tax havens

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Tax havens are in effect the aircraft carriers from which assaults on major democratic states and their policies can be launched. No wonder Russia loves them.

Published by Anonymous (not verified) on Thu, 30/06/2022 - 6:44pm in

I wrote this more than ten years ago (with minor changes to tenses to suit the new context):

Feral capitalism is the unfettered, wild form of capitalism that we have suffered for thirty years: a form where people are constrained but money is allowed to roam free whence it will with consequences now all too clear.

Tax havens are fundamental to this form of capitalism - they let the money flow unhindered and unaccountable; they are in effect the aircraft carriers from which assaults on major democratic states and their policies can be launched.

Today we have this story in the Guardian:

The government’s failure to tackle Russian kleptocrats laundering “dirty money” through the UK has led millions of pounds used to finance Putin’s invasion of Ukraine to flow through London, a powerful committee of MPs has warned.

The commons foreign affairs committee said ministers’ complacency over “morally bankrupt billionaires using the UK as a safe deposit box” had led to “assets laundered through the UK … financing President Putin’s war in Ukraine”.

I did issue an appropriate warning - and repeated it many times. But the Tories - who control the Committee that issued the report I note - would not listen. The question to ask now is why was that?

HM Revenue & Customs really do not want to collect tax from the wealthy

Published by Anonymous (not verified) on Mon, 30/05/2022 - 4:37pm in

I campaigned for automatic information exchange from tax havens for a long time. Perhaps my most important paper on the issue was published in 2009. It was written after a meeting at the Treasury where I was told data exchange from tax havens would not happen in my lifetime and I set out to explain how it could, and how the data in question might be used.

We eventually won automatic information exchange. The OECD driven Comprehensive Reporting Standard began reporting in 2016 and has been fairly effective on a widespread scale since 2018. It takes time for reform to happen: this is one that can be very largely attributed to pressure from the Tax Justice Network during the era that John Christensen and I ran it.

Now Dan Neidle has secured data from HMRC on the level of funds held offshore. The data looks like this:

He has also secured data on average balances held split between tax haven and non-tax haven locations:

So, we now know we were right to be concerned. Around £570 billion is held in tax havens. You might expect that to yield a useful tax return each year, split between tax on income and gains.

But, as Dan Neidle discovered, HMRC has no idea how many of these accounts are properly declared, and nor has it sought to find out. It's as if they don't care. Instead, they are actually offering excuses, suggesting for example that most such accounts are probably held by non-doms and therefore not a concern, when in itself that is simply not true.

As Dan correctly points out, it is not possible to be sure what tax is lost as a result of this indifference by HMRC. It is their job to work this out. But we can be quite confident most of the accounts are not held by non-doms: there are just not enough of them.

So, what to conclude?

First, HMRC is not trying to collect tax owing.

Second, there is no one holding them to account for that.

Third, no wonder we have growing inequality in the UK.

Fourth, no wonder too that we have a tax gap that is out of control.

Fifth, there can be no political direction on this. Clearly, ministers have never asked.

I hope that pressure is brought to bear as a result because right now it is apparent that HM Revenue & Customs really do not want to collect tax from the wealthy.

How to beat tax cheating oligarchs

Published by Anonymous (not verified) on Wed, 11/05/2022 - 1:15am in

I addressed a meeting of the European Parliament sub-committee on Tax Matters today, addressing the issue of how Russian oligarchs abuse tax systems to avoid and evade tax and hide funds from view. These were the notes I supplied in advance of my talk to assist the translators. I( guessed correctly that other presenters would go for detail so I did a bit more theory. The notes broadly summarises my opening presentation:

As a result of the meeting I am now supplying the Parliament with more ideas on tax gaps and tax spillover. It was a useful session in my view.

Country-by-country reporting is beating transfer mispricing, as I always said it would

Published by Anonymous (not verified) on Wed, 04/05/2022 - 6:21pm in

As Accountancy Age has reported:

A 49% uptick in the amount of extra tax collected from investigations into large corporates shifting profits overseas is an indicator that HMRC is ramping up its scrutiny multi-national tax avoidance arrangements, according to specialist law firm Pinsent Masons.

“HMRC is now much more aggressive in tackling what it sees as artificial profit shifting, and much more stringent in its interpretation of what makes an acceptable transfer pricing arrangement,” said Steven Porter, partner and head of tax disputes and investigations at Pinsent Masons.

According to new figures from the 2020/21 tax year, the amount of extra tax collected from transfer pricing investigations into multinational corporates increased from £1.45bn to £2.16bn – HMRC’s highest yield on record.

So, why the uptick? Because country-by-country reporting data is available, of course.  I first created country-by-country reporting in 2003. I campaigned pretty tirelessly for it from then until 2015 when the OECD adopted it, very largely as I first proposed it. The aim was to beat transfer mispricing. It is.

I should ask for a cut (that's a joke, by the way).

The UK has a constitutional duty to impose direct rule on the BVI to bring its role as a secrecy jurisdiction to an end

Published by Anonymous (not verified) on Mon, 02/05/2022 - 6:35pm in

The FT has noted that:

The acting premier of the British Virgin Islands, Natalio Wheatley, has rejected as “unacceptable” the reimposition of direct rule from London, setting up a confrontation with the UK over the central recommendation of an official inquiry into corruption and maladministration in the Caribbean tax haven.

He is wrong. And the fact that he does not recognise that the BVI is so systemically corrupt shows that, because that is what it is. That he comes from an old political family within the islands, also suggesting that he is part of the architecture that created this systemic problem is also indicative of why he is wrong and change must be imposed. It is apparent that the required changes cannot come from within the BVI now.

Let me offer some theory to support this argument. In 2009 I wrote a paper for the Tax Justice Network that has had some significance since then, not least in still shaping most of the work of the tax justice movement in putting a focus on secrecy, as it has also done for most regulators. The preamble to the paper noted:

The summary was quite short:

What the paper did was develop a schematic summary of the new language that I proposed to explain the offshore world, which when fully developed looked like this:

An example demonstrated the idea in this way, showing how abuse existed in a secrecy space resulting from the interaction of many secrecy providers operating from secrecy jurisdictions:

What I suggested was that there was a systemic, deliberately created, interlocking network of secrecy jurisdictions and secrecy providers (banks, lawyers and accountants) who created a secrecy space in which abuse could take place beyond regulation. The book that I co-authored that resulted from this work is still one of the most cited in academic offshore literature.

The BVI is an enormous player in the creation of this secrecy space. It hosts 370,000 companies of which almost nothing is known. That is by continuing choice. The result is massive opacity in the world that undermines fair competition and effective markets and simultaneously permits corruption. I stress, this is deliberate.

The UK has the right to intervene for this reason. It is responsible for the maintenance of good governance, law and order and stable international relations in the islands. Law and order has obviously failed: the premier and a senior official are under arrest in the USA. Good governance has failed, as indicated by the choice to supply corruption services. And this is a foreign affairs issue. The companies the BVI creates are deliberately intended to undermine the law, order and tax systems of other states.

The BVI remains a key component in the creation of the secrecy space. It has to be taken out of action. But I stress, direct rule without ending this secrecy would make the UK responsible for it. And that would be intolerable, so direct rule c9mes with conditions, which is that BVI secrecy  goes.

What does that mean? Full beneficial ownership of all companies on public record plus full accounts on that same record. That’s the minimum demand for the BVI.

The UK must take control of the BVI now. It has a constitutional duty to do so. But if it does it cannot duck its own duty to end BVI secrecy. We will be watching.

Corruption in the British Virgin Islands? Whatever next?

Published by Anonymous (not verified) on Fri, 29/04/2022 - 4:54pm in

The Guardian reports this morning that:

The premier of the British Virgin Islands (BVI) has been arrested in a sting operation in Miami on charges of conspiring to import cocaine into the United States and money laundering.

The BVI governor, John Rankin, confirmed in a statement that Andrew Fahie had been arrested on Thursday morning, saying: “I realise this will be shocking news for people in the territory. And I would call for calm at this time.”

Oleanvine Maynard, the manager director of the Caribbean territory’s port authority, and her son Kadeem were also detained in the operation.

Compared to other Prime Ministers who I think should have charges brought against them this seems like a low-grade offence, but leaving such comparison aside, and noting that no one is guilty until proven so in court, that such an allegation might be made does not surprise me.

The British Virgin Islands, as I have recounted over many years, including in two books on tax havens, is a centre for international crime. It provides more than 400,000 companies that are used by corruption service providers. I can think of quite literally no legitimate reason for the use of a BVI company, unless you are running a store in the BVI that is.

Is it surprising then that such allegations might be made? Not at all. You have, in my opinion, to be a defender of corruption to be engaged in defending the activities of the BVI, as its Premier is. And corruption corrupts.

Sunak: they non-dom hedge fund managers friend

Published by Anonymous (not verified) on Wed, 13/04/2022 - 6:46pm in

Rowena Mason noted in the Guardian yesterday that Sunak has not made many big statements on tax. Nor has he had a lot to say on tax havens.

But as she also noted:

Sunak … brought in a new low-tax scheme that is partly designed to benefit some wealthy non-dom investors, just days before his national insurance risehit millions of working people at the height of a cost of living crisis.

The new scheme – the qualifying asset-holding company regime – specifically mentions fund manager non-doms as a category of people who can benefit by not having to pay tax on foreign earnings through the new vehicles.

The point of the whole scheme is to try to attract asset managers from low-tax jurisdictions such as Ireland and Luxembourg. In the view of Richard Murphy of Tax Research UK, this is a first step towards “Singapore-on-Thames” in a post-Brexit Britain, the goal being to “encourage the flow of funds through a jurisdiction with little or no tax being paid”.

I am, apparently, one of very few to have actually commented on this scheme on the web. Where are the rest looking? The wrong way, by the look of it.

The fight against tax havens was worth it

Published by Anonymous (not verified) on Sat, 09/04/2022 - 6:28pm in

Back in 2o12 I leaked to the International Tax Review that the UK was finally going to crack down on the absence of tax transparency in its tax havens. The story is here.

Why did I get the leak? Because I had spent years before then working to shatter the secrecy in those tax havens that was used to help tax cheats. This blog was called Tax Research UK back then. for a good reason: that was most of what it was about.

Yesterday the FT reported that:

The number of people who admitted not paying tax on their overseas assets to the UK tax authority jumped by more than a third last year, prompted by warning letters sent by HM Revenue & Customs.

They added:

A freedom of information request revealed that 4,443 people confessed to not paying enough tax on their foreign assets to HM Revenue & Customs in 2021-22. The figures were 35 per cent higher than the 2020-21 year, when 3,301 individuals admitted failing to meet their tax obligations on foreign assets.

As they noted, £56.9 million was raised as a result.

None of that would have been possible in political-economic terms without the work of a very small group of tax justice campaigners back then, of whom I was one.

I am delighted we succeeded because remember that not only was this recovered, but vast amounts were legitimised as a result as well.

If the Big 4 can quit Russia they can quit Cayman, the BVI, Jersey, the Isle of Man, Bermuda and others too

Published by Anonymous (not verified) on Mon, 07/03/2022 - 7:11pm in

The FT has reported this morning that:

PwC and KPMG have severed ties with their businesses in Russia and Belarus, becoming the first Big Four accounting firms to exit the countries since the invasion of Ukraine.

The moves are the most significant departures from Russia by global professional services groups since the war in Ukraine started last month and are likely to increase pressure on their peers, Deloitte and EY, to follow suit.

I did, of course, raise this issue last week, and was one of the first to do so.

I am of course pleased that two of the Big 4 have taken note. But it was too late. They should not have needed to be pressured into this.

Deloitte and EY make themselves look even more in the wrong by still being on the wrong side of this issue.

And the question still remains as to why these firms do still provide the foundations for the entire secrecy world of tax havens that underlines the worldwide corruption networks that have permitted the corruption that has flowed from the oligarchs' abuse of Russia, whether they directly provided the services in question or not.

If the Big 4 can quit Russia they can quit Cayman, the BVI, Jersey, the Isle of Man, Bermuda and others too. When we know that these places exist to provide opacity above all else, why aren't they doing so?

The Big 4 are far from being out of trouble on this issue.

A political commitment to transparency has to be our reaction to this war. Our contribution to ‘never again’, if you like.

Published by Anonymous (not verified) on Sun, 06/03/2022 - 10:00pm in

I have just posted this thread on Twitter:

To pretend that the world is anything like that we lived in two or so weeks ago. War in Ukraine poses threats that are unprecedented with many now wondering what the risk of nuclear annihilation might be. Some thoughts on this and many other issues that we face in this thread…..

It is the ultimate paradox of life that we must live it based on the assumption that we will live forever knowing full well that we will not. Right now many are questioning how long we have because of the renewed threat of nuclear war.

I can offer no answer to that question. I have no more idea what Putin might do than anyone else. So I carry on with the assumption that life will continue, albeit differently. I can offer no other useful working assumption.

What does interest me instead is how things might change, and most particularly, how we might want them to change. Nothing does, after all, alter our right react to what is happening.

There are many things we can change as a result of this war. One is our attitude to nuclear weapons. As someone old enough to have gone on CND marches 40 years ago my position on these has always been unambiguous. Surely when this is over we have to seek their elimination?

We have too to decide what to do about nuclear power. War involving nuclear power stations is dangerous, as we have now seen. The world is vulnerable whilst we rely on nuclear power. There is a decision to be taken. No more, I suggest, is the minimum requirement.

But there is another decision to be made regarding power, and that comes down to our dependence on oil and gas. Russia’s economy relies upon the sale of them. Without them it would not be a power. Our carbon dependency has to end for that reason too.

If we are to live in a world where we cannot be held to ransom we are learning that there is real merit in putting a focus on local energy. If ever there was a reason for local renewable energy other than tackling climate change, this is it.

The bedrocks on which our economies are built - across Europe and beyond - all have to change as a result. Nuclear power and the burning of carbon cannot be the foundations of our lives in the future if we are also to have security.

Of course, we already knew that. Climate change demanded the change with regard to carbon. It also challenges so many assumptions with regard to nuclear power - most especially when so many nuclear power facilities are in vulnerable locations.

But the changes that are required that this war makes very clear go very much deeper than this. The whole of our political economy - which is term to describe how power relationships influence economics rewards - is now open to question.

Let’s start with the politics, and then move to the economics.

First, we now know (beyond reasonable doubt) that Russian influence has been deeply destructive of UK politics. Brexit was funded by Russia. The Tory party has been funded by Russia. It seems very likely that major think tanks are Russian influenced.

The media is heavily Russian influenced, and some of it is oligarch controlled. More may be than we know.

I think it very likely that some policy agendas, e.g. the deeply disruptive No. 10 policy on Northern Ireland that makes no rational sense in isolation does when viewed as an instrument for Russian influenced disruption.

The fight against climate change is, I suspect, as heavily funded by Russia as it is by the US far-right. Indeed, it is hard to spot the difference in interests.

And because of the UK first past the post electoral system and the inclination of some to vote Tory because their parents and grandparents always did at a time when that did not involve voting for agents of Russian policy, Russian influence is deep in our hierarchies of power.

There is corruption at the heart of the UK in other words. For more than twenty years a far-right Russian regime has cooperated with far-right funding from the USA to take control of the Tory right-wing in UK politics and make it an instrument for anti-democratic activity.

The goal of this activity has been very straightforward. It has been to create an economy whose interests are aligned with those of a global kleptocracy serviced by a state where the supposed rule of law can be used to oppress opposition.

First, they came with the libel writ. Then they bought the politician’s silence. Next, they controlled the media. Then they bought the political narrative, and won a referendum. Then they came for us with the demand that we protest no more. This is the creeping takeover of power.

In between all that, they showed their indifference. From austerity, to the bedroom tax, to not caring about Covid deaths, every now and again they showed the reality of their contempt for the rest of us.

This they reinforced by bringing their friends into government, or by transferring their politicians into the media. The web of control was, they thought, theirs to spin.

We now know all this. It is plain to see. The question now is whether this is enough to finally induce the required action from all other political parties to act together to rid us of this corruption for good?

The fighting, so far, is in Ukraine, and our hearts and thoughts are with those who suffer. But this is a war on many fronts. And one is here in the UK, where right-wing, mainstream politicians are at war on us.

They can be beaten, but only by political alliance to rid us of corruption and to create a democracy to withstand any further assaults by being truly representative. Will all our democratic politicians, including the few remaining decent Tories, now cooperate to deliver this?

This is our war that we have to win, or Russia wins, whatever happens in Ukraine.

Then let’s look at the economy, because there will be so much to do there too and many issues to resolve.

There will be calls for more spending on defence very soon. Maybe they will be appropriate. Maybe when this is over we could alternatively ask what the remaining threat might be? It will require soul searching to answer that.

What we can say for certain is that defence will be far from the only priority when this war is over. Do not listen to anyone who claims that this will be the issue for a new era: it is not. The causes of war are.

In that case the energy revolution I have already referred to will require as much funding as any defence measures. Energy is the cause of conflict now. That is why it must have priority.

But the economic reforms required go much further. This is an economic war. There’s no real surprise to that. They almost invariably are. The desire is to command resources. In this case it is land. But what drives it is the economic structure of Russia.

Russia is a kleptocracy. It can be claimed that this is an accident. When the Soviet economy collapsed it was claimed that it could transition to capitalism. An ultra-free market logic was introduced into a situation of chaos.

Without the checks and balances that markets require if they are to operate with any degree of fairness that failed attempt to create capitalism delivered kleptocracy, and Putin.

London has been reorientated to serve that kleptocracy. From the libel lawyer, to the corporate lawyer working in cahoots with accountants and bankers to hide the ownership of assets, London has worked to destroy fair markets.

When this war is over we need to call this out. We need to say that markets in the UK are rigged, as is the UK legal system. They are stacked against fair competition, justice and the equality of opportunity that capitalism requires if it is to work.

Only the politicians and think tanks in hock to Russia, but who have never engaged in real business, now suggest that markets work when it is glaringly obvious that as they stand they do not.

This does not mean I am opposed to markets. Far from it. I see no other way that the entrepreneurial spirit of many can be turned to the common good. But the unaccountable market has become our enemy, as much as corrupt politicians are.

So transparency is the requirement. Company law must be heavily regulated. Those who cannot prove their right to limited liability must be denied it. Corruption - including on tax - must become a personal responsibility for all who permit it.

We can deliver markets free from corruption. It just requires political will to do so. That political commitment to transparency has to be our reaction to this war. Our contribution to ‘never again’, if you like.

And we have to ask what is everything for? The kleptocrats are the personification of a school of economic thinking that says the accumulation of wealth is what the political economy should be about. Note, I said ‘should’, not ‘is’.

The refugees from Ukraine and those dying in shelled apartments are the clearest evidence that this is not true. Most of us are not wealthy. Most of us survive because of networks of families, friends and communities that support us.

The political economy should not be about supporting wealth for its own sake. The political economy should be about supporting our networks of community, wherever and however we find it.

Don’t get me wrong. I am not saying economic well-being does not matter. It does. But wealth accumulation at cost to others -which is the political economy we have had - is about oppression of most, and can lead to the indifference towards people we are now seeing in Ukraine.

To summarise, this war does change everything. Or at least, it should, or it will continue. And given how key the UK is to the delivery of Russian policy if life here does not change after it then something will be very seriously wrong.

We need to change our defence and energy policies. We need to transform our politics and political systems. Transparency must become normal. Corruption must be treated as the offence it is. And people may be the priority now.

Is that too much to ask for? I hope not, because I cannot see us surviving with anything less.

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