The following is for all serious offshore aficionados. It comes form the person I think the foremost expert on the European Union Savings Tax Directive – Mark Morris, and is from his blog, with permission.
What it says is at the end of the day simple, but vitally important, and that is that iof the European Union Savings Tax Directive is amended as the EU desires then Liechtenstein’s secrecy is cracked open. Which is very welcome indeed. Over to Mark:
“Liechtenstein is home to nearly 100,000 entities and legal arrangements which are effectively untaxed. These structure are used for succession planning, creditor protection, family support and confidentiality. Considering there are onshore taxable facilities that do these tasks equally well, one assumes the following Liechtenstein structures are chosen because tax efficiency is a prime motivator.
Tax haven activist Nicholas Shaxson has hit out at New Zealand for opposing a plan to create a UN body to tackle tax haven abuse.
Shaxson, who has become famous following the publication of Treasure Islands: Tax Havens and the Men Who Stole the World, said New Zealand is letting down the developing world.
He has also revealed that New Zealand has a growing reputation as an offshore haven itself. He predicts New Zealand will appear on the Tax Justice Network’s Financial Secrecy Index by 2013.
In January, New Zealand’s permanent mission to the UN in New York said it did not support the creation of a new intergovernmental body or upgrading existing structures noting the creation would have “resource implications”.
I have the following article in the latest edition of the London Review of Books:
In his budget last month George Osborne announced that if in the future a UK company runs its internal banking arrangements through a tax haven subsidiary it will benefit from a special tax rate of just 5.75 per cent of the resulting profits. The rate is exceptionally low: the same activity undertaken in the UK is taxed at 23 per cent. It is a change that will delight corporate tax avoiders everywhere: the UK will now condone the use of tax havens in locations such as the Cayman Islands, Jersey and the Isle of Man. It is expected that by 2016 more than one sixth of corporation tax will come from such offshore activities.
No one has yet offered a definition of ‘tax haven’ on which we can all agree. The IMF, the OECD and the other main agencies tend to adopt the language they think acceptable to their own constituency. The term ‘tax haven’ is too obviously value laden, as the French equivalent, paradis fiscal, makes clear. ‘Offshore’, too, conjures images of island paradises, when some of the locations involved – Liechtenstein, for example – are landlocked. ‘International financial centre’, a creation of the financial services industry, seems designed solely to give an air of respectability.
This wasn’t meant to happen in the last decade.
Money laundering regulation was meant to have stopped the handling of drug cash in the USA.
The Patriot Act was meant to have closed down such things.
The FATF 49 recommendations were meant to have been in place.
But as the Observer reported yesterday, US bank Wachovia, now part of Wells Fargo, money laundered hundreds of billions for Mexican drug gangs in the USA. And, when the activity was questioned internally from London, the money laundering officer who did so was driven out.
I’ve read the government’s new anti-avoidance strategy for tax. It’s not a good read. For that reason I think a translation is needed.
First of all, as I’ve already noted, the government has a massive problem in agreeing how big this issue is. That does not help them politically, and undermines much of the forward.
Whatever the issue then is, the strategy is laid out in four parts, each being allocated a chapter in their paper.
Chapter one says there is a strategy. It’s a little hard to work out what it is due to use of a weird graphic, but in summary HMRC says it will (to quote the report):
I have the following comment on the Guardian site this afternoon:
George Osborne said this was a budget to tackle avoidance. How wrong he was. Lawyers and accountants all over the country must be jumping for joy this afternoon – unless they’re in the Channel Islands.
Employee benefit trusts – often based in Jersey – are going to be hit hard by this budget, and rightly so. These are last remnants of the age-old pursuit of avoiding PAYE. If they’re consigned to history Osborne’s done at least one thing right.
And Osborne gets full marks* for tackling another abuse long overdue to be abolished – which is the absurd industry shipping CDs, DVDs, computer memory and other items from the UK to the Channel Islands and then straight back again simply to avoid VAT. At least £200m a year was lost in this way – and countless fuel wasted. This is a reform that will cost consumers a little, cost Jersey and Guernsey a lot, and which will put jobs back on the high street.
Caroline Lucas MP, leader of the UK Green Party, yesterday tabled [introduced] a Bill in the House of Commons that would require country-by-country reporting by all UK companies for all their activities.
Clause 3 of her Tax and Financial Transparency Bill 2011 says:
Financial transparency: companies and trusts
(1)Every company, including a parent company, incorporated in or operating in the United Kingdom must publish in its annual financial statements prepared in accordance with the requirements of the Companies Act 2006 an analysis of the consolidated turnover and profit made by it in each jurisdiction in which it has a permanent establishment for taxation purposes as defined by section 1119 of the Corporation Tax Act 2010 and the resulting taxation liability due and payment made by that company and its group (if applicable) in each such jurisdiction, without exception being made on the grounds of immateriality.
Tax Research UK published a new report this weekend on the administration of the UK’s Register of Companies by Companies House, the agency responsible for it on behalf of the UK government’s Department of Business, Innovation and Skills. The report extended the review to look at the administration of corporation tax returns by H M Revenue & Customs, the UK’s tax agency. In combination these are the two main agencies with responsibility for registering and regulating companies in the UK. The Task Force on Financial Integrity and Economic Development funded the study.
Tax Research UK published a new report this weekend on the administration of the UK’s Register of Companies by Companies House, the agency responsible for it on behalf of the UK government’s Department of Business, Innovation and Skills. The report extended the review to look at the administration of corporation tax returns by H M Revenue & Customs, the UK’s tax agency. In combination these are the two main agencies with responsibility for registering and regulating companies in the UK. The Task Force on Financial Integrity and Economic Development funded the study.
The UK is an important location to study when it comes to limited companies. Firstly, it has many more limited companies than is commonplace. There were more than 2.7 million in 2009, for example – a ratio much higher at 4.5 per one hundred people than is found in Germany, France and the Nordic states, for example. Second, as the country responsible for a great many tax havens it would seem important that the UK set a clear example of good practice in the running of such a Register.
The European Council of Ministers held its 3074th Competitiveness (Internal Market, Industry, Research and Space) Council meeting in Brussels on 10 March 2011. As a result it:
Invited the Commission to come forward with initiatives, in consultation with Member States and relevant stakeholders, on the disclosure of financial information by companies working in the extractive industry, including the possible adoption of a country-by-country reporting requirement, International Financial Reporting Standards (IFRS) for the extractive industry, and the monitoring of third-country legislation;
It’s a shame the move is not as yet towards full country-by-country reporting.
The Wall Street Journal reports:
Billionaire Bill Gates on Thursday agitated for state governments to adopt “clear and honest” accounting of their budgets, saying states’ true finances are being obscured from voters and threaten America’s public-education system.
Speaking at a meeting here of leading thinkers known as the TED conference, Mr. Gates said that state budgets need more scrutiny and should follow more-transparent accounting principles, such as those used by GoogleInc. and Microsoft Corp, which Mr. Gates co-founded.
The Tax Justice Network has long listed Israel as a tax haven – but most ignored the claim.
Now the Sovereign Society is going out of its way to promote Israel as a tax haven.
On this occasion we seem to be in agreement. And I don’t say that very often.
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