John Christensen ■ The Offshore Wrapper: a week in tax justice #31
Offshore deals worth £80bn sealed in just three months
New data from Appleby shows that offshore deals jumped in the last quarter making the three months to June one of the highest value quarters for offshore deals in the last ten years.
In total US$80bn of mergers and acquisitions were completed offshore. This means that the value of offshore mergers and acquisitions has not fallen for six quarters.
If anyone thought that the increased focus on tax havens will mean people and companies would be less likely to use them, they have now been proved wrong.
The divine right of Swazi royalty to party
This week’s ‘Wrapper Recommendation’ is @swazileaks – a twitter account that exposes the luxurious lifestyle, exploitation and corruption of Swaziland’s monarchy.
Swaziland is one of the poorest countries on earth. 60% of its 1.1 million population live on less than a dollar a day.
Ruled by King Mswati III, an absolute monarch, the royal household has a $60m annual budget.
A quick trawl though @swazileaks shows a significant amount of this $60m is spent on shopping and partying. Take a peek behind the royal curtain.
You know things have got bad when…
This week, The Wrapper brings you the first in an occasional series entitled: “You know things have got bad when …”
Reader, You know things have got bad when even people located in tax havens are allegedly parking their wealth in other tax havens to avoid tax.
Swissinfo.ch reports that the Swiss tax authority have reopened an investigation into the affairs of Ammann Group, a Swiss construction machinery company when run by Johann Schneider-Amman, the country’s current economics minister.
Apparently a tax inspector concluded that the company moved profits to Jersey and Luxembourg in order to avoid paying tax in Switzerland.
European Investment Bank wants less more secrecy
The EIB invests hundreds of billions of taxpayer funded euros in projects both inside and outside the EU.
Now a group of NGOs have written to the European Investment Bank calling on it to drop its plans to change their transparency policy.
Campaigners with Eurodad, the European Network on Debt and Development and Counterbalance, claim that the changes proposed to the EIB’s transparency policy will make it more difficult to see where these billions are going.
The Wrapper decided to see if this was true. And after reading the EIB’s Draft Transparency Policy paper, we think Eurodad and others are on to something. It does appear the EIB’s draft policy could increase its ability to refuse information on the basis that it would damage “clients, co-financiers and investors”.
The EIB doesn’t have a squeaky clean record in the illicit finance zone. There have been allegations that companies receiving EIB loans are linked to the mafia. Earlier this year, an EIB vice president had to post bail on corruption charges linked to embezzlement of state funds in Spain. The executive has since tendered her resignation from the EIB. The EIB has also invested in companies which were alleged to be connected to the corrupt Nigerian governor James Ibori.
So – just the time to be reducing transparency then…
UNCTAD slams the role of tax havens and takes a swipe at the OECD
The UN Conference on Trade and Development (Unctad) last week strongly criticised the role of tax havens in undermining development.
In its latest Trade & Development report, Unctad argued that the structure of the global economy and in particular tariff free trade, combined with tax havens means that countries have lost the ability to gather tax revenue. This is undermining infrastructure improvements to drive forward economic development.
The report suggests that the increasing use of tax havens for foreign investment is encouraging companies to engage in a race to the bottom. We at the TJN call this phenomenon, “Tax Wars”. It results in countries using beggar-thy-neighbour policies to attract business away from other countries, with little care for the damage they may inflict on neighbours’ economies.
The solution according to the UN, is more multilateral agreements, where countries come together to agree common rules rather than fight it out. However in a clear reference to the OECD and the G20, who have been leading the international agenda on these issues, the UN says it is a problem that most of this work is being led by exclusive groups of rich nations, excluding developing countries from the dialogue. The solution, says the UN, is that this should be done under the umbrella of the UN.
This may sound self-serving but the UN has a point, especially when an OECD representative recently commented that developing nations were not interested in automatic information exchange, a key tool for combatting tax avoidance.
OECD releases action plan on base erosion and profit shifting
Bang on cue, days after the UNCTAD report, the OECD today released their action plan for how to deal with international tax avoidance. The action plan and recommendations will be on the agenda for the G20 meeting in Australia on the 20th of September.
The action plan includes measures to prevent the abuse of tax treaties, and improve the rules on transfer pricing which have been key mechanisms allowing multinational companies to move profits out of a country before taxation.
On announcing the action plan the OECD Secretary General, Angel Gurria insisted that developing nations had a seat at the table when new recommendations were being formulated. He also said that the OECD would do more to involve developing nations in the future work.
Academics call for tax justice for developing countries – you can too
The need to focus development policy on improving tax collection is being pushed by a group of academics. Academics Stand Against Poverty (ASAP). The group has launched a petition on the website of campaign group Avaaz to make sure that action to combat tax abuse is included in the new UN Sustainable Development Goals (SDGs).
The UN SDGs are the planned update to the Millennium Development Goals which were key to driving policies to lift hundreds of millions out of poverty in the developing world at the beginning of this century.
The petition will be delivered to the secretary general of the UN. Please do sign it and pass it onto your friends by going to this link.
Big Tobacco, big tax abuse
Tobacconomics: Measuring the value of cigarette taxes
$427bn lost to tax havens every year: landmark study reveals countries’ losses and worst offenders
Corporate profit misalignment: An analysis of German parent companies and their foreign affiliates
Offshore, National Security and Britain’s Role
Tax Justice Network’s offshore wealth estimates have just been validated by the OECD
Ashes to ashes: How British American Tobacco avoids taxes in low and middle income countries
20 April 2019