Tax avoidance

The false EU promise of listing tax havens

This week, European Union finance ministers agreed to establish a common EU blacklist of so-called “non-cooperative jurisdictions” – in other words, tax havens. With one tax scandal unfolding after the other, listing and sanctioning tax havens may seem like a good solution. However, as tempting as it may sound, this EU exercise is doomed to fail – and here’s why. 

The proposal for a common blacklist stems from the European Commission’s external strategy on tax, which was published this January. However, tax havens are not an external matter to the EU, quite the contrary – some of the world’s most powerful tax havens are to be found in Europe.

For example, a new report from Oxfam uses European Commission (EC) data to analyse the role of the Netherlands as a corporate tax haven. It shows how the Netherlands is making large-scale tax avoidance possible and how Dutch regulations are an integral part of the international tax system that enables multinationals to avoid at least US$100 billion in taxes in developing countries every year. Several other EU Member States – such as Luxembourg, Ireland, Malta and the UK – have also been criticised for helping multinational corporations to avoid taxes. Yet you will not find any of these countries on a blacklist produced by the EU.

Tax avoidance

US corporate giants hoarding more than a trillion dollars

Moody’s report says 72% of the money held by Apple, Google and other American companies is being parked offshore for tax reasons

Some of the biggest US companies have accumulated cash piles worth almost $1.7tn (£1.1tn) – more than two thirds of it overseas.

According to the calculations by ratings agency Moody’s, the five companies hoarding the most cash – Apple, Microsoft, Google, Cisco and Oracle – between them held $504bn by the end of last year. The tech sector held 46% of the total.

Apple – described as the “cash king” by the ratings agency – held $216bn of cash, more than double the $102bn held by the next largest hoarder, Microsoft.

The figures will add to the controversy about companies sitting on cash as the data shows they are parking it offshore to avoid the tax bill that would be due on returning it to the US.

An estimated $1.2tn of cash was held overseas at the end of 2015 – about 72% of the $1.68tn cash stockpile, Moody’s said. Of the five big hoarders of cash, three –Apple, Microsoft and Cisco – keep more than 90% outside the US.

Tax avoidance

Bank of Ireland loses £27m tax avoidance case in UK

The UK Court of Appeal has ruled against Bank of Ireland in its a long-running tax avoidance dispute with UK authorities over a £27 million (€34.3 million) tax bill relating to its subsidiary, Bristol & West.

In response, Bank of Ireland said the ruling Appeal was “conclusive and definitive” and it would not pursue any further appeals on the matter.

“The group will not be pursuing a further appeal and is satisfied that the acknowledged legislative and procedural uncertainties have now been clarified,” the bank said.

“The group notes this is an issue that dates back some 12 years and that the tax assessed has already been paid. The group have signed up to the Code of Practice on Taxation of Banks and is fully compliant with its obligations under the code.”

Tax avoidance

Obama: new tax rule will fight corruption, help economy

U.S. President Barack Obama said on Friday a long-delayed rule requiring the financial industry to identify the real owners of companies will help fight corruption and tax evasion and boost the economy.

His administration on Friday issued the Customer Due Diligence rule in the works since 2012 and proposed legislation meant to stop prevent criminals from using shell companies to evade taxes, launder money, and finance terror.

"These actions are going to make a difference," Obama told reporters. He said they would help the administration to do a better job of tracking financial flows and making sure companies are "paying the taxes they owe rather than using shell corporations and offshore accounts to avoid doing the things that ordinary Americans are doing every day."

Obama also called on Congress to pass legislation that requires all companies formed in the United States to report information to the financial crimes enforcement network at the Treasury Department.

Tax avoidance

Canadians put $40 billion in tax havens last year

Canadian corporations and individuals quadrupled the amount of money they transferred into tax havens last year, pouring almost $40 billion into the tropical islands and European duchies that shield funds from Canadian taxes, newly released statistics show.

It was one of the biggest years ever for “investment” in tax havens — more than four times greater than the $9 billion sent offshore in 2014. The total amount of wealth held in the 10 most popular tax havens now sits at $270 billion.

“The problem is bigger than it has ever been,” said Dennis Howlett, executive director of Canadians for Tax Fairness, which took foreign direct investment numbers from Statistics Canada to calculate the use of tax havens.

In 2015, $13 billion went to the Cayman Islands, $9 billion to Barbados, and nearly $8 billion to the Bahamas, according to the statistics. Money sent to Switzerland shot up by 58 per cent over the previous year.

Tax avoidance

Forget Panama: Why Corporations And The Rich Love US Tax Havens

The Panama Papers, a massive leak of secret financial data relating to the use of overseas tax havens, cast an uncomfortable spotlight on many political figures and world governments.

However, the 11.5 million documents contain few American names or corporations, leading some to speculate that the documents had been censored before release.

While Mossack Fonseca, the secretive “boutique” law firm that created the hundreds of offshore shell corporations revealed in the leak, may have simply served a primarily European clientele, there’s another reason that few American corporations have been found in the files: When a U.S. company wants to hide its earnings, it’s easier to create a tax shelter at home than to take its business abroad.

Several states, including Nevada, Delaware, and Wyoming, have corporate tax laws so lenient, they are effectively domestic tax havens. In these states, “it’s possible to create these shell corporations with virtually no questions asked,” said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a Washington-based nonprofit, in a recent interview with The New York Times’ Patricia Cohen.

While shell corporations may have legal uses, they are most often used for “cloaking wrongdoing” from public and governmental scrutiny. Gardner described to Cohen that, “Aside from avoiding taxes, shell companies are routinely used by terrorist organizations to hide assets, by political donors to sidestep campaign finance laws and by criminals to launder money.”

Tax avoidance

So is corporate tax avoidance on the way out? Don't bet on it

The days of loopholes are numbered, said EU Commissioner Pierre Moscovici.

Don't count on it.

The suite of measures announced by the EU yesterday, which essentially proposes making elements of the OECD's BEPs project legally binding, have an impressive air about them.

Companies would be deterred from shifting their profits from parent companies to subsidiaries in low or no tax countries; loopholes that allow companies to use dividends or capital gains to skip taxation would be closed; and, in a bid to increase transparency, corporations will have to reveal their taxes, profits, revenues and other financial data to the authorities in all countries where they operate.

There's some understandable uncertainty about what the implications may be for companies as they adjust to the new reality.

Tax avoidance

Ex-U.N. diplomat in bribe case likely faces more charges: U.S. prosecutor

A former United Nations General Assembly president accused of being part of a bribery scheme would likely face additional charges, a U.S. prosecutor said on Monday, hours before the diplomat was released from jail.

John Ashe, who served in the U.N. post from 2013 to 2014, already faces two counts of tax fraud in an indictment filed in Manhattan federal court.

But prosecutors have not charged Ashe with bribery, despite allegations he took $1.3 million in bribes from Chinese businessmen, citing his possible diplomatic immunity. Prosecutors say that immunity does not apply to the tax charges.

Tax avoidance

10 Accounting Tricks the 1% Use to Dodge the Taxman

It’s not a good time to be rich. Currently, the world of finance is going through more scandals than British comedian Jimmy Carr has one-liners (but more on him later). And everywhere you look, there’s illegal shifting, trading and sharing of information between the wealthy.

But what about the legal and quasi-legal tricks used by the rich to hang onto their money? It’s a sad fact that most of the methods used by the top 1% to evade the taxman are, if not moral, at least allowed within the letter of the law. Hold onto your purse strings as we list the 10 dirtiest accounting tricks the rich use to keep their cash.