Dirty Secrets: my speaking notes at Manchester today

Posted on March 18 2017

I am speaking at the Post-Crash Economics conference in Manchester today on how tax havens harm the economy. These are my unedited speaking notes:

  • How tax havens destroy the economy
    • The new book:
    • Part of a series on new economic thinking
      • Tax havens: the true story of globalisation, with Ronen Palan and Christian Chavagneux, 2009
      • The Courageous State, 2011
      • The Joy of Tax, 2015
      • Dirty Secrets, 2017
      • And innumerable reports plus 13,000 blog posts
      • Including work on the Green New Deal and People's QE
    • One theme
      • How did we get here?
      • What is it about here that does not work?
      • How can we go forward?
    • A three part solution
      • Tax justice campaigners have always believed in a three part solution to building a new economy
      • Have a vision of what we want
      • Work out why what we have fails that ideal
      • Design solutions that move us in the direction we want to go
    • Tax havens
      • The real problem with tax havens was we couldn't define them
      • Too many varieties
      • Too many characteristics
      • Too many apparent issues to address
      • I only really use the term because the media still recognises it
    • What we've really got
      • So we had to work out just what we were really facing when work on this issue got under way
      • "We' were:
        • John Christensen
        • Sol PIcciotto
        • Prem Sikka
        • Ronen Palan
        • Me
      • And we realised what we face is secrecy
    • Tax havens are actually secrecy jurisdictions
      • Secrecy jurisidictions:
      • Places that create legislation and regulation for the benefit of people who live elsewhere
      • And who create a legally backed veil of secrecy that prevents those using this regulation being identified
      • This is what tax havens really are: purveyors of deliberate economic opacity
    • What economic opacity is used for
      • Tax abuse
      • To hide crime
      • To hide the true ownership of assets
      • To hide the true nature of a corporation's trade
      • To subvert the law of another country
    • Opacity
      • Undermines the data required to allocate capital efficiently
      • Creates an unlevel playing field for businesses
      • Increases the tax gap
        • Resulting in the failed policy of austerity
        • And undermining the social justice a proper tax system can deliver
      • Permits crime
      • Undermines the rule of law
      • Increases monopoly power for those who can access it
      • Permits the concentration of wealth
    • The mechanisms that permit this
      • Banking secrecy
        • Although now an issue of declining significance
      • Offshore companies
        • No accounts
        • No ownership details
        • No director details
        • And quite likely no tax
      • Offshore trusts
        • Designed to delivery opacity on ownership and control
        • As well as perpetuate wealth ownership
    • The agents that permit this
      • Offshore governments
      • Those who promote tax competition
      • The lawyers, accountants and bankers who service this sector
        • And who write much of the law that allows this activity
        • The 'Pinstripe Mafia' as Prem Sikka calls them
      • Most especially: the Big 4 accountants
    • How does it work?
    • What we wanted
      • Effective markets
      • The control of monopolies
      • Fair competition
      • Tax paid in the right place at the right rate and at the right time by the right person
      • The rule of law
      • Reduced inequality
    • How to deliver it
      • We had to shatter the secrecy
      • And create the fear of being found out for the perpetrators
      • We could not change the secrecy jurisdictions one by one - they'd always be ahead
      • But we could shatter the secrecy they hid behind
    • The tools
    • Country-by-country reporting
      • Created by me in 2003
      • Simply requiring an MNC to publish a profit and loss account for every jurisdiction where it trades
      • Including intra-group data
      • Revealing in the process who uses tax havens and how much of that use is likely to be abusive
    • Automatic information exchange
      • Demanding that tax havens tell the countries where their clients really live:
      • That those people have accounts there
      • In what names they're operated
      • How much is in them
      • Some basic income data
      • A 'smoking gun' to let tax authorities 'elsewhere' check if the data is disclosed to them
    • Registers of beneficial ownership
      • Literally who owns companies
      • And who benefits from trusts
    • Corporate tax reform
      • Delivering unitary taxation
      • Changes the whole logic of international group taxation
      • Starts from the global profits and apportions them to states based on real economic activity there indicated by
      • Totally inverts the current absurd system
    • New data
      • The Financial Secrecy Index
      • Research
      • And now beginning work on tax spillover effects
    • Has it worked?
      • CBCR
        • Now required for tax
        • EU getting towards public version
      • AIE
        • Now beginning worldwide
      • Beneficial ownership
        • About 30 countries signed up - but some way to go
      • Unitary taxation
        • On the agenda
        • Everyone knows the existing system does not work
      • Data
        • Delivered by the bucket load
      • The world is changing
      • And when the next crash happens we'll be ready to exploit it

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9

9 Responses

  1. Charley Farley says:
    March 18 2017 at 7:59 pm

    So what is the economic impact? You have mentioned it but not given any indication of what exactly it is. If you can’t quantify it then it is very dificult to accept that it has destroyed anything. You are just saying that it has. People look around and don’t see a destroyed economy.

    • Richard Murphy says:
      March 18 2017 at 9:05 pm

      Read the book

      It is in there

    • eriugenus says:
      March 18 2017 at 11:33 pm

      Mr Farley

      Whilst I appreciate its hard to precisely quantify, my rough guess would be to look at the aid a country has received & subtract from that the infrastructure investment it has experienced. The difference, which has somehow gone missing, is almost certainly in on of the secrecy islands that Richard, so rightly, identifies as a threat to humanity

    • PSR says:
      March 19 2017 at 8:54 am

      ‘Charley Farley’

      As Richard says, read his book.

      You may also wish to read ‘Capital Without Borders’ by Brooke Harrington which will reinforce the known impacts of tax havens somewhat.

  2. Ruedi Elmer says:
    March 19 2017 at 1:50 pm

    Richard,

    I like your structuring of your speech. There are some more thoughts based on my learning dealing with judicial system of a secrecy jurisdiction. Here we go

    1) culprits are also prosecutors, judges and courts because the criminal law has the task to protect the system and that means certain matters to investigate which threatens the system, however, more immportant is NOT to investigate matters which could threaten the system respectively e.g. the Golden Calf of Bank Secrecy! (in case for international political reasons/pressure certain cases must be investigated e.g. FIFA, Swiss Banks BUT the cases are soon or later closed for whatever reasons (UBS, CS Managers were investigated in 2008/9 but all cases were closed after a few months).

    2) to change things there must be sanctions for countries and more importantly that the culprits have to serve long prison sentences. As long as thoses prison sentences are not implemtented the companies and culprits will get off the hook by paying moderate fines (eg. HSBC Geneva was investigated for MONEY LAUNDERING last year got of the hook by making a deal with the prosecution office of Geneva, USD 40 Mio closed the case of a money laundering investigagtion). As long as criminals makes deals with criminals because that is really the case, there will not be a lot of change happening!

    I hope this helps.
    Best,
    Ruedi

  3. Toby says:
    March 21 2017 at 10:53 am

    Richard, AIE is not really beginning worldwide. Whatever the OECD may claim.
    The era of banking secrecy is only over for some.

    A majority of developing countries are excluded, due to a lack of information sharing agreements.

    More to come…