In TJN’s inaugural Taxcast, rounding up tax justice news at the end of January, they discuss the implications of the Vodafone vs India landmark tax case, compare Bill Gates and Mitt Romney’s attitudes to taxation and visit the Occupy camp outside St Paul’s Cathedral in London.
In this report, we first estimate the absolute size of a country’s shadow economy based on its own published estimate of its GDP and recently-reported data on the size of shadow economies published by the world bank. This, and other data we use, is what we think the best currently available for the purpose of this report and, as such, should provide the best estimates possible.
By the definition used here, economic activity in the shadow economy of a country will be tax-evading. So we next calculate an estimate of the amount of tax lost as a result of the existence of that shadow economy. We do this by looking at how much taxes are on average in the state as a share of GDP, and then apply the same tax share to the shadow economy, to reveal our estimates of lost taxes by state. We then compare these lost taxes to health care spending in each country surveyed. This data has also been compared by continent.
Half of the world’s trade passes through tax havens. Right now, they are hiding billions of dollars on behalf of criminals, dictators, wealthy individuals, and corporations.
Watch this video, then find out what tax havens are, why they’re so damaging and what we can do about it.
LONDON – The issue of tax collection is rising fast up the political and social agenda, as countries across the world make deep cuts in public spending and increase taxes in ways that hurt the poor and the middle classes the most.
This new research demonstrates how important it is to tackle tax evasion and the tax havens that help wealthy individuals and organisations escape from contributing to the services that directly benefit them – from the health and education systems that support their workforces, to the roads that ship their goods to markets, to the courts of law that enforce their contracts or to the police who protect their property.
This report is part of an initiative to create a comprehensive, and globally representative series of country reports that touch on diverse tax justice issues. The production of this report is the collective effort of all of the organisations involved.
The Tax Justice Network promotes transparency in international finance and opposes secrecy. TJN was initiated at in 2002, and is dedicated to high-level research, analysis and advocacy in the field of tax and regulation. Tax Justice Network Africa was launched in 2007 with the aim of bringing tax issues to the foreground of the broader development agenda. We work to map, analyse and explain the role of taxation and the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens.
TJN is delighted that a long term investigation into how Eastern European criminals and politicians have been using secrecy jurisdictions to hide the proceeds from their crimes has been selected as one of the two overall winners of this year’s Daniel Pearl Award for cross-border investigative journalism. TJN has been involved in this investigation, along with our colleagues at Global Financial Integrity and Global Witness, and our Financial Secrecy Index, which placed the USA at the top of the ranking, and drew specific attention to how Delaware, Nevada and Wyoming provide offshore secrecy, is also cited in the report.
The 2011 Financial Secrecy Index (FSI) focuses on 73 secrecy jurisdictions. These places set up laws and systems which provide legal and financial secrecy to others, elsewhere.
The FSI combines two measurements, one qualitative and one quantitative. The qualitative measure looks at a jurisdiction’s laws and regulations, international treaties, and so on, to assess how secretive it is. The assessment is given in the form of a secrecy score: the higher the score, the more secretive the jurisdiction. The second, quantitative, measurement attaches a weighting to take account of the jurisdiction’s size and overall importance to the global financial markets. In combining the two scores, we mathematically emphasise the secrecy score and de-emphasise the weighting, in order to give secrecy its due importance.
Congratulations to Professor Prem Sikka, a senior adviser to the Tax Justice Network, for his extraordinary success on the case of Bank of Credit and Commerce International (BCCI). Information on the investigation into BCCI, that was previously withheld from the public by the UK government, has now been released. Prem has fought a legal battle for five years so that missing information in the “Sandstorm Report” could be made publicly available.
The case of BCCI, (referred to by many as “Bank of Crooks and Commerce International”), is possibly the biggest banking fraud in history. BCCI is a story of massive-scale money laundering, bribery, blackmail, and organised crime, operating through a secrecy network involving deceit, fraud, and the brokering of power and influence around the world.
We blogged an update recently, and you can see a report on the breaking open of the Sandstorm Report on the website of the Association for Accountancy and Business Affairs (AABA).
Jeffrey Sachs is back in the Financial Times with a fine article about the failed economic leadership of western governments, and tax havens feature prominently in his analysis.
“Tax havens”, he notes, “have proliferated even as the politicians have occasionally railed against them” we like the twist to the politician’s collective tails implied by the word ‘occasionally’. And he continues: “In the end the poor are doubly hit, first by global market forces, then by the ability of the rich to park money at low taxes in hideaways around the world.”
We have argued for many, many years, that tax havens are a major faultline in the globalisation project, and Sachs clearly shares our viewpoint. Not only has wealth cascaded upwards into the hands of a tiny, tiny minority – killing ‘trickle down’ theory stone dead – but tax competition has forced governments to concede to the power of big business:
In a piece titled Dirty Money: Why does the international banking system make it so easy for corruption to flourish?, the People & Power series on Al Jazeera reports on kleptocrats, grand scale corruption, and the ease of channelling dirty money through the secrecy mechanisms of the global financial system,
Again, let’s drive the point home here, we’re talking secrecy – we are not disputing rights to due privacy – we are talking the kind of secrecy that allows criminals and tax cheats to profit with impunity, and to lead privileged lifestyles of excess at the expense of others.
The report observes that western governments are scrambling to find the hidden wealth of out-of-favour despots and freeze it, and then asks the question we have been asking: how, “as if by magic” did the assets get there in the first place?
“The answer involves hidden accounts, tax havens and shell companies, and a banking and regulatory system unable to see through the corruption and halt the flow of dirty money.”
Well, “unable to see through” does not describe the picture accurately, and the report itself goes on to show how banks are complicit in corruption and crime.
Recently we wrote a blog, entitled “Jeffrey Sachs joins the tax justice movement, sort of,” after he wrote some superb (but incomplete) things in the Financial Times about the race to the bottom on corporate tax.
Well, now he has a new piece on Project Syndicate, to which we have already briefly linked, but which is worth expanding on. It’s entitled The Global Economy’s Corporate Crime Wave, and it’s excellent, all the way through. We are particularly excited by this section:
“We will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and secretive Swiss banks. Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions flow through these accounts. The wealth, power, and illegality enabled by this hidden system are now so vast as to threaten the global economy’s legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments’ inability politically – and sometimes even operationally – to impose taxes on the wealthy.
So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the US nor any other “advanced” country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem.”
The international edition of the Financial Times has a comment by TJN’s Nick Shaxson and John Christensen evaluating how far the G-20 countries have progressed towards their stated goal of tackling banking secrecy and tax havens. The title says it all: ”Time to black-list the tax haven whitewash.”
In April 2009 British prime minister Gordon Brown, the then G-20 president, issued the following commitment:
“to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information”
By the autumn of that year French president Nicolas Sarkozy, current G-20 president, stated ”there are no tax havens any more.”
A response to Ben Heinman's article on corruption in The Atlantic.
February 3, 2012
This week, the lawyers of Teodoro Nguema Obiang, the son of Equatorial Guinea’s longtime President, ...
February 3, 2012
Thursday's top news stories from Global Financial Integrity
February 2, 2012
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