tax havens

Appealing for aid on the basis that there are no tax havens in the Caribbean is not going to work

Published by Anonymous (not verified) on Wed, 20/09/2017 - 5:40pm in

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tax havens

Guy Hewitt, who is the Barbados High Commissioner to the UK, has an article in the Guardian this morning arguing that it is is grossly unjust that assistance cannot be provided to the hurricane damaged Caribbean islands out of the overseas aid budget. Taking a swipe at Christian Aid, who have argued that this is an inappropriate use of those budgets, he says:

The prevailing view of the international donor community is that the gross national income per capita of these islands is too high for them to have access to aid budgets designed to relieve poverty, a perspective shared by the international NGO community.

He follows this, saying:

This perspective is premised on two misconceptions. First, the egregious notion that “tax havens” exist in the Caribbean. While the Caribbean contains low tax jurisdictions, they form part of a wider strategy to diversify Caribbean economies. Moreover, the development of international business and financial centres mirrors the practice of many developed countries as shown by a report published by Oxfam last December, in which Ireland, Luxembourg and the Netherlands are ranked among the world’s 10 lowest-tax jurisdictions.

The second fallacy is the limited way in which the deserving poor are identified. DAC rules restrict overseas aid to low- and middle-income countries based on GNI per capita as computed by the World Bank. This classification by economic data alone is both dated and myopic. It ignores the acute vulnerability of small countries, particularly those island states in the Caribbean and Pacific vulnerable to catastrophic storms.

Three thoughts.

First, nothing is preventing aid by direct grant or loan; it just cannot come from the aid budget. So let’s stop the stupidity here: if the UK wants to assist it can do so. It is just untrue to say aid cannot be given.

Second, appealing for aid on the basis that the BVI is not a tax haven stretches credibility beyond any known limits.

Third, these places do have high GDPs because they are tax havens. They have traded on it. Yes they are remote. That’s why they are tax havens. But that also required them to raise sufficient funding to manage contingencies and the opportunity was there, and was not taken. Those who have worked so hard in these places to undermine the state do really need to know that this dangerous game that they have been playing has to end as a condition of any support. Nothing less will do.

I suggest His Excellency the High Commissioner changes his negotiating position. The one he’s got is not appealing.

We don’t need to give money to the BVI: loans would do a better job

Published by Anonymous (not verified) on Fri, 15/09/2017 - 4:28pm in

Boris Johnson is apparently struggling to find ways to give development aid to the UK Overseas Territories that are too wealthy to benefit from the aid budget. As ever, Johnson is wholly misguided in his efforts.

Of course these islands have suffered badly, and of course they need aid but their high GDP per capita is not an accident, even if not everyone who lives there will see all the benefits of it. Rather, that high GDP per capita is an indication of their tax haven activity and, in turn, their ability to fund their own recovery.

What the islands need is liquidity and resources now. So let’s provide both. But let’s not worry about digging into the aid budget. Just as £1bn could mysteriously be found for Northern Ireland when needed so too can the money for these islands be found now. But better still, we don’t even need to find a budget to take the money from. Just lend it instead. Nothing could be easier to do: after all government can create money at will for that purpose just as banks can.

Charge interest on this loan by all means, but make it modest.

Be fair and require repayment over the life of the assets.

And build in incentives to give up tax haven activity into the loan conditions. So waive part of the capital for accounts published on line, and more for trusts doing the same. Then add another waiver for public beneficial ownership data and maybe a bit more for having a corporation tax. Give the islands a choice. But make opacity cost.

That way help is given now and tough decisions can be deferred. But international tax abuse gets a local price. And those in these places can either pay it or elect politicians who reform their practices. Now what could be fairer than that?

Crisis and Closures in the Academy Schools

Published by Anonymous (not verified) on Thu, 14/09/2017 - 4:02am in

One of the major issues is the Tories’ continuing attempts to destroy whatever remains of value in the British education system, all for the profit of big business. Last week, one of the academies closed only a week after it had opened. I did wonder what would happen to its pupils. Would they be thrown out and denied an education, as they had enrolled in the wrong school and there may not be places available in the other local schools.

Fortunately, that’s not going to happen. From what I understand the school will be kept open until someone else is found to take it over.

But it is still absolutely scandalous that British schools are now run by private companies, who can announce at any time that they are no longer interested in running them. Especially as tens of millions of taxpayers’ money is given to individual academies, far beyond the budget for the local LEA. In some cases, the amount spent on an academy can reach £40 million, while the budget for the LEA is under a million.

As for replacing LEA’s, from what I understand from talking to friends about them, the authorities dictate that schools can only join certain academy chains. This makes a mockery of the claim that they are outside LEAs, as these chains in effect act as them. But I suppose as the academy chains are all privately run, the government thinks this is just as well then.

I also understand that one of the academies in Radstock in Somerset doesn’t even belong to a chain based in the UK. The chain’s based in Eire, and all its directors live across the Irish Sea. I can’t say I’m surprised. Eire attempted to encourage investment by massively cutting corporate taxes, in the same way that the Tories are doing for Britain. Thus you find many businesses, that actually do their work in Britain, have their headquarters over there, using the country as a tax haven. And the ordinary people of Ireland have paid for this, just as we Brits are paying for the Tories’ self-same policy over here. One of the books I found rooting through one of the bargain bookshops in Park Street was by an Irish writer describing the way his country’s corporate elite had looted the country and caused its recession. Like the banksters in Britain and America.

The academies are a massive scam. They were launched under Maggie Thatcher, and then quietly wound up as they didn’t work. Blair and New Labour took over the idea, as they did so much else of the Tories’ squalid free market economics, and relaunched them as ‘city academies’. And then, under Dave Cameron, they became just ‘academies’.

They were never about improving education. They were about handing over a lucrative part of the state sector to private industry. They aren’t any better at educating children than state schools. Indeed, many can only maintain in the league tables by excluding poorer students, and those with special needs or learning difficulties. And if state schools had the same amount spent on them as those few, which are more successful than those left in the LEAs, they too would see improved standards.

In fact, academies offer worse teaching, because as private firms in order to make a profit they have to cut wages and conditions for the workforce to a minimum. And with the Tories freezing public sector workers’ wages, it’s no wonder that tens of thousands of teachers are leaving the profession.

And those companies interested in getting a piece of this cool, educational action are hardly those, whose reputation inspires confidence. One of them, apparently, belongs to Rupert Murdoch, at least according to Private Eye again. Yes, the man, who has almost single-handedly aimed at the lowest common denominator in print journalism, lowering the tone and content of whatever newspaper he touches and whose main newspaper, the Sun, is a byword for monosyllabic stupidity and racism, now wants to run schools. Or at least, publish the textbooks for those who do.

Academy schools are a massive failure. They’re another corporate scam in which the public pays well over the odds for a massively inferior service from the private sector, all so that Blair and May’s mates in the private sector could reap the profits.

It’s time they were wound up. Get the Tories out, and private industry out of state education.

The UK has a duty to reform its Caribbean Overseas Territories

Published by Anonymous (not verified) on Wed, 13/09/2017 - 4:10pm in

Rupert Jones, the former attorney general of Anguilla, wrote an article for the Guardian yesterday in which he suggested that the UK’s lethargic response to the Hurricane Irma induced crisis that has hit that island and others in the Caribbean is due to the UK’s uncertain attitude towards its Overseas Territories due to their tax haven status.

He graciously referred to my comments on this issue on this blog, as did the Guardian when quoting me at length in a related artcile on their web site. I have to say, he and I seem to be of not dissimilar mind. His central argument is that the UK is deeply embarrassed by tax haven activity and the refusal of these places to comply with requests for improved transparency but as he notes:

The UK may hold the local governments of these territories responsible for these failures. What it does not say is that the UK could legislate to require reform tomorrow if there was the political will. There is not, perhaps because of the fear that it would highlight the UK’s ultimate responsibility.

This ability on the part of the UK to impose its will on these places is something I have long argued exists, but is strenuously denied in Whitehall. It is good to see it confirmed by someone with very good reason to know the facts.

I also welcome this statement, with which I concur:

Both UK and local politicians also recognise that the islands’ economies, heavily reliant on offshore financial services, might flounder with the major loss of jobs. Then the UK may have to provide alternative investment.

I have long argued this is our duty.

In essence what we agree upon is what Rupert Jones says at the end of how own artcile:

I hope he [Boris Johnson] will maximise the UK’s response to the devastation wreaked by Irma, as well as using it as an opportunity to discuss our relationship with the overseas territories. It’s a conversation long overdue.

I can hope.

But I do not expect it will happen.

The UK: the ultimate ‘no questions asked’ tax haven

Published by Anonymous (not verified) on Tue, 12/09/2017 - 4:18pm in

The Scottish Herald newspaper had an excellent article on Scotland as a tax haven yesterday which also focused on one of my continual concerns, which is the near total incompetence of the UK’s Companies House, which is based in Cardiff.As the Herald noted , the issue of concern is the Scottish Limited Partnership. These are not partnerships as usually recognised, and nor are they the same as English limited liability partnerships (of which Tax Research is one). As a Scottish firm of lawyers says of this type of entity, the advantages are:

Separate legal personality: this is a unique trait of the SLP which is not enjoyed by limited partnerships constituted elsewhere in the UK. It means that the SLP itself can own assets, enter into contracts, sue or be sued, own property, borrow money and grant certain types of security.

Tax transparency: this means that the SLP is taxed as though it did not have a separate legal personality. No tax is payable by the SLP itself. Instead, the UK tax authorities (and other foreign tax jurisdictions) look through the partnership structure and partners are taxed on their share of partnership income and gains arrived at in accordance with their profit-sharing ratios (which can be different from the ratios in which capital has been contributed). The hybrid status of separate legal personality coupled with tax transparency offers the best of both worlds in a way that limited partnerships incorporated in other jurisdictions cannot.

Limited management participation: the legal requirement that limited partners may not participate in management makes SLPs ideal vehicles for multi-party investor structures where management and control rests with the general partner or manager appointed by the general partner.

All upside on rights and no down side on obligations like paying tax then, because if the partners are not in the UK nor is the tax bill: it’s pretty much as simple as that. This is tax haven UK at work. As the Herald noted, tax planners have noticed:

The number of Scottish Limited Partnerships has mushroomed. Not that Scotland is to blame though: the Scottish parliament has no control over Scottish company law (which is absurd). The administration of Scottish Limited Partnerships, most of which appear to have a somewhat scant regard for company law requirements, takes place at the UK’s Companies House in Cardiff. And as Roger Mullins found when an SNP MP Britain’s Companies House,  has just six civil servants policing the accuracy of filings for more than four million UK firms.

This is a theme that I have visited before: see this report. There is in effect no company regulation in the UK at all now. It’s true that documents must be filed, but no one gives a damn what they say and there is no chance of getting them corrected if wrong. What is more, if they are not supplied then the standard action of Companies House is to assume that the entity is no longer required by its owners and to then ‘strike it off’; i.e. dissolve it without trace. This, of course, is just what anyone permitting any form of crime, including money laundering and tax abuse would want. It’s as if the UK goes out of its way to set up the ‘no questions asked’ option for their use.

Why go to more esoteric, and sometimes better regulated, tax havens to get a company when the perfect solution is here in the UK? The absurdity of this situation is staggering, and the likely loss phenomenal. I estimated that the abuse of companies of all types cost more than £20 billion a year in tax loss when I last looked at the issue, and suspect I was cautious. But austerity says that we cannot look at the issue. As errors of judgement go this one is off the scale.

And in the meantime Scotland should be given the right to close down the tax abuse done in its name.

Plan B for the Caribbean’s tax havens after Irma

Published by Anonymous (not verified) on Sun, 10/09/2017 - 7:35pm in

Professor Mariana Mazzucato has an article in the Observer this morning in which she notes an argument that she attributes to the Tax Justice Network. As she notes:

The relief efforts needed are larger than they should be due to how these countries have been starved of tax revenue precisely because they have chosen to be tax havens.

In that case she says:

The simpler question is to ask those “elites” who save billions by using tax shelters in the Caribbean, and the Big 4 accounting firms that enable their transactions, to contribute to the relief funds. The more difficult question is how to change the status quo and make sure that these companies actually contribute to the resources they take advantage of, both at home and abroad.

It’s more difficult because it requires admitting that the governments offering tax shelters, which today might be appealing for relief, are also extracting value from the governments of the foreign companies they host. So, for example, the UK taxpayers pay for infrastructure and education in the UK. British-based companies benefit from that. If they then benefit from havens to avoid paying tax to the UK, the tax shelters are, of course, a key part of the problem.

And as she notes:

Clearly, a priority should be for companies, operating in countries offering tax havens in British Overseas Territories and the Commonwealth (or, indeed, elsewhere, such as Switzerland or Monte Carlo), to be more transparent. As argued by the Tax Justice Network, this would mean that countries in the Overseas Territories should “provide free, online and publicly accessible registers of all companies and trusts” located there.

At this point I have to correct Mariana: the argument actually came from me, writing for the Progressive Economics Group. I enjoy working with the Tax Justice Network and am often still linked to them as I was a founder of that organisation, but on this occasion they’re not involved, and I am not sure what their position is because I have not asked, so I apologise if they’re embarrassed by this.

As Mariana goes on to say:

In particular, it argues that this information should include which individuals own more than 10% of the shares in each company registered in the location; the names of the directors and the various locations where the companies have offices. The Network also argues that the cost of UK aid should be matched by revenue from the companies benefiting from the tax shelters and that full annual accounts should be prepared in accordance with a recognisable set of accounting standards. A modest proposal would be for the countries to raise money from the companies by increasing, for example, the charges they make for offshore services, or by charging tax on the companies based in these places.

Her follow up points are what then add real value:

But if the whole point was to avoid tax, would this cause the companies to leave? This gets us to the core of the problem. It is impossible to have real growth, and a reduction in inequality, through policies that are in the end just part of what we might call the “global value extraction business”. ….

Governments need to make critical investments that transform their societies in ways that create capacity, knowledge and long-run growth. This will be expensive, but possible, if arrangements are put in place so that those benefiting from the common resources also plough their profits back into those very resources. This, however, requires moving away from the “us v them” mentality and recognising that the problem rests just as much on the forces causing inequality at home as on the tensions between the rich and poor countries. It’s more than just an argument about who has to pick up the bill for the mess, disaster after disaster.

And that is precisely why this issue does need to be on the agenda, as does Plan B for these places, something I have long been engaged in.

NB: The article has been approximately corrected now

Who should pay for the Hurricane Irma clean up in the UK’s Caribbean islands?

Published by Anonymous (not verified) on Sat, 09/09/2017 - 12:47am in

I have written a policy brief on this question for the Progressive Economics Group. It’s available here.

Should the people who use tax havens be paying for the Hurricane Irma clear up in the British Virgin Islands and beyond?

Published by Anonymous (not verified) on Thu, 07/09/2017 - 8:55pm in

Hurricane Irma has hit the British Virgin Islands. We know because Sir Richard Branson has been very keen to tell the world all about it. The damage appears to be significant, but of course cannot be assessed in detail as yet. What we do know is that there will be a cost. This will not only be to the BVI but to other British Overseas Territories, including Anguilla and the Turks and Caicos Islands.

We know that Boris Johnson has said the UK will support these islands, although how is not clear as yet. I have said that there should be a cost to them in terms of extra transparency being demanded as a price for support. 

But there is another factor to consider. All three territories I have mentioned are significant tax havens. If there are impacts on St Kitts and Nevis and Bermuda, which are also British Overseas Territories, then they too also fall into this category. Antigua and barbuda and The Bahamas are members of the Commonwealth, and tax havens. These places all set out to undermine the world’s tax systems, and are ably assisted in that task by the professional services firms that operate from them, like PWC, EY, Deloitte and KPMG. My question now is a very simple one. It is whether or not both the people making use of these tax havens and those that sell services from them should be required to contribute to the cost of bailing them out?

Should the bankers, lawyers and accountants with branch offices in those places now be expected to very publicly contribute to the cost of supporting the reconstruction required in those communities? What are the Big Four accountants saying about this?

Should companies like Virgin, ultimately headquartered as it is in the British Virgin Islands, be similarly expected to contribute in significant amount, perhaps based on the tax they might have avoided by using the place?

And should the places in question now be expected to raise considerable additional funds for their own benefit by either significantly increasing the charges they make for offshore services (for example, by raising company registration fees), or by charging tax on the companies based in these places?

Global capital uses places like the BVI because they say doing so ‘oils the motion of international trade’ and sings the praises of tax havens ‘tax neutral’ environments (where tax neutral means ‘no tax’). But tax havens have a cost, and right now it looks like ordinary people in the UK, the Netherlands and France may be bearing much of the cost of bailing out the Caribbean. I think we should do that, come what may. But sending aid has never been, by itself, the answer to aid issues. Asking why aid is needed has always been appropriate as well. These islands cannot be moved out of the eye of some storms. But they can raise tax. And I think it reasonable to think that they should raise tax now.

I look to Boris Johnson for the Foreign Office, Priti Patel at DfID and David Lidington at the Justice Ministry, as the three ministers responsible for this issue, to now take a lead in making this demand. And if it is not made I sincerely hope that they are held to account for their failure to do so.

Hurricane Irma and the UK’s Caribbean tax havens

Published by Anonymous (not verified) on Thu, 07/09/2017 - 4:19pm in

Hurricane Irma is continuing to batter the Caribbean. At a human level there can only be concern for tall those affected, and a desire that all that can be done to restore normal life in the places impacted will happen.

But the Caribbean is not a politics free zone, and nor is Hurricane Irma. I will leave aside the obvious global warming issues and the politics of that. I will mention instead that many of the places affected are tax havens. And many of them are British.

I sincerely hope that the UK government does supply all the assistance required to these places, as they will also do to those other places without such support. But I make the point that if we are to honour our responsibilities, then so should they. The British Caribbean tax havens can only exist because of the guarantee that the UK supplies, the legal system that the UK supplies and the regulation that we support. There is a cost to that. We will bear ours, but it’s not unreasonable to expect that those places who need us to do so respond in kind. That means they deliver accounts on public record, registers of beneficial ownership of companies and trusts for all to inspect and new regimes of transparency in all that they do.

And for those who think this isn’t the time to ask I would point out that even neoliberals think that the role of government is to act as a back stop. When the governments of the UK’s Caribbean tax havens rely on us to take that role then now is precisely the time to remind them of their reciprocal responsibilities, whilst continuing to supply all the support that is needed.

Note: This blog has been referenced, and largely reproduced, in The Guardian this morning.

HMRC’s offshore paper tigers

Published by Anonymous (not verified) on Wed, 23/08/2017 - 4:55pm in

The FT has an article today on the requirement that tax advisers write by the end of this month to all their clients who they believe might have had offshore bank accounts  to warn that HMRC is about to receive significant new information straight from tax havens on accounts that might be held there.

I am well aware that many advisers resent this letter because its content is largely dictared by HMRC requirements.

Others resent it because it makes it look as if the adviser is cooperating with HMRC. They think that will backfire in terms of voluntary compliance.

I do not share these concerns. I welcome the requirement, as I welcome automatic information exchange from tax havens, which I campaigned for when the idea was considered absurd.

I do have a doubt though, and that is HMRC’s ability to follow up on this. We do not know how much information HMRC will receive as yet. Nor do we know its quality. But what we do know is that HMRC will receive it whilst undergoing a pointless and costly physical reorganisation of premises in the course of which thousands of jobs will be shed. My concern in that case is simply that the data will not be used. And, if the belief that this exercise is a paper tiger spreads as a result the behavioural response on which HMRC are most relying will not materialise.

HMRC have imposed a massive admin exercise on tax advisers. I am not arguing with their right to do that. But the evidence is that HMRC may not have the resources to deal with the consequences. And that worries me, a lot.

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