I wasn't here to blog on Friday as the full extent of the disclosures on tax fraud in Liechtenstein began to emerge. The Tax Justice Network did, however, covered the story well, and I was also in the FT on it. I will certainly be in the German press this week.
What has now emerged is that Germany paid to secure the data from an informant on more than 700 suspected tax evaders. Reuters suggest that some 4.2 million euros was paid for a CD containing Liechtenstein bank data on over 1,000 tax evasion suspects. The German finance ministry described this as:
money well invested.
I'm going to return to the ethics of this in another blog: quite clearly serious ethical issues are raised when paying any informant. Right now I am as concerned with the reality that rampant tax evasion is being shown to exist. This has already Deutsche Post Chief Executive Klaus Zumwinkel his job, and as Reuters reports, threatens to ensnare hundreds more rich Germans.
Again I'll deal with Lichtenstein itself in another blog. The reaction to this news is what is so significant right now. As Reuters, again reports:
German leaders expressed concern at the weekend that the tax scandal risked discrediting the economic model on which the country's post-war identity is founded, and industry chiefs sought to shore up their reputation.
Germany has prided itself on economic and corporate prowess, epitomised by the country's status as the world's biggest exporter of goods and by the number of companies which are world leaders in their sectors.
Industry leaders distanced themselves from tax dodgers.
"Managers and companies carry particular responsibilities. Anyone who contravenes the rules, turns against the economy," Juergen Thumann, president of the BDI industry group, told the Bild am Sonntag newspaper.
"We will only stand up for those who work according to justice and the law, honesty and conscience," he added.
Ludwig Georg Braun, head of the DIHK chambers of industry and commerce, urged executives to speak to their workers.
"Make clear that tax evasion and enrichment at the cost of the community, the tax payer or at the cost of a business has no place with you," Braun wrote in a letter to company managers.
It's rare I will quote at that length but I do so to highlight the ethical point that I and my fellow campaigners for tax justice and against tax corruption have so often made: that tax abuse (and the dividing line between evasion and avoidance is so fine in so many cases both count as abuse) undermines the effective operation of markets, destroys confidence and ultimately threaten our democratic system and our well-being.
Germany is realising this.
The time for combined action to eliminate the cancer in our market system that tax havens represent has arrived.
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[…] suggested yesterday that I would have to blog on the ethics of Germany buying data from an informer to enable them to […]
I hate to make a further comment after my last attempt to debate with you was sneerily dismissed, but do you include the United States of American in your shrill demand for the tax havens to close? After all you could set up a bank account in the US and as a Non Resident Alien pay no tax on the interest and nor would the Americans exchange information unless you were in Canada. It would be good if you could have the decency to reply politely this time. Thanks.
Phil
We do include the USA in our list of tax havens, and we also consider some states such as Delaware to have that status.
We also inlcude the UK, the Netherlands and places like Ireland in our list of havens for their own abusive practices.
We condemn tax haven activity wherever it arises.
Richard
Phil
I might add, we also condemn those who supply services exploiting tax haven legislation wherever they might be as well.
Richard
It’s certainly interesting to read your blog. I had always thought that tax evasion is the modern equivalent of heresy, and now I find your Tax Justice Network is the modern equivalent of the Salem Witchhunt! However in all seriousness, plainly I condemn tax evasion which must be punished severly. I do think that the position of the offshore financial centres is a bit more complicated than you give it credit for. At the end of the day, whether or not to report taxes fully is a personal decision, taken by individuals and not by the likes of Panama, the United States of America, Jersey or Liechtenstein. Perhaps the other end of the telescope is to look at Eastern Europe like Russia where tax rates were slashed to encourage compliance?
Phil
The trouble for you is that you assume increased compliance rates: in Russia it was found that the rich complied less under a flat tax.
As for that element of choice: corecion doesn’t half help. As would automatic information exchange.
Richard