Useful quotations

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A breed apart

”Real rich people figure out how to dodge taxes.”
George W. Bush, 2004
”We don’t pay taxes. Only the little people pay taxes”
Leona Helmsley, property heiress
”I'm not prepared to re-enact the French revolutionary renunciation of the rights of the nobility."
Lord Conrad Black,disgraced publishing tycoon
(News Corp's) profits, declared in Australian dollars, were A$364,364,000 in 1987, A$464,464,000 in 1988, A$496,496,000 in 1989 and A$282,282,000 in 1990. The odds that such figures were a happy coincidence are 1,000,000,000,000 to one. That little grace note in the sums is accountant-speak for ‘Fuck you.’ Faced with this level of financial wizardry, all the ordinary taxpayer can do is cry ‘Bravo l’artiste!’
John Lanchester, London Review of Books, February 2004
We are not the successor of, we are not a continuation of, Western civilisation. We are a unique and different civilisation.
Grover Norquist, anti-tax president of Americans for Tax Reform, cited in Perfectly Legal by David Cay Johnston, p3
Flat Tax: An effort by the well-to-do to shift the burden of taxes to the middle and lower classes, where it doubtlessly belongs because they don't have enough sense to become rich so they can afford their own accountants.
The Devil's Dictionary of Taxation: Taxanalysts, October 13, 2008
However hard it is for them to enter the Kingdom of Heaven, the super-rich have no difficulty entering the United Kingdom of Tax Haven.
UK Labour MP Michael Meacher, writing about Britain's domicile rule, 2007.
How do I possess that power, that sovereignty? Through privacy. Through the fact that nobody knows. Through the fact that I have to account to no-one.
Ian Fleming, Dr No
We now live in a separate economy, we live on a separate level to the vast majority of people in the country. We don't send our kids to the same schools, we have more choice over schools, we have more choice over health, we have more choice over where we live, we have more choice over where we go on holiday and what we do for our jobs. And we live in a completely different world to the people we live next door to.
Wealthy lawyer quoted in Unjust Rewards, a book about inequality and wealth, 2008, by Polly Toynbee and David Walker
These élites "have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past whose only useful function is to facilitate the elite's global operations."
Samuel Huntingdon , inventor of the term "Davos Man," on Davos Man
Setting aside both the fanciful and the insidious theories of puppet masters and their cabals, we must recognise that there is something new afoot, a huge imbalance in the global distribution of power that concentrates great influence in among informal clusters of elites. These elites often transcend or supplant the insititutions of the past: national governments, systems of law that could not keep pace with global relaities, and even the earnest but incomplete efforts of the past half century at creating effective multinational organisations.
David Rothkopf, in his book "Superclass"
What this boils down to – and this is one of the most Postmodern things about Murdoch – is that he is in a sense not located anywhere.
John Lanchester, London Review of Books, February 2004, on Rupert Murdoch, whose tax bill stayed below ten cents in the dollar for the entire decade from 1989.

Accountability from tax

For imposing taxes on us without our consent
[American Declaration of Independence]
The payment of taxes gives a right to protection.
[James M. Wayne]
Taxation is the new frontier for those concerned with state-building in developing countries. The political importance of taxation extends beyond the raising of revenue. We argue in this book that taxation may play the central (their emphasis) role in building and sustaining the power of states, and shaping their ties to society. The state-building role of taxation can be seen in two principal areas: the rise of a social contract based on bargaining around tax, and the institution-building stimulus provided by the revenue imperative. Progress in the first area may foster representative democracy. Progress in the second area strengthens state capacity. Both have the potential to bolster the legitimacy of the state and enhance accountability between the state and its citizens.
[Taxation and State-Building in Developing Countries: Capacity and Consent, January 2008]
Paying taxes is perhaps the most fundamental way in which private and corporate citizens engage with broader society. Tax revenues are the lifeblood of the social contract.
[Christensen and Murphy: The Social Irresponsibility of Corporate Tax Avoidance: Taking CSR to the Bottom Line, Development Journal, vol 47(3) 2004 p 37-44]

Accountants, lawyers and other enablers and intermediaries

‘Without reservation they think advisers had undermined spending plans by governments."
Dave Hartnett, Director-General of UK Revenue & Customs, July 2007. He said every country involved in a recent OECD project believed tax advisers had an adverse effect on government budgets.
“Our investigation revealed a culture of deception inside KPMG’s tax practice.”
Senator Carl Levin, the senior ranking member of the US Senate.
The adage that a bird in the hand is worth two in the bush is now old hat. A conservative accountant counts the bag at the end of the shoot and a less conservative one registers the numbers as the birds fall from the sky. But the modern accountant not only eats what he kills but also takes credit for the expected cull as soon as the hunters’ guns are primed.
John Kay, Financial Times, Oct 14, 2008
It's too early to say whether we will see more prosecutions of lawyers who helped engineer tax shelters, said John Moscow, who spent 30 years at the New York County DA's office investigating fraud and white-collar crime. But there are "a couple thousand people in the world who run this industry, and if they were to be prosecuted, tax collections would rise without an increase in tax rates.
John Moscow , veteran crime-fighting lawyer, 2009
Men have to do some awfully mean things to keep up their respectability
George Bernard Shaw
The auditing industry is the private police force of capitalism.
Prem Sikka, John Dunn, 1999
The role and influence of tax intermediaries on the tax-paying public, including corporates is significant. Tax administrations need to demonstrate that they operate on the basis of fairness, that they are transparent, that the laws governing taxes are clear and that good governance is practiced. This goes along with making it easier to comply through innovative measures designed to make paying tax easier. Intermediaries, however, influence these attempts to raise levels of compliance for good and for ill. On the one hand they may make the tax system more accessible to taxpayers. On the other they may market or facilitate aggressive tax strategies that undermine the policies of government and influence perceptions around what is fair and equitable. In our environment, this is of particular concern as the role of the fiscus in development, redistribution and providing stability and predictability cannot be understated.
Trevor Manuel, South Africa's Finance Minister, January 2008
The industry is going to crap.
David Kelley, U.S. attorney in New York in charge of a case against KPMG on selling fraudulent tax shelters.
An essential component of any agenda for more stable capital flows is better accounting, for accountancy plays a vital role in economic development. At its simplest, economic growth is the cost-conscious pursuit of productivity. . . In this respect the commercialisation of the professional ethos in accountancy has been singularly unfortunate. The fact that the big accountancy firms franchised their brand names outside the US and Europe without maintaining the quality of their audits has contributed to corporate scandals in the emerging market and transition economies, so eroding investor confidence. . . . The work of bodies like the IASB will comprise a critical element in the puluming of globalization. . . . it would be greatly helped if its funding base could be broadened to the point where its dependence on the big professional firms and large corporations was insignificant.
From Going off the Rails: Global Capital and the Crisis of Legitimacy, by John Plender, Wiley, 2003
At some point . . . such conduct passes from clever accounting and lawyering, to theft from the people.
US Internal Revenue Service, in a case dealing with KPMG's "phoney tax losses."
"(IFRS-8) moves accounting into uncharted waters that only the US have looked at before (and not without some difficulties arising for them on the way). Worse, it abandons any commitment to accounting on the basis of geography which breaks the links between a corporation and the societies which grant its licence to operate, and as such undermines the whole essence of Corporate Social Responsibility."
Richard Murphy , Tax Research LLP, April 2007
"I have had Russian clients introduced to me who appear to have built up wealth . . its not just the source of the wealth though. It's the attitude to advice. Too many clients want to hide behind the institutional name of the law firm - "my lawyer is X". It gives a level of approval the client might not otherwise get."
Charles Lubar, London partner, Morgan Lewis & Bockius
"In many respects tackling the secrecy culture of tax havens should be the highest priority for anti-corruption campaigners because the agents who create and maintain this secrecy space include some of the most powerful and privileged elites with society. It is bankers, lawyers and accountants who create and operate the corruption interface linking illicit activities to the mainstream economies."
John Christensen, Tax Justice Network
"There are plenty of carrots encouraging accounting firms to look the other way ... there had been one big stick discouraging them. If things went awry, they could be sued ... In 1995, Congress adopted legislation intended to limit securities litigation ... in doing so, they provided substantial [liability] protection for the auditors. But we may have gone too far: insulated from suits, the accountants are now willing to take more 'gambles'.
Joseph Stiglitz, in his book The Roaring Nineties
With complexity of commercial activities, regulators need some expert input and thus need to consult the relevant corporations and industries. However, that should not result in domination by technical experts. As a crude analogy, consider the case of nuclear energy. In building any reactor and power plant, nuclear experts should be consulted, but whether we should have nuclear energy is a social and political decision.
Professor Prem Sikka, University of Essex, Jan 29, 2008.
Mark-to-market accounting is criticised today for forcing banks to recognise that unsalable assets have little value. Companies resent the obligation to use mark-to-market accounting when the market is down. But the public should be more concerned for the implications of mark-to-market accounting when the market is up. The authors Bethany McLean and Peter Elkind describe how Enron’s Jeff Skilling, in a fit of uncharacteristic generosity, once ordered champagne for all his colleagues. The toast was in appreciation of a letter from the Securities and Exchange Commission agreeing that Enron could make wide use of mark-to-market accounting.
John Kay, Financial Times, Oct 14, 2008

Aid and finance for development

Pay your taxes, and set your country free
Michael Waweru, commissioner-general of the Kenya Revenue Authority, November 2007
For the first time in the 200-year run of the free-market system, we have built and expanded an entire integrated global financial structure, the basic purpose of which is to shift money from poor to rich. . . In my reading of history and in my judgment, this reality is the ugliest chapter in global economic affairs since slavery.
Raymond Baker, author of Capitalism's Achilles Heel, June 2007
Developing countries are estimated to lose to tax havens almost three times what they get from developed countries in aid.
Angel Gurría, OECD Secretary-General, November 2008
Tax havens have a bigger impact on developing countries than on developed countries . . . there is an enormous drainage of revenues to tax havens. This is equivalent to around 7 to 8 percent of gross domestic product for the African continent and a multiple of the aid it gets from developed countries.
Jeffrey Owens, tax director at the OECD, November 2008
It is a contradiction to support increased development assistance, yet turn a blind eye to actions by multinationals anothers that undermine the tax base of a developing country.
Trevor Manuel, South African Finance Minister, January 2008
"Taxation is the new frontier for those concerned with state-building in developing countries. The political importance of taxation extends beyond the raising of revenue. We argue in this book that taxation may play the central role in building and sustaining the power of states, and shaping their ties to society. The state-building role of taxation can be seen in two principal areas: the rise of a social contract based on bargaining around tax, and the institution-building stimulus provided by the revenue imperative. Progress in the first area may foster representative democracy. Progress in the second area strengthens state capacity. Both have the potential to bolster the legitimacy of the state and enhance accountability between the state and its citizens."
Taxation and State-Building in Developing Countries: Capacity and Consent, Edited by Deborah Bräutigam, Cambridge, 2008
I have made revenue collection a frontline institution because it is the one which can emancipate us from begging, from disturbing friends... if we can get about 22 percent of GDP we should not need to disturb anybody by asking for aid....instead of coming here to bother you, give me this, give me this, I shall come here to greet you, to trade with you.
Yoweri Museveni, President of Uganda (which collects 11% of GDP in taxes and receives a further 11% of GDP in aid), Washington DC, September 2005.

“One might have thought that money would flow from rich countries to the poor countries; but year after year, exactly the opposite occurs. One might have thought that the rich countries, being far more capable of bearing the risks of volatility in interest rates and exchange rates, would largely bear those risks when they lend money to the poor nations. Yet the poor are left to bear the burdens. Of course, no one expected that the world market economy would be fair; but at least we were taught that it was efficient. Yet these and other tendencies suggest that it is neither.
Joseph Stiglitz in his review of On Globalisation by George Soros in the NY Reivew of books.
The real spelling of aid is t.a.x.
Jeffrey Owens, head of tax at the OECD, Nov 30, 2008. Speaking at a Doha side event on fighting tax evasion and avoidance.
Smaller, poorer countries with tax administrations that are less sophisticated cannot be expected to develop the expertise required to unravel the complex structures that multinationals and other large companies put in place to minimise tax.
Trevor Manuel, South African Finance Minister, January 2008
Through most of the 1990s and into the current decade, aid as been running about $50 to $80 billion a year from all sources. Consider the comparison: $50 to $80 billion of aid in; $500 to $800 billion of illicit money out. In other words, for every $1 that we have been generously handing out across the top of the table, we in the West have been taking back some $10 of illicit money under the table. There is no way to make this formula work for anyone, poor or rich.
Raymond Baker, author of Capitalism's Achilles Heel, June 2007
The OECD has led the way in fostering partnerships between nations in response to many of these global public goods issues. These partnerships must be applauded but they must be extended to poorer countries who are often the victims of organised efforts to undermine their tax bases.
Trevor Manuel, South African Finance Minister, January 2008
There’s a growing acceptance internationally that tax evasion and its facilitation by so called “tax havens” is counterproductive to international development and growth and ultimately damaging to the economies of those countries themselves.
Frank Daly, (former) chairman of the Irish Revenue Commissioners, November 2002
Evidence suggests that income redistribution, via taxes and transfers – the latter of which are key to social protection – are more efficient for poverty reduction than economic growth per se.
World Health Organisation , Commission on Social Determinants of Health, 2008.
Aggressive tax avoidance is a serious cancer eating into the fiscal base of many countries
Pravin Gordhan, South African finance minister, May 2009
Low-income countries often have relatively weak direct tax institutions and mechanisms and a majority of the workforce operating in the informal sector. They have relied in many cases on indirect taxes such as trade tariffs for government income. Economic agreements between rich and poor countries that require tariff reduction can reduce available domestic revenue in low income countries before alternative streams of finance have been established. Strengthened progressive tax capacity is an important source of public finance and a necessary prerequisite of any further tariff-cutting agreements. At the same time, measures to combat the use of offshore financial centres to reduce unethical avoidance of national tax regimes could provide resources for development at least comparable to those made available through new taxes. As globalization increases interdependence among countries, the argument for global approaches to taxation becomes stronger.
- World Health Organisation , Commission on Social Determinants of Health, 2008.
This is a seductive idea: freeing up trade is good, why not also let capital move freely across borders? But the claims of enormous benefits from free capital mobility are not persuasive. Substantial gains have been asserted, not demonstrated. . . The myth has been created by what one might christen the Wall Street-Treasury complex, following in the footsteps of President Eisenhower, who had warned of the military-industrial complex.
Jagdish Bhagwati, Foreign Affairs, 1998
'Public expenditure is not some wasteful luxury. It aims to be an investment in a more prosperous and pleasant society. No business discusses investment without examining the different items it might invest in. Likewise no one should talk of tax cuts unless prepared to say which expenditures they will forgo.'
Richard Layard (LSE) from 'The real reasons for Public Expenditure' FT 1 Nov 1993
It's far easier to levy a tariff than to collect value added tax. You just need a guy at the border . . . But as more and more countries join the World Trade Organisation (WTO) they join in the commitment to reduce tariffs.
Jeffrey Owens , head of tax at the OECD, noting that these easy-to-collect tariffs now constitute as much as half of many poorer countries' entire tax collection.

Banks, banking and finance

There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is a part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.
John Kenneth Galbraith, A short history of financial euphoria
If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.
Thomas Jefferson
The tax avoidance was so big it became the engine of growth for the whole of the investment banking arm.
Barclays whistleblower, March 2009
At the core of the financial system remain the big banks, which are insured, explicitly and implicitly, by governments. Regulators have to ensure that excessive risk-taking is not going on, with the gains once again privatised and the losses shifted on to taxpayers. Financial Times editorial, June 25, 2007
A group of Mexicans, supported by the private banks, have taken more money out of Mexico in the past two years than imperialists ever exploited during the entire history of our country.
José Lopez Portillo, Mexican president, September 1982
It is easier to reward people on the basis of what they believe they are worth than to recover bonuses from people whose ideas turn out not to have been as good as they thought. Even Newton’s heirs might have struggled to repay when Einstein demonstrated flaws in Newtonian mechanics.
John Kay, Financial Times, Oct 14, 2008
I do think it is rather unattractive that so many young people, when contemplating careers, look at the compensation packages available in the City and think that these dominate almost any other type of career. It’s not a very attractive situation that such a high proportion of our talented young people naturally look at the City and think it is the only place to work in. It shouldn’t be. It should be one of the places, but not the only one.
Mervyn King, Bank of England Governor, April 29, 2008
The world's financial markets seem shocked and surprised, like Bagpuss being disappointed to learn that the mice from the mouse organ couldn't really create an endless supply of chocolate biscuits from thin air.
Charlie Brooker, following the Dubai fiasco, November 2009.
(I wonder) how long it will be found necessary to pay City men so entirely out of proportion to what other servants of society commonly receive for performing social services not less useful or difficult.
John Maynard Keynes, Indian Currency & Finance
No agency in the US or the UK has the resources or the commitment to challenge SCM (Barclays' Structured Capital Markets division). SCM has huge amounts of resources, the best minds rewarded by millions of pounds. Compare this with HMRC [Her Majesty's Revenue & Customs] recently advertising for a tax and accounting expert with the pay at £45,000. . . . HMRC will never, in its current state, be up to the job of combating this business.
Anonymous whistleblower, Barclays, March 2009
Securitization was based on the premise that a fool was born every minute. Globalization meant that there was a global landscape on which they could search for those fools -- and they found them everywhere.
Josep Stiglitz, October 2008
The process by which banks create money is so simple that the mind is repelled
John K. Galbraith, in “Money: Whence it came, where it went”, p. 29. (also see this blog article
When you're a banker, you have to know how to have blinkers.
Jean-Didier Maille, banker on trial in Paris in the "Angolagate Affair," explaining his involvement in a murky arms-for-oil deal. October 2008.
The liberal who understood why free finance is capitalism's greatest enemy
Will Hutton on John Maynard Keynes, November 2008
Candy floss money.
Gillian Tett, Financial Times, January 2007, as financial technology spun real money into an exaggerated bubble that, like its fairground equivalent, collapses ultimately.
I may like many bankers, but I rather dislike banks. I recognise their necessity, but fear their irresponsibility. Worse, they are irresponsible partly because they know they are necessary. No industry has a comparable talent for privatising gains and socialising losses. Participants in no other industry get as self-righteously angry when public officials – particularly, central bankers – fail to come at once to their rescue when they get into (well-deserved) trouble.
Martin Wolf, Financial Times, Jan 15, 2008.
People like this shouldn't simply get away with this and carry on playing golf
Marcel Ospel, Swiss politician, on the former head of UBS bank after a giant government bail-out
The financing plague is wreaking greater and greater havoc throughout the world. As in Medieval times, it is scourging country after country. It is transmitted by rats and its consequences are unemployment and poverty, industrial bankruptcy and speculative enrichment.
José Lopez Portillo , Mexican president, September 1982
The institutions that prospered on the upside expect rescue on the downside. They are right to expect this. But this can hardly be a tolerable bargain between financial insiders and wider society. Is such mayhem the best we can expect? If so, how does one sustain broad public support for what appears so one-sided a game?
Martin Wolf, Financial Times, February 2008
Bad money drives out good.
Sir Thomas Gresham (c1519-1579), a merchant, financier and government under Elizabeth 1. This phrase is sometimes known as "Gresham's Law"
The whole culture of Anglo-American finance is increasingly subversive of regulation, taxation and democratic values, even where it remains within the law.
John Plender, "The hijack that made Enron happen", Financial Times, 28 January 2003
The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking . . . All of this behaviour supporting the aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.
Andrew Lahde, founder of California’s Lahde Capital, Financial Times, October 2008
Now that you are in receipt of taxpayers' money, will you stop implementing tax avoidance schemes?
UK Liberal Democrat MP Colin Breed challenges Lloyds Bank, Feb 2009
Because financial markets permit many more fast, transactional, short-term decisions than any other, they swing faster with the crowd than any other part of the economy. Alternating between asset price bubbles and hoarding of cash is in their DNA. And free-market economists' attempts to prove otherwise, along the way serving the interests of a financial plutocracy, are just wrong. . . if farming were to be organised like the stock market, (Keynes) once wrote, a farmer would sell his farm in the morning when it was raining, only to buy it back in the afternoon when the sun came out.
Will Hutton, November 2008
Partly because the very complexity of banking, the way in which, sometimes just investment banks and sometimes others have sought to develop instruments in order to avoid pay taxes has in itself posed a systemic threat to the system
Alistair Darling, UK Chancellor, March 2009

Britain and its dependencies

The Chancellor should end the tax abuses which reach to the heart of our public finances by indulging the super rich at the expense of all the rest of us.
UK shadow chancellor Gordon Brown, now Prime Minister, writing in 1993
The City of London,that state within a state which has never transmitted even the smallest piece of usable evidence to a foreign magistrate.
Eva Joly, investigating magistrate who broke open the "Elf Affair," Europe's biggest corruption investigation. In her book Notre affaire à tous, page 243
Over and over again we have seen that there is in this country another power than that which has its seat at Westminster. The City of London, a convenient term for a collection of financial interests, is able to assert itself against the Government of the country. Those who control money can pursue a policy at home and abroad contrary to that which has been decided by the people. The first step in the transfer of this power is the conversion of the Bank of England into a State institution.
Former British Prime Minister Clement Attlee, The Labour Party in Perspective, p179
One inhabitant of Sark was found to be on the board of as many as 2,400 companies, most of which he knew almost nothing about. Another was a nominee director of the Mil-Tec Corporation, registered in the Isle of Man, which was involved in supplying arms to the Rwandan Hutu militias at the time of the 1994 genocide.
New Statesman, 1998
Most of these were former British colonies. Unquestionably it has been the collapse of the British Empire which has bequeathed most micro-states to the New International Order or Disorder.
Tom Nairn, Faces of Nationalism, 1997 p146
The whole culture of City opacity - the tax havens, the seclusion of liabilities off-balance sheet, the offshore investment vehicles - must be subjected to the harsh glare of public scrutiny. For a generation, the City and Wall Street have assumed an inalienable right to make as much money as possible, in whatever way they saw fit, while paying as little tax as possible. Policy-makers accepted that such unchallenged greed served the greater good. That consensus must end.
The Observer, on the turmoil in global markets, September 2008
“A Labour Chancellor will not permit tax reliefs to millionaires in offshore tax havens.”
Gordon Brown, Hansard, 1998
The very existence of the resident but non-dom category is an outrageous sop to a small number of highly vocal and well-connected rich folk and their lobbyists. The unequal treatment of equals introduced by the creation of the non-dom (resident but non-domiciled for the purpose of income tax and inheritance tax) category undermines respect for the law among the tax paying public at large. . . Every UK resident should pay UK income taxes on his/her worldwide income. End of story.
Willem Buiter, Financial Times, February 2008
It may be helpful to think of the financial networks that converge on London as a recharged version of the British Empire, held together by modems rather than gunboats and overseen by the mother of all anachronisms, the British political system.
Daniel Finn, London Review of Books, July 2009
Have you ever examined UK trust law? All our bankers and financial lawyers say that if you really, really want to hide money, go to London and set up a trust
Luxembourg politician talking to UK MP Dennis MacShane, after he had complained about bank secrecy
“It has taken me a long time to understand that there is a connection between colonial powers and corruption. “The United Kingdom has maintained its privileges by allowing British companies to operate from their own tax havens. The expansion in the use of these jurisdictions has a link to decolonisation. It is a modern form of colonialism," she says adding that many of the big tax havens in the world are under British control.
Eva Joly, the Norwegian-born investigating magistrate who broke open the “Elf Affair” in Paris, regarded as Europe’s largest fraud investigation since the Second World War. Interview carried in Development Today.
The U.K. Treasury should tell banks receiving investment from the government to close their operations in offshore tax havens. . . It seems totally inappropriate for banks funded by the taxpayer to be systematically avoiding British tax or helping customers to do so.
Vince Cable, UK opposition Liberal Democrat finance spokesman, after the partial nationalisation of several large British banks.
Swiss justice has frequently collided with a lack of co-operation from British justice, demonstrating a duplicitous gap between what it says and what it does.
Bertrand Bertossa, former top Geneva magistrate, February 2009
"If some of that (the banking sector) were to migrate overseas that would be unfortunate but given the costs of carrying that financial system around, it may be a price worth paying."
Andrew Haldane, Bank of England, December 2009
“We feel that this (lack of provision of an effective regulatory system) might be a grave omission, since it is notorious that this particular territory, in common with Bermuda, attracts all sorts of financial wizards, some of whose activities we can well believe should be controlled in the public interest”
Extract from a memorandum concerning the Bahamas dated 3rd November 1961 submitted by Mr W.G.Hulland of the Colonial Office to Mr B.E.Bennett at the Bank of England. (From the Bank of England archive.)
“The entire UK economy has become, in effect, a giant hedge fund with a massive one-way bet on financial services - and no Plan B for the day when the City goes off the boil.” If and when it does, the costs of the government's failure to understand the managerial economy will be high - for all of us.
Simon Caulkin, The Observer, before the big banks started collapsing.
"We cannot run the tax economy of this country as a large-scale version of Chelsea Football Club.''
UK Labour MP Jim Cousins, July 2007
The HMRC would not generally be able to compel information to be disclosed by Jersey subsidiaries and/or branches of UK institutions. . . A high threshold therefore exists before the Jersey authorities will accede to a request under a TIEA. For example in the past year, there have been just four requests from the US under the terms of the TIEA. There is no automatic exchange of information under any circumstances and no ‘fishing expeditions’ for information. Strict confidentiality provisions in the agreement preclude any information being passed to third parties without the express written consent of the requested country.
Jersey Finance, explaining why it is a secrecy jurisdiction, in a document published in December 2008 claiming to show why it is not a secrecy jurisdiction. Almost immediately after TJN drew attention to this, these words were removed from the web site; it is now permanently available here .
The accountancy firm Grant Thornton worked out that the UK’s 54 billionaires paid income tax totalling just £14.7m on their £126bn combined fortunes.
The Guardian, March 2007
The libel laws of England and Wales are tilted so heavily against the defendant and involve such monumental costs that they amount, in effect, to censorship by private interests: a sedition law for the exclusive use of millionaires. . . English libel law is an international menace, a national disgrace, a pre-democratic anachronism. It defends crooks, terrorists and tyrants from investigation. It threatens the free speech of people all over the world and causes untold damage to the reputation of this country. And neither the British government nor the British parliament gives a damn.
George Monbiot, July 2008
The house price boom had been " one of the major adverse developments affecting the UK economy in 20 years".
M.R. Weale, director of the National Institute of Economic and Social Research, on how rising house prices represented a transfer of wealth from young people to old.
Britain has a particular responsibility for tackling the tax havens since so many of these toxic fiddle factories are initricately linked to the City of London and politically tied to Britain.
John Christensen, Tax Justice Network, October 2008
Since the Al-Yamamah deal was signed in 1985, Britain has been supporting, financially and militarily, one of the world's most despotic regimes. ... This makes a mockery of successive governments' claims to be supporting democracy around the world, and ensures our security is now entangled with that of the Saudi princes. ... Close down Deso <Britain’s Defence Export Services Organisation>. Reopen the investigation. Sack the attorney general and the senior civil servants at the Ministry of Defence. Open a public inquiry to determine what Blair knew. Wage war on tax havens and secret offshore accounts. Hold BAE to account. Then lecture the rest of the world on good governance.
George Monbiot, The Guardian, June 8, 2007.
We must now build a new global financial order founded on transparency not opacity, rewarding success not excess, responsibility not impunity and which is global not national.
Gordon Brown, September 2008, amid financial chaos, while his officials worked to undermine global agreements on taxation.
Britain’s legal system allows people depositing money to hide their identities behind a trust system. The consequence of this is that the authorities’ investigations reach no conclusions, because the banks really don’t know who their customers are.
Pierre Mirabaud, president of the Swiss Banking Association, 2004, after Swiss investigators freezing funds from the late Nigerian dictator Sani Abacha followed a paper trail that consistently led to the City of London. He described Britain's exchange of information as "a farce."
They provide an easily accessible, English speaking, comfortable bolt-hole for every type of avoidance of UK tax . . (and that they are) besmirching the name of the offshore British Islands by attracting tax dodgers that bleed of vital revenue from the UK.
Labour MP George Foulkes, Hansard, 1981 (quoted in Hampton p78)

Corporations, intermediaries, and corporate responsibility

Corporate responsibility begins with paying tax; that means paying the right tax in the right place at the right time.
John Christensen, Chatham House, March 2004
‘Without reservation they think advisers had undermined spending plans by governments."
Dave Hartnett, Director-General of UK Customs, July 2007. He said every country involved in a recent OECD project believed that tax advisers and their actions had an adverse effect on government budgets.
Tax is not a cost to a company. It is a distribution out of profits. That puts tax in the same category as a dividend - it is a return to the stakeholders in the enterprise. This reflects the fact that companies do not make profit merely by using investors' capital. They also use the societies in which they operate, whether that is the physical infrastructure provided by the state, the people the state has educated, or the legal infrastructure that allows companies to protect their property rights. Tax is the return due on this investment by society from which companies benefit.
Richard Murphy, The Guardian, November 2007
Tax shelters are to democracy what pollution is to the environment
David Cay Johnston, in Perfectly Legal: The Covert Campaign to Rig Our Tax System
Too many boards right across Britain tick the green and diversity boxes, then reward their finance or tax director for cheating their customers, the taxpayer
Lord Oakeshott, UK Liberal Democrat spokesman, Feb 2009
There is dramatic polarisation between those who see tax as simply a§ cost to be avoided, versus those who acknowledge stakeholder interest in the issue and recognise tax as part of their social contract with significant ethical issues. . . . tax will soon prove as challenging for business as the early days of fair-trade campaigning.
SustainAbility "Taxing Issues: Responsible business and tax"
The question arises whether the policy of a single state occupying a critical position should be permitted to grant management unilateral control untrammeled by other interests. . . the raison d'etre behind the whole system has been achieved - revenue for the state of Delaware . . . necessary high standards of conduct cannot be maintained by courts shackled to public policy based upon the production of revenue; pride in being 'number one;' and the creation of a 'favorable climate' for new incorporations.
William L. Cary, former head of the Securities and Exchange Commission, in a seminal 1974 article exploring Delaware's lead in a regulatory "race to the bottom" between U.S. states.

Corruption, Crime, Cheats and Monkey Business

“The difference between tax avoidance and tax evasion is the thickness of a prison wall.”
Denis Healey, a former British chancellor.
Joly says the expansion of tax havens in recent years has also become a problem for the market. She calls dealing with tax havens “phase two" in the corruption debate.
Development Today, in an interview with Eva Joly.
The U.S. should not be financing itself by opening the door to foreign tax cheats and giving them assurance their information will not be shared with their home governments.
Jack Blum, TJN senior adviser, testifying before the US Sentate Committee on Finance, July 24, 2008
Singapore's success came mostly from being the money laundering center for corrupt Indonesian businessmen and government officials. . . to sustain its economy, Singapore is building casinos to attract corruption money from China.
Andy Xie, Morgan Stanley economist, in an internal e-mail that cost him his job
The police work with criminals on a daily basis — we have paid informers who help us uncover drug trafficking or other crimes. Particularly with tax fraud, you'd never be able to get at these people otherwise.
Konrad Freiberg, head of Germany's police union, responding to Swiss cries of outrage that Germany's tax authorities would buy supposedly "stolen" information on German tax evaders
The magistrates are like sheriffs in the spaghetti westerns who watch the bandits celebrate on the other side of the Rio Grande... They taunt us—and there is nothing we can do.”
Eva Joly, furious about how tax havens stonewalled her judicial probes.
Perhaps you are thinking that anti-money laundering laws are designed to address this. Well, yes and no. Many nations have major holes in their anti-money laundering laws. Take the United States for example. We bar only the incoming proceeds of drugs, bribery, and terrorism. It remains legal to bring into the United States the proceeds of other forms of foreign crimes, including racketeering, handling stolen property, credit fraud, counterfeiting, contraband, slave trading, alien smuggling, trafficking in women, environmental crimes, and of course, all forms of tax-evading money. Without trying to cover each country in Europe, suffice it to say that no western nation does a good job of enforcing its anti-money laundering regime.
Raymond Baker, money laundering expert and author of Capitalism's Achilles Heel, June 2007
Abusive tax shelters are usually tough to prosecute. Crimes such as terrorism, murder, and fraud produce instant recognition of the immorality involved. Abusive tax shelters, by contrast, are often “MEGOs,” meaning “My Eyes Glaze Over.” Those who cook up these concoctions count on their complexity to escape scrutiny and public ire.
Carl Levin, introducing the Stop Tax Haven Abuse Act in the U.S.
The problems of offshore tax evasion are exacerbated by the longstanding “revenue rule,” which, put crudely, is a common law rule that says no government should help enforce the tax laws of another government. . . . the revenue rule gives professionals and financial institutions the idea that helping people evade the taxes they owe their own governments is a legal and indeed honorable business as long as you are not in their country. That proposition has no place in today’s world. Mexico cannot pay its police enough to keep them honest because it lacks the tax revenue. We have an all out drug war on the Mexican border and little hope that the Mexican government can end it. Helping Mexicans avoid Mexican tax is not benign. It has a direct impact here. Likewise, having an offshore industry ready to serve U.S. tax cheats is not benign.
Jack Blum , TJN senior adviser, testifying before the US Sentate committee on finance July 24, 2008.
Tax evasion by means of offshore investment is quite easy for U.S. resident individual investors. U.S. tax, securities, and anti-money laundering laws, as well as U.S. information agreements, don't do much to stop tax evasion.
Martin A. Sullivan and Lee A. Sheppard, TaxAnalysts/Tax Notes
Offshore (is) a kitchen, where corporate books are cooked.
Jack Blum, April 2009
A $1,000 fine is like a jaywalking ticket for robbing a bank.
US Senator Carl Levin, Feb 2007, on the current level of fines for lawyers who help tax evaders head off questioning from the Internal Revenue Service (IRS.)
"There is very little evidence that the reports banks are required to submit have been a deterrent to illegal activity or a method of identifying criminal behavior."
Florida Bankers' Association, July 2008
Each year, the States allow persons to form nearly 2 million corporations and limited liability companies in this country without knowing – or even asking -- who the beneficial owners are behind those corporations. . . . our law enforcement officials have too often had to stand silent when asked by their counterparts in other countries for information about who owns a U.S. corporation committing crimes in their jurisdictions. The reality is that the United States is as bad as any offshore jurisdiction when it comes to responding to those requests – we can’t answer them because we don’t have the information. Senator Carl Levin, May 2008
“Illicit, disguised and hidden financial flows create a high-risk environment for capitalists and a low-risk environment for criminals and thugs. When we pervert the proper functioning of our chosen system, we lose the soft power it has to project values across the globe. Capitalism itself then runs a reputational risk. As it is now, many millions of people in developing and transitional economies scoff at free markets, regarding the concept as a license to steal in the same way as they see other others illicitly enriching themselves.”
Raymond Baker, in his book Capitalism's Achilles Heel
'We feel that this (lack of provision of an effective regulatory system) might be a grave omission, since it is notorious that this particular territory, in common with Bermuda, attracts all sorts of financial wizards, some of whose activities we can well believe should be controlled in the public interest.'
WG Hulland (Colonial Office) to BE Bennett (Bank of England) 3 NOV 1961 [memorandum concerning Bahamas]
The structures are mere pieces of paper with no commercial reality. They are backed by formalities that allow them to pass paper checklists in other jurisdictions including the United States. For example, the island of Nevis, part of the Federation of St. Kitts and Nevis, is home to tens of thousands of corporations, all of which have boards of directors. When banks and brokerage firms ask about the control of the corporation for AML purposes, the person opening the account furnishes the passport photos of the nominee shareholders, officers and directors. The same twenty people are the nominees for thousands of corporations. They have no knowledge of, or fiduciary responsibility for the corporation’s business. If the nominee directors and officers were water-boarded they could not tell you what the corporation was doing or who owned it.
Jack Blum , TJN senior adviser, testifying on trusts and other offshore products before the US Sentate committee on finance, July 24, 2008.
"If Swiss banking secrecy were abolished, a large part of Switzerland's private banking business would disappear."
Dr Gunter Woernle, author of Wernlim directory of Swiss private banking - FT, 1997
We must reconsider what constitutes corruption. It is right to be concerned by bribery and embezzlement of public assets, but tax evasion is generally overlooked even though it represents theft of public assets and, in terms of orders of magnitude, has far greater impact on public revenues than bribery and embezzlement. Tax evasion involves abusive behaviour at the intersection between private activity and the public interest. It involves minorities bypassing accepted social norms, and provides one set of rules for the rich and well connected, and another set of rules for the poor and weak. More insidiously, it involves privileged elites, who use secrecy jurisdictions to undermine the will of elected parliaments. It is time that secrecy jurisdictions are recognised for what they really are: a full-on assault on the sovereignty of nation states, a direct attack on democracy, and a cancer running through the veins of contemporary capitalism.
John Christensen, director, Tax Justice Network, September 2008
In Belize you can be the grantor, the trustee, and the beneficiary, and have the trust considered valid. You can include provisions allowing you to redraw the trust instrument and add a flee clause which allows a change in situs for the trust in case of criminal or tax investigation. Jersey trusts can be administered outside of Jersey by non-citizens, and with no records kept in Jersey. Jurisdictions in search of financial services business are engaged in a race to the bottom to provide tools for people trying to hide money.
Jack Blum, TJN senior adviser, testifying before the US Sentate committee on finance, July 24, 2008.
'Almost the last thing (Adam Smith) wrote..was a passage he added to the sixth edition of the Theory of Moral Sentiments. In it he describes the admiration accorded to the rich and the contempt meted out to the poor not just as a fault but as the "great and most universal cause of the corruption of moral sentiments."'
James Buchan LRB vol 17 no 24 Dec 1995
A senior tax professional at accounting giant KPMG compared possible tax shelter fees with possible tax shelter penalties if the firm were caught promoting an illegal tax shelter. This senior tax professional wrote the following: “[O]ur average deal would result in KPMG fees of $360,000 with a maximum penalty exposure of only $31,000.” He then recommended the obvious: going forward with sales of the abusive tax shelter on a cost-benefit basis.
US Senator Carl Levin, February 2007
Yukos "exercised its constitutional right to manicure its tax affairs"
[Yukos CFO Bruce Misamore, quoted in Platts, 03 12 2003]
There’s a building in the Cayman Islands that supposedly houses 12,000 U.S. corporations, which means it is either the largest building in the world or the biggest tax ripoff in the world, and I think we know which one it is.
Barack Obama, US Senator, 2007
"Offshore tax havens have become so ingrained in the international business system that it will be very difficult for regulators to substantially change it -- not that they shouldn't try. Unfortunately, while its perfectly natural and sensible for companies to minimise tax for shareholders, the same systems can be used for money-laundering by organised crime."
Jeff Katz, chief executive, Bishop International (a corporate investigations group)
"It is the hiding mechanisms we want to get rid of, not the tax havens. Tax rates are not my concern. What I am talking about is the option of hiding criminal money. ... When you have these kinds of structures they can be used by everybody, including terrorists."
Eva Joly In journal Development Today, March 2007
“I see so many similarities, in France and overseas, between state corruption and all kinds of mafia. The same networks, the same henchmen, the same banks, the same marble villas.”
Eva Joly, Notre affaire à tous, 2000
The greater the loss, the greater the profit. How’s that for turning capitalism on its head!
US Senator Carl Levin, Feb 2007, on tax shelter fees typically paid in proportion to the size of projected paper losses which can be used to shelter income from tax.
There is a five-story building in the Cayman Islands that is the home to 12,748 companies. Mr. President, this is a tax dodge. There are not over 12,000 companies doing business out of this building. They are doing monkey business out of this building. They are engaged in a massive tax evasion. This is the kind of thing we ought to shut down. . . This is a picture of a sewer system in Europe. What does a sewer system in Europe have to do with the budget of the United States? Unfortunately, a lot because wealthy investors and companies bought this sewer system in Europe, depreciated it on the books in the United States to reduce their tax in America, and then they leased the sewer system back to the European city that built it in the first place. There are hundreds of billions of dollars involved in these tax scams. It is growing, and it is a cancer that has to be stopped. ... Another committee of Congress has told us that there is $100 billion a year -- over $500 billion over 5 years -- being lost to the U.S. Treasury to these offshore tax haven scams. We suggest cutting that off, stopping it, recovering that revenue.
Chairman Kent Conrad (D-ND) on FY 2008 Senate Budget Resolution March 23, 2007.

Democracy and citizenship

Taxation is the new frontier for those concerned with state-building in developing countries. The political importance of taxation extends beyond the raising of revenue. We argue in this book that taxation may play the central role in building and sustaining the power of states, and shaping their ties to society. The state-building role of taxation can be seen in two principal areas: the rise of a social contract based on bargaining around tax, and the institution-building stimulus provided by the revenue imperative. Progress in the first area may foster representative democracy. Progress in the second area strengthens state capacity. Both have the potential to bolster the legitimacy of the state and enhance accountability between the state and its citizens.
Taxation and State-Building in Developing Countries: Capacity and Consent, Edited by Deborah Bräutigam, Cambridge, 2008
Tax burdens are shifting from companies to ordinary people, whose effective taxation rates in the UK have risen as corporate contributions have fallen. This means corporations not only fail to pay their way, they make others pay for them and undermine the democratic accountability of taxation in the process. This is not just a threat to state services in the developed and developing worlds alike: it's a threat to the whole democratic way of life we enjoy, because a powerful and influential elite is giving clear signals that the way forward is to opt out of society.
Richard Murphy , senior adviser to TJN, The Guardian, November 2007
We can either have democracy in this country or we can have great wealth concentrated in the hands of a few. But we can't have both.
Louis Brandeis, U.S. Supreme Court justice, 1916-1939
We thought until now that crime lived in the shadows of our societies. We find them intimately connected to the great companies or to the most honourable European political leaders.
Eva Joly, from her 2000 book Notre Affaire à Tous.
“Illicit, disguised and hidden financial flows create a high-risk environment for capitalists and a low-risk environment for criminals and thugs. When we pervert the proper functioning of our chosen system, we lose the soft power it has to project values across the globe. Capitalism itself then runs a reputational risk. As it is now, many millions of people in developing and transitional economies scoff at free markets, regarding the concept as a license to steal in the same way as they see other others illicitly enriching themselves.”
Raymond Baker, in his book Capitalism's Achilles Heel
In conditions of civic rights without duties the citizen asserts rights without awareness of duty, and equates liberty with claims to unimpeded satisfaction of demands.
David LOCKE, Two Treatises of Civil Government book 2 para 59
Corporate tax shelters are our number one problem (in enforcing the tax laws), not just because they cost money but because they breed disrespect for the tax system
Lawrence Summers, former US Treasury Secretary quoted in “Corporations’ Taxes are Falling Even as Individuals’ Burden Rises,” The New York Times, February 20, 2000.
It is the duty of the civic order to deny all other claims to dutiless right, demand satisfaction, and self-realisation through unimpeded freedom of action - generally made in the name of liberty itself - where such claims, if allowed, would harm the interests of the citizen-body as a whole."
David Selbourne,The Principle of Duty pp 213-214
Right wing notions of liberty have "increasingly hidden from view the sense of the civic order as a 'commonwealth', for whose condition and well-being the individual citizen is co-responsible and to which he owes determinate duties, duties which are ethically prior to claims of right." p277
David Selbourne, The Principles of Duty, 1994
The heart and soul can find fulfilment in doing worthwhile work, in making a modest personal income and in contributing to the wealth of the whole community through taxation. Christians should take a lead in a public campaign to change the assumption that everyone pays their taxes grudgingly and unwillingly. Taxation is a proper way by which wealth is distributed more fairly and by which the poor and the whole of society are given better opportunities. A scheme of international taxation is needed if the enormous gap between the rich and poor nations is to be lessened.
Bishop of Liverpool, Right Rev David Shepherd, "Bias to the Poor" (p133).
“. . . never be afraid to attack wrong, whether by predatory plutocracy or predatory poverty.”
[Joseph Pulitzer, Crusading newspaper publisher, St. Louis Post-Dispatch, 1907 ]
Democracy rests on the perception of fair treatment of its citizens. Most people accept the wealth earned by successful business activity. Far less acceptable, however, is the ability of the rich to avoid almost all taxation. The case for a neutral tax system, with few loopholes, is stronger than ever.
[Financial Times editorial, June 25, 2007]
'One part of the community pays the taxes and votes; another receives the benefits and does not vote. In pursuit of the self-interest of those with vote and voice, it has been held that taxes should be reduced and not thereafter increased in any visible way; welfare services should, to the extent possible, be curtailed.'
[J.K. Galbraith, The Culture of Contentment 1992 p49]
Offshore represents a new and significant division of labour in regulation: ‘private’ regulation for the corporate citizen and ‘public’ regulation (the law, prisons and social welfare) for individuals.
[Ronen Palan p37 in Offshore Finance Centres and Tax Havens: the Rise of Global Capital, ed. Mark P. Hampton and Jason Abbott.]
With complexity of commercial activities, regulators need some expert input and thus need to consult the relevant corporations and industries. However, that should not result in domination by technical experts. As a crude analogy, consider the case of nuclear energy. In building any reactor and power plant, nuclear experts should be consulted, but whether we should have nuclear energy is a social and political decision.
[Professor Prem Sikka, University of Essex, Jan 29, 2008.]

Distortions

So capitalism is for poor people and socialism is for capitalists. This view is not just offensive. It is catastrophic.
Martin Wolf in August 2007, on calls by a hedge fund manager for the US Federal Reserve to bail him and his colleagues out.
This $1 trillion or more per year of illicit money that moves across borders and the structure that facilitates its movement is the biggest loophole in the global economic system.
Raymond Baker , June 2007
Any common sense person would say that a highly paid private equity executive paying less tax than a cleaning lady can't be right. ... I have not heard anyone give a clear explanation of why it is justified."
Nicholas Ferguson, chairman of SVG Capital, who built what is now Permira, Europe’s biggest private equity fund.
In direct contradiction to the theory of comparative advantage, which assumes that economic activities tend to gravitate towards geographically relevant areas, offshore has the opposite effect.
Ronen Palan p35 in Offshore Finance Centres and Tax Havens: the Rise of Global Capital, ed. Mark P. Hampton and Jason Abbott.
Many of the most damaging policies have been created in the name of Adam Smith, the original modern economist. If that eighteenth-century Scotsman could come back today, he might smite the plutocrats setting the government's bill of fare and cast out the rule-changers. No doubt he would remind us of his eighteenth-century insight that subsidy economics are inherently inefficient and wasteful.
David Cay Johnston, in his bestseller Free Lunch: How the wealthiest Americans enrich themselves at government expense (and stick you with the bill). p24 of the paperback version
Tax havens warp the foundations of market capitalism. David Ricardo's theory of comparative advantage says that production should gravitate towards geographically relevant areas: cheap manufactures come from China and France or Chile produce fine wines. But now we have thousands of companies operating from one building in the Cayman Islands, and a former Thai prime minister avoids paying tax on a $1.9bn sale through a British Virgin Islands company called Ample Rich Investments. Small wonder that people lack confidence in the global economy.
John Christensen, director of the Tax Justice Network, in The Guardian, May 2007
Experience is accumulating that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.
John Maynard Keynes , pre-dating the securitisation crisis by 74 years.
Enron and other big companies have escaped taxes in recent years through financial maneuvers so complex that the Internal Revenue Service has been unable to understand them.
Expert witness to Senate Finance Committee 13 February 2003
The advanced tax planning undertaken today by most global companies is as intelligible to the average person as particle physics.
Alan Rusbridger, editor of the Guardian, writing about the huge legal risks his newspaper has faced in addressing offshore tax abuses
The business model followed in all offshore secrecy jurisdictions is for compliant trustees, corporate administrators, and financial institutions to provide a veneer of independence while ensuring that their U.S. clients retain complete and unfettered control over “their” offshore assets. That’s the standard operating procedure offshore. Offshore service providers pretend to own or control the offshore trusts, corporations, and accounts they help establish, but what they really do is whatever their clients tell them to do. In truth, the independence of offshore entities is a legal fiction.
Senator Carl Levin, introducing the Stop Tax Haven Abuse Act, Feb 2007
Offshore represents a new and significant division of labour in regulation: ‘private’ regulation for the corporate citizen and ‘public’ regulation (the law, prisons and social welfare) for individuals.
Ronen Palan p37 in Offshore Finance Centres and Tax Havens: the Rise of Global Capital, ed. Mark P. Hampton and Jason Abbott.
The accountancy firm Grant Thornton worked out that the UK’s 54 billionaires paid income tax totalling just £14.7m (0.01%) on their £126bn combined fortunes.
The Observer, 2007
“Illicit, disguised and hidden financial flows create a high-risk environment for capitalists and a low-risk environment for criminals and thugs. When we pervert the proper functioning of our chosen system, we lose the soft power it has to project values across the globe. Capitalism itself then runs a reputational risk. As it is now, many millions of people in developing and transitional economies scoff at free markets, regarding the concept as a license to steal in the same way as they see other others illicitly enriching themselves.”
Raymond Baker, in his book Capitalism's Achilles Heel
International economic liberalization since the mid-1970s has entailed the substantial removal of border barriers (tariffs and currency controls), greatly reinforcing the movement towards deeper international economic integration. But this shift towards more `open’ national economies did not create a unified and free world market. Instead, like an outgoing tide, it revealed a craggy landscape of diverse national and local regulations. Trying to deal with these differences has generated an exponential growth of networks of regulatory cooperation, coordination and harmonization. These are no longer primarily of an international character, but also supranational and infranational, frequently by-passing central government. They also reflect and reinforce changing public-private forms, since these regulatory networks are very often neither clearly state nor private but of a hybrid nature. . . . Thus, there has been a movement from the classical liberal international state system, towards one that is often denounced as neo-liberal, but is perhaps better described as post liberal. ...To paraphrase David Vogel (Vogel 1996), the apparent shift to `freer markets’ has meant more rules.
The Retreat of the State: Challenges to Law and Lawyers Institute of Advanced Legal Studies, University of London 27-29th June 2006 Sol Picciotto Lancaster University Law School
Company directors feel under pressure to minimise taxes, but tax is a vital contribution to society, and it is offshore where this all goes wrong, and where our queasy feelings originate.
John Christensen, director of the Tax Justice Network, in The Guardian, May 2007
Time and again, a tax break that is big enough to make a difference to the behaviour of entrepreneurs and investors ends up being exploited in a way that was not intended. Tax officials are left scrambling to close loopholes after too much money ends up subsidising low risk assets, supporting businesses with no intention of expanding, or cutting the tax bills of wealthy individuals.
Vanessa Houlder in the Financial Times, 2007
When Senator Max Baucus held up the photo of the modest Cayman office building that houses over 12,000 shell companies I was tempted to comment that it was amazing that the weight from the brass plates had not sunk the building into the sand!
Jeffrey Owens>, head of tax at the OECD, 2007
"The only clear winners are large corporations. In return for building new facilities in many states, companies are actually getting negative income taxes. Subsidy packages routinely exceed $100,000 per job. Guess who's getting stuck with the tab. When the big boys pay less, either the rest of us pay more or the quality of our public services declines - and usually its some of both."
Greg LeRoy, The Great American Jobs Scam: Coroporate tax dodging and the myth of job creation, Berret-Koehler, 2005
I’m not sure it is riots on the streets yet. But it may not be far away, the way things are going . . . The industry certainly pays very low tax and that is not easy to justify,” he told the Financial Times. “Buy-out firms are stacking up cash offshore in ways that look bloody wrong to me,” he said, referring to the practice of locating funds in overseas tax havens and keeping carried interest rolling over."
John Moulton, the founder of the UK buy-out firm Alchemy Partners, July 2, 2007

Dubious words and justifications

From this trade proceeds benefits far outweighing all mischiefs and inconveniences.
Quote from a slave trader, cited in William Snelgrave’s book, A New Account ofthe Slave Trade (quoted in Raymond Baker, Capitalism’s Achilles Heel.)
“Secrecy is as vital as the air we breathe.”
The Swiss Banking Association in half-page advertisements in a number of broadsheet newspapers, in a rearguard action following the Nazi gold scandal.
Not just a light touch but a limited touch . . . a million fewer inspections every year
UK Chancellor Gordon Brown, 2005, as he launches his "Better Regulation Plan."
We are not a tax haven
Officials or interests representing most, if not all, the world's tax havens, speaking on various occasions. Click here
I do not subscribe to the theory that a company that violates tax and exchange control regulations is a bad corporation.
John Fedders, former US Securities & Exchange Commission director of enforcement, quoted in Lucy Komisar's chapter in A Game as Old as Empire.
I have long dreamed of buying an island owned by no nation and of establishing the World Headquarters of the Dow company on the truly neutral ground of such an island, beholden to no nation or society.
Carl Gerstacker, Chairman of Dow Chemical, 1972
"I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."
Grover Norquist, president of Americans for Tax Reform
I find it amusing
Paul O'Neill, US Treasury Secretary under President George W. Bush, asked about whether the disparity between reported offshore accounts and their actual numbers was significant
German tax evasion is a legitimate defense by citizens attempting to “partially escape the current grasp of the administrators of a disastrous social welfare state and its fiscal policies. . . . Swiss-style saving outside the system” is something to which not only the wealthy, but also productive small and mid-sized businesses are entitled. “These people must be protected,” he says.
Konrad Hummler, a partner in Wegelin & Co, Switzerland's oldest private bank.
The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.
Alan Greenspan, June 1999
A fault-line is developing in what is considered tax avoidance. The City believes that if no tax is due after they have undertaken their shenanigans then there could not have been avoidance. This is what I have already called the ‘Philip Green’ defence. It is summarised as ‘no tax was due, so how could it have been avoided?’ The reality is that it is the shenanigans to ensure no tax is due that constitute the avoidance.
Richard Murphy , May 2008
Yukos "exercised its constitutional right to manicure its tax affairs"
Bruce Misamore, Yukos CFO, quoted in Platt's, 03 12 2003
The last ten years in particular have been good years for the world economy as a whole. They have been characterised by two massively favourable trends. The first is an era of easy money. The main central banks worldwide have opted for low interest rates, the ready creation of credit, and tolerance of innovatory means of financing public and private sector activity through big increases in debt. It has been the era of public/private partnerships, specialised credit-based funds and funds of funds, collateralized debt obligations, collateralized loan obligations, credit default swaps, special purpose vehicles and many other similar ways of raising borrowing throughout the financial system.
Britain's Conservative Party, "Freeing Britain to compete", Aug 2007, at the start of economic turmoil triggered by collateralized debt obligations, collateralized loan obligations, credit default swaps, special purpose vehicles and many other similar ways of raising borrowing throughout the financial system.
Let's face it. Nobody pays more tax than they have to. We're all tax dodgers aren't we?
Edmund Vestey, one of Britain's richest citizens, 1980.
If your wallet's taken a bit of beating over the festive season, an unsecured loan from Northern Rock could be the perfect way to sort things out.
Northern Rock promotion, not long before the UK-based bank collapsed at the leading edge of a global economic crisis.
Congress can swear on two stacks of Bibles that it’ll never do it again, but they’ve lost their virginity
David Rosenbloom, New York University, on the U.S. Congress' enthusiasm for tax amnesties

Religion, ethics and morals

I cannot comprehend how we have got to the point where nation states have so profoundly trivialised tax evasion
Bertrand Bertossa , crime-fighting Swiss magistrate, 2002
We have always known that heedless self-interest was bad morals; we know now that it is bad economics. Out of the collapse of a prosperity whose builders boasted their practicality has come the conviction that in the long run economic morality pays.
Franklin D. Roosevelt, 1937
This is why you also pay taxes, for the authorities are ministers of God, devoting themselves to this very thing. Pay to all their dues, taxes to whom taxes are due, toll to whom toll is due, respect to whom respect is due, honour to whom honour is due.
Romans 13: 6 & 7
A code of conduct can help create a climate of opinion where tax cheats cannot successfully pose as refugees from oppressive government but instead are seen for what they are—selfish, self-absorbed people who undermine good government and help keep two thirds of the world locked in poverty.
Michael J. McIntyre, Professor of Law at Wayne State University Law School. The UN Tax Committee asked him to work on a UN Code of Conduct on tax evasion and avoidance. 2008
Perhaps, as we move into the new millennium, governments will need to reach out and develop a social compact with citizens. They would undertake to provide the service requested by citizens in an efficient and cost-effective manner and to minimise the complexity and compliance costs of tax systems. In turn, citizens would seek to meet their tax obligations. Civil society would put peer pressure on those who wish to avoid their obligations. Illegal tax behaviour would be seen for the crime that it is. Aggressive tax planning by tax advisers would be considered sociably unacceptable. This would help governments to break out of the vicious circle of each new tax loophole, leading to more complex tax legislation that in turn generates further loopholes.
Jeffrey Owens, head of OECD Fiscal Affairs department, 2002
Tax evasion should not be a sport, but an offence. The needs of nations are not diminishing. Do you think it is normal that only the honest taxpayers should be counted? This calls into question the very foundations of democratic states.
Bertrand Bertossa, crime-fighting Swiss magistrate, 2002

Global competition, tax competition, co-operation

In defiance of all economic logic, George Bush's advisers said tax competition was beneficial in just the same way as competition in general - deliberately conflating the real gains that arise when things are produced more efficiently with the subzero-sum game that results when exchequers pick each other's pockets.
Guardian editorial, March 2009
Regulation must be global. Moreover, such regulation must include taxation. As finance goes global, so must the depth of co-operation among fiscal authorities. A world in which a global plutocratic class pays little or no tax, while benefiting from the stability generated by taxes imposed on the "little people", will prove unsustainable. Financial Times editorial , June 25, 2007
Lack of competitiveness is nowhere to be found in these highly taxed countries
Martin Wolf, in his book Why Globalisation Works, p260 (paperback edition)
Financial regulation is only one example of where the mantra of needing to be “internationally competitive” has been invoked too often as a reason to cut back on regulation. There has not been enough serious consideration of the alternative – global co-operation to raise standards.
Lawrence Summers, former US Treasury Secretary, May 2008.
After O’Neill’s announcement, the OECD efforts to curb ‘‘harmful tax competition’’ slowly dissolved into a series of toothless pronouncements, a mixture of cheerleading and scorekeeping that continues to this day. Beginning in 2001 the OECD started to abandon its confrontational approach. Tax havens were now ‘‘participating partners.’’ The original July 31, 2001, deadline to avoid defensive measures came and went without a murmur, and the OECD later publicly admitted that it had no intention to pursue them in the future.
Martin A. Sullivan, Lessons from the last war on tax havens, Tax Notes, July 30, 2007, on an announcement in 2001 that the U.S. Treasury would not support the OECD initiative to stamp out harmful tax competition.
The OECD’s approach to tax transparency requires information to be exchanged with other jurisdictions only on request. In other words, you must know what you are looking for before you request it. This is shockingly inadequate. We need the automatic exchange of tax information between jurisdictions and all developing countries must be included.
John Christensen and David Spencer, Tax Justice Network, Financial Times, March 2008
The notion of the competitiveness of countries, on the model of the competitiveness of companies, is nonsense,”
Martin Wolf, in his book “Why Globalisation Works.”
Governments can respond to the challenge of globalisation in one of three ways. They can retreat behind national frontiers and try to move back towards an “isolationist” approach to global tax issues. The second option is to press for a harmonisation of the international tax system: a sort of global tax code administrated by a global tax authority. And third, they can respond by intensifying their co-operation, which includes putting in place transparent systems and sharing information across borders. . . Intensifying co-operation, the third option, is the only appropriate response to the pressures of globalisation.
Jeffrey Owens , head of OECD Fiscal Affairs department, 2002
The activities engaged in routinely and as a matter of course by these tax havens are hostile acts towards all countries whose tax bases are undermined by them.
Willem Buiter, FT columnist and former chief economist of the EBRD, former external member of the UK's Monetary Policy Committee, in his article Blockade the Tax Havens.
“High-income countries tend to offer financial incentives – outright bribes, in other words. Developing countries tend to provide fiscal incentives – tax reductions, tax holidays, accelerated depreciation, investment allowances, duty drawbacks and so forth. The effectiveness of such incentives is doubtful – as is their economic desirability. This is particularly true of selective or, worst of all, firm-specific, tailor-made incentives. General across-the-board improvements in the business climate are far more likely to make sense. There is, in fact, good reason to believe that the competition across the globe in offering such incentives is wasteful and foolish.
Martin Wolf, “Why Globalisation Works.”p240 (paperback edition)
There is a growing literature which questions whether offering incentives to business is worth the loss of revenue that it implies. A study by global consulting firm McKinsey concludes that incentives are often ineffective, and argues that while FDI brings significant benefits such as employment and technology, ‘popular incentives, such as tax holidays, subsidised financing or free land, serve only to detract value from those investments that would likely be made in any case’.
Mckinsey’s Quarterly, 2004 vol. 1
The expanding credit crisis has helped underline the dangers of a lack of trans parency in international finance, poor regulation and insufficient co-operation. Fighting tax haven abuses requires tackling all of these. Yet the world risks wasting this political capital on the wrong targets. We are pursuing the timorous policies of a past age to tackle tax havens.
John Christensen and David Spencer, Tax Justice Network, Financial Times, March 2008
China: a country that prides itself on having one of the world’s toughest controls on inward and outward movements of money.
Financial Times, 2007
Orthodox economists have not ignored these phenomena completely. But they have tended to compartmentalize them into so-called institutional problems like “corruption” and “transparency,” regarding them as endogenous to particular countries. In this narrow-minded approach, the individual country is the unit of analysis. In fact, all these local problems have been greatly exacerbated by a global problem—the structure of the transnational system for financing development, on the one hand, and for stashing vast quantities of untaxed private capital abroad, on the other.
James Henry in the book A Game as Old as Empire.
"Trade within multinational corporations is one of several 'fiscal termites gnawing away at the foundations of tax systems."
Vito Tanzi, Director, Fiscal Affairs, IMF - March 2001
A broad cross-country analysis shows that FDI is not related to incentives. . . .The emerging consensus from this research is that a country’s overall economic characteristics may be more important for attracting successful investments than any tax incentive; and even if tax incentives play a role in securing an investment, they are not generally cost effective.
IMF Working Paper examining the effectiveness of tax incentives in attracting investment.
'Even the heartland of state activity, the capacity to tax, is under threat. Everywhere the yield from corporate taxation is falling as companies shield their profits in tax havens. The old double taxation treaties are outmoded and nobody has any intention of giving supranational entities like the EU a greater right to tax.'
[Will Hutton, Global terror and the threat to the nation state. Observer 28 July 1996]
"The global economy may already have grown beyond the capacity of nation states to control it. It is increasingly difficult even to talk coherently of national economies when so much of the world's growth potential is now locked in offshore and multi-national structures that are designed to avoid any single nation state's direction"
[Martin Walker, The Harkness Lecture, Chatham House 18.05.95]
'A few states - Singapore, Malaysia, Japan, Holland, Britain, Sweden, Norway - may have the capacity to preserve social cohesion while responding to global competition, Most are too weak, corrupt or incompetent. Most actually existing states cannot hope to reconcile the imperatives of global markets with the needs of social cohesion and environmental conservation.'
[John Gray False Dawn Granta p202]
'By eroding the revenue base, tax competition can become too much of a good thing… Bidding wars between countries can undermine the collective revenue base. This increases the tax burden on the less mobile industries and on labour, relative to capital.'
[Financial Times editorial 'living with tax rivalry' 14 January 1997]

High taxes or low taxes?

"It is the hiding mechanisms we want to get rid of, not the tax havens. Tax rates are not my concern. What I am talking about is the option of hiding criminal money. ... When you have these kinds of structures they can be used by everybody, including terrorists."
Eva Joly In journal Development Today, March 2007
There are those including myself who . . . in the passion of the argument have made statements -- I think I even made a statement once -- that tax relief did pay for itself."
Jim Nussle, director of the US Office of Budget and Management, on an ideology widespread in the US that tax cuts pay for themselves.
The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease—the modern-day equivalent of leeches
Joseph Stiglitz, December 2008, on the Bush tax cuts
No serious academic, including Mr. Bush's own economists, has argued that tax cuts produce enough additional economic growth to make up for lost revenue.
Washington Post, "The Tax Fairy, Debunked", November 2007

Inequality, wealth and economic growth

“It is the 'horse and sparrow' theory of income distribution and its taxation. If you feed a horse enough oats, some will pass through to the road for the sparrows.”
J. Kenneth Galbraith on trickle-down economics
The steady downward adjustment in corporate tax rates reflects both competition between countries as well as a steady erosion of the tax bases of major countries, forcing the tax burden to be shifted to the less powerful but more vulnerable.
Trevor Manuel, South African Finance Minister, January 2008
No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.
Adam Smith
The rich are different when it comes to paying taxes: They hide more of their income.
Forbes magazine, reporting on a U.S. Internal Revenue Service study estimating that those with true incomes of $200,000 or more accounted for 40% of net underreported income in 2001
Much of what politicians say about our tax system ignores 2,500 years of history, dating to when the athenians jettisoned their flat tax and with it tyranny, in favour of a tax system based on ability to pay.
David Cay Johnston, Perfectly Legal
Great accumulations of wealth cannot be justified on the basis of personal or family security. Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our country.
Franklin Roosevelt, U.S. President, 1933-1945
According to Grant Thornton, the UK billionaires paid income tax totalling just £14.7m on their £126 billion combined fortunes, and only a handful paid any capital gains tax.
The Times, December 3, 2006
There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.
Warren Buffett , November 2006
For the first time in the 200-year run of the free-market system, we have built and expanded an entire integrated global financial structure, the basic purpose of which is to shift money from poor to rich.
Raymond Baker, June 2007, speaking about the offshore world.
In our office fifteen people cooperated in a survey out of eighteen: my total tax - payroll taxes plus income taxes - mine came to 17.7 percent - and the average for the office was 32.9%. There wasn't anyone in the office, from the receptionist up, who paid a lower tax rate. And I have no tax planning, I don't have an accountant, I don't have tax shelters. I just do what Congress tells me to do.
Warren Buffett, billionaire, 2008
Our research shows that economic papers that rely on mathematics are not scientifically valid. . . we need to rebuild the world to make it resistant to the economist’s mystifications
Nassim Nicholas Taleb and Mark Spitznagel , July 2009
If the income distribution in the United States were the same today as it was in 1979, the bottom 80 percent of the population would have about $670 billion more, or about $8,000 per family. And the top one percent would have about $670 billion less, or about $500,000 per family. Relative to numbers like that, a $3 billion trade adjustment assistance program looks very small. We need to think in a much more comprehensive way about income distribution, the progressivity of taxation, the enforcement of tax laws, and the benefits of public spending if we’re going to maintain broad support for the legitimacy of the system including the ability to maintain open markets.
Larry Summers, former US Treasury Secretary, speaking in the Fall 2007 edition of The International Economy.
The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
Adam Smith on progressive taxation
Rothkopf says there were 21 financial institutions in 2007 managing assets of at least $1 trillion each and that the top 50 have assets in excess of $48.5 trillion. Their extraordinary freedoms are not natural, or economically efficient, as is now obvious post the credit crunch. They are the consequence of a 20-year-long lobbying campaign to win finance freedoms from national regulation and which are now used against governments to keep them in their place. Brown and Alistair Darling are having urgent discussions, for example, to reshape Britain's corporate tax laws as companies start to move to Ireland to pay less taxation, a classic way the superclass exercises its power (and a classic government response in giving way). The superclass is super-rich - the top 1,000 are billionaires - is super-influential and super-confident. There has not been a gap between the rich and poor on the current scale ever in history, warns Rothkopf. It is unstable. Sooner or later, there will be popular outrage and a political response. For the moment, though, it seems that a spell has been cast over the political process, at least in Britain.
Will Hutton, 2008
These days, as Mr Bernanke observed last month, “the long-term tendency towards greater inequality represents a major challenge for economists and policymakers”.
John Gapper, Financial Times, March 9 2007
The house price boom had been "one of the major adverse developments affecting the UK economy in 20 years".
M.R. Weale, director of the UK's National Institute of Economic and Social Research, on how rising house prices represented a transfer of wealth from young people to old
Every significant policy change benefits some people and harms others. If the gains to winners substantially outweigh the costs to losers, solutions can always be found that allow everyone to come out ahead. But those solutions often involve higher taxes and income transfers to the poor. ... Is it better to solve a problem by spending two extra dollars in the private sector than by spending one additional dollar in the public sector? The two commandments insist, preposterously, that it is.
Robert H. Frank, an economist at the Johnson School of Management at Cornell University, is the author of “The Economic Naturalist,” which will be published this spring.
It is easy for the rich, in an arbitrary government, to conspire against them [the poor], and throw the whole burthen of the taxes on their shoulders.
David Hume, 1752
'It is a basic but rarely articulated feature of the modern economic system that the highest pay is given for the work that is most prestigious and most agreeable.'
JK Galbraith The Culture of Contentment 1992 p32
'A reasonably equitable distribution of income is thought by individuals of liberal disposition to be politically virtuous; in fact it is economically highly functional.' (because of the nature of discretionary spending by the rich - imported luxuries, speculative investments, etc)
JK GalbraithThe Culture of Contentment 1992 p159
Cross-country differences in inequalities in health appear to be due principally to cross-country differences in income inequality.
EA van Doorslaer, H Wagstaff, S Bleichrodt et al 'Socio-economic inequalities in health: some international comparisons.' accepted for publication in Journal of Health Economics 1996
'The US is the odd man out: as a more diverse and physically dispersed society, its voters are willing to tolerate the creation of an underclass which European voters are prepared to pay to prevent.'
Richard Layard (LSE) taken from 'The real reasons for public expenditure.' Financial Times, 1 November 1993
All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind."
Adam Smith, Wealth of Nations bk 3, ch 4
"There will be howls of anguish from those who are rich enough to pay the highest rate of income tax - but you never hear a word of sympathy from them for those who are too poor to pay tax at all."
Denis Healey

Inheritance taxes

"a certain corrective against the development of a race of idle rich"
[Winston Churchill in 1924, on inheritance taxes]
Of all forms of taxes this seems the wisest. By taxing estates heavily at death the state marks its condemnation of the selfish millionaire’s unworthy life.
Andrew Carnegie, 1889
Warren E. Buffett urged Congress yesterday to maintain the estate tax. “Tax law changes have benefited this group, including me, in a huge way,” he said. “During that time the average American went exactly nowhere on the economic scale: he’s been on a treadmill while the superrich have been on a spaceship.”
New York Times, November 2007

Justice

If we tolerate injustices we end by becoming its accomplices. Not every law is just; there are laws which are an outrage to the right of individuals and peoples; these are therefore unjust laws which must be resisted until they are rendered totally null because they harm the social body and endanger democratic coexistence.
Henry Thoreau
New Labour set out to fail. Its tax policy was designed to be unfair. There was one tax policy for the rich, another for the rest. There was one tax policy for those resident in the UK, another for those acquainted with the UK but able to exist beyond the reach of its taxes.
Richard Murphy on Britain's "New Labour" government, November 2008

Magnitudes

(See separate section under Resources - “Magnitudes and measurements”)
Switzerland is home for about one-third of the world’s privately held offshore wealth. ... UBS alone received SFr113bn in net new money in its worldwide wealth management network in 2006 – more than the entire balance sheets of many individual banks.
Haig Simonian and Nikki Tait in the FT, April 10, 2007
So long as one is connected in some way to the modern financial system, it's safe to say that there's a little bit of offshore in every one of us.
Moisés Naím, Illicit: How Smugglers, Traffickers and Copycats are Hijacking the Global Economy

Offshore general

The U.S. should not be financing itself by opening the door to foreign tax cheats and giving them assurance their information will not be shared with their home governments
Jack Blum, TJN senior adviser, testifying before the US Sentate Committee on Finance, July 24, 2008
It is important now that the spotlight is put on the tax havens. In my opinion, that is one of the biggest problems the world faces today ... I believe strongly that when we explain and present the figures [concerning tax havens] this will result in action. Of course [for some the reason is] protection mechanisms. But I do not attribute any protection mechanism to Transparency International. Their excuse is ignorance."
Eva Joly, the Norwegian-born investigating magistrate who broke open the “Elf Affair” in Paris, regarded as Europe’s largest fraud investigation since the Second World War.
A study of the development impact of off-shore financial centers would be a valuable contribution to the governance and anti-corruption agenda.
Robert Zoellick , World Bank president, September 2008
Tax havens are to those engaged in tax evasion what fences are to thieves.
Willem Buiter, FT columnist and former chief economist of the EBRD, former external member of the UK's Monetary Policy Committee, in his article Blockade the Tax Havens.
”It does not surprise anyone when I tell them that the most important tax haven in the world is an island. They are surprised, however, when I tell them that the name of the island is Manhattan. Moreover, the second most-important tax haven in the world is located on an island. It is a city called London in the United Kingdom."
Marshall Langer, a leading pro-tax haven analyst, Tax Notes International, 2001
'Any survey of the main uses of offshore funds would have to conclude that low tax is not the main benefit at all; the real attraction is their total confidentiality. This makes them perfect places to lodge capital in flight from tax, politics or the law.'
Financial Times January 18/19 1997
It promotes itself as a low-tax zone off north-west Europe, a kind of Cayman Islands in a cold climate and aggressively chases footloose financiers and less scrupulous British companies to move to Dublin to dodge tax. . . . Dublin does not need to be Liechtenstein on the Liffey. If you set out to attract mobile money from around the world, you run much bigger risks when things go wrong.
Lord Oakeshott, UK Liberal Democrat MP and Treasury spokesman, December 2008
The Jersey ‘sprat’ had served its purpose now that the UK ‘mackerel’ had been landed.
Prem Sikka on how Jersey was used by major accountancy firms to weaken British legislation on auditor liability.
At one Subcommittee hearing, a former owner of an offshore bank in the Cayman Islands testified that he believed 100 percent of his former bank clients were engaged in tax evasion. He said that almost all were from the United States and had taken elaborate measures to avoid IRS detection of their money transfers. He also expressed confidence that the offshore government that licensed his bank would vigorously defend client secrecy in order to continue attracting business.
Carl Levin, US Senator introducing the Stop Tax Haven Abuse Act, February 2007
As an investigator you need to know what you want. The so-called fishing expeditions are taboo, and not just in offshore centers by the way. Even if as an investigation service you would like information about a British bank account, you have to be able to prove it concerns a punishable fact before they grant you access to that information
Rosalind Wright, chairwoman of the British Fraud Advisory Panel and former director of the UK Serious Fraud Office.
The OECD, the FATF and others focus on tiny aspects of the problem, such as narrowly defined money-laundering, while not properly tackling tax evasion and other forms of tax abuse that are far more important. All these activities use the same subterfuges: offshore trusts, bank secrecy and so on. The current initiatives have, in effect, legitimised the illegitimate.
John Christensen and David Spencer , Tax Justice Network, in the Financial Times, March 2008
'The term offshore is a relative one: it implies an onshore..offshore markets are markets for currencies, loans, bonds and a host of other financial instruments which exist beyond the reach of regulation by the originating national economy. The offshore market's raison d'etre is simply that they are less regulated than the onshore markets with which they compete.'
Roberts S p93
'Continued political instability, corruption and crime around the world mean that flight capital and 'hot money' are still looking for havens where they may stay or from which they may re-enter circuits of capital anonymously.'
Roberts S 1994 p104
'Global custody services such as cash management, securities transfer, and corporate financial strategies such as mergers and acquisitions allow corporations to combine risk management and tax minimization strategies.. The ability to use the uneven global topography of taxation and regulation to gain advantage is now an imperative.'
Roberts S, 1994 p96
Partly because the very complexity of banking, the way in which, sometimes just investment banks and sometimes others have sought to develop instruments in order to avoid pay taxes has in itself posed a systemic threat to the system
Alistair Darling, UK Chancellor, March 2009
'The term "offshore" entered the general vocabulary of most languages (in the mid 1960s). It meant the practice - originally marginal and apparently of minor importance - of registering the legal place of businesses in some tiny and fiscally generous territory which allowed firms to avoid taxes and other constraints imposed by their own countries.
Tom Nairn, Faces of Nationalism

Promises, promises

“A Labour Chancellor will not permit tax reliefs to millionaires in offshore tax havens”
Gordon Brown in 1997
"That's the Great American Jobs Scam: an intentionally constructed system that enables corporations to exact huge taxpayer subsidies by promising quality jobs - and them lets them fail to deliver. The other benefit often promised - higher tax revenues - often proves false or exaggerated as well."
Greg LeRoy, The Great American Jobs Scam: Corporate tax dodging and the myth of job creation, Berret-Koehler, 2005
The Committee is analysing ways to improve the exchange of information on an automatic basis.
OECD, Improving Access to Bank Information for Tax Purposes, March 2000

Regulation

When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.
Adam Smith, arguing in favour of government intervention "especially when the object is to reduce poverty."
Since 1980, regulations have been progressively relaxed until they have practically disappeared.
George Soros, Jan 22, 2008
Offshore represents a new and significant division of labour in regulation: ‘private’ regulation for the corporate citizen and ‘public’ regulation (the law, prisons and social welfare) for individuals.
Ronen Palan in Offshore Finance Centres and Tax Havens: the Rise of Global Capital
Subject to a structure complying with the order, there will be no regulatory review or oversight of the terms or conduct of such unregulated funds and, therefore, processes for their establishment depend only on being carried out in accordance with the exemption order. Unregulated funds have been made available in response to market demands for a fully flexible framework aimed at sophisticated and institutional investors.
Jerseyfunds.org, on the new unregulated fund possibilities offered by Jersey in 2008
Under George Bush, the White House Office of Management and Budget reckoned the total yearly cost of federal regulations between 1997 and 2007 was $46 billion to $54 billion. The benefits, in terms of pollution averted, lives saved and so on, were far higher: $122 billion to $656 billion a year.
The Economist, May 2009
Regulation must be global. Moreover, such regulation must include taxation. As finance goes global, so must the depth of co-operation among fiscal authorities. A world in which a global plutocratic class pays little or no tax, while benefiting from the stability generated by taxes imposed on the "little people", will prove unsustainable.
Financial Times editorial, June 25, 2007
Most of today’s tax arrangements were developed in an era when tax authorities could rely upon exchange controls, highly regulated capital markets and technological constraints to protect them from the negative fiscal effects of global activities. These barriers to cross-border activities protected tax authorities from the full implications of the interaction between national tax systems. While corporations globalised, tax authorities remained constrained by national frontiers.
Jeffrey Owens, head of OECD Fiscal Affairs department, 2002
Financial elites argue that global financial markets and markets in new securities should remain “self-regulating” (how many of them would hop into a self-regulating taxicab?) then when crisis comes have persuaded governments to cauterise their wounds.
David Rothkopf, author of the book Superclass. May 15, 2008
Self-regulation stands in relation to regulation the way self-importance stands in relation to importance and selfrighteousness to righteousness.
Maverecon blog, Financial Times, 2008
With complexity of commercial activities, regulators need some expert input and thus need to consult the relevant corporations and industries. However, that should not result in domination by technical experts. As a crude analogy, consider the case of nuclear energy. In building any reactor and power plant, nuclear experts should be consulted, but whether we should have nuclear energy is a social and political decision.
[Professor Prem Sikka, University of Essex, Jan 29, 2008.]
The whole culture of Anglo-American finance is increasingly subversive of regulation, taxation and democratic values, even where it remains within the law.
John Plender, "The hijack that made Enron happen ", Financial Times, 28 January 2003
If, however, a government refrains from regulations and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer.
John Maynard Keynes, The Economic Consequences of the Peace
Innovation, like “change,” has no inherent value. It can be bad as well as good.
Joseph Stiglitz, December 2008

Secrecy and transparency

As in battling vampires - in taking on tax havens, what is really needed is a great blast of daylight
Guardian editorial , April 3, 2009
Identifying tax shelter activity can be as difficult as finding objects trapped inside a black hole — their presence is known only through inference.
TaxAnalysts, 2008
In the Gospel of John, Jesus states that those who do what is right do so in the light, while wrong-doers shroud their deeds in secrecy and darkness.
Peg Chamberlain, President, National Council of Churches of Christ, USA, May 2010
"Secrecy is as vital as the air we breathe."
The Swiss Banking Association in half-page advertisements in a number of broadsheet newspapers, in a rearguard action following the Nazi gold scandal.
Sunlight is said to be the best of disinfectants and the area of income tax accounting could use more sunlight.
Donald Nicolaisen, the Security and Exchange Commission's chief accountant, FT, Nov 2004
"If Swiss banking secrecy were abolished, a large part of Switzerland's private banking business would disappear."
Attributed to Dr Gunter Woernle, author of Wernlim directory of Swiss private banking - in Financial Times 08.08.97 'Swiss banks guard the secrets of their success'
Any survey of the main uses of offshore funds would have to conclude that low tax is not the main benefit at all; the real attraction is their total confidentiality. This makes them perfect places to lodge capital in flight from tax, politics or the law.
Financial Times January 18/19 1997
The standard OECD information exchange agreement is nearly worthless. Information exchange under the standard agreement is sporadic, difficult, and unwieldy for tax administrators even under the best of circumstances. When a banking haven is the requested party, information exchange is nearly impossible. The information exchange article in the OECD model tax convention suffers from the same limitations.”
Lee Sheppard, tax expert, in "Don’t Ask, Don’t Tell, Part 4: Ineffectual Information Sharing," Tax Notes, March 23, 2009, 1411-1418

Tax general

”We don’t pay taxes. Only the little people pay taxes”
Leona Helmsley, property heiress
When there is an income tax, the just man will pay more and the unjust less on the same amount of income
Plato, The Republic.
”Offshore tax havens have declared economic war on honest U.S. taxpayers”
Senators Carl Levin (D-Mich.,) Norm Coleman, (R-Minn.,) and Barack Obama, (D-Ill.), Feb 2007Link
”It is important now that the spotlight is put on the tax havens. In my opinion, that is one of the biggest problems the world faces today.” Joly says the expansion of tax havens in recent years has also become a problem for the market. She calls dealing with tax havens “Phase Two" in the corruption debate.
Eva Joly, the Norwegian-born investigating magistrate who broke open the “Elf Affair” in Paris, regarded as Europe’s largest fraud investigation since the Second World War. Interview in the journal Development Today, March 2007.
Paying taxes is a pain, no doubt about it, but its less of a pain if everyone bears their fair share of the tax charge. Its intolerable, however, when not everyone pays their contribution: and the poor end up paying for the rich. Worse still when the rich choose every now and then to raise the level of taxes, but the poor are made to pay for them. What a scandalous confiscation! A powerful minority deciding what the unfortunate masses must pay! Can you tell me amongst which races such a scandalous situation prevails: not amongst the Francs, nor the Huns, and neither amongst the Goths or the Vandals. One thing that amazes me, in these conditions, is that all the poor and the native peoples haven’t simply switched sides to the Barbarians. But they certainly would if it was possible for them to take their homes and families.
Salvien of Marseille, a priest who had studied the underlying causes of the fall of the Roman empire and concluded that the general public had little incentive to struggle for the empire. 5th Century. Translated from the original French, Lucien Jerphagnon, "Les Divins Césars. Idéologie et pouvoir dans la Rome impériale", Ed. Tallandier, 2004, pp.481-82.
”Real rich people figure out how to dodge taxes.”
George W. Bush, 2004
Tax havens are to those engaged in tax evasion what fences are to thieves.
Willem Buiter, FT columnist and former chief economist of the EBRD, former external member of the UK's Monetary Policy Committee, in his article Blockade the Tax Havens.
Tax is where the environment was 10 years ago
Jeffrey Owens, director of the OECD's centre for tax policy and administration, FT, November 2004. Owens opined in this article that the emergence of NGOs (like TJN) intent on exposing large-scale tax avoiders could eventually achieve a change in attitude comparable to that achieved on environmental and social issues.
It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.
Adam Smith on progressive taxation
An imbalance between rich and poor is the oldest and most fatal ailment of all republics.
Plutarch, ancient Greek historian
Asking companies how they feel about the tax system can be a bit like asking people’s views on dentistry.
Financial Times Lex, November 27 2006
Simply stated, the bright new financial system – for all its talented participants, for all its rich rewards – has failed the test of the market place.
Paul Volcker, April 8 2008
Taxes, after all, are dues that we pay for the privileges of membership in an organized society
Franklin D. Roosevelt
America's tax laws are similar to the writings of Karl Marx and the writings of Sigmund Freud in that many of the people who loudly proclaim opinions about these documents have never read a word of them.
Jeffrey L. Yablon, Taxanalysts, 2006
A government that robs Peter to pay Paul can always depend upon the support of Paul
George Bernard Shaw
”Any survey of the main uses of offshore funds would have to conclude that low tax is not the main benefit at all; the real attraction is their total confidentiality. This makes them perfect places to lodge capital in flight from tax, politics or the law."
Financial Times January 18/19 1997
People think that taxation is a terribly mundane subject. But what makes it fascinating is that taxation, in reality, is life. If you know the position a person takes on taxes, you can tell their whole philosophy. The tax code, once you get to know it, embodies all the essence of life: greed, politics, power, goodness, charity. Everything's in there. That's why it's so hard to get a simplified tax code.
Sheldon Cohen, former IRS Commissioner
”It does not surprise anyone when I tell them that the most important tax haven in the world is an island. They are surprised, however, when I tell them that the name of the island is Manhattan. Moreover, the second most-important tax haven in the world is located on an island. It is a city called London in the United Kingdom."
Marshall Langer, a leading pro-tax haven analyst, Tax Notes International, 2001
The vast majority of Americans pay their taxes without additional prodding by the IRS, out of a sense of fairness and civic duty. They understand the importance of paying what they owe, and they know that when people fail to pay their taxes, it serves as a de facto tax increase on everyone else.
Testimony of Treasury Secretary Henry M. Paulson, Jr. before the Senate Finance Committee On Ways to Reduce the Tax Gap
Each year, the (United) States allow persons to form nearly 2 million corporations and limited liability companies in this country without knowing – or even asking -- who the beneficial owners are behind those corporations. . . . our law enforcement officials have too often had to stand silent when asked by their counterparts in other countries for information about who owns a U.S. corporation committing crimes in their jurisdictions. The reality is that the United States is as bad as any offshore jurisdiction when it comes to responding to those requests – we can’t answer them because we don’t have the information. Senator Carl Levin, May 2008

Transfer pricing and mispricing

Ask any tax vice president what is the biggest issue on their agenda and 99 percent of them will say it’s transfer pricing. This is not surprising given that transactions between related subsidiaries dominate world trade. From a tax perspective, transfer pricing is where the big bucks lie.
Jeffrey Owens, head of the OECD’S Centre for Tax Policy and Administration
"A cumbersome creation of stupefying complexity” with “rules that lack coherence and often work at cross purposes.
Experts cited on the subject of the OECD-led "arm's length" approach to transfer pricing.
The problems of implementation appear to be getting worse rather than better. . . combined reporting is vastly superior to the current system, assuming, of course, that nation-states could agree to implement it.
Professor Michael J. McIntyre, on the "arm's length" approach
The ALS (Arm's Length Standard) creates a climate of uncertainty and an immense administrative burden for the taxpayers, the IRS and the courts and provides ample opportunity for abuse.
Reuven Avi-Yonah, 2006
Transfer pricing is the corporate equivalent of the secret offshore accounts of individual tax dodgers
Senator Carl Levin, May 2010
Combined reporting would result in a fairer sharing of tax revenue among nation-states, would reduce substantially the opportunities for tax avoidance and evasion that MNEs enjoy under the current system, and would simplify compliance for tax departments and taxpayers.
Professor Michael J. McIntyre
Experience to date is sufficient to demonstrate that the current system is based on faulty assumptions regarding the way multinational business is conducted, so that the system, no matter how hard one seeks to reform it, simply is not capable of functioning acceptably.
Michael Durst, a top U.S. transfer pricing expert on the arm's length principle
Incompatible with today’s global economy
Tax experts Reuven Avi-Yonah and Kimberly Clausing on the arm's length principle
It is difficult to overstate the crisis in the administration of the international tax system of the United States.
Observers cited as testifying before the U.S. President’s Advisory Panel on Federal Tax Reform.
Current transfer pricing rules have spawned a huge industry of lawyers, accountants and economists whose professional role is to assist multinational companies in their transfer pricing planning and compliance.
Reuven Avi-Yonah, 2007
Once you take on board the fact that more than 60% of world trade takes place within multinational enterprises, the importance of transfer pricing becomes clear.
OECD, April 2002
The problems with the current system derive not from rules at its periphery, but instead from a fallacy that lies at the system’s central core: namely, the belief that transactions among unrelated parties can be found that are sufficiently comparable to transactions among members of multinational groups that they can be used as meaningful benchmarks for tax compliance and enforcement.
Reuven Avi-Yonah on the current "arm's length" approach to transfer pricing taxation.

Unintended consequences

This is an area where the legitimate, rational behaviour of a single country can do considerable damage to the global economy or to specific countries.
Trevor Manuel, South African Finance Minister, January 2008
For the global trade system to work in the long term, everyone – including multinationals - must recognise that such short term behaviour is only likely to result in a backlash, a retreat to protectionism, and inevitably to a world that is poorer.
Trevor Manuel, South African Finance Minister, January 2008
Time and again, a tax break that is big enough to make a difference to the behaviour of entrepreneurs and investors ends up being exploited in a way that was not intended. Tax officials are left scrambling to close loopholes after too much money ends up subsidising low risk assets, supporting businesses with no intention of expanding, or cutting the tax bills of wealthy individuals.
Vanessa Houlder , Financial Times, June 10, 2007
This parallel economy is a hothouse for crime and corruption, facilitating capital flight from developing countries on a mind-boggling scale, a corollary of the City's boasts about attracting capital into the UK. The offshore economy distorts markets by providing tax loopholes to some businesses but not others. It corrupts democracy, helping elites to evade their responsibilities to the societies that nurtured them, and breaking fundamental relationships of accountability that are forged when rulers tax citizens. It does not create wealth but redistributes it from poor to rich. Worse, it destroys wealth and slows growth.
John Christensen, director of the Tax Justice Network, in The Guardian, May 2007

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