Saturday, September 7, 2013

Naked tax protest in front of German Chancellor's office

We never quite thought we'd see this. From Spiegel Online: a naked tax protest by Attac-Germany, with calls for unitary taxation and country by country reporting.

The messages on the big poster are "Reveal balance sheets" and "Unitary tax now" and "FKK for corporations"(in German, "FKK" refers to "Freikörperkultur," - a reference to naturists, or people who like to be naked. They want corporations to reveal themselves too.)

Read more about unitary tax here, and about country by country reporting here.

Hat tip: Markus Henn.

Friday, September 6, 2013

The G20 leaders' statement, in relevant part

For those who haven't yet read the G20 leaders' statement today, here is the part that particularly interests us:
51. In a context of severe fiscal consolidation and social hardship, in many countries ensuring that all taxpayers pay their fair share of taxes is more than ever a priority. Tax avoidance, harmful practices and aggressive tax planning have to be tackled.

The growth of the digital economy also poses challenges for international taxation. We fully endorse the ambitious and comprehensive Action Plan – originated in the OECD – aimed at addressing base erosion and profit shifting with mechanism to enrich the Plan as appropriate. We welcome the establishment of the G20/OECD BEPS project and we encourage all interested countries to participate. Profits should be taxed where economic activities deriving the profits are performed and where value is created.

In order to minimize BEPS, we call on member countries to examine how our own domestic laws contribute to BEPS and to ensure that international and our own tax rules do not allow or encourage multinational enterprises to reduce overall taxes paid by artificially shifting profits to low-tax jurisdictions. We acknowledge that effective taxation of mobile income is one of the key challenges. We look forward to regular reporting on the development of proposals and recommendations to tackle the 15 issues identified in the Action Plan and commit to take the necessary individual and collective action with the paradigm of sovereignty taken into consideration.

51.    We commend the progress recently achieved in the area of tax transparency and we fully endorse the OECD proposal for a truly global model for multilateral and bilateral automatic exchange of information. Calling on all other jurisdictions to join us by the earliest possible date, we are committed to automatic exchange of information as the new global standard, which must ensure confidentiality and the proper use of information exchanged, and we fully support the OECD work with G20 countries aimed at presenting such a new single global standard for automatic exchange of information by February 2014 and to finalizing technical modalities of effective automatic exchange by mid-2014.

In parallel, we expect to begin to exchange information automatically on tax matters among G20 members by the end of 2015. We call on all countries to join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters without further delay. We look forward to the practical and full implementation of the new standard on a global scale. We encourage the Global Forum to complete the allocation of comprehensive country ratings regarding the effective implementation of information exchange upon request and ensure that the implementation of the standards are monitored on a continuous basis. We urge all jurisdictions to address the Global Forum recommendations in particular those 14 that have not yet moved to Phase 2. We invite the Global Forum to draw on the work of the FATF with respect to beneficial ownership. We also ask the Global Forum to establish a mechanism to monitor and review the implementation of the new global standard on automatic exchange of information.

52.    Developing countries should be able to reap the benefits of a more transparent international tax system, and to enhance their revenue capacity, as mobilizing domestic resources is critical to financing development. We recognize the importance of all countries benefitting from greater tax information exchange. We are committed to make automatic exchange of information attainable by all countries, including LICs, and will seek to provide capacity building support to them. We call on the Development Working Group in conjunction with the Finance Track, to work with the OECD, the Global Forum and other IOs to develop a roadmap showing how developing countries can overcome obstacles to participation in the emerging new standard in automatic exchange of information, and to assist them in meeting the standard in accordance with the action envisaged in the St Petersburg Development Outlook. The Working Group should report back by our next meeting.

Working with international organizations, we will continue to share our expertise, help build capacity, and engage in long-term partnership programmes to secure success. In this respect, we welcome the OECD Tax Inspectors without Borders initiative, which aims to share knowledge and increase domestic capacities in developing countries in the tax area. Finally, we are committed to continue to assist developing countries, including through the IOs, in identifying individual country needs and building capacity in the area of tax administration (in addition to automatic exchange of information) and encourage such support to be developing country led.
With tax annex here.

Reminder: we have commented on the G20 process already today, here.

Overall summary: this is rather short on specifics, and falls far short of some of the recommendations we have made (such as this one), but we have come a long way from even a couple of years ago. 
We are, of course, delighted to see official support for the Tax Inspectors Without Borders initiative, which is a proposal that TJN put to a government conference in Bonn, Germany, in 2011, and which rapidly found political support from a wide range of countries. 

Netherlands officially admits shame in being a tax haven, pledges limited reforms

Frans Weekers
We have long criticised the Netherlands for being a particularly important tax haven for multinational companies. As, increasingly, have many others in Europe, the United States, and elsewhere. We recently noted, too, how some developing countries have been kicking back at some of the abuses that have been perpetrated upon them with the help of the Netherlands and other tax havens.

We are now delighted to see a Financial Times interview Netherlands’ deputy finance minister, Frans Weekers, making an admission that his government is uncomfortable with, and perhaps even ashamed of, the Netherlands' role in this pernicious trade. The Financial Times reports:
"A proposal by the Netherlands to renegotiate its tax treaties with 23 least-developed countries marks a turning point for a country that has until now deflected accusations that it is a key player in tax avoidance by multinational corporations.

The initiative, which comes as the G20 meeting in St. Petersburg is putting tax harmonisation issues high on the agenda, is the most concrete move yet by the Netherlands to address the criticisms. Tax justice advocates say the country’s network of treaties with over 90 countries makes it a nexus for tax avoidance, allowing multinationals to reroute their profits through Dutch “letterbox companies” that do no real business in the Netherlands and exist largely for tax purposes."
This comes in the context and the spirit of today's G20 leaders' declaration, which includes a statement that:
"We call on member countries to examine how our own domestic laws contribute to BEPS [TJN: Base Erosion and Profit Shifting, OECD-speak for corporate tax dodging] and to ensure that international and our own tax rules do not allow or encourage multinational enterprises to reduce overall taxes paid by artificially shifting profits to low-tax jurisdictions."
There is, of course, far less to the Dutch plans than Weekers' words would perhaps suggest. The FT article describes an official Dutch report presented last week, which seeks to insert new anti-fraud provisions in their tax treaties with the 23 countries; will pass on information to tax authorities in developing countries; and will 'crack down' on letterbox companies with no genuine substance behind them. The article also cites our excellent Dutch NGO colleagues at SOMO as saying, among other things, that new demands for letterbox companies to have 'substance' will be too easy to comply with.

In a brief email to TJN, Lee Sheppard of Tax Analysts spoke of the Dutch
"promises to put more 'substance' in shell companies MNCs [Multinational Corporations] use. Turns out the "substance" ain't gonna be much."
(For those interested, more details on this lack of substance in the Annex below.)

Despite this disappointment in the detail -- as is so often the case with shiny-looking tax justice-styled reforms, or world leaders' statements on these kinds of issues -- the broad new public statement by the Dutch authorities is welcome. The headline announcement is politically significant, and an official admission that the tax justice movement, in the Netherlands and elsewhere, has had a point all along.

Today's blogger remembers a tax justice meeting in Amsterdam a few years ago when a top Dutch tax official gave a horribly patronising presentation, seeking to pooh-pooh a seminal report by SOMO pointing out the damage that the Netherlands was transmitting globally through these practices. But, as the FT report continues, this attitude is changing:
“Over the past 10 years the trend has been for the number of letterbox companies in the Netherlands to keep growing. I want to turn that trend around,” Mr Weekers said. “I see the Netherlands being portrayed in a bad light. I don’t want to be portrayed in a bad light.
The Dutch move stems from a government-commissioned report over the summer which, for the first time, agreed with tax-justice groups that developing countries miss out on substantial tax revenues because of their treaties with the Netherlands.”
Here is a clear and public admission by the Netherlands government that this tax haven activity is causing great harm around the world. Or, to put it more succinctly, Tax Havens Cause Poverty.

Which, of course, immediately raises the next question: why stop at 23 countries? And why stop at these limited measures?

The logic points inexorably in one direction: the Netherlands should work towards rolling up this whole sordid industry and starting to compete on the basis of genuine business activity.

We urge other nations engaged in this shameful trade - such as Ireland, Luxembourg, Switzerland, Belgium, the United Kingdom and others - to take note.

For those with a Financial Times subscription, there is a whole lot more in the FT story.

Update from SOMO, via e-mail:
"Next week there will be a Round Table, organised by the Dutch Parliament about national tax policies in order for them to gain more insights on the matter. Tax Justice Network Netherlands as well as SOMO will participate as speakers, a.k.a. spokespersons for a fair tax system."
Annex update: a Dutch correspondent sent us this commentary on the relative lack of substance, via e-mail:
"About the substance demands: the government does not propose to raise or increase the substance demands, they only want to expand the group of companies that have to comply with them. Right now, only companies applying for a tax ruling (Advance Pricing Agreement or Advance Tax Ruling) have to meet the requirements. This will change so that all companies that function as a vehicle for channeling through royalty and interest payments (so called "schakelvennootschapen" which would be literally translated into "linking companies") have to meet these requirements.

The problem is, as you already pointed out in the blog, that the substance requirements are much too easy to comply with. The government, in their reaction published last Friday, actually said that it carried out a random sample and found that most "linking companies" already comply with the requirements. Requirements include things like: at least half of board members have to live or be "officially situated" in the Netherlands, they need to have "the necessary professional knowledge to carry out their tasks", the (important) management decisions need to be taken in the Netherlands, the company needs to have an address situated in the Netherlands, and the company needs to have equity that is "fitting for the activities it carries out". 

As you can see, all requirements are fairly easy to fulfill and open for interpretation. The government, however, stated that - based on research published earlier this summer - there's no point in raising the requirements by for example asking for a number of employees, since this will lose all effect if companies find a way of hiring personnel without increasing their real economic activity. The mailbox companies indeed already do the same with recruiting board members: trust offices offer companies to find Dutch board members, which are persons that are member of numerous boards at the same time.

So the Dutch governement, by saying that they do not raise substance requirements "since that will have no effect", combined with finding that almost all companies concerned already meet the existing requirements, are seemingly taking a kind of useless measure to obligate all "linking companies"  to comply with current requirements. It seems an empty measure really." 

OECD and G20: How Long Will it Take on Tax?

Update: the G20 statement is now available.

The OECD has reported to today’s G20 Leaders meeting in St Petersburg on its tax work. This now falls into three areas, covering two issues.

First, transparency and exchange of information on tax. We should remember that this resulted from a much earlier initiative by the then G7, when Russia was still waiting in the wings and the developing countries such as the BRICS were not even candidates to be considered leading states.

The concerns at that time about tax havens and the offshore secrecy system led the G7 to ask for an OECD initiative, and the result was its report in 1998 on Harmful Tax Competition.  This project was of course effectively derailed by a change in US policy, when the new Bush administration accepted arguments that the initiative as first formulated entailed dictating tax policy to other states. The project then refocused on obtaining information from tax havens, laboriously pursued by the OECD for nearly a decade by negotiation of bilateral tax information exchange agreements (TIEAs). Only now, after the fiscal crisis of 2007-8, has this effort for fiscal transparency produced the commitment at this year’s G8 summit meeting in Lough Erne to establish a new global standard of automatic exchange of tax information, as well as transparency of beneficial ownership. Yet this is what organisations like TJN called for from the start. Until recently, we were laughed at: now it is mainstream.

So the OECD now has two transparency projects. The first, based on bilateral agreements for exchange of information on request, is coordinated through the so-called Global Forum on Transparency and Exchange of Information for Tax Purposes, which conducts `peer reviews’ on each country. Second, the new standard which has finally been proclaimed is for multilateral automatic exchange of information. The OECD now aims to develop a model for this to be ready next year. The key is of course establishing suitable technical systems to ensure effective use can be made of such large quantities of data that will emerge from automatic information exchange. The OECD has in fact been working on this for some 30 years, largely in secret, so it will be interesting to see what they come up with.

The third area is of course "Base Erosion and Profit Shifting" (BEPS), a project looking at corporate tax avoidance which the OECD launched quietly in July 2012, and was then given a political impetus by the G8 and the G20. After a year’s work, it published an Action Plan on  July 19th 2013. This envisages a 30-month work programme on 15 Action Points, aimed essentially at trying to repair the international tax system. We gave our immediate response to the Plan at the time, regretting that the OECD had chosen to try to repair a fundamentally flawed system that cannot be effectively fixed, and rejecting the new 21st Century approach that we think is needed. In our view, the OECD has allowed the G20 leaders to kick the can down the road, proposing a plan which will face enormous obstacles, and may prove largely ineffective. We will continue to keep a close watch, and will have much more to say as the work proceeds.

What can be learned from comparing the two initiatives? Only after 15 years’ pressure from civil society has the OECD now accepted the global standard of multilateral automatic exchange of information. We hope that it will not take quite so long for it to accept that the only effective way to take transnational corporations is to treat them as unitary firms, based on Combined and Country-by-Country reporting and profit apportionment based on their real presence in each country.

See also this policy briefing, co-signed by the Tax Justice Network and 33 other organisations, focusing on the BEPS initiative.

Two new tax haven items in UK parliament, pushing transparency

First, an Early Day Motion, from Wednesday:
"That this House notes with concern that one in five tax havens worldwide are under UK jurisdiction; further notes that although all the British Overseas Territories have committed to joining the Convention on Mutual Administrative Assistance in Tax Matters, none have actually done so and no time-frame has been set in which they will do so; further notes that the island of Sark, where income tax is set at zero per cent will not come under the new agreement signed by Guernsey so will be exempt from oversight on beneficial ownership; believes that clarification on when the register of beneficial ownership will come into force, which British Overseas Territories will sign up to the Register and whether it will be publicly accessible is required as a matter of urgency; observes that while the automatic sharing of tax information will aid transparency, it will not in itself alter the tax regimes which made these territories attractive to companies and individuals aiming to minimise their taxes; and calls on the Government to take action both domestically and internationally to tackle the use of tax havens by multinational companies and individuals operating in the UK or in territories under its jurisdiction."
We would support that.

We would also like to draw attention to this important parliamentary bill on corporate transparency; United Kingdom Corporate and Individual Tax and Financial Transparency Bill, which
"aims to tackle the opacity that exists in the affairs of multinational corporations"
and, more specifically,
"any UK multinational corporation must publish the accounts of all its subsidiaries on public record, and if nowhere else that must be on its own web site."
and something else of significance:
"the Bill tackles the opacity in the tax affairs of both large companies and wealthy individuals in the UK by requiring that the tax returns of the top 250 in each group should be put on public record.
. . .
Most of the rest of the Bill focuses on ensuring that the beneficial ownership of companies and trusts is placed on public record when the public interest requires it."
See this letter from UK MP Michael Meacher, the bill's sponsor, here. With a summary overview of the issues at Tax Research, here.

Timeless US tax reform comic book from 1977, now available online

From our friends at Citizens for Tax Justice in the United States:
While most comic books deal with spandex-suited superheroes saving the day,  the protagonists in New York Public Interest Research Group's (NYPIRG) "Blood from a Stone: A Cartoon Guide to Tax Reform," published in 1977, are the everyday taxpayers who are getting shafted by a tax code increasingly riddled with loopholes that directly benefit the rich. The only full-fledged, full-length comic book we know of that’s dedicated to the issue of tax reform, "Blood from a Stone” offers a concise and witty introduction to the history of taxation and the need for progressive tax reform in the United States.

While the comic is now over 36 years old, it remains strikingly prescient considering that tax reform has once again become one of the dominant topics of debate in Washington. In fact, many of the specific tax breaks called out as in need of reform in the comic, such as the preferential rate for capital gains or accelerated depreciation, are on the top of the list of the breaks that still need to go!

We are proud to pluck this comic from its obscurity and to post, for the first time since its original release, a digitized copy of this fascinating comic in its entirety.  We do so with gratitude and permission from the comic's original authors Larry Gonick and Steve Atlas.  Enjoy!
The complete comic is available here, or you can download more bite-sized sections from CTJ directly. The panel below (click to enlarge) provides a good defence of the principle of progressive taxation.

The Missouri-Kansas border war and the disaster of tax "competition"

We have for many years explained how engaging in tax "competition" is a disastrous economic strategy for any jurisdiction, and an even greater collective disaster for the world. Tax "competition" bears no economic relation to healthy market competition; on the contrary, it distorts markets; increases complexity, steepens inequality and deepens poverty, and erodes countries' sovereign powers to create the tax systems that voters want.

Tax competition is economic warfare and has no redeeming features of any kind. Any politician or economist who favours it has fallen prey to economic fallacies - or is a shill for vested interests. See their arguments derobed here.

One of the hotspots of the tax wars inside the United States is State Line Road, the dividing line between Kansas and Missouri. These states have been aggressively using their state tax codes to try and poach businesses from each other, to the collective detriment of both.

Now, courtesy of KCTV5 News in Kansas City, we learn that a coalition is coming together to try and put a stop to the nonsense, which has been going on for years but seems to have become sharper recently:
"Kansas Gov. Sam Brownback had embarked on an aggressive tax-cutting policy which sweetened the pot by offering incentives to businesses willing to relocate. Missouri passed a similar tax measure, which Gov. Jay Nixon recently vetoed."
The KCTV5 reporter correctly calls this "the border war." But there are voices of sanity out there, calling for a truce in this border war:
"Critics and some economists say tax incentives prevent revenue from going into schools and local roads which ends up hurting both states in the long term. That was the focus of a recent University of Missouri-Kansas City forum.

"In terms of the message to economic students, lowering taxes: it is which taxes and at what expense. It is questionable in terms of where our revenue is going to come from," said Annie McKay with the Kansas Center for Economic Growth.
Quite so. A recent study that we cited in April found that Kansas and Missouri alone had spent at least $192 million in tax subsidies to poach jobs from one another despite an 'anti-poaching' agreement; the net result appears to have been only a tiny net jobs migration of a few hundred jobs (in favour of Kansas) but at very, very high overall cost to both states. The latest efforts are nothing new.

But perhaps there is new political will in the air. As KCTV5 reports:
"We shouldn't have some sort of race to the bottom to create jobs that don't create any kind of quality of life," said state Sen. Paul LeVota in Missouri's 11th District.

If that sounds like sour grapes from a Missouri politician, consider that his colleague across the state line agrees.

"Our local business leaders from both sides of the state line needs to step up and say, 'it is time to stop and re-evaluate,' because at the end of the day, we're not doing any favors for anybody here," said state Sen. Tom Holland in Kansas' 3rd District.
These politicians have avoided the economic fallacies and have clearly understood what is happening here. This is economic warfare, from which the only winners are the wealthy owners of the corporations that gain the tax benefits: for it is on the owners of capital, not the ordinary workers, upon which the tax charge falls.

So tax "competition" creates, as tax writer David Cay Johnston once put it, "not trickle-down, but Niagara up."

For more on this general subject, see our briefing on tax competition here, with further stories here.

Note to journalists: when writing about this subject, it helps to put the word 'competition' inside quote marks, as a marker to show understanding of the economic issues involved. 

Wednesday, September 4, 2013

Being technically true is not the same as being honest

Our quote for the day (Hat-tip to James McLaren):

I realize that lawyers are brought up (probably from small children) to think that technically true is what matters, but when you make public PR statements, they should be more than technically true. 
They should be honest. 
There's a big f*cking difference.
Linus Torvalds, author of the Linux computer operating system.  Originating source here

Links Sep 4

Common ground for Obama and Putin is offshore Reuters

G20 Leaders Will Need Great Political Courage to Win Fight Against Tax Dodging allAfrica

Release Of Offshore Records Draws Worldwide Response ICIJ
Latest reactions and responses

From West Africa To Tibet, New Locales Enter The Offshore Secrecy Market ICIJ
See also: Australia: Tax haven ticket to uncharted territory SBS and Kenya: want a shell company? No question Financial Times

Swiss mull restitution of Mubarak funds to Egypt swissinfo

Argentina's ex-leader Carlos Menem back on trial in tax case BBC

Offshore tax-dodger dragnet widens with U.S.-Swiss bank deal Reuters
See also: Every American With Money Abroad--Anywhere Abroad--Is Impacted By Massive Bank Deal Forbes and Americans Hide Up to $32 Trillion; Singapore, HK, Caymans Top List ValueWalk

Panama’s government approves bearer shares immobilization law STEP / La Nación
See also: Bearer Share Law Contradictory The Bulletin Panama

British Virgin Islands: BVI office to open in Hong Kong, local discussions on FATCA, “shock” at France blacklist Financial Secrecy Media Monitor

The Turks & Caicos Islands sign international convention on tax transparency Turks & Caicos Islands Weekly News

Microsoft is funding its Nokia acquisition with cash it kept from the taxman Quartz

The Netherlands: German companies' favorite tax haven Deutsche Welle

Rising transfer pricing scrutiny dials up risk CGMA Magazine

SEC must take opportunity to re-issue a strong rule for the vital US transparency law under Dodd-Frank 1504 Global Witness'

The missing part is the tax gap – video from the European Commission Tax Research UK

Twelve steps to stop tax avoidance New Statesman

Tuesday Tax Tradeoff: Protect the Environment vs. Give Tax Breaks to Oil Companies Americans for Tax Fairness

Tuesday, September 3, 2013

Links Sep 3

Dutch, under pressure on tax, offer talks with emerging economies Reuters

United States and Switzerland Issue Joint Statement Regarding Tax Evasion Investigations U.S. Department of Justice
See also: Press unenthusiastic about US tax deal swissinfo and Bankers regret past conduct But does this translate into ceasing such activity for clients around the globe? 

Senate moves to end anonymous shell companies to crack down on money laundering, tax dodging and corruption Global Witness

Cyprus Bank’s Bailout Hands Ownership to Russian Plutocrats The New York Times

Samoa: Tax ‘secrecy’ faces new threat Samoa Observer
"Samoa’s offshore industry is facing a new threat to revenues with the signing of a major tax agreement between China and other tax authorities"

Labuan, a tropical safe Le Temps (In French)
"The Malaysian island of Labuan dreams of copying Liechtenstein."

‘Taking from the poor to give to the rich’ presseurop
"The Isle of Man, Jersey and Guernsey welcome billionaires who want to cheat the tax man. But campaigns against tax evasion have eroded these tax havens' revenues and even they have been forced to resort to budget cuts."

Liechtenstein Adopts Implementing Law For Austrian Tax Deal Tax-News

Liechtenstein: Banks issue voluntary tax compliance guideline “to keep untaxed assets away”  Financial Secrecy Media Monitor

Bermuda: Ministry Responds To France “Tax Haven” List Bernews



Monday, September 2, 2013

Diabetes and CKD - Pitfalls: Cystatin C

Cystatin C has been proposed as an alternative marker of kidney function and studies have shown that CyC is a better predictor of mortality that serum creatinine. Although, when first introduced, it was thought that CyC was not influenced by factors apart from renal function, this assumption has been questioned in the recent past.

CyC is a 13 kDa cysteine protease inhibitor that is produced by all nucleated cells. It is freely filtered at the glomerulus and then catabolized in the proximal tubule such that very little appears in the urine. CyC levels are affected by renal function but also independently influenced by age, gender, BMI, fat mass, triglycerides and the presence of diabetes. Interestingly, these are all components of the metabolic syndrome.

In 2011, a paper was published in Diabetologia that found that elevated levels of CyC were associated with an increased incidence of type II diabetes. The thought was that CyC was potentially involved in the pathogenesis of diabetes. In July, a paper was published in NDT that shed a bit more light on this issue. The authors reported the results of a 3-year study of French adults in whom the incidence of diabetes was low. In this study, in common with previous research, CyC predicted incident diabetes. However, when stratified by BMI, CyC predicted incident diabetes only in participants with a BMI >25 at baseline.

So what is the explanation for this? CyC secretion has been shown to be 2-3 times higher in obese patients than in non-obese patients. CyC is also highly expressed in subcutaneous adipose tissue. Data from the Framingham Heart Study has shown that adipose tissue was not associated with CKD using creatinine-based estimating equations while it was associated with CKD using a CyC-based equation. CyC may play a role in preventing inflammation associated with increased adiposity explaining the increased secretion in obese patients.

The implications of this are that, although CyC may predict diabetes, it is unlikely that it adds any more to prediction algorithms considering that it is not independent of BMI and the metabolic syndrome - both of which are well known to be associated with diabetes. The second implication is that the fact that CyC is better at predicting mortality than creatinine (at the same level of eGFR) is related to non-renal factors - again, adiposity and the metabolic syndrome. It similarly suggests that in obese patients, estimating equations that utilize CyC may not be as accurate as previously suggested. The search for a better biomarker of GFR continues...

Public registries on companies, trusts: an idea whose time has come

For a long time we and many of our colleagues in the tax justice movement have been calling for public registries to be set up containing beneficial ownership for all companies, trusts and foundations, and their like.

We thought we would share part of an e-mail this morning from Robert Palmer of Global Witness, an NGO that has played a pivotal role in this crucial area.
"We've seen real support growing behind the idea of public registers - from businesses, law enforcement and even the banks themselves."
For examples, he cites Simon Walker, head of the UK's Institute of Directors, a large business lobby groups, who has come out in favour of public registers of beneficial ownership, here.

The head of the British Bankers Association has also spoken publicly about the need for registers, though he’s less clear on whether they should be public.

The head of tax for the Confederation of British Industry, the most powerful UK business group, Will Morris, has stated that having such a register was a “no-brainer” - and his personal preference was to make it available to the public.
A public Avaaz petition from businesses calling on the UK government to adopt public registers of beneficial ownership attracted 23,000 signatures so far.

And then of course there's Britain's Prime Minister David Cameron:
"I hope G8 Leaders will consider publishing national Action Plans by June that set out concrete steps that their governments will take to achieve this – including, for example, by enhancing the availability of beneficial ownership information through central public company registries."
Many others in other countries support such an idea. See, for example, Frank Knapp's article in The Hill in Washington, D.C. supporting the idea, or this, from the Manhattan District Attorney.

See also this, via the World Economic Forum, (courtesy of Joe Stead and Robert Palmer)

Elsewhere, the European Banking Federation has stated (p6) that it regards public registries as “imperative if credit and financial institutions are expected to discharge their obligations concerning Beneficial Ownership identification” under the EU's Anti Money Laundering (AML) legislation."
As Global Witness' Palmer notes, timing is crucial on this, since the European Union is currently debating how to deal with the problem of hidden company ownership as part of the discussions around the revision of its anti-money laundering directive.

Public registries with beneficial ownership information: this is clearly an idea whose time is coming. Why not just get on with it?

Fixing the cracks in corporate tax: new policy brief

The Tax Justice Network and 33 other non-governmental organisations have just released a new policy brief responding to the OECD's large and widely reported Action Plan on "Base Erosion and Profit Shifting (BEPS) by multinational companies," (otherwise known as corporate tax dodging.)

Our new report is entitled Fixing the Cracks in Tax: A Joint Plan of Action.

As it states, and as we have stated before:
"The international system for the taxation of TNCs is no longer fit for purpose.  International tax rules, drawn up 80 years ago, have not kept pace with the changing business environment."
This new report, also available from here and here, issues a range of recommendations to the OECD and the G20, with three key pillars:
  • Take effective steps to ensure that developing countries can participate in the BEPS process on  an equal footing, and assist them in implementing measures to stem their losses from international tax avoidance that deprives governments of badly needed revenues.
  • Undertake – jointly with other organisations, policy makers from developing and developed countries, and independent experts – a rigorous study of the merits, risks and feasibility of more fundamental alternatives to the current international tax system, such as unitary taxation, with special emphasis on the likely impact of these alternatives on developing countries.
  • Implement additional measures to tackle financial and corporate secrecy, including the requirement for TNCs to provide public combined and country-bycountry reports, the establishment of comprehensive multilateral automatic exchange of tax information, and the public disclosure of the beneficial owners of companies, foundations and trusts.
We wholeheartedly endorse and support all of these. For reasons best known to its members, the OECD has a history of viscerally, intransigently attempting to close down all discussion of unitary taxation; the BEPS report was the first time it allowed a tiny chink of an opening, when it acknowledged that measures "beyond the arm’s length principle" may be required to
deal with some of the problems it identifies.

In more fine-grained detail, the report also makes a series of other recommendations, of which we will highlight these two here:
  • The OECD and the G20 should strengthen the UN tax committee. Quite so, as we've noted before.
  • Governments must promote a shift from tax competition to global and regional tax cooperation. Read more about the evils of tax 'competition' here
This blog will be posted permanently on our transfer pricing page.