Global Tax Haven Industry: World Leaders Still ‘Working On It.’

(Cross-posted from on February 23, 2015 / Comment: Surely, governments have the resources/expertise to shut down the global tax evasion industry. So, after that trillion-dollar/year industry has been humming along and operational for decades, why hasn’t global tax evasion been shut down?)


Settling accounts: what happens after SwissLeaks?


From Koen Roovers, re-posted from Open Democracy:

Settling accounts: what happens after SwissLeaks?

By Koen Roovers, Financial Transparency Coalition

ocean77A major leak of incriminating HSBC records last week resulted in print and television news coverage around the globe, trended on Twitter for several days and prompted several governments to start long-anticipated investigations. Through its Swiss entity, the British banking juggernaut helped customers from around the world to hide their money for tax evasion or other nefarious purposes without any questions asked. In fact, in several of the ‘scripts’ which accompany the accounts, banking personnel are seen to be very willing to accommodate dubious requests—from allowing cash withdrawals worth millions of dollars to setting up sham legal entities to obscure the ownership of the funds.

The ‘Lagarde list’, as the files have come to be known, has been around for a couple of years and so many have been asking: ‘Why do we only see government action once a group of reporters put the spotlight on this?’ Another frequent question has been whether the bank has really (as it claims) cleaned up its act.

Relatively few commentators have asked: how do we prevent this in the first place?

Information exchange

Last year, the Organisation for Economic Co-operation and Development (OECD)—a rich nations’ think tank—proclaimed the death of banking secrecy when it launched its new ‘Common Reporting Standard’, a global system intended to enable automatic information exchange (AEoI) between governments on the deposits of residents, for tax purposes. The Financial Transparency Coalition (FTC) has been following this closely and questions whether the plan, in its current shape, will prevent the next global tax-evasion scandal.  The poorest countries suffer most from tax evasion and other illicit financial flows, and they may be left out of the plan.

The idea behind AEoI is simple: financial institutions everywhere will determine which of their clients are foreign tax residents. Each institution will provide information about them to its ‘home government’, which will forward this ‘automatically’ at set intervals to the government whose citizens it concerns. Essentially, instead of governments relying on their own tax residents to disclose their foreign accounts, a tax resident’s foreign bank will let its government know about them.

A good idea in principle, but the way it is intended to be put into practice is controversial. OECD members have made participation dependent on confidentiality standards yet to be defined. And some states—including Switzerland—have added further reservations, wanting to exchange only with countries with which they have political and economic ties.

To illustrate why such a requirement would be disingenuous, look at offshore holding around the world. Residents of Africa and Latin America are estimated to hold over a quarter of their assets offshore, whereas the volume of offshore assets from other countries held in the poorest countries is negligible. Nigeria, with one of the most developed financial sectors in Africa, holds less than 1% of its bank assets in the UK, for example. In other words, wealthier states generally have little to gain economically from exchanging information with poorer countries, whereas the latter have a great deal to gain. If the criteria for exchange include whether wealthier countries obtain a substantial economic benefit, the intended global development benefits of the plan will be lost before the first bytes of data are exchanged.

It is in everyone’s interest that automatic information exchange becomes a global standard, with all jurisdictions participating as soon as possible. But it is widely accepted that developing countries will face challenges in joining the AEoI system and fully benefiting. Both for OECD members and developing countries the stakes are high, as potential loopholes in the global system could be devastating. Creating a system where developing countries are effectively excluded risks the creation of new tax havens outside of the exchange, as well as depriving developing countries of the necessary information for them to enforce their tax systems effectively.

Significant challenge

Capacity in developing countries will need to be increased, so that any technical barriers to taking part in the global system can be overcome sooner rather than later. The scale of the challenge is significant: the UK-based charity Christian Aid has estimated that sub-Saharan Africa would need around 650,000 more tax officials to reach the world average. Inadequate information technology represents another barrier.

A good idea in principle, but the way it is intended to be put into practice is controversial.

Through the G8, the G20 and the Global Forum—a platform hosted by the OECD with 125 participating governments—rich states have promised help to poor countries to build the capacity they need, but these commitments have yet to be honoured. Investing in AEoI is one of many pressing issues facing developing countries, so if and when they make a commitment to it they should be ensured that support will be there.

Such technical assistance should engage developing-country tax authorities and investigative and prosecutorial personnel, to demonstrate how AEoI information can be mined for specific data or used to identify trends. For this to happen, developing countries need to be receiving data. The FTC strongly recommends a phased approach for the poorest countries (those with gross national income per capita of less than $4,125), to prepare them for full co-operation in a global system of information exchange.

Identifying assets

Meanwhile, potential benefits for developing countries can also be assessed by identifying the assets of their residents held overseas, for example using data collected by the Bank of International Settlements. As sufficiently disaggregated data are not available publicly, only government-led research is currently possible here. Governments are encouraged to publish the volume of data being exchanged, the number of individuals involved and the extent of the assets concerned.

These statistics would give citizens, journalists, politicians and organisations an idea about the potential impact of AEoI. Research on the deterrent effect—which may be the main impact—would very likely prompt countries to prioritise participation. And what, other than such a deterrent of tax evasion, would prevent the next big scandal?

But even if all the loopholes in global information exchange are fixed, this is a solution to today’s problems, not tomorrow’s. Criminals and their enablers are creative, so the only way to prevent future scandals is to shed light on what criminals and tax dodgers are trying to hide. This is why online registers of assets for all legal persons and arrangements are necessary and should be publicly available. And law-enforcement bodies around the world should have access to information about other stores of wealth, such as gold and art held in freeports.

If we turn a blind eye to these loopholes, economic development for all will continue to be undermined by illicit actors looking to exploit them.


Bilderberg Attendees Vow To Destroy Tax Havens. Not.

Posted on June 1, 2014

by Jerry Alatalo

“I believe in a graduated income tax on big fortunes, and a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.”

– THEODORE ROOSEVELT (1858-1919) 26th President of the United States

aaa-16The men and women who’ve attended Bilderberg 2014 will take no action to end the decades-old, global tax evasion/tax haven industry. If anything at all is done, it will be dramatic speeches which feign outrage against such an injustice, while resulting in more “working on it” and “we are studying the issue.” It’s astonishing to notice that in France, where Francois Hollande called for an end to tax havens – the only national leader to issue such a direct statement on the issue – that the right-wing in that nation won in recent voting.

Recently, the United States Department of Justice (DOJ) reached a plea-bargain agreement with Switzerland mega-bank Credit Suisse for an over 2 billion dollar fine for tax evasion efforts the bank carried out for wealthy American clients. Credit Suisse did not lose its license to operate in America, and none of Credit Suisse’s executives will spend a day in jail. Many journalists have compared the sentence of a woman Occupy protester to three months behind bars for elbowing a police officer to the lack of jail time/sentencing for any Credit Suisse executives.

And that comparison pretty much sums it up regarding the two-tiered criminal justice system on Earth. The U.S. Justice Department missed a tremendous opportunity to apply a real deterrent by holding Credit Suisse and its executives’ feet to the fire. The DOJ could have demanded the names of every American citizen who broke the tax laws with Credit Suisse’ help by threatening to take away their license to do business in America, but this may have been “a little embarrassing” for those Americans – so the monetary penalty option was chosen.

Perhaps more relevant than embarrassment would be worldwide publicity for the tax criminals, as well as even-more elite-distressing widespread awareness of the tax haven industry by men and women from that rapidly shrinking segment of the population that gets their “news” from the corporate media, 6-o’clock broadcasts. Could it be that the DOJ in America didn’t push all the way to obtain those Swiss tax-criminals’ names because keeping the names secret would avert an “American shit storm”?

Yes, it not only could be –  it was the reason.

How ironic that a woman – Cecily McMillan – who participated in protests against the “1%” on Wall Street – the same 1% represented by Credit Suisse and its American tax cheat clients – will spend three months behind steel bars, while Credit Suisse executives receive punishment the equal to average folks’ leaving a tip at the restaurant on Saturday night after the movie. Yes, it certainly is ironic, just like the Alanis Morissette song which gained popularity years ago.

(Thank you to A&E @ YouTube)

Perhaps there is some value in probing a little deeper into the contrast between Cecily McMillan’s “crime” and the criminal actions of Credit Suisse and its American clients. A good place to begin is identifying the motivation of the separate cases and individuals. Ms. McMillan had as a primary motivation the wish to help create a fairer, more just, and better world for all people everywhere. Credit Suisse and its clients were primarily motivated in breaking the law through evasion of tax payments, in the overall scenario where both clients and bank owners would increase the numbers in their respective bank accounts.

Ms. McMillan threw an elbow at another human being, the results of which, with regard to causing any permanent injury of any kind, are unknown. In the case of Credit Suisse, people will never know the true extent of monetary loss to the United States government because a lump sum, without investigation and accounting to arrive at an actual dollar amount, was the option “agreed on.” During the “decades” which Eric Holder told reporters was the amount of time Credit Suisse had engaged in tax evasion services for clients, how much money did the mega-bank make?

The settled-upon fine was a little over 2 billion dollars. Has Credit Suisse netted profits well over that amount in the past twenty or so years? Could their profits from tax evasion services been 20 billion, or 40 billion, or 100 billion? Let’s say it was 100 billion. Credit Suisse probably put that money through the years into interest-earning instruments, so the total amount from tax evasion services may greatly exceed 100 billion dollars.

According to James Henry of Tax Justice Network, the mega-bank’s stock rose in price after the plea-bargain arrangement was reached, so people can understand why one of Credit Suisse’ top executives said after the deal, “this will have trivial, minor effect on our performance.” And what offer did Cecily McMillan get so that she could pay a fine instead of going to prison? Was she ever offered a “plea-bargain”, the chance to fork over some cash and avoid jail-time?

As we compare the two different class-related cases, Ms. McMillan has a felony on her record, the Credit Suisse executives do not. Ms. McMillan didn’t embezzle the police officer’s bank account(s) to the tune of multi-billions of dollars, and she didn’t take a penny from the government accounts that hold funds for financing the United States’ food stamp program. Ms. McMillan didn’t take a penny from any university students struggling to pay their tuitions and living expenses. She never reached into anyone’s pocket and stole jobs held by teachers, police officers, or firefighters, or Veterans Administration physicians.

Ms. McMillan elbowed a law enforcement officer, but she didn’t steal billions of dollars from the United States government. She was never proven guilty of taking money from government accounts which paid for psychological treatment of veterans of wars in Afghanistan, Iraq, Vietnam, or Korea.

Now, who are the real criminals on this Earth? The 99% or the 1%?

For the answer turn your eyes toward Bilderberg.


Visit the Tax Justice Network

(Thank you to TheRealNews @ YouTube)