-chairman Paul Meader said he was tired of seeing the island being mentioned alongside harmful jurisdictions after UK politicians and the Tax Justice Network suggested it could be included on a new blacklist before the G20 economic summit.

‘If the UK wants to investigate offshore centres, then we say bring it on.

‘We see it as a great opportunity to differentiate between those that are not playing by the rules and international standards and those, like us, that are,’ he said.

Mr Meader demanded respect for the island’s system, which he said met international standards that many larger centres did not.

‘We are tired of getting lumped in with everyone else when we are demonstrably in the first tier of financial centres,’ he said.

I can we presume that some people are taken in by these acts of bravado. They are fools if they are.

As a matter of fact, I am absolutely sure that Guernsey will be on any new list of tax havens to be issued by the G20, whether on 2 April or soon thereafter. It is quite impossible to imagine that that list, rumoured to have at least 40 states on at at present, could exclude a place like Guernsey. Mr Meader is therefore setting himself up for a bruising.

But he is also showing how enormously out of touch he is. It is absolutely irrelevant how compliant Guernsey has been with current international regulatory requirements. Those regulations have very clearly failed the world. They are going to be scrapped. Tests of substance, not of box ticking, will replace them. Guernsey faces a real risk of failing those tests of substance.

Guernsey is a secrecy jurisdiction. It does not comply with international expectations on placing data on public record. It has not shown serious commitment to information exchange. It applies the withholding tax option under the EU savings tax directive. These are consistent indications of its lack of willing to play a proper role in a well regulated world financial system.

Mr Meader should listen to what we are saying rather than abuse us. I think he is heading for a train crash, both at the G 20 and subsequently when the UK reviews its own secrecy jurisdictions. Does he really seriously think that Gordon Brown can imagine ‘ outlawing tax havens’ and that Guernsey will not be affected?

If he does he is in for a rude awakening.

Richard Murphy Guernsey, Tax Justice Network