Australia: America is a secrecy jurisdiction

We have long pointed to the fact that the United States is, to a very significant degree, a secrecy jurisdiction, not least through dirty practices offered in places such as Delaware. It isn’t something that people like to mention in polite company.

Now we’re very heartened to see the Australian tax office has written an open submission to the US Senate Committee on Homeland Security and Governmental Affairs, which includes the following strongly-worded:

“In our opinion, entities established in some states of the USA, for example some US incorporated companies, have some of these same attributes as entities established in secrecy havens.”

This is timely, in light of a briefing by TJN-USA and its colleagues and partners, Global Financial Integrity and Citizens for Tax Justice, on the Hill in Washington DC tomorrow, including on the all-important Incorporation Transparency and Law Enforcement Act which will engage on the issue of the United States being a secrecy jurisdiction.

The Australians also helpfully include a description of some of the crimes that have been encouraged and facilitated by American secrecy. The overview is here, and the detailed case studies are here.

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Time to bury the Oxford report

On several occasions we have written about a report produced by the Oxford Centre for Business Taxation, which is critical of estimates of illicit flows and other offshore-related phenomena published by TJN and its colleagues.

Professor Michael Devereux of the Centre has replied in the Financial Times to an earlier letter from TJN and its partners. Devereux’s riposte says little of interest, but accuses us of seeking “to spread innuendo about the messenger rather than to engage in constructive debate about the research” – without noting that the letters page of a newspaper – ours was just 263 words long – simply isn’t the place to offer a detailed rebuttal of a detailed report.

A blog, however, is an excellent place to do this. So here we go!

We’ve already exposed some of the fatal flaws in the report in several earlier blogs; this report seeks to look at this report in a slightly more organised way. In short the Oxford report cannot be supported by their research, and the researchers are not in control of their materials. The estimates by TJN and its colleagues are by far the best estimates that are out there, and the report has strengthened our case for further research in this area, (and we only wish that the World Bank and others would get on the case as we have been urging for so long). The Oxford report has quite simply failed to knock our numbers down — and what doesn’t kill us, as we recently remarked, makes us stronger. They haven’t, it should also be noted from the outset, produced any numbers of their own, though that wasn’t the focus of their report.

Until more research has been done, ours remain the key references in this area.

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Is France soft on its own little tax haven?

There is often a symbiotic relationship between small secrecy jurisdictions (or tax havens, if you must) and wealthy élites in larger economies. Germany is surrounded by Switzerland, Liechtenstein, Luxembourg and Austria; Portugal has Madeira; the United States has a string of options in the Caribbean; and Britain has cast a whole spider’s web around the world, not least in the Channel Islands and the Caribbean. Monaco, of course, is France’s special secrecy jurisdiction.

A new story from Wealth Bulletin notes the France-Monaco relationship is a bit like the one between, say, Britain and the Cayman Islands.

“The principality, which benefits from zero income and inheritance tax, shares a central bank with France. Paris also picks its chief of police and its financial regulator chief, who are always French nationals.”

And it notices that for all of French President Nicolas Sarkozy’s words against tax havens, he seems to have been mysteriously reluctant to get tough with France’s own little haven for dirty money, with Monaco wealth managers having covered some $130 billion away with their veil of secrecy.

“For the French crackdown to be taken more seriously the country is likely to be forced to take a tougher stance against offshore centre Monaco, which effectively enjoys many privileges because of its links with its big neighbour.”

Quite right. Take a look at your own back yard, Sarkozy, and crack down.

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A wunch of Swiss bankers

The interviewer leant forward and looked me in the eye.

“According to the Swiss Banker’s Association” he said, “their members have no duty to collect taxes on behalf of other countries. What do you say about that?”

Despite the hour (this was an early morning recording session), and the cameras and the bright lights in my eye, I had to fight hard to suppress a giggle. Where do these bankers get this nonsense from?

“Well let’s turn this argument on its head” I started. “If Swiss bankers don’t want to collect withholding taxes from clients who are non-resident in Switzerland, they have a simple choice: sign up to the European Union’s automatic information exchange process and allow their European neighbours to collect the taxes due for themselves.”

“And anyway,” I added, getting more fired up at Swiss sophistry, “these bankers can’t moan about international pressures to tackle tax crime when they’re responsible for encouraging the crime in the first place. They can argue ’til the cows come home, but most reasonable people understand that banking secrecy encourages people to act in a certain way.”

The interviewer sat back in his chair and grinned.

For years bankers and other privileged elites have used obfuscation and mendacious garbage to disguise their criminal activities. Under open challenge their deceitful arguments simply fall apart.

“That’s a take“, said the producer.

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Confessions of the London regulator

This just in, from the Financial Times:

“The City regulator will put less emphasis on maintaining London’s competitiveness in relation to other financial centres, its head said on Tuesday, in a striking acknowledgement that the approach had undermined the stability of the financial system.

Lord Turner, chairman of the Financial Services Authority, said that prudential regulation of institutions and the financial system had suffered as regulators in many countries had in the past put too much focus on the attractiveness to the financial industry of their home markets.”

That is quite a confession. The regulator of the City of London is, it seems, catching up with the Tax Justice Network. Not all the way – he needs to define his terms a little more closely:

“We are interested in competitive markets rather than competitiveness.”

Yes, OK – but he needs to unpack this some more. This word competitiveness is a weasel word, if ever there was one. The competitiveness of a country is quite a different thing from the competitiveness of a company, as he seems to have woken up to. He might read more here in this section, which has been on our site for a rather long time.

But these words by Turner undoubtedly reflect progress. What other position is there to take?

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Netherlands wants more automatic information exchange

Following the OECD’s false claim that its extremely narrow approach to information exchange enjoys “universal endorsement”, we have yet another indication of more actors keen to push forwards with multilateral and automatic exchange of information.

The Dutch Deputy Finance Minister, Jan Kees de Jager, has said in a letter to parliament that, unofficially translated, says:

“The Netherlands would like to go a step further in the relationship with these countries, and make agreements on the automatic exchange of information. This way, tax evasion can be addressed (even) more effectively. . . . The Netherlands strives for automatic exchange of [tax] information, at the multilateral level (OECD, UN) as well as the bilateral level (at the conclusion of tax treaties and Tax Information Exchange Agreements).”

The Netherlands will be contacting Austria, Luxembourg, Switzerland, Belgium, Liechtenstein and Singapore to improve agreements about information exchange. De Jager also wrote that he intends to conclude TIEAs with Monaco, Andorra, Bermuda, Panama, the Cayman Islands and the British Virgin Islands. This is significant, and it shows that political will exists to push this superior standard of information exchange forwards.

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