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

(Cross-posted from www.taxjustice.net 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?)

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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.

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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.

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Visit the Tax Justice Network

(Thank you to TheRealNews @ YouTube)

Tax Haven Expert James S. Henry On “The Pinstripe Mafia”

Panama Banks
Panama Banks (Photo credit: thinkpanama)

Posted August 24, 2013

by Jerry Alatalo

James S. Henry speaks at a TED talk about the massive industry which has been active, thriving, and unknown to the majority of humanity for decades. This is the industry of tax avoidance (zero taxes) and tax havens up and running in locations around the world.

The International Consortium Of Investigative Journalists (icij.org) broke the silence on this industry after receiving over 130,000 documents related to tax avoidance from the British Virgin Islands, which started a world-wide discussion. As of August 2013 there are reports that the G8 and G20 groups will be meeting to discuss this major issue.

The question that has to be asked is: Where have all of these world leaders been for the last twenty years while this industry has been going gangbusters?

If the International Consortium Of Investigative Journalists had not received those thousands and thousands of documents, would world leaders have still expressed any “concern” about tax havens? If those documents hadn’t been transferred to ICIJ and the story was never told, would these leaders have remained in “business as usual” mode, and remained silent?

Tax havens are no longer secret.

(The following is from an article posted on May 27, 2013. At the end you will hear from expert James S. Henry at his TED talk.)

The Cayman Islands, Cyprus, the Netherlands, Belize, Panama, Hong Kong… Offshore tax havens have operated all around the world for a long time. Fortunately the people have become aware of the size of the operations, to evade paying taxes, run by corporations and wealthy people.

Bankers, lawyers and accountants have been busy aiding firms and the wealthy avoid taxes with offshore smoke and mirrors for long enough now. Complex corporate structures, mysterious chains of ownership, confusing and irrational levels of ownership, along with hide and seek cutout owners are some of the tools of the tax haven industry. Understand that the tax haven industry is a huge industry.

For corporations and rich people the options are there to take advantage of low to non-existent tax rates and secrecy laws in other countries. The offshore tax haven industry is a very controversial subject. The bankers, lawyers and accountants involved in this multi-trillion dollar industry are known as “the pinstripe mafia.” The big four accounting firms of Price Waterhouse Coopers, Deloitte, Ernst and Young and KPMG, along with the too big to fail banks and the largest legal firms in the world are the facilitators of offshore tax havens.

Every day accountants, bankers and lawyers are working to find their clients “neutral taxation” (0%) or “tax optimization” (0%). As long as the actions taken are “legitimate and proper” (getting around the law) it is full steam ahead. They first find the free zones where money is transported by corporations, billionaires and millionaires in secrecy where nothing is visible. Here is where you can erase your clients’ steps so as not to worry about being found out by the taxman or the media.

The interests of those who would seek help to avoid taxes through the use of offshore havens are at odds with the rest of the people. The system is rigged to the tune of many trillions of dollars. This is the way it is on Earth. Perhaps the tide has turned here as exposure and awareness of this greed industry continues to grow.

The writer will admit that, if he had many millions of dollars, he is not at this time able to say with certainty that he would not be tempted to use an offshore tax haven. If such a situation came about he would hope not to go there. We are simply being fully candid with the reader.

It is of note that those with less financial resources have to pick up the tabs for those who use offshore havens. The conditions of societies suffer where companies and individuals evade paying their fair share of tax. Plainly and simply tax havens are not fair.

The accountants, lawyers and bankers involved have to keep this large industry secret or will risk losing their jobs, never working again in the business. Whistleblowers have to think long and hard before they make any decision to let these secrets out to the public and the media.

A wealthy woman Leona Helmsley said years ago, “We don’t pay taxes. Only the little people pay taxes.” The big four accounting firms are in charge of all the accounting rules and are not governed by any type of oversight. They are not accountable to anybody so there were no penalties suffered for their signing off on the health of the large too big to fail banks that recently crashed.

Cruelly, tax havens are funding deficits as governments are borrowing offshore funds. Democracy is diminished as corporations threaten to move offshore if tax rates go up on them and the wealthy people who own them.

There are estimates that anywhere in the range of 40-100 billion dollars per year is lost due to these tax avoidance and evasion schemes. When you add up all the banks in Switzerland, Antigua, Singapore, the British Virgin Islands and the many others you find a huge, legal, bordering on the immoral, unethical practice. Offshore jurisdictions offer lucrative advantages to clients who live outside of that region or country.

Offshore transactions happen outside of the client’s country of residence and financial secrecy is the key to the entire offshore tax haven industry. Clients are assured of confidentiality through laws and other means. Civil law, criminal law, bank policies and industry practices all combine to offer clients complete secrecy to the point where in many of these havens it is against the law for bank employees to show anyone information about client accounts.

Havens offer little or no tax liability on business operations outside of the haven, favorable laws for foundations, trusts and corporations, while working closely with the client’s financial and professional advisors. Shams and schemes are actively promoted, arrangements are made for secret control of accounts, false statements and documents are created.

Financial advisors and facilitators are found in New York, Los Angeles, Chicago, London, Singapore, Geneva and elsewhere to help clients hide assets and avoid taxes. Accounting schemes are engineered to blur or blind the vision of any person attempting to discover fraud and corrupt accounting.

The British Virgin Islands have a land mass the size of Washington, D.C. There are around 20,000 people who live there. In the British Virgin Islands there are more than 1,000,000 registered corporations.

Layers of secrecy have been created where multiple haven locations around the world connect in increasingly complex and secret ways. Fake securities transactions, phone transactions and phony accounting are a few of the tools used to avoid taxes.

Tax avoidance is a worldwide industry that has gone on for decades. It is not operated by tiny, crooked banks on tiny islands all over the world. It is a money-making industry run by the largest banks in the world along with the largest accounting firms and the largest law firms.

These firms are found in every large city on the planet. While clients enjoy the services and benefits of their home countries, they pay no taxes on their hidden wealth. The letter of the law has been met but the spirit of the law has been thoroughly trashed for decades. Any person or entity of any significant wealth will end up consulting a tax haven financial engineer.

These same facilitators of tax evasion end up in positions of power and control in government tax and treasury departments. The large accounting, law and banking firms have come to have no concern for societies and the well-being of ordinary citizens. It is all about profits, period. They use the language of drug pushers and talk about “satisfied clients.”

Enormous public expenditures are made to investigate and prosecute tax schemes. The taxpayer bears the cost while new and more complex schemes are in development now, in real-time, to wipe out client profits with smoke and mirror accounting. These schemes are marketed and sold to clients every business day. “You can increase your income by millions per year”, “profits are larger than the fines you will pay if caught”… Tax scheme products are many and are on the shelf for purchase by clients, just as the average person buys items off the shelves of the supermarket.

There is a lack of deterrence as firms that get caught end up paying fines that are smaller than the amounts realized from their illegal activities.

There are estimates that 500 billion dollars of tax revenues are lost per year to developing countries. The amount lost for developed countries is much higher, perhaps one trillion per year. It is interesting that this writer became aware of this world tax haven reality after seeing investigative reports at an obscure website. The main stream media has not done a major report on this important issue, ever. No politicians have made this information available to the people.

We have to ask why this tax haven secrecy has existed for decades. As this explosive issue is not being reported by the mainstream media, and governments have not dealt with it, the people will have to take the lead and start powerful actions.

Transparency of not just international financial transactions but of everything that is occurring on Earth is healing and healthy for all people. With total transparency comes total democracy.

It is convenient to direct the blame toward those on the lower end of the economic and wealth scale for problems with economies. It is very important to note that the attention has shifted correctly to those who hold the reins of power and are responsible for the realities affecting the human race on Earth.

It is understandable that those in the top-tier of wealth and privilege have no strong want to make any changes to things as they are. Here we find hope in the recent actions taken by the many men and women who are bringing the true reality of what is occurring on Earth to the people of the world.

Transparency will bring to light those problems which can then be dealt with through reforms which end the root causes, instead of treating the symptoms of human problems. Conventional economic wisdom does not pay close enough attention to power arrangements in societies and institutions.

The lack of total transparency, fraud regulations, monitoring and control has led to the current economic free fall. Inequality is the core problem which both caused the crisis and is a result of the crisis. Increasing inequality of human beings has concentrated wealth into the hands of an increasingly smaller group of people, who have captured political institutions and seized power at the expense of the average person.

There is a false belief that governments and markets are separate when in fact vested private interests, not the public interest, are served. Are we to see a race to the bottom or a race to the top? Models of development must be developed which are based on equality, not inequality, that keeps concentration of power in check for the people. Common goals need consideration as opposed to the goals of concentrated power, wealth and resources.

A super class of 6,000 individuals controls the world.

There is a lack of governance in the world of finance where citizens subsidize corporations and the wealthy, where social inequality is actually far worse than perceived. Diversions of wealth have especially hurt the developing countries where many billions of dollars have been transferred to developed countries’ citizens. The unfortunate economic conditions in societies of people have been given very shallow coverage by major media, as the root causes are never identified and reported.

There are hopeful signs of new beginnings as many thousands of the world’s wealthiest corporations and people have become exposed for tax evasion with accounts in offshore tax havens. These people are many times the most politically powerful in their home countries. These are the folks who make calls for austerity and higher taxes on regular citizens while hiding their stashes.

Corporations claim profits in those tax haven jurisdictions where taxes are the lowest. These activities are widespread, criminal and effectively poison the world’s economy. The recent expose of 130,000 client bank accounts from the British Virgin Islands has made many people aware of what is going on, while yet millions of corporate and individual accounts are still secret in the rest of the world.

Britain plays a big role in the control of islands around the world which have become tax havens. Huge profits are reaped in Switzerland, New York, Singapore and dozens of other cities and countries where the tax haven industry operates.

Estimates are that 100 billion dollars per year is lost to America as a result of individuals’ tax avoidance. The amount of corporate tax avoidance losses is much larger.

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