Tax Research UK

Goldman Sachs is supposedly having a great year:

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year

I’ve said it before, and I’ll say it again: banks should pay an extra 10% corporation tax for the risk they impose on society when doing this. Call it an insurance premium until we cut the risk they create down to size.

I’d add something else: I don’t think we can make a maximum wage stick. I’d like to, but I can’t see it working. But we can disallow wages for corporation tax purposes. I’d do that for all salaries more than  10 times the average of UK mean and median wages. That provides useful indexing and benchmarking. It also means all pay over about £250,000 now would not be subject to corporation tax relief. More than 99.5% of people should be OK with that – and let me assure you – it would work.

Richard Murphy Banking, Economics, UK

The standard OECD Tax Information Exchange Agreement includes this clause in Article 5:

4. Each Contracting Party shall ensure that its competent authorities for the purposes specified in Article 1 of the Agreement, have the authority to obtain and provide upon request:

a) information held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees;

b) information regarding the ownership of companies, partnerships, trusts, foundations, “Anstalten” and other persons, including, within the constraints of Article 2, ownership information on all such persons in an ownership chain; in the case of trusts, information on settlors, trustees and beneficiaries; and in the case of foundations, information on founders, members of the foundation council and beneficiaries. Further, this Agreement does not create an obligation on the Contracting Parties to obtain or provide ownership information with respect to publicly traded companies or public collective investment funds or schemes unless such information can be obtained without giving rise to disproportionate difficulties.

But the UK can’t secure the data required by para (b).

It’s about time we could. Starting now.

We should be hanging our heads in shame. So should the USA – because I don’t believe this is possible in Delaware.

It’s time to get acts together. Cayman has, I am pretty sure, rumbled this. And as a result are going to get away with a DTA that is almost meaningless.

Richard Murphy Cayman, UK

I have already blogged a new report describing the shocking ease with which it is possible to create companies in the UK, published in the Economist and elsewhere today.

The report is timely. It is not a defence of tax haven behaviour. What it says is that the UK and USA are tax havens – and we are just about alone in the world the Tax Justice Network in doing this – critics please note.

What this report makes clear is that abuse is easy in the UK. It is something I have said for am long time – not just here but numerous times on the UK media.

It is absolutely essential that there is reform of company law in the UK as part of the whole process of writing down on abuse. In particular:

1. The UK should ban the use of bearer shares, which are outlawed offshore but remain legal in this country.
2. The true identities of the beneficial owners of all private companies should be put on public record. All trust arrangements should be’ ‘ looked through’ and the names of beneficiaries and settlors provided. Anyone who acts as a nominee shareholder should declare it and state on whose behalf they act.
3. Similarly, if anyone acts as a nominee director or company secretary then they must declare that fact and state the names of the persons on whose behalf they act. If they are accustomed to accept any form of instruction on a regular basis as to the exercise of their duty then the the name of the person giving them instruction should be put on public record.
4. The current registered office arrangement for companies is open to abuse. It gives no indications of where a company actually trades. The main place of trading for every company that is on the register must be put on public record.
5. Full accounts must be filed for all legal entities in the UK. Abbreviated accounts must be abolished. They are a characteristic of a secrecy jurisdiction.
6. Trusts should be considered legal entities for this purpose. All trusts should be registered.
7. The annual filing fee for a company, currently £15 a year, should be increased at least twenty fold with the funds being used to rigorously police the UK’s register of companies, to make enquiry wherever there is doubt as to the accuracy of information on the register, to pursue those who do not file information on a timely basis, and to impose substantial, automatic penalties upon those who fail to file that data at the time that the offence occurs.
8. The facility that allows companies to be struck off the register without ever having filed accounts or without ever having filed a corporation tax return must be abolished. It is a license for fraud and it is undoubtedly used for that purpose.

Lord Myners, Lord Mandelson and all who argue for tax haven reform: get the UK in order too. It will make us a more competitive economy if you do.

Richard Murphy Accounting, Corruption, Regulation, Tax Havens, UK

Switzerland’s Le Temps newspaper has just pointed out a remarkable new study by Jason Sharman, an offshore expert (he wrote a book on the OECD project against tax havens, reviewed here.)

Le Temps said this:

With a small budget, and using classified ads that proliferate on the Internet or in the press, this professor of the Center for Governance and Public Policy at Griffith University (Australia) made bids to set up shell companies in 22 countries — some labeled as tax havens; others are very respectable members of the OECD.

What, pray, did he find?

His conclusion is doubly embarrassing for members of the G20 currently leading the hunt for tax evasion. First, it is easy to transfer money anonymously, despite all the rules of conduct and the conventions. Second, and more surprisingly, countries where the misuse of rules is easiest are not the exotic islands, Switzerland or Liechtenstein - but the United States and Great Britain.

This does not surprise us, and we’ve said this kind of thing many times before, but it has colossal implications. How did he find this out?

He began by identifying on the internet players that offer to set up front companies, and solicited 45 bids. In 17 cases, these service providers kindly provided the requested shell without bothering to check on the actual identity of the client. And it was not expensive: $800 to $3000. Interestingly, only four of these providers were located in tax havens (TJN: we presume they mean "classic" tax havens of the popular imagination), while 13 were located in OECD countries claiming to keep to the rules of verification: seven in Great Britain, four in the United States, one in Spain, and one in Canada.

The next step was to open an anonymous bank account. Here, the task proved more difficult: the process resulted in only five cases. Five out of 45? At first glance the system seems pretty tight. Jason Sharman did not believe it: he only had Google and 20,000 dollars available, "which is nothing compared to the capacity of criminal organizations," he adds.

The five successful attempts to open an anonymous account took place in Wyoming (where the laws have since changed), Nevada (a scanned driver’s license was the only proof of identity requested), twice in Great Britain (via the Seychelles, Montenegro, St. Vincent and the Grenadines) and once in Liechtenstein (in a joint arrangement through Somalia). Copies of passports were sometimes required, but not certified by notary.

Sharman’s conclusion?

The United States, Great Britain and other OECD states have chosen not to comply with the international standards which they have been largely responsible for putting in place.

I’m not surprised. I’ve pointed out the ease with which it is possible to create companies in the UK on many occasions - and the fact that there are far too many formation agents who are willing to offer nominee services. Indeed, when Jason Sharman began this survey he asked for my help to find some likely targets, and I was only too pleased to help as I want to eliminate this abuse in the UK, as elsewhere.

I will publish my recommendations for action that follow from this report in my next blog, bit I make clear: I welcome this report. It greatly assist those asking for reform here in the UK.

Richard Murphy Corruption, Secrecy jurisdictions, Tax Havens, UK, USA