There’s a new book out that looks very interesting reading from Professor Jason Sharman with the rather catchy title: The Despot’s Guide to Wealth Management: On the International Campaign against Grand Corruption. It has been reviewed here in The Economist. We haven’t read it yet, but this study of kleptocracy looks worth reading, and the amounts of money stolen are staggering. The estimates on Egypt’s Hosni Mubarak are as high as $70bn.
It is a fact that the trust laws of some tax havens openly promote illegality. The reality that some tax havens will not enforce foreign laws (e.g. ensuring non-recognition of foreign laws and judgements that favoured legitimate heirs and former spouses) is even publicly advertised by some offshore service providers, not on the deep web like drugs and illegal weapons, but on the internet, accessed by a simple google search on tax or estate planning.
Despite this, there has been some reluctance from governments to take on the issue of trusts, and some difficulties posed for governments that have attempted to deal with some of their more problematic features. Today, a new paper called Trusts – Weapons of Mass Injustice from the Tax Justice Network attempts to reopen the debate on trusts, and argues that there is urgent need for effective measures to curtail their activities.
Organised crime has had a long association with tax havens, and tax evasion. After All, Al Capone was imprisoned for tax evasion, and not any of the other crimes that it is said he committed. But how much do governments and police forces include tackling tax havens in their thinking of modern organised crime? Not much according to two experts on the issue Mary Young and Michael Woodwiwiss.
From the United Nations General Assembly, the fifth report of the Independent Expert on the promotion of a democratic and equitable international order. The summary goes like this:
“The report focuses on impacts of taxation on human rights and explores the challenges posed to the international order by widespread tax avoidance, tax evasion, tax fraud and profit shifting, facilitated by bank secrecy and a web of shell companies registered in tax havens. The Independent Expert calls for resolute action by the international community, including through the creation of a United Nations tax cooperation body, the adoption of a United Nations tax convention, the phasing out of tax havens, the revision of the Guiding Principles on Business and Human Rights to include the obligation of corporations to pay their fair share of taxes and the adoption of a financial transactions tax.”
As you can imagine with an introduction like this, here’s a lot of tax justice stuff in here, and TJN gets a number of mentions. It follows our earlier blog on calls by Rafael Correa, head of the G77 group of developing countries, for an international tax body. Among other things, the UN Independent Expert on the promotion of a democratic and equitable international order discusses the definition of ‘tax havens’ and refers to TJN’s alternative term ‘secrecy jurisdiction’ while providing further details on TJN’s Financial Secrecy Index (FSI) and the top listed jurisdictions on the FSI 2015 here (p9 and in the annex).
We’ll highlight only this section below for now, which is a recommendation for the following:
From Michael West, an Australian tax journalist:
“In Australia, Part 4a of the Tax Act deems that the principal purpose of a transaction should be commercial (rather than tax driven). In light of the proliferation of tax haven activities by Australian companies this law, Part 4a, must be the most highly disregarded and disobeyed law in the nation, perhaps only topped by traffic offences.”
It’s an interesting story, not least because it has unearthed a hard-to-get number that we haven’t, from memory, seen before:
“The IPO documents for Intertrust estimate in 2014 the “total value of the global trust and corporate services market … was estimated at approximately €5.6 billion in revenue.”