The #LuxLeaks whistleblowers appeal verdict is in and once again it demonstrates what an upside down world we’re living in, when whistleblowers on the frontline of tax justice find themselves convicted for a second time for exposing information that was so clearly in the public interest. Disclosure of such information can be decisive for driving political change, and this is exactly why tax deals in Luxembourg were brokered behind closed doors. Now it’s time to swing the spotlight onto accountancy firm PwC not only for the disgraceful way they treated these whistleblowers, but to hold them to account for their role the whistleblowers exposed in siphoning off tax revenue from so many EU member states. You can read about the less known but truly shocking treatment of whistleblower Raphael Halet in detail here.
The Tax Justice Network’s John Christensen says today,
“This is a disgraceful verdict when you consider that the real villains are accountancy firm PwC and the Luxembourg tax authorities who should never have negotiated these secret tax deals which go against the grain of free trade and all of which will almost certainly be found to constitute illegal state aid.”
In July we wrote a blog entitled Luxembourg backing down on supporting tax haven USA. Now it’s Switzerland’s turn.
This concerns the OECD’s Common Reporting Standard (CRS,) a global scheme to share banking information. The United States isn’t a participating jurisdiction: it has its own FATCA project, which as we’ve remarked before, is good at ferreting out US taxpayers overseas, but provides relative little information in the other direction to help other countries enforce their own tax laws. Making the United States a giant tax and secrecy haven.
Why reregulation after the crisis is feeble: Shadow banking, offshore financial centers, and jurisdictional ‘competition’
Prof. Thomas Rixen, who has written a lot about tax ‘competition’ (aka tax wars) in the past, has a new article looking at similar dynamics in the area of financial regulation. Entitled Why reregulation after the crisis is feeble: Shadow banking, offshore financial centers, and jurisdictional competition, it points out that the shadow banking sector, many of whose players were implicated in the global financial crisis that erupted almost a decade ago, is heavily entwined with offshore financial centres. Typically, this involved banks sponsoring off-balance sheet vehicles, located in places like Cayman or Luxembourg: these supposedly took risk off the banks’ books, but then returned to haunt the banks when they blew up, causing widespread economic disaster.
We recently hosted Brooke Harrington, an Associate Professor at the Copenhagen Business School, on our Taxcast, talking about her remarkable research on tax havens. She wrote an article in The Atlantic last October, entitled Inside the Secretive World of Tax-Avoidance Experts – which we’d urge you to read if you haven’t already – and now she’s followed it up with another equally powerful article, also in The Atlantic, entitled Why Tax Havens are Political and Economic Disasters. This article draws directly and explicitly from TJN’s work on The Finance Curse, spearheaded by TJN’s John Christensen and Nicholas Shaxson. In short, if your country is overdependent on financial services, it will suffer many of the same problems that are faced by countries overdependent on exporting minerals like oil, and for mostly similar reasons.