David Cameron has an article in the Guardian today which, I think it safe to presume, indicates the likely outcomes from today's Corruption Summit (which I am not attending; like the BVI I did not make the invitation list). This does require some comment.
First, I am amused it is in the Guardian: Cameron clearly knows from which direction the demand for change is coming.
Second, as I expected, corruption is defined in the very narrow sense that, for example, Transparency International use, which lets Cameron ignore the systemic corruption in the supply side in places like the City of London and the UK financial services industry. This spectacularly misses the point, and the UK's role in this issue.
Turning then to the likely outcomes of the Summit, these are:
- The almost entirely useless model of a beneficial ownership register that the UK is introducing is to be adopted by a number of other EU countries, Nigeria and Afghanistan.
- Some of the UK Crown Dependencies and Overseas Territories will agree to join an information exchange mechanism on beneficial ownership.
- The UK will have a register of beneficial ownership for properties in this country whose ownership is registered overseas.
- There will be a new corporate offence of failing to prevent money laundering.
Of these the first has been announced before. And the model will not work, as I have explained here: around 400,000 companies a year fail to file any information on their affairs to Companies House and almost none are prosecuted. There is no checking mechanism available to Companies House on the data that they receive, when I have made clear that this is entirely possible by automatic information exchange from the UK's banks, which the government is unwilling to do. And there is no statement that additional resources will be supplied to support Companies House in their work. This register is going to be an unenforced gesture as a result.
The second move is another token gesture. The detail has not been worked out, so my sources say. September is the target date for that. But more important, this does not include Cayman and the BVI, at least. And the information exchange is only for the use of tax authorities and law enforcement agencies: transparency in secret as I called it recently. What that means is that a host of people who really need the data will never get it. That includes many governments, those of developing countries being most likely if the precedent of Cameron's actions on country-by-country reporting are followed. The list of those not getting the data will also include all businesses wishing to assess their risk, journalists, politicians, regulators and civil society, all of whom have entirely legitimate reason to want to know this information. This is not then just a token gesture, but a failed one too.
The third proposal deserves the obvious name of the Emma Watson clause: it is intended to shatter secrecy and I welcome it, but the impact is small and as much for UK domestic consumption as anything else. It demeans a Summit to suggest this is a big outcome.
Finally, the history of prosecutions on corporate offences is very small indeed whilst the definition of money laundering is very wide indeed. Lawyers are going to have fun with this one when seeking to create a meaningful offence. I would suggest that by the time this is enacted the scope will be nothing like the suggestion being announced. It's another token gesture.
Cameron will think he has made a PR gain today.
The reality is that today Cameron will fail developing countries and their people, business around the world, civil society and all who wish to uphold the law.
Today is a victory for tax havens and most especially for the City of London, who will no doubt raise a glass or two in celebration sometime tonight. Nothing here disrupts their trade in undermining markets, purveying tax abuse and threatening democratic government with regard to its right to tax. And that guarantees that this Summit will be a failure.
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There is no incentive for the Tories to do anything about dodgy finances since they some of it in donations via their City hedge fund friends.
Not forgetting the on-going investigation into potential election expenses fraud, which the Tory party are now refusing or unwilling to provide evidence to substantiate and risk being taken to the High Court for full disclosure – yet more hypocrisy from the party that is leading in “hypocritical and corrupt thought leadership”
http://www.thecanary.co/2016/05/12/conservatives-try-hiding-information-electoral-fraud-watchdog-bares-teeth/
I fear that the epithet ‘fantastically corrupt’ was motivated by envy.
Desperately disappointing after the hopes raised by the Panama Papers, but not really surprising. Cameron was never going to disadvantage the City of London, simply to push business from UK dependencies towards Delaware, or tax havens supported by our other Global competitors. This is the exact point I make in my own book “The Global Race”. Tax havens (and the race to the bottom in Global tax rates) is one of the critical issues that can now only be solved by a “Global Economic Community”. It has to be one rule for everyone if we are going to stop any country from gaming the system. The financial rewards for undercutting the rest of the World are just too great.
Of course my campaign for a GEC is not going to be quick, so what can be done in the meantime? I think Gordon Brown is probably on the money here, when he calls for EU pressure for reciprocal exchange with the US (and country by country reporting of corporate profits). Eventually Pressures will mount as more and more countries, including the UK, find they cannot close their budget deficits. Oil states from Russia to Saudi Arabia will find their numbers are never going to add up again, and eventually we will all learn from Greece, where they raised corporation tax from 20% to a pretty modest 29%, only to see net tax take fall as companies relocated their base to Cyprus (12.5%) and other low tax havens.
http://www.economist.com/news/business/21693213-big-tax-rises-are-driving-companies-out-country-actual-grexit?fsrc=scn%2Ftw%2Fte%2Fbl%2Fed%2F
Even the United States must eventually recognise that a 35% corporate tax rate is a joke when most US corporations pay closer to 20% after profit shifting. This race to the bottom cannot continue for ever. Sooner or later we will have to change to a set of Global rules that applies to all. The question is when and how this international cooperation will come about. Perhaps my idea of a “Global Economic Community” for G20 nations will not be the answer, but its hard to see what alternative strategies are possible. We know the Economic Community in Europe worked, and has delivered a minimum VAT rate across the EU of 15%. We simply have to expand our thinking to create a Global Economic Community that delivers a net benefit to every member country, and can finally regulate the power of Global financial markets. There really is no other way to put the genie back in the bottle.
https://youtu.be/eeAvBvf_N6I
But what would be the underlying financial and monetary basis of your proposed “Global Economic Community” Robert P Bruce?
If it is private financial capitalism and privately controlled money creation are you not just proposing an even greater social disaster than the results seen today across the USA, the EU, Asian and South American “Regional Economic Communities”?
Globalising the control over regional social and economic disaster zones would only increase the exploitation by global private financial interests.
Are you expecting puny regulations to be any more effective at a global level than their epic failures at the regional and national level. As we now know, the rules of the game are controlled by a very small number of extremely wealthy and powerful financial players. Give them even more global power and we are all doomed, are we not?
I am intrigued by your thinking, but I don’t think you’ve got to the heart of the problem yet. More sticking plasters are not the answer in my view. Compounding the current world problems by globalising the current economic hegemony of private financial capitalists would be totally disastrous for the planet as a whole, in my view.
I think I’ve traveled a similar journey to yourself and come to different conclusions, but have not yet read your work so may have misunderstood where you’re coming from.
Its a universal truth that bad leaders (owned by wealthy interests) will give bad government, but this is not a reason to favour international anarchy. There are many good leaders today – look at the inspiration behind the UN Global Goals, the huge advances made in Paris on #COP21, or the progress on eliminating World disease : first smallpox, then ebola, soon polio and maybe others.
The issue people fail to understand is that even good national leaders can do nothing to bring about change. If the UK banned all tax havens and enforced transparency in all its dependencies the money would immediately move to Delaware, or the Far East. The UK can only lose out financially as a result of such a move so Cameron’s hands are tied, whether he really wants to do something or not. Similarly, any nation that unilaterally imposed a carbon tax at the level we now need would be committing commercial suicide.
I just don’t understand why people cannot see that this is not a question of preference for national or international solutions. The problem is a structural one and basic economics tells us that only Global solutions are now possible.
I would also challenge the assumption that a “Global” (initially G20 or similar) authority would be worse than current governments. It would be under massive international press scrutiny, would give a single focus for NGO’s and UN bodies to lobby, and best of all it would actually be in a position to do something about our biggest problems, if it is properly designed and adopts the right policies.
Of course what I am calling for flies in the face of current public mood in the rich World, and any number of other obstacles. However, I refuse to live in denial about the truth. If the only way forward is through greater Global cooperation (and any objective observer would conclude that it is) we need to start the debate about how we are going to make it happen.
I do not disagree with the direction of travel in your thinking Robert P Bruce, you are clearly very intelligent and experienced but as you say yourself not an economist or more importantly not a global financier (as I’m not sure many economists actually really understand global finance – hence why we had 1929 and 2008 and many other less severe asset bubbles and crashes in between when economists were almost all pi**ing in the wind and looking the other way).
My point is that as an engineer by training, you will have a very good understanding of the need for rock-solid foundations before scaling anything up to a national, regional or global scale. The same applies in all the physical sciences – but it seems some people think the rules do not apply in economics and finance (and politics).
So my suggestion was only to try to focus your mind and some time (you will need it I can assure you, together with some painkillers and lots of coffee) on really understanding how global money and finance really works. Especially within the context of the global power and control mechanisms put in place after WW2.
You may then understand why organisations like the UN, the IMF, the World Bank, and the Eurozone amongst other attempts to forge large scale systems to create world order, peace, health and remove poverty – have all failed spectacularly so far.
Because if you try to scale up to regional or even global levels, antiquated and inherently unstable financial and monetary systems which are neither democratic or accountable to the people who are forced to use them – you will see why financial and social disasters are just going to keep getting more frequent and more damaging in their effect on the vast majority of people.
I am several years into trying to getting my head around it, so good luck!
I hope you have sent this analysis to key reporters in the BBC, which as usual just parrot the Tory PR blurb and never bother to actually analyse or interrogate the spin.
Some media have it
This is probably a bad question, but why is Cameron so intent on being ineffectual? Is it state capture by interests, the fact that he doesn’t really believe in change, or just the inherent personality of the man….
I would even suggest it is the last reason as it is pretty common to most of the Tories legislative programme.
A bit of all three. Plus he’s been socialised into acceptance of corruption as defined more broadly (as here). Thus it’s just the way “the system” works. It is, after all, a deep-seated and fundamental feature of crony capitalism and economic and governmental system(s) constructed around the interests of the 1%, finance and big business. In short, he would be a traitor to his class if he attempted to do anything substantive to tackle an obviously exploitative and destructive system, as would so many of his ilk.
In know he’s a love him or hate him figure, Richard, but at least Simon Jenkins has been consistent on tax havens and corruption. His article in The Guardian today is a gem: http://www.theguardian.com/commentisfree/2016/may/12/crony-capitalist-corruption-david-cameron-british-tax-havens-avoidance
This excerpt is one of many that’s spot on:
‘For six years Cameron and Osborne have promised to clean up this mess. A British world corruption conference is a bit like the selection of Libya in 2003 to chair the UN Commission on Human Rights. Little or nothing to end the plague has been done. British ministers are happy to impose the world’s most draconian electronic surveillance on the British people, yet are curiously reluctant to get tough with the finances of the rich.’
Spot on
And I love him and hate him
You’re not the only one.
I’m trying to get my head round point 3. Does that mean the public will know the beneficial owners behind all UK properties, even where the legal owner is a company registered in the BVI/Cayman Islands etc? If so, this is a significant development over the half-hearted efforts to have tax haven registers, but only available to crime agencies and on request. But it is hard to imagine the scoundrels agreeing to this voluntarily, and it is evident the Government doesn’t have the appetite to take them on. It must be more empty rhetoric, surely?
Unless foirfeiture is involved you are right
Nothing else will do
I think you will, like King Louis,”get to the top & have to stop”, which will bother you.
If the Secrecy Jurisdictions didn’t do KYC in the past (& I suspect most of them thought this meant only adding NYC Ketchup to Fried Chicken) they will not be able to answer. They will simply say that the nominee Directors in their Jurisdiction are, so far as they’re concerned, the true owners.
You could challenge the nominees directly, but I’m not sure what leverage you’d have,
It sounds like this will be a worthwhile change for the future but it won’t address the abuses of the past.
I agree, entirely
Beneficial ownership is a step
But we also need accounts as well