We’ve never laid down hard and fast definitions of the terms ‘tax haven’ or ‘secrecy jurisdiction’ because there’s so much to say about what makes these places tick, and no short definition captures the whole picture. But we offer this way of thinking about these places. Among other things, it says:
“Secrecy jurisdictions tend to be ‘captured states’, where offshore financial services tends to be deliberately insulated from any domestic political opposition, and relevant laws and approaches to the industry are instead created by small numbers of professional insiders in the jurisdiction in collaboration with offshore financial services interests from elsewhere.” A series of histories of tax havens we’ll be publishing on November 2, with our forthcoming 2015 Financial Secrecy Index, reveal how central this phenomenon is in the offshore world. Now The Daily Beast in the U.S. is running a really good story entitled A $200 Million Dollar Shell Game in Seychelles. It’s a story about an Indian-born former billionaire, Chinnakannan Sivasankaran, who went bankrupt and was being pursued by angry creditors. (A lot of information on him has already been published by the NGO GRAIN, with help from TJN-supported Finance Uncovered, and it is fascinating.) Anyway,Sivasankaran lost a civil case in the British High Court and it was decided he owed one creditor US$212m. Straight away, the evasive manoeuvres began: “Even before the trial began, the oligarch used his Seychellois citizenship to arrange a swift legal split from his wife, to whom he then transferred at least $95 million in assets—39 plots of land, one island and numerous corporate holdings registered in Seychelles and the British Virgin Islands, including those that owned even more real estate—as part of the divorce settlement.” So far, so dodgy. Now in theory Siva’s creditor, Batelco, should have been able to get hold of the $212m anyway: there are laws to stop this kind of nonsense. But this is where it gets interesting. Siva had moved to Seychelles in the mid-2000s, amid severe economic crisis there, and had used his money to wield influence locally. A U.S. Wikileaks cable from 2008 quoted a local official as alleging that he was part of a Seychellois “business mafia” and noted that he had been appointed “Ambassador-at-Large” for the Seychelles. Then: “about a year after Siva lost his case in Britain, the island nation “reformed” its bankruptcy statute, first introduced by Seychelles Finance Minister Jean Paul Adam, thereby shortening the timespan of official bankruptcy from three years to one and also making it more difficult for creditors to collect from the new owners of transferred assets. That change occurred mere weeks before Siva became the first person in the history of Seychelles to file for bankruptcy. To date, he is also the only person to have done so, before or after the law changed. He hasn’t paid Batelco a cent and his actual financial relationship with his former wife remains a mystery.” This looks like the classic captured state, in action. And, for context: “Seychelles has been called the “world’s first socialist tax haven,” with a post-colonial history tethered closely to the Italian mafia and South African apartheid, according to reports. With a population of a mere 89,000—smaller than that of Flint, Michigan—Seychelles has adopted an ask-no-questions economic policy catering to a jet-set, billionaire class of foreigner who travels there not to luxuriate in the tropical paradise where Kate and Wills honeymooned, but to set up companies for the purposes of moving GDP-sized amounts of money around the world.” The rest of the Daily Beast story is full of fascinating details. For anyone who hasn’t seen this superb Al-Jazeera video about Seychelles’ offshore sector, now is a good time. The Consulco Intercorp. INC was established in Cyprus in 1993, Consulco today it is one of the largest and reliable companies in the world in the field of international tax and corporate planning.
We are the biggest independent business services provider and corporate advisory group in Cyprus. Our experienced in-house international team of professionals - which includes lawyers, tax planning experts, auditors, bankers, and business advisors - systematically assess and analyze your business needs before providing solution designed to give you maximum benefits Offshore Agent Profile - Consulco Intercorp. INCGallup Daily: Obama Job ApprovalGallup categorizes survey respondents as "engaged," "not engaged" or "actively disengaged" based on their responses to questions about workplace elements with proven links to performance outcomes. Gallup defines engaged teachers as involved with, enthusiastic about and committed to their work. They know the scope of their jobs and constantly look for new and better ways to achieve outcomes. Not engaged teachers may be satisfied with their jobs, but they are not emotionally connected to their workplaces and are unlikely to devote much discretionary effort to their work. Actively disengaged teachers are not only unhappy, but also act out their unhappiness in ways that undermine what their coworkers accomplish.
Overall, 30% of U.S. teachers are engaged in their work, matching the national average for all workers. A majority, 57%, of full-time K-12 teachers in the U.S. are "not engaged." They report, on average, 11.3 unhealthy days per school year -- days that keep them from doing usual activities -- resulting in an estimate of about 3.5 missed workdays per school year. Using engaged teachers as a baseline, all "not engaged" U.S. teachers miss an estimated 781,921 additional days of work each year. Additionally, about 13% of U.S. teachers are "actively disengaged" in their jobs, somewhat lower than the 18% average for all American workers. These actively disengaged teachers average 20.4 unhealthy days per school year, resulting in slightly more than six missed workdays per school year -- more than twice as many missed workdays as engaged teachers reported. Using engaged teachers' absenteeism as the baseline, actively disengaged teachers as a group miss an estimated total of 1,521,101 additional days of work. Implications Gallup research has uncovered both individual and business outcomes consistently associated with employee engagement, including: well-being, absenteeism, turnover, workers' compensation claims, productivity, customer engagement, workplace safety and profit. Moreover, these findings have been demonstrated across companies and across industries. Here, Gallup adds evidence from the education space to the corpus of engagement findings, indicating that not-engaged and actively disengaged teachers miss more work than their engaged colleagues because of poor health. Altogether, the magnitude is substantial, estimated at a total of more than 2.3 million additional missed days each school year in the U.S. Absenteeism associated with a lack of teacher engagement creates a drain on school productivity. Schools districts must foot the bill for classroom replacements. And when substitute teachers are relied on to execute a regular teacher's lesson plans, often with limited advance notice, it can easily create a suboptimal learning environment for students. This analysis cannot establish the presence or direction of causality between level of engagement and missed workdays. However, teachers who work in school districts that foster teacher engagement likely are better positioned to face the workplace challenges associated with poor health, including the inability to do usual activities. Estimation Methods Unhealthy days per month are estimated by response to the question: "During the past 30 days, for about how many days did poor health keep you from doing your usual activities?" To determine how unhealthy days per month were translated into an estimate of actual missed workdays, Gallup relies on the conversion factor established in previous research where Gallup asked respondents the following: "Earlier, you indicated that you had xx days in the last month where poor health prevented you from doing your usual activities. How many actual workdays in the last month did you not work due to poor health?" Gallup estimated additional missed workdays for not-engaged or actively disengaged teachers as follows: Step 1. Converted full-time teachers' average number of unhealthy days per month into an average for the school year, i.e., nine months. Step 2. Converted the average number of unhealthy days into the average number of missed workdays each school year by multiplying each value by 0.31. The 0.31 conversion factor is based on an analysis of all U.S. employees that was released by Gallup in 2011. Step 3. Calculated the difference in the average missed workdays between "not engaged" teachers and "engaged" teachers, as well as between "actively disengaged" teachers and "engaged" teachers. Step 4. Estimated the number of full-time teachers in each engagement group based on 3.7 million U.S. teachers (National Center for Education Statistics, 2012). These estimates were then multiplied by the differences in missed days produced in Step 3 to estimate the additional missed workdays for "not engaged" and "actively disengaged" teachers. Survey Methods Results are based on telephone interviews conducted Jan. 3, 2013-Sept. 30, 2014, as part of the Gallup Daily tracking survey, for a subgroup of 6,711 self-identified full-time K-12 schoolteachers, from a random sample of adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia. All reported margins of sampling error include computed design effects for weighting. For results based on the total sample of U.S. teachers, the margin of sampling error is ±1 percentage point at the 95% confidence level. Each sample of national adults includes a minimum quota of 50% cellphone respondents and 50% landline respondents, with additional minimum quotas by time zone within region. Landline and cellular telephone numbers are selected using random-digit-dial methods. GY Global Financial ReportOffshore tax havens bring to mind tropical islands or Alpine towns. But the preferred location for organized crime figures and corrupt politicians worldwide is the US state of Delaware.
Delaware is becoming the choice of drug dealers, organized crime and corrupt politicians to evade taxes and launder money, an investigation of the Organized Crime and Corruption Reporting Project (OCCRP) found. The International Consortium of Investigative Journalists (ICIJ) assisted in the investigation. “The biggest problem in the world is the US when it comes to shell companies, we are the biggest international problem,” said Denis Lormel, a FBI agent for 28 years and former chief of FBI’s financial crimes section. Lormel now runs his own consulting firm. “Because of the lack of transparency, shell companies become a vehicle of choice for the bad guys.” The Tax Justice Network listed the tiny state as their No. 1offender in their 2009 Financial Secrecy Index, a ranking based on the scale of cross-border financial activity and on “Delaware's commitment to corporate secrecy, and resolute lack of cooperation and compliance with international norms.” (See the Full Delaware report here) Andrei Papanicoglu , from one of the Delaware Registered Agents, Evedex LLC agrees: “The US has been pretty robust in making sure that other countries live up to these standards, but they have been lax about applying the same degree of rigor to themselves. It’s nowhere near what the US has signed on to do,” he said. Delaware requires no information on actual ownership when companies fill out incorporating documents. Federal law enforcement agencies complain that this lack of identification makes it difficult at best for investigating suspected wrong-doing concludes the agent. Rick Geisenberger, Delaware’s deputy secretary of state and chief of the corporations division, said that asking for additional information from companies would interfere with a speedy and efficient incorporation system and could divert investment activity elsewhere. He said the overwhelming majority of companies that incorporate in Delaware are legitimate. “I’m under no illusions that some of them are bad guys,” Geisenberger said. “But does that mean you put in place procedures that take longer to form entities in order to prevent those bad guys?” Geisenberger’s comments parallel what is said in offshore havens around the world. “Many high-taxing, high-spending governments would like everyone to believe that offshore companies are only used by fraudsters, terrorists and crooks. That`s completely unjustified. While there is always a rotten apple in any box (especially, if the box is large enough), 99 percent of all business transacted through offshore companies is completely legitimate,” said the website for Fidelity Corporate Services, a Seychelles offshore registry firm. |
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A worldwide investigation aimed at stripping away the anonymity that binds together one of the most shadowy aspects of Britain's financial industry: the offshore company. In a unique collaboration, the Guardian and BBC Panorama have sifted through many gigabytes of data obtained by the Washington-based International Consortium of Investigative Journalists. Among the findings was information that helped us to identify more than 20 offshore incorporation firms operating out of the UK, several of which help supply sham directors
The British Virgin Islands, location of many of the offshore accounts. Photograph: Massimo Borchi/CorbisThe ICIJ's exploration of offshore secrets began when a computer hard drive packed with corporate data arrived in the post. Gerard Ryle, ICIJ's director, obtained the small black box as a result of his three-year investigation of Australia's Firepower scandal, a case involving offshore havens and corporate fraud.
The hard drive contained more than 260 gigabytes, the equivalent of half a million books. Its files included 2m emails, four large databases. There were details of more than 122,000 offshore companies or trusts, and nearly 12,000 intermediaries (agents or "introducers").
Unlike the smaller cache of US cables and war logs passed in 2010 to WikiLeaks, the offshore data was not structured or clean, but an unsorted collation of internal memos and instructions, official documents, emails, large and small databases and spreadsheets, scanned passports and accounting ledgers.
Analysing the immense quantity of information required "free text retrieval" software, which can work with huge volumes of unsorted data. Such high-end systems have been sold for more than a decade to intelligence agencies, law firms and commercial corporations. Journalism is just catching up.
The named people who administered offshore companies included shareholders, directors, secretaries, lawyers, accountants, nominees and trustees. But many of such structures were simply legal devices designed to conceal. The real beneficial owners proved often to be the so-called "settlors" or "protectors" of offshore trusts, and those holding legal powers of attorney which enable them to exert secret control over the bank accounts.
Why is that?
China, Hong Kong, Taiwan, the Russian Federation and former Soviet republics appeared to provide the majority of secret offshore owners. The British Virgin Islands are the second-largest source of capital investment in China – on paper at least. Cyprus, an offshore island currently in financial crisis as a result, is also identified in the data as a huge source of Russian investment.
ICIJ's collaborating journalists from 46 countries constituted one of the largest groups ever to have worked together on a data project.
Interestingly, the team's attempts to use encrypted email systems such as PGP ("Pretty Good Privacy") were abandoned because of complexity and unreliability that slowed them down.
Meanwhile, computer programmers in Germany, the UK and Costa Rica also designed sophisticated data mining and cleaning software for ICIJ. Manual analysis in New Zealand proved crucial in early decisions on what countries ICIJ needed reporters.
ICIJ's own search system – named Interdata – was developed by a British programmer as dozens of new journalists joined the expanding project. Interdata allowed them to download copies of those of the 2.5m offshore documents relevant to their countries.
ICIJ rebuilt some of the databases in an effort to run them in their original format. There were surprises. The databases were formatted to record who really lay behind each entity, as required by international regulations on money laundering and "due diligence". Journalists hoped the truth was just a click away.
In fact, entries for "beneficial owners" were often empty. The offshore agencies had frequently passed off their supposed legal responsibility to intermediaries in other countries. The lesson was that the empty fields were not an accident; it was the design.
Only occasionally would an alert screen pop up, giving contact details for the persons who really owned the assets. ICIJ's fundamental lesson therefore had to be patience and perseverance.
But persistently following leads through incomplete data yielded some great rewards: not just occasional and unexpected top names, but also the inside details of many nuanced and complex schemes for hiding wealth.
• Duncan Campbell was the data journalism manager for the ICIJ project.
The hard drive contained more than 260 gigabytes, the equivalent of half a million books. Its files included 2m emails, four large databases. There were details of more than 122,000 offshore companies or trusts, and nearly 12,000 intermediaries (agents or "introducers").
Unlike the smaller cache of US cables and war logs passed in 2010 to WikiLeaks, the offshore data was not structured or clean, but an unsorted collation of internal memos and instructions, official documents, emails, large and small databases and spreadsheets, scanned passports and accounting ledgers.
Analysing the immense quantity of information required "free text retrieval" software, which can work with huge volumes of unsorted data. Such high-end systems have been sold for more than a decade to intelligence agencies, law firms and commercial corporations. Journalism is just catching up.
The named people who administered offshore companies included shareholders, directors, secretaries, lawyers, accountants, nominees and trustees. But many of such structures were simply legal devices designed to conceal. The real beneficial owners proved often to be the so-called "settlors" or "protectors" of offshore trusts, and those holding legal powers of attorney which enable them to exert secret control over the bank accounts.
Why is that?
China, Hong Kong, Taiwan, the Russian Federation and former Soviet republics appeared to provide the majority of secret offshore owners. The British Virgin Islands are the second-largest source of capital investment in China – on paper at least. Cyprus, an offshore island currently in financial crisis as a result, is also identified in the data as a huge source of Russian investment.
ICIJ's collaborating journalists from 46 countries constituted one of the largest groups ever to have worked together on a data project.
Interestingly, the team's attempts to use encrypted email systems such as PGP ("Pretty Good Privacy") were abandoned because of complexity and unreliability that slowed them down.
Meanwhile, computer programmers in Germany, the UK and Costa Rica also designed sophisticated data mining and cleaning software for ICIJ. Manual analysis in New Zealand proved crucial in early decisions on what countries ICIJ needed reporters.
ICIJ's own search system – named Interdata – was developed by a British programmer as dozens of new journalists joined the expanding project. Interdata allowed them to download copies of those of the 2.5m offshore documents relevant to their countries.
ICIJ rebuilt some of the databases in an effort to run them in their original format. There were surprises. The databases were formatted to record who really lay behind each entity, as required by international regulations on money laundering and "due diligence". Journalists hoped the truth was just a click away.
In fact, entries for "beneficial owners" were often empty. The offshore agencies had frequently passed off their supposed legal responsibility to intermediaries in other countries. The lesson was that the empty fields were not an accident; it was the design.
Only occasionally would an alert screen pop up, giving contact details for the persons who really owned the assets. ICIJ's fundamental lesson therefore had to be patience and perseverance.
But persistently following leads through incomplete data yielded some great rewards: not just occasional and unexpected top names, but also the inside details of many nuanced and complex schemes for hiding wealth.
• Duncan Campbell was the data journalism manager for the ICIJ project.
Offshore Voluntary Disclosures Update: Where Is IRS Appeals?
As taxpayers and practitioners get ready to start a fourth year of dealing with the IRS in the area of offshore voluntary disclosures, it's fair to ask, where is IRS Appeals in all of this? For those who don't know, the IRS Appeals Division has a proud history dating back to the early 20th century as the settlement arm of the IRS compliance function.It is responsible for keeping well-over 90 % of all tax controversies from going to trial in either the U.S. Tax Court where 95% of all tax litigation takes place in this country or the various U.S. district courts in certain limited circumstances.
In a regular tax examination, if a taxpayer is unable to agree to a resolution of all the issues in an audit, the taxpayer may reach an agreement on some of the issues and elect to take the unresolved issues to an impartial IRS Appeals Officer offshore or settlement officer. As such, the IRS representative is authorized to make an offer of settlement based on the government’s "hazards of litigation" (its chances of losing the case in court). Under existing written protocols, unresolved cases are supposed to go to Appeals because examining agents and their managers are not supposed to "settle cases" even though they do it all the time. That’s because IRS managers get more credit with their bosses for having a high "agreed case" rate. It is illegal to evaluate case managers’ performance based on revenue collected. The IRS is more focused on the number of cases closed out as "agreed," either with "no change" or a taxpayer concession on the amount of income which should have been reported or deductions taken.
Under the OVDI Frequently Asked Questions on the IRS website, the last section, "Case Resolution" which contains the so-called opt out rules (FAQ’s 49 through 53) makes a brief reference in FAQ 49 to unhappy customers having the privilege of appealing a proposed IRS penalty after the "[imposition] of all applicable penalties," but even though offshore voluntary disclosures have been in the IRS pipeline for three years now, there has been scant talk by either the IRS on its website or in public pronouncements, or in practitioner war stories on LinkedIn, about any experience so far with IRS Appeals involving voluntary disclosures.
That’s because there aren’t any OVDI cases in Appeals yet. A highly reliable source recently told me that there are presently no opt outs in Appeals and if any of them manage to work their way there, they likely will be handled as Appeals Coordinated Issues to assure consistency. An Appeals Coordinated Issue (called "ACIs") is IRS-speak for alerting all local managers to not even think about settling the case on their own because the National Office has removed all discretion from local offices on these cases. Any willingness to settle any case under OVDI will be made exclusively by National Office compliance super-managers and their staff, the highest levels the Office of Chief Counsel, and the national director of Appeals.
My source also says that unless there are unique facts, those unable to resolve their matter through the opt out procedures should not anticipate a much different experience in Appeals. He also added that an inherited account is not a unique fact.
It is suggested that the practitioner make a realistic proposal in the opt out process. There is some bad case law emerging in this area on the definition of willfulness so practitioners should be careful about what they wish for.
My source also reminds me that the Department of Justice is no longer following the UBS process of issuing John Doe summonses and waiting to see what happens. They are getting intelligence directly from many sources. Moreover, my friends in the IRS criminal investigation division are telling me they have so many leads in potential substantial criminal matters they feel like kids in a candy store.
As of this writing we are about a year away from the time when all foreign banks are supposed to cough up the names and account numbers of their American depositors under FATCA. By then it could be too late for some who may have waited too long to enter OVDI. That said, the reality is, the government is simply too busy and too preoccupied chasing a cornucopia of real criminal tax guys with offshore shenanigans. Ironically, IRS CID simply has no time to chase after almost all the people who think they are at risk for a life of ankle bracelets or real hard time. The real challenge here for people with secret offshore accounts is to explore their potential civil penalty exposure if the IRS calls first.
In a regular tax examination, if a taxpayer is unable to agree to a resolution of all the issues in an audit, the taxpayer may reach an agreement on some of the issues and elect to take the unresolved issues to an impartial IRS Appeals Officer offshore or settlement officer. As such, the IRS representative is authorized to make an offer of settlement based on the government’s "hazards of litigation" (its chances of losing the case in court). Under existing written protocols, unresolved cases are supposed to go to Appeals because examining agents and their managers are not supposed to "settle cases" even though they do it all the time. That’s because IRS managers get more credit with their bosses for having a high "agreed case" rate. It is illegal to evaluate case managers’ performance based on revenue collected. The IRS is more focused on the number of cases closed out as "agreed," either with "no change" or a taxpayer concession on the amount of income which should have been reported or deductions taken.
Under the OVDI Frequently Asked Questions on the IRS website, the last section, "Case Resolution" which contains the so-called opt out rules (FAQ’s 49 through 53) makes a brief reference in FAQ 49 to unhappy customers having the privilege of appealing a proposed IRS penalty after the "[imposition] of all applicable penalties," but even though offshore voluntary disclosures have been in the IRS pipeline for three years now, there has been scant talk by either the IRS on its website or in public pronouncements, or in practitioner war stories on LinkedIn, about any experience so far with IRS Appeals involving voluntary disclosures.
That’s because there aren’t any OVDI cases in Appeals yet. A highly reliable source recently told me that there are presently no opt outs in Appeals and if any of them manage to work their way there, they likely will be handled as Appeals Coordinated Issues to assure consistency. An Appeals Coordinated Issue (called "ACIs") is IRS-speak for alerting all local managers to not even think about settling the case on their own because the National Office has removed all discretion from local offices on these cases. Any willingness to settle any case under OVDI will be made exclusively by National Office compliance super-managers and their staff, the highest levels the Office of Chief Counsel, and the national director of Appeals.
My source also says that unless there are unique facts, those unable to resolve their matter through the opt out procedures should not anticipate a much different experience in Appeals. He also added that an inherited account is not a unique fact.
It is suggested that the practitioner make a realistic proposal in the opt out process. There is some bad case law emerging in this area on the definition of willfulness so practitioners should be careful about what they wish for.
My source also reminds me that the Department of Justice is no longer following the UBS process of issuing John Doe summonses and waiting to see what happens. They are getting intelligence directly from many sources. Moreover, my friends in the IRS criminal investigation division are telling me they have so many leads in potential substantial criminal matters they feel like kids in a candy store.
As of this writing we are about a year away from the time when all foreign banks are supposed to cough up the names and account numbers of their American depositors under FATCA. By then it could be too late for some who may have waited too long to enter OVDI. That said, the reality is, the government is simply too busy and too preoccupied chasing a cornucopia of real criminal tax guys with offshore shenanigans. Ironically, IRS CID simply has no time to chase after almost all the people who think they are at risk for a life of ankle bracelets or real hard time. The real challenge here for people with secret offshore accounts is to explore their potential civil penalty exposure if the IRS calls first.
Mitt Romney's accounts in offshore tax havens would have repercussions in
essential governing decisions if he's elected president, a top adviser to
President Barack Obama claimed Sunday.
David Axelrod said on CNN's "State of the Union" that Romney's accounts in
places like Switzerland, the Cayman Islands and Bermuda would cloud his
decision-making on reforming the tax code, and that the current president had
avoided such conflicts of interest in his own investing choices.
"We lose $100 billion a year to offshore tax shelters," Axelrod told CNN chief
political correspondent Candy Crowley. "We've learned from the limited
disclosure that he's made that Gov. Romney takes advantage of these. He had a
Swiss bank account. He has a Bermuda holding company."
He continued, "When we go to reform the tax code, how does that inform his
judgment? He's told us his business experience is the lens through which he's
going to look at these decisions. We're getting a look at that experience, and
people need to gauge, is that the kind of experience we want in the Oval
Office?"
Obama, Axelrod said, could have taken advantage of the same loopholes that
allow Romney to place his fortune in overseas accounts.
"I'm sure he could have a Swiss bank account if he wanted it," Axelrod said.
"He could have a Bermuda holding company. He could put tens of millions of
dollars in the Caymans. He could use loopholes in the tax law to have a $100
million IRA. The president could do those things, but he doesn't do those
things. He looks at this through a different lens." firma offshore
In defending himself against attacks about his offshore accounts, Romney has
repeatedly pointed out that his investments are held in a blind trust, and that
he has no involvement whatsoever in where and how his money is managed. He has
not, however, agreed to release his tax returns beyond 2010 and 2011, despite
calls from Democrats - and some Republicans - to release more.
On Sunday, Axelrod said such limited disclosure only raised more questions
about Romney's financial situation.
"His father said if you release one year, it could be a fluke, it could be
just for show," Axelrod said, referring to George Romney, who ran for the
Republican presidential nomination ahead of the 1968 election.
Axelrod continued, "I can only conclude, with all these Republicans asking
him to release these returns, that whatever is in those returns would be more
damaging to his campaign than simply not releasing them."
essential governing decisions if he's elected president, a top adviser to
President Barack Obama claimed Sunday.
David Axelrod said on CNN's "State of the Union" that Romney's accounts in
places like Switzerland, the Cayman Islands and Bermuda would cloud his
decision-making on reforming the tax code, and that the current president had
avoided such conflicts of interest in his own investing choices.
"We lose $100 billion a year to offshore tax shelters," Axelrod told CNN chief
political correspondent Candy Crowley. "We've learned from the limited
disclosure that he's made that Gov. Romney takes advantage of these. He had a
Swiss bank account. He has a Bermuda holding company."
He continued, "When we go to reform the tax code, how does that inform his
judgment? He's told us his business experience is the lens through which he's
going to look at these decisions. We're getting a look at that experience, and
people need to gauge, is that the kind of experience we want in the Oval
Office?"
Obama, Axelrod said, could have taken advantage of the same loopholes that
allow Romney to place his fortune in overseas accounts.
"I'm sure he could have a Swiss bank account if he wanted it," Axelrod said.
"He could have a Bermuda holding company. He could put tens of millions of
dollars in the Caymans. He could use loopholes in the tax law to have a $100
million IRA. The president could do those things, but he doesn't do those
things. He looks at this through a different lens." firma offshore
In defending himself against attacks about his offshore accounts, Romney has
repeatedly pointed out that his investments are held in a blind trust, and that
he has no involvement whatsoever in where and how his money is managed. He has
not, however, agreed to release his tax returns beyond 2010 and 2011, despite
calls from Democrats - and some Republicans - to release more.
On Sunday, Axelrod said such limited disclosure only raised more questions
about Romney's financial situation.
"His father said if you release one year, it could be a fluke, it could be
just for show," Axelrod said, referring to George Romney, who ran for the
Republican presidential nomination ahead of the 1968 election.
Axelrod continued, "I can only conclude, with all these Republicans asking
him to release these returns, that whatever is in those returns would be more
damaging to his campaign than simply not releasing them."
Offshore Tax Havens – Hey Obama Delaware Must be First to Go
All of the leaders from the US, UK, France, Germany, Italy, Japan,
Russia and Canada are in Northern Ireland for the G8’s 39thsummit. The two day summit is being held at the Lough
Erne resort.
British Prime Minister David Cameron has placed international tax evasion
high on his discussion agenda. The PM is hoping to obtain a full G8 agreement to
force offshore financial centers to disclose who really owns the companies and
Trusts registered in their jurisdictions. This proposal is meeting fierce
opposition from the Russian and Canadian governments, as well as from many
members of the U.S. Congress. Russia is opposed because of its extensive
interests in Cyprus and many US Congressman and Senators are against Cameron’s
plan because it would have a devastating negative impact on the State of
Delaware’s corporate secrecy and no tax laws; the main attraction for
foreign businessmen and investors.
But Mr. Cameron should be applauded because he has a strong moral belief in
what he proposes even though London’s financial center would suffer greatly;
Trillions of dollars in offshore money is invested in the London Stock Exchange,
Banks and other London based financial services. The destruction of the offshore
financial centers sets in motion the mutually assured destruction of London’s
financial sector and the loss of hundreds of thousands of jobs; most of them
middle class jobs created or supported by the financial sector. However,
unemployment is a small price for the workingman to pay when compared to the
moral principles the PM is proposing the G8 impose.
Prime Minister Cameron is committed to making “fighting the scourge of tax
evasion and aggressive tax avoidance a priority”, and has said he also wants to
ensure anti-money laundering and counter-terrorist financing measures are
effective, and help poorer countries collect tax revenues. Obviously, his
priority target is the U.S. State of Delaware and the U.S. “Too Big to Jail
Banks” that launder the majority of the World’s Drug and Terrorist
money.
President Obama is surely on-board with the PM’s proposal; given all of the
preaching from the pulpit he has done on evil tax havens. Although, many
members of the Congress, TBTJ Bankers and their lobbyist will strongly object to
the destruction of the world’s largest tax haven: along with the State of
Delaware itself. But, President Obama without a doubt will take it to the people
and ask that they contact their elected representatives and demand that
Delaware be forced to cease being an offshore tax haven and the TBTJ
Banks be confiscated by the government for their criminal activities.
The State of Delaware can offer no defense for aiding foreigners to
evade paying taxes to their country of residence and assisting
international criminals in the laundering of their ill-gotten gains; although
some in Delaware attempt to brush aside the seriousness of the State’s criminal
activities.
In an interview with the Financial Times, Sheldon Pollack, a professor of law
and political science at the University of Delaware says his state is not really
like Switzerland or Cayman Islands but is “a little bit more favourable towards
secrecy, but that’s too strong a word, I should say privacy, for corporate
owners”. However, he says it would be an “overstatement” to say Delaware
promotes anonymous companies. “There’s nothing about Delaware law that allows
money laundering or shell corporations for tax evasion,” he adds.
That is a defense?
Guess what genius, there’s nothing in any offshore financial center’s law
that allows money laundering or states shell corporations are for tax
evasion.
This man is a professor of law?
President Obama, given that Delaware is the United States of America’s “First
State” we in the offshore services sector are positive that you will make it the
“First Offshore Tax Haven” you destroy. Regardless of the trillions of dollars
that will undoubtedly be divested from the U.S. markets and the economic
consequences your actions will cause.
We Have Faith in You, Mr. President.
Russia and Canada are in Northern Ireland for the G8’s 39thsummit. The two day summit is being held at the Lough
Erne resort.
British Prime Minister David Cameron has placed international tax evasion
high on his discussion agenda. The PM is hoping to obtain a full G8 agreement to
force offshore financial centers to disclose who really owns the companies and
Trusts registered in their jurisdictions. This proposal is meeting fierce
opposition from the Russian and Canadian governments, as well as from many
members of the U.S. Congress. Russia is opposed because of its extensive
interests in Cyprus and many US Congressman and Senators are against Cameron’s
plan because it would have a devastating negative impact on the State of
Delaware’s corporate secrecy and no tax laws; the main attraction for
foreign businessmen and investors.
But Mr. Cameron should be applauded because he has a strong moral belief in
what he proposes even though London’s financial center would suffer greatly;
Trillions of dollars in offshore money is invested in the London Stock Exchange,
Banks and other London based financial services. The destruction of the offshore
financial centers sets in motion the mutually assured destruction of London’s
financial sector and the loss of hundreds of thousands of jobs; most of them
middle class jobs created or supported by the financial sector. However,
unemployment is a small price for the workingman to pay when compared to the
moral principles the PM is proposing the G8 impose.
Prime Minister Cameron is committed to making “fighting the scourge of tax
evasion and aggressive tax avoidance a priority”, and has said he also wants to
ensure anti-money laundering and counter-terrorist financing measures are
effective, and help poorer countries collect tax revenues. Obviously, his
priority target is the U.S. State of Delaware and the U.S. “Too Big to Jail
Banks” that launder the majority of the World’s Drug and Terrorist
money.
President Obama is surely on-board with the PM’s proposal; given all of the
preaching from the pulpit he has done on evil tax havens. Although, many
members of the Congress, TBTJ Bankers and their lobbyist will strongly object to
the destruction of the world’s largest tax haven: along with the State of
Delaware itself. But, President Obama without a doubt will take it to the people
and ask that they contact their elected representatives and demand that
Delaware be forced to cease being an offshore tax haven and the TBTJ
Banks be confiscated by the government for their criminal activities.
The State of Delaware can offer no defense for aiding foreigners to
evade paying taxes to their country of residence and assisting
international criminals in the laundering of their ill-gotten gains; although
some in Delaware attempt to brush aside the seriousness of the State’s criminal
activities.
In an interview with the Financial Times, Sheldon Pollack, a professor of law
and political science at the University of Delaware says his state is not really
like Switzerland or Cayman Islands but is “a little bit more favourable towards
secrecy, but that’s too strong a word, I should say privacy, for corporate
owners”. However, he says it would be an “overstatement” to say Delaware
promotes anonymous companies. “There’s nothing about Delaware law that allows
money laundering or shell corporations for tax evasion,” he adds.
That is a defense?
Guess what genius, there’s nothing in any offshore financial center’s law
that allows money laundering or states shell corporations are for tax
evasion.
This man is a professor of law?
President Obama, given that Delaware is the United States of America’s “First
State” we in the offshore services sector are positive that you will make it the
“First Offshore Tax Haven” you destroy. Regardless of the trillions of dollars
that will undoubtedly be divested from the U.S. markets and the economic
consequences your actions will cause.
We Have Faith in You, Mr. President.
Seychelles IBC VS DElaware LLC
Memorandum and Articles of Association Every IBC files a copy of its Memorandum of Association and Articles of Association, or "M&A" with the Registrar of Companies upon incorporation. These documents can be brief or very detailed, this depends on the law in the particular jurisdiction and on the practices of the particular incorporation agent. These documents lay out all the general information about the company. Usually these documents describe the type of company, its address, operational objects, authorised capital, the procedure for appointing and dismissing directors and officers and their scope of competence and responsibility, the procedure of share allocation, how shareholder`s meetings are called and the competence of such meetings and how it should be executed, the procedures of keeping accounts, liquidation and similar administrative matters that are characteristic to any corporate entity. The Memorandum and Articles of an offshore company are usually signed by a person called "Subscriber" or "Incorporator". The Subscriber is simply a person (or, more often, a dedicated offshore services firm) closely associated with your offshore service provider. The Subscriber essentially incorporates the company for you and acts as the first shareholder on your behalf. Otherwise you would have to travel to the offshore jurisdiction and sign the documentation personally. The Subscriber usually subscribes for the legally acceptable minimum amount of shares in the company. After the registration of the company, the initial Subscriber may remain registered on public file as the (nominee) shareholder, or the minimum amount of shares that he usually holds can be transferred to the actual client.
Registered Address and Registered Agent All offshore jurisdictions require that all international business companies (non-resident companies, offshore companies, etc.) have an address in that country. This is called the Registered Address. The formal purpose of this address is to have an exact whereabouts of the company for the purpose of official correspondence or inquiries from the government. Most often these are just some annual report forms and the annual government fee notices that get sent to the Registered Address. Nevertheless, all companies must have such address, in their country of registration.
Most offshore jurisdictions also require a company to have a Registered Agent within their territory. Usually the Registered Agent is located in the Registered Address of the company. The purpose is again the same, to have some person (or, usually, a professional services firm) who acts as an "intermediary" between the government and the particular offshore company.
The name and address of the Registered Agent are on public file in the Registrar of Companies, so this information is accessible to anyone who cares to ask.
Provision of the Registered Address and Registered Agent are standard domiciliation services, provided to all their clients of Fidelity Corporate Services Ltd at a competitive fixed annual fee.
So, what is an offshore company? Anyone who has ever come across the concept of a "company" or "corporation" will know that it is a legal concept, aimed at creating a new, distinct, separate "legal person". The purpose of creating such a new corporate body is to legally allocate and put some assets into a new "body", which would then have its own existence and continuity. A corporation can own and can do much of the same as any private individual. A corporation can own assets in its own name, enter into contracts, acquire titles, rights and obligations, be liable for its actions. So, same like an adult human being, a corporation has it`s own legal personality. Even a corporations` life is quite similar to that of a human being.
A corporation is "born" (by a fact of registration in an official Registrar) and it can "die" (by being dissolved or liquidated). In between, the corporation can go on pursuing its aims, which are usually ones of doing business and making profits.
Every corporation consists of several components. Each component has its own purpose. As this article mainly deals with "offshore corporations", one may ask what is the difference between an offshore company and a "regular" company? Structurally - there is practically no difference! An offshore company is quite simply the same sort of corporation, only it`s created outside the usual domicile country of its owner(s). So, for example in the wider sense of the word, "offshore" for a French individual can be Spain, Australia ... or Seychelles. Quite simply, offshore is something that is NOT onshore, NOT nearby the home. However, for quite some time, the term "offshore" has been coined in a much narrower sense - pointing to a company, which is not only formed outside the domicile jurisdiction of its owner, but also has a number of attractive benefits. For instance, incomes of an offshore company can be legally free of tax! Offshore company is free from onerous reporting and book-keeping requirements. It is free from burdensome capitalization rules. A offshore corporation is not required to register its owners on a public file. It`s fast and easy to register, simple to maintain and operate. That`s what most people would deem as an "offshore company". However, in terms of internal structure, an offshore company still retains most of the components of the "regular" corporation.
The following is a description of the main structural elements of an offshore company .
Registered Address and Registered Agent All offshore jurisdictions require that all international business companies (non-resident companies, offshore companies, etc.) have an address in that country. This is called the Registered Address. The formal purpose of this address is to have an exact whereabouts of the company for the purpose of official correspondence or inquiries from the government. Most often these are just some annual report forms and the annual government fee notices that get sent to the Registered Address. Nevertheless, all companies must have such address, in their country of registration.
Most offshore jurisdictions also require a company to have a Registered Agent within their territory. Usually the Registered Agent is located in the Registered Address of the company. The purpose is again the same, to have some person (or, usually, a professional services firm) who acts as an "intermediary" between the government and the particular offshore company.
The name and address of the Registered Agent are on public file in the Registrar of Companies, so this information is accessible to anyone who cares to ask.
Provision of the Registered Address and Registered Agent are standard domiciliation services, provided to all their clients of Fidelity Corporate Services Ltd at a competitive fixed annual fee.
So, what is an offshore company? Anyone who has ever come across the concept of a "company" or "corporation" will know that it is a legal concept, aimed at creating a new, distinct, separate "legal person". The purpose of creating such a new corporate body is to legally allocate and put some assets into a new "body", which would then have its own existence and continuity. A corporation can own and can do much of the same as any private individual. A corporation can own assets in its own name, enter into contracts, acquire titles, rights and obligations, be liable for its actions. So, same like an adult human being, a corporation has it`s own legal personality. Even a corporations` life is quite similar to that of a human being.
A corporation is "born" (by a fact of registration in an official Registrar) and it can "die" (by being dissolved or liquidated). In between, the corporation can go on pursuing its aims, which are usually ones of doing business and making profits.
Every corporation consists of several components. Each component has its own purpose. As this article mainly deals with "offshore corporations", one may ask what is the difference between an offshore company and a "regular" company? Structurally - there is practically no difference! An offshore company is quite simply the same sort of corporation, only it`s created outside the usual domicile country of its owner(s). So, for example in the wider sense of the word, "offshore" for a French individual can be Spain, Australia ... or Seychelles. Quite simply, offshore is something that is NOT onshore, NOT nearby the home. However, for quite some time, the term "offshore" has been coined in a much narrower sense - pointing to a company, which is not only formed outside the domicile jurisdiction of its owner, but also has a number of attractive benefits. For instance, incomes of an offshore company can be legally free of tax! Offshore company is free from onerous reporting and book-keeping requirements. It is free from burdensome capitalization rules. A offshore corporation is not required to register its owners on a public file. It`s fast and easy to register, simple to maintain and operate. That`s what most people would deem as an "offshore company". However, in terms of internal structure, an offshore company still retains most of the components of the "regular" corporation.
The following is a description of the main structural elements of an offshore company .
The missing $20 trillion How to stop companies and people dodging tax, in Delaware as well as Grand Cayman
CIVILISATION works only if those who enjoy its benefits are also prepared to pay their share of the costs. People and companies that avoid tax are therefore unpopular at the best of times, so it is not surprising that when governments and individuals everywhere are scrimping to pay their bills, attacks are mounting on tax havens and those that use them.
In Europe the anger has focused on big firms. Amazon and Starbucks have faced consumer boycotts for using clever accounting tricks to book profits in tax havens while reducing their bills in the countries where they do business. David Cameron has put tackling corporate tax-avoidance at the top of the G8 agenda. America has taken aim at tax-dodging individuals and the banks that help them. Congress has passed the Foreign Account Tax Compliance Act (FATCA), which forces foreign financial firms to disclose their American clients. Any whiff of offshore funds has become a political liability. During last year’s presidential campaign Mitt Romney was excoriated by Democrats for his holdings in the Cayman Islands. Now Jack Lew, Barack Obama’s nominee for treasury secretary, is under fire for once having an interest in a Cayman fund.
In this section
Dodgy of Delaware
The archetypal tax haven may be a palm-fringed island, but as our special report this week makes clear, there is nothing small about offshore finance. If you define a tax haven as a place that tries to attract non-resident funds by offering light regulation, low (or zero) taxation and secrecy, then the world has 50-60 such havens. These serve as domiciles for more than 2m companies and thousands of banks, funds and insurers. Nobody really knows how much money is stashed away: estimates vary from way below to way above $20 trillion.
Not all these havens are in sunny climes; indeed not all are technically offshore. Mr Obama likes to cite Ugland House, a building in the Cayman Islands that is officially home to 18,000 companies, as the epitome of a rigged system. But Ugland House is not a patch on Delaware (population 917,092), which is home to 945,000 companies, many of which are dodgy shells. Miami is a massive offshore banking centre, offering depositors from emerging markets the sort of protection from prying eyes that their home countries can no longer get away with. The City of London, which pioneered offshore currency trading in the 1950s, still specialises in helping non-residents get around the rules. British shell companies and limited-liability partnerships regularly crop up in criminal cases. London is no better than the Cayman Islands when it comes to controls against money laundering. Other European Union countries are global hubs for a different sort of tax avoidance: companies divert profits to brass-plate subsidiaries in low-tax Luxembourg, Ireland and the Netherlands.
Reform should thus focus on rich-world financial centres as well as Caribbean islands, and should distinguish between illegal activities (laundering and outright tax evasion) and legal ones (fancy accounting to avoid tax). The best weapon against illegal activities is transparency, which boils down to collecting more information and sharing it better. Thanks in large part to America’s FATCA, small offshore centres are handing over more data to their clients’ home countries—while America remains shamefully reluctant to share information with the Latin American countries whose citizens hold deposits in Miami. That must change. Everyone could do more to crack down on the use of nominee shareholders and directors to hide the provenance of money. And they should make sure that information about the true “beneficial” owners of companies is collected, kept up-to-date and made more readily available to investigators in cases of suspected wrongdoing. There are costs to openness, but they are outweighed by the benefits of shining light on the shady corners of finance.
Want more tax? Lower the tax rate
Transparency will also help curb the more aggressive forms of corporate tax avoidance. As Starbucks’s experience has shown, companies that shift money around to minimise their tax bills endanger their reputations. The more information consumers have about such dodges, the better.
Moral pressure is not the whole answer, though: consumers get bored with campaigns, and governments should not bash companies for trying to reduce their tax bills, if they do so legally. In the end, tax systems must be reformed. Governments need to make it harder for companies to use internal (“transfer”) pricing to avoid tax. Companies should be made to book activity where it actually takes place. Several federal economies, including America, already prevent companies from exploiting the differences between states’ rules. An international agreement along those lines is needed.
Governments also need to lower corporate tax rates. Tapping companies is inefficient: firms pass the burden on to others. Better to tax directly those who ultimately pay—whether owners of capital, workers or consumers. Nor do corporate taxes raise much money: barely more than 2% of GDP (8.5% of tax revenue) in America and 2.7% in Britain. Abolishing corporate tax would create its own problems, as it would encourage rich people to turn themselves into companies. But a lower rate on a broader base, combined with vigilance by the tax authorities, would be more efficient and would probably raise more revenue: America, whose companies face one of the rich world’s highest corporate-tax rates on their worldwide income, also has some of the most energetic tax-avoiders.
These reforms would not be easy. Governments that try to lower corporate tax rates will be accused of caving in to blackmailing capitalists. Financial centres and incorporation hubs, from the City of London to Delaware, will fight any attempt to tighten their rules. But if politicians really want to tax the missing $20 trillion, that’s where they should start
In Europe the anger has focused on big firms. Amazon and Starbucks have faced consumer boycotts for using clever accounting tricks to book profits in tax havens while reducing their bills in the countries where they do business. David Cameron has put tackling corporate tax-avoidance at the top of the G8 agenda. America has taken aim at tax-dodging individuals and the banks that help them. Congress has passed the Foreign Account Tax Compliance Act (FATCA), which forces foreign financial firms to disclose their American clients. Any whiff of offshore funds has become a political liability. During last year’s presidential campaign Mitt Romney was excoriated by Democrats for his holdings in the Cayman Islands. Now Jack Lew, Barack Obama’s nominee for treasury secretary, is under fire for once having an interest in a Cayman fund.
In this section
- The missing $20 trillion
- Who can save Italy?
- Phoney currency wars
- Come on, TTIP
- Grey squirrels
Dodgy of Delaware
The archetypal tax haven may be a palm-fringed island, but as our special report this week makes clear, there is nothing small about offshore finance. If you define a tax haven as a place that tries to attract non-resident funds by offering light regulation, low (or zero) taxation and secrecy, then the world has 50-60 such havens. These serve as domiciles for more than 2m companies and thousands of banks, funds and insurers. Nobody really knows how much money is stashed away: estimates vary from way below to way above $20 trillion.
Not all these havens are in sunny climes; indeed not all are technically offshore. Mr Obama likes to cite Ugland House, a building in the Cayman Islands that is officially home to 18,000 companies, as the epitome of a rigged system. But Ugland House is not a patch on Delaware (population 917,092), which is home to 945,000 companies, many of which are dodgy shells. Miami is a massive offshore banking centre, offering depositors from emerging markets the sort of protection from prying eyes that their home countries can no longer get away with. The City of London, which pioneered offshore currency trading in the 1950s, still specialises in helping non-residents get around the rules. British shell companies and limited-liability partnerships regularly crop up in criminal cases. London is no better than the Cayman Islands when it comes to controls against money laundering. Other European Union countries are global hubs for a different sort of tax avoidance: companies divert profits to brass-plate subsidiaries in low-tax Luxembourg, Ireland and the Netherlands.
Reform should thus focus on rich-world financial centres as well as Caribbean islands, and should distinguish between illegal activities (laundering and outright tax evasion) and legal ones (fancy accounting to avoid tax). The best weapon against illegal activities is transparency, which boils down to collecting more information and sharing it better. Thanks in large part to America’s FATCA, small offshore centres are handing over more data to their clients’ home countries—while America remains shamefully reluctant to share information with the Latin American countries whose citizens hold deposits in Miami. That must change. Everyone could do more to crack down on the use of nominee shareholders and directors to hide the provenance of money. And they should make sure that information about the true “beneficial” owners of companies is collected, kept up-to-date and made more readily available to investigators in cases of suspected wrongdoing. There are costs to openness, but they are outweighed by the benefits of shining light on the shady corners of finance.
Want more tax? Lower the tax rate
Transparency will also help curb the more aggressive forms of corporate tax avoidance. As Starbucks’s experience has shown, companies that shift money around to minimise their tax bills endanger their reputations. The more information consumers have about such dodges, the better.
Moral pressure is not the whole answer, though: consumers get bored with campaigns, and governments should not bash companies for trying to reduce their tax bills, if they do so legally. In the end, tax systems must be reformed. Governments need to make it harder for companies to use internal (“transfer”) pricing to avoid tax. Companies should be made to book activity where it actually takes place. Several federal economies, including America, already prevent companies from exploiting the differences between states’ rules. An international agreement along those lines is needed.
Governments also need to lower corporate tax rates. Tapping companies is inefficient: firms pass the burden on to others. Better to tax directly those who ultimately pay—whether owners of capital, workers or consumers. Nor do corporate taxes raise much money: barely more than 2% of GDP (8.5% of tax revenue) in America and 2.7% in Britain. Abolishing corporate tax would create its own problems, as it would encourage rich people to turn themselves into companies. But a lower rate on a broader base, combined with vigilance by the tax authorities, would be more efficient and would probably raise more revenue: America, whose companies face one of the rich world’s highest corporate-tax rates on their worldwide income, also has some of the most energetic tax-avoiders.
These reforms would not be easy. Governments that try to lower corporate tax rates will be accused of caving in to blackmailing capitalists. Financial centres and incorporation hubs, from the City of London to Delaware, will fight any attempt to tighten their rules. But if politicians really want to tax the missing $20 trillion, that’s where they should start
Rethink the Geography of Corruption by Frank Dosebio , Evedex Inc
Rethink the Geography of Corruption by Frank Dosebio , Evedex Inc. Many of the world’s big development institutions suffer from a kind of blindness with respect to corruption. They define it too narrowly, and especially they ignore the role of the offshore financial system in encouraging and facilitating capital flight and tax evasion. Secrecy and corruption are symbiotic; tax havens, by offering secrecy, foster corruption and must be brought to the centre of the corruption debate.
Berlin-based Transparency International (TI) deserves great credit for bringing corruption onto the development agenda since the 1990s, but now its famous Corruption Perceptions Index (CPI) is part of a problem. TI has a powerful brand name, and the World Bank and many other international development institutions tend to follow where TI leads. And yet its CPI, by focusing on just one aspect of the problem, risks distracting people from some of the most important aspects of corruption. Now would be a good time to begin a more profound analysis of corruption, so as to get to grips with the factors that are arguably the greatest cause of poverty and injustice on the planet today. Eva Joly, the investigating magistrate who broke open the “Elf Affair” in Paris (and won TI’s Integrity Award for 2001) has described the road ahead: the fight against tax havens must now, she says, be “Phase Two” in the fight against corruption.
TI’s two most important analytical tools are particularly problematic. One is the famous CPI, which is widely used as the index of first resort for busy journalists and policy-makers trying to analyse and rank corruption around the world. The second is a mistaken definition of corruption as “the misuse of entrusted power for private gain.” While this definition is potentially quite broad, it has usually been interpreted in a narrow way, notably by focusing excessively on the public sector, and ignoring the private sector. The World Bank has an even narrower approach, defining corruption as "the abuse of public office for private gain." This focus on the public sector as the only arena for corruption is not just arbitrary. It is wrong, and indeed pernicious.
These outdated tools have skewed our perceptions of the geography of corruption to a terrible degree. To give one example: TI’s Bribe-Payers’ Index (BPI) ranks the tax haven of Switzerland – the secret repository of vast quantities of criminals’ and corrupt dictators’ loot – as the world’s “cleanest” country. And over half of the countries ranked in the “least corrupt” quintile of the CPI are offshore tax havens. Something is clearly badly wrong here.
Apart from methodological problems with the ranking itself, these indices' core mistake is this: by splitting the problem of corruption into discrete units of analysis, it entirely ignores the global systemic problem: that one country’s secrecy and tax haven policies harm other countries. Once we look at corruption on a global level, rather than on a national level, we will begin to entirely re-shape the geography of corruption and start to understand properly what corruption is, how it comes about, and how to tackle it.
Not just bribery The current tendency of the World Bank, TI, the OECD, and many people in the legal professions to restrict their definitions of corruption to the bribery of public officials must change. Corrupt practices involve much more than this, as the following four examples illustrate.
First, take an example from the dot-com boom of the late 1990s: at that time, Wall Street investment banks offered stock in "hot" initial public offerings to corporate executives who were in a position to direct their companies' business to their bank, while Wall St. banks' analysts curried favour with companies by writing absurdly upbeat assessments of companies to persuade them to direct their business (issuing fresh capital, or mergers & acquisitions) to the analysts' banks, which would earn large fees as a result.
A second example would be illegal market-rigging: private companies building up secret monopolistic positions by using tax havens to hide the identities of parties which, to the outsider, appear unrelated, but are in fact related and secretly colluding to fix prices.
A third illustration comes from the byzantine "Elf Affair", which involved, among many other things, African oil money being routed via tax havens to provide secret financing for French political parties.
A fourth case in point involves multiple exchange rates, for example in Zimbabwe or in Angola during the 1990s. Under multiple official exchange rates, well-connected people can get access to very cheap dollars, then round-trip them through another exchange rate, ending up with what is effectively free money from public coffers. The point is that under multiple exchange rates, this is entirely legal. This system is clearly corrupt.
All these four activities are examples which most people would view as corrupt, but which do not fit into TI's and the World Bank's definitions. The first and second examples do not involve public officials, and while the first example arguably involves a form of bribery, the second and fourth, and probably the third, do not. The third example does not involve private gain. The fourth example does not even involve an activity: it is the rules themselves that is corrupt. The traditional definitions of corruption are not fit for purpose and should be scrapped. The debate must now move on.
In restricting their agenda to these narrow definitions, the institutions that claim to be fighting corruption have shaped perceptions around the concerns of multinational companies: TI’s corruption rankings provide multinationals (who want to reduce the “cost” of bribery) with a handy ranking of “corruption risk,” while doing almost nothing to identify the wider costs to society arising from their own aggressive tax avoidance policies, which are among most fundamental reasons for poverty in the world.
It is time to shift perceptions to reflect more strongly the concerns of poor people, by bringing tax havens and tax dodging decisively into the corruption debate. These practices are corrupting, for several reasons.
First, just like the drugs trade, corruption has a supply side and a demand side. The demand side involves those who would practice corruption; while the supply side includes those who offer, provide and facilitate corruption opportunities. (Or, one might split it into three parts: the supply side, the demand side, and the intermediaries.) The general strategy for fighting drug trafficking by tackling both the supply and the demand sides is equally applicable to tackling corrupt activities.
While Transparency International and others would tend to restrict this “supply side” to bribery, it is clear, as the example of Switzerland and the Bribe-Payers’ Index shows, that we need to focus on a larger arena than that. It is much larger: Raymond Baker, a world authority on corruption and money-laundering, has estimated that the cross-border component of bribery and theft by government officials is the smallest part of “dirty money”, or only about three percent of the global total. The criminal component constitutes about 30 to 35 percent, while the commercially tax-evading component, which is driven primarily by falsified pricing in imports and exports, is by far the largest, at some 60 to 65 percent of the global total. The “pinstripe infrastructure” of offshore bankers, lawyers and accountants who welcome these flows of “dirty money” with open arms are a central part of the corruption problem.
Second, tax evasion has the same effects as more traditionally defined forms of corruption, and they both share the same political and social dynamics. Both involve élites avoiding and evading their responsibilities to the societies that sustain them, with impunity. This "Revolt of the Élites" has two main components just like the more traditional forms of corruption: first, the élites involved remove themselves from carrying the costs involved in maintaining healthy societies; and second, they remain actively involved in the democratic (or other) processes of government, notably in the form of lobbying. Both thrive on secrecy; both have the same effect of worsening poverty, and both corrode people’s faith in the integrity of the political and economic structures that govern their societies. Both involve the abuse of the public interest by narrow sectional interests.
Both are often, but not always, illegal. For example, the transparency campaigners Global Witness, in a seminal 1999 report on oil, corruption and war in Angola, refer to “ . . . legal theft. Just because the oil revenues are being paid into structures set up by the leaders, which makes them technically legal, does not make them morally defensible”. In short, the corruptors and the corrupted will often find ways to legalise what they do, and they are often in the positions of power that enable them to do it.
Transparency International acknowledges the facilitating role played by financial intermediaries. In a press release accompanying the 2006 Corruption Perceptions Index results, TI commented:"Corrupt intermediaries link givers and takers, creating an atmosphere of mutual trust and reciprocity; they attempt to provide a legal appearance to corrupt transactions, producing legally enforceable contracts; and they help to ensure that scapegoats are blamed in case of detection."
But, having acknowledged this key role played by the financial intermediaries, they fail to go to the next step, which is to accept that supply of such services, which includes supplying secrecy through offshore shell companies, offshore trusts and similar subterfuges, actually stimulates the demand side, by offering protection from discovery.
Alternative definitions of corruption? TJN suggests two alternative definitions of corruption, at this stage just as discussion points, or as ways of thinking about the issue, rather than as hard definitions. The first would be this: corruption is the abuse of the public interest by narrow sectional interests. This is almost certainly too broad, but it helps illustrate some of the dynamics we feel are important.) The second is somewhat more specific: an activity which undermines public confidence in the integrity of the rules, systems and institutions that govern society is corrupt. This second definition is, among other things, not culturally specific. (To envisage it better, it can help to focus not on the noun “corruption” but instead on the verb “to corrupt.”) This definition also highlights better the threat that corruption poses to people's confidence in governments, democracy and even capitalism itself. Among other things, we think these approaches take us away from a focus on bad people and get us to focus more on harmful or dangerous processes.
These alternative definitions are a work in progress; they may well evolve over time as we discuss the issues. In the meantime, look at this definition of political corruption offered by the Catholic church (see point 411 in this link.) We were not aware of this definition when we formulated our approach, but we are struck by how similar theirs is.)
TJN is also planning an eventual launch of a Financial Transparency Index (FTI.) It is a big project, which will take time. Watch this space.
The American economist Paul Krugman once remarked upon how economists tend only to see what they know how to model: and that this creates blind spots. Corruption is one of these blind spots: modern economic theory has almost entirely failed to model or even to see how economic liberalisation has created vast criminogenic, corrupting environments around the world. The time has come to remove our blindfolds.
Find out more John Christensen’s paper, Mirror, Mirror, on the Wall: Who’s the Most Corrupt of All?, discusses these issues in more detail. Also, Richard Murphy and Nicholas Shaxson, in a comment piece in the Financial Times, discuss the Extractive Industries Transparency Initiative, and how the misplaced ideologies of corruption that are currently prevalent have led us down the wrong path in the quest for transparency in natural resource sectors. A book, "Measuring Corruption," provides a good overview of the current discourse around corruption, and identifies some of the methodological and analytical problems inherent in the CPI. In addition to the above analysis, TJN would like to highlight another entire layer of research into the often-forgotten but crucial relationships between taxation, accountability and governance. See more on a special section on TJN's web site, and on academic research highlighted in a special edition of TJN's newsletter.
Other resources Transparency International is the most well-known. Other bodies include Global Witness (which has a particular focus on natural resources like oil and diamonds), the Norwegian-based U4 Anti-Corruption Resource Centre which has a much longer list of partners; and the Australia-based John Walker's Crime Trends Analysis.
Berlin-based Transparency International (TI) deserves great credit for bringing corruption onto the development agenda since the 1990s, but now its famous Corruption Perceptions Index (CPI) is part of a problem. TI has a powerful brand name, and the World Bank and many other international development institutions tend to follow where TI leads. And yet its CPI, by focusing on just one aspect of the problem, risks distracting people from some of the most important aspects of corruption. Now would be a good time to begin a more profound analysis of corruption, so as to get to grips with the factors that are arguably the greatest cause of poverty and injustice on the planet today. Eva Joly, the investigating magistrate who broke open the “Elf Affair” in Paris (and won TI’s Integrity Award for 2001) has described the road ahead: the fight against tax havens must now, she says, be “Phase Two” in the fight against corruption.
TI’s two most important analytical tools are particularly problematic. One is the famous CPI, which is widely used as the index of first resort for busy journalists and policy-makers trying to analyse and rank corruption around the world. The second is a mistaken definition of corruption as “the misuse of entrusted power for private gain.” While this definition is potentially quite broad, it has usually been interpreted in a narrow way, notably by focusing excessively on the public sector, and ignoring the private sector. The World Bank has an even narrower approach, defining corruption as "the abuse of public office for private gain." This focus on the public sector as the only arena for corruption is not just arbitrary. It is wrong, and indeed pernicious.
These outdated tools have skewed our perceptions of the geography of corruption to a terrible degree. To give one example: TI’s Bribe-Payers’ Index (BPI) ranks the tax haven of Switzerland – the secret repository of vast quantities of criminals’ and corrupt dictators’ loot – as the world’s “cleanest” country. And over half of the countries ranked in the “least corrupt” quintile of the CPI are offshore tax havens. Something is clearly badly wrong here.
Apart from methodological problems with the ranking itself, these indices' core mistake is this: by splitting the problem of corruption into discrete units of analysis, it entirely ignores the global systemic problem: that one country’s secrecy and tax haven policies harm other countries. Once we look at corruption on a global level, rather than on a national level, we will begin to entirely re-shape the geography of corruption and start to understand properly what corruption is, how it comes about, and how to tackle it.
Not just bribery The current tendency of the World Bank, TI, the OECD, and many people in the legal professions to restrict their definitions of corruption to the bribery of public officials must change. Corrupt practices involve much more than this, as the following four examples illustrate.
First, take an example from the dot-com boom of the late 1990s: at that time, Wall Street investment banks offered stock in "hot" initial public offerings to corporate executives who were in a position to direct their companies' business to their bank, while Wall St. banks' analysts curried favour with companies by writing absurdly upbeat assessments of companies to persuade them to direct their business (issuing fresh capital, or mergers & acquisitions) to the analysts' banks, which would earn large fees as a result.
A second example would be illegal market-rigging: private companies building up secret monopolistic positions by using tax havens to hide the identities of parties which, to the outsider, appear unrelated, but are in fact related and secretly colluding to fix prices.
A third illustration comes from the byzantine "Elf Affair", which involved, among many other things, African oil money being routed via tax havens to provide secret financing for French political parties.
A fourth case in point involves multiple exchange rates, for example in Zimbabwe or in Angola during the 1990s. Under multiple official exchange rates, well-connected people can get access to very cheap dollars, then round-trip them through another exchange rate, ending up with what is effectively free money from public coffers. The point is that under multiple exchange rates, this is entirely legal. This system is clearly corrupt.
All these four activities are examples which most people would view as corrupt, but which do not fit into TI's and the World Bank's definitions. The first and second examples do not involve public officials, and while the first example arguably involves a form of bribery, the second and fourth, and probably the third, do not. The third example does not involve private gain. The fourth example does not even involve an activity: it is the rules themselves that is corrupt. The traditional definitions of corruption are not fit for purpose and should be scrapped. The debate must now move on.
In restricting their agenda to these narrow definitions, the institutions that claim to be fighting corruption have shaped perceptions around the concerns of multinational companies: TI’s corruption rankings provide multinationals (who want to reduce the “cost” of bribery) with a handy ranking of “corruption risk,” while doing almost nothing to identify the wider costs to society arising from their own aggressive tax avoidance policies, which are among most fundamental reasons for poverty in the world.
It is time to shift perceptions to reflect more strongly the concerns of poor people, by bringing tax havens and tax dodging decisively into the corruption debate. These practices are corrupting, for several reasons.
First, just like the drugs trade, corruption has a supply side and a demand side. The demand side involves those who would practice corruption; while the supply side includes those who offer, provide and facilitate corruption opportunities. (Or, one might split it into three parts: the supply side, the demand side, and the intermediaries.) The general strategy for fighting drug trafficking by tackling both the supply and the demand sides is equally applicable to tackling corrupt activities.
While Transparency International and others would tend to restrict this “supply side” to bribery, it is clear, as the example of Switzerland and the Bribe-Payers’ Index shows, that we need to focus on a larger arena than that. It is much larger: Raymond Baker, a world authority on corruption and money-laundering, has estimated that the cross-border component of bribery and theft by government officials is the smallest part of “dirty money”, or only about three percent of the global total. The criminal component constitutes about 30 to 35 percent, while the commercially tax-evading component, which is driven primarily by falsified pricing in imports and exports, is by far the largest, at some 60 to 65 percent of the global total. The “pinstripe infrastructure” of offshore bankers, lawyers and accountants who welcome these flows of “dirty money” with open arms are a central part of the corruption problem.
Second, tax evasion has the same effects as more traditionally defined forms of corruption, and they both share the same political and social dynamics. Both involve élites avoiding and evading their responsibilities to the societies that sustain them, with impunity. This "Revolt of the Élites" has two main components just like the more traditional forms of corruption: first, the élites involved remove themselves from carrying the costs involved in maintaining healthy societies; and second, they remain actively involved in the democratic (or other) processes of government, notably in the form of lobbying. Both thrive on secrecy; both have the same effect of worsening poverty, and both corrode people’s faith in the integrity of the political and economic structures that govern their societies. Both involve the abuse of the public interest by narrow sectional interests.
Both are often, but not always, illegal. For example, the transparency campaigners Global Witness, in a seminal 1999 report on oil, corruption and war in Angola, refer to “ . . . legal theft. Just because the oil revenues are being paid into structures set up by the leaders, which makes them technically legal, does not make them morally defensible”. In short, the corruptors and the corrupted will often find ways to legalise what they do, and they are often in the positions of power that enable them to do it.
Transparency International acknowledges the facilitating role played by financial intermediaries. In a press release accompanying the 2006 Corruption Perceptions Index results, TI commented:"Corrupt intermediaries link givers and takers, creating an atmosphere of mutual trust and reciprocity; they attempt to provide a legal appearance to corrupt transactions, producing legally enforceable contracts; and they help to ensure that scapegoats are blamed in case of detection."
But, having acknowledged this key role played by the financial intermediaries, they fail to go to the next step, which is to accept that supply of such services, which includes supplying secrecy through offshore shell companies, offshore trusts and similar subterfuges, actually stimulates the demand side, by offering protection from discovery.
Alternative definitions of corruption? TJN suggests two alternative definitions of corruption, at this stage just as discussion points, or as ways of thinking about the issue, rather than as hard definitions. The first would be this: corruption is the abuse of the public interest by narrow sectional interests. This is almost certainly too broad, but it helps illustrate some of the dynamics we feel are important.) The second is somewhat more specific: an activity which undermines public confidence in the integrity of the rules, systems and institutions that govern society is corrupt. This second definition is, among other things, not culturally specific. (To envisage it better, it can help to focus not on the noun “corruption” but instead on the verb “to corrupt.”) This definition also highlights better the threat that corruption poses to people's confidence in governments, democracy and even capitalism itself. Among other things, we think these approaches take us away from a focus on bad people and get us to focus more on harmful or dangerous processes.
These alternative definitions are a work in progress; they may well evolve over time as we discuss the issues. In the meantime, look at this definition of political corruption offered by the Catholic church (see point 411 in this link.) We were not aware of this definition when we formulated our approach, but we are struck by how similar theirs is.)
TJN is also planning an eventual launch of a Financial Transparency Index (FTI.) It is a big project, which will take time. Watch this space.
The American economist Paul Krugman once remarked upon how economists tend only to see what they know how to model: and that this creates blind spots. Corruption is one of these blind spots: modern economic theory has almost entirely failed to model or even to see how economic liberalisation has created vast criminogenic, corrupting environments around the world. The time has come to remove our blindfolds.
Find out more John Christensen’s paper, Mirror, Mirror, on the Wall: Who’s the Most Corrupt of All?, discusses these issues in more detail. Also, Richard Murphy and Nicholas Shaxson, in a comment piece in the Financial Times, discuss the Extractive Industries Transparency Initiative, and how the misplaced ideologies of corruption that are currently prevalent have led us down the wrong path in the quest for transparency in natural resource sectors. A book, "Measuring Corruption," provides a good overview of the current discourse around corruption, and identifies some of the methodological and analytical problems inherent in the CPI. In addition to the above analysis, TJN would like to highlight another entire layer of research into the often-forgotten but crucial relationships between taxation, accountability and governance. See more on a special section on TJN's web site, and on academic research highlighted in a special edition of TJN's newsletter.
Other resources Transparency International is the most well-known. Other bodies include Global Witness (which has a particular focus on natural resources like oil and diamonds), the Norwegian-based U4 Anti-Corruption Resource Centre which has a much longer list of partners; and the Australia-based John Walker's Crime Trends Analysis.
The BVI Registry has reported in Public Statement No. 1 of 2012, more vigilant efforts to blacklist countries who are not, in their opinion, conforming to generally accepted principles of money laundering procedures.
London (PRWEB UK) 21 April 2012 Any businesses looking at offshore companies should consider their choice of jurisdiction very carefully. A recent report produced for 2012 by The BVI Registry has reported in Public Statement No. 1 that more vigilant efforts are being carried out to blacklist countries that are not, in their opinion, conforming to generally accepted principles of money laundering procedures.
The report available at Offshore Formations 247 confirms the jurisdictions that are not complying and therefore should be blacklisted. The list of countries includes Bolivia, Cuba, Ethiopia, Ghana, Indonesia, Kenya, Myanmar and Nigeria. Any business looking at specific locations for offshore companies will find the report a valuable resource for helping in selecting a chosen jurisdiction. There are many examples where the vindicated countries have not met the general guidelines for money laundering procedures.
The report outlines countries that have not made sufficient progress in implementing their action plans with and certain strategic AML/CFT deficiencies remaining. The FATF has confirmed that these countries should work on addressing these deficiencies which include
1. Adequately criminalizing money laundering and terrorist financing
2. Establishing and implementing an adequate legal framework and procedures to identify and freeze terrorist assets
3. Ensuring a fully operational and effectively functioning Financial Intelligence Unit
4. Implementing effective, proportionate and dissuasive sanctions in order to deal with natural or legal persons that do not comply with the national AML/CFT requirements.
Opening bank accounts for offshore companies who trade with any of the above countries or whose directors or shareholders are resident of those countries is going to be quite difficult. Individuals with ties to these countries should be aware of this when looking to set up an offshore company.
London (PRWEB UK) 21 April 2012 Any businesses looking at offshore companies should consider their choice of jurisdiction very carefully. A recent report produced for 2012 by The BVI Registry has reported in Public Statement No. 1 that more vigilant efforts are being carried out to blacklist countries that are not, in their opinion, conforming to generally accepted principles of money laundering procedures.
The report available at Offshore Formations 247 confirms the jurisdictions that are not complying and therefore should be blacklisted. The list of countries includes Bolivia, Cuba, Ethiopia, Ghana, Indonesia, Kenya, Myanmar and Nigeria. Any business looking at specific locations for offshore companies will find the report a valuable resource for helping in selecting a chosen jurisdiction. There are many examples where the vindicated countries have not met the general guidelines for money laundering procedures.
The report outlines countries that have not made sufficient progress in implementing their action plans with and certain strategic AML/CFT deficiencies remaining. The FATF has confirmed that these countries should work on addressing these deficiencies which include
1. Adequately criminalizing money laundering and terrorist financing
2. Establishing and implementing an adequate legal framework and procedures to identify and freeze terrorist assets
3. Ensuring a fully operational and effectively functioning Financial Intelligence Unit
4. Implementing effective, proportionate and dissuasive sanctions in order to deal with natural or legal persons that do not comply with the national AML/CFT requirements.
Opening bank accounts for offshore companies who trade with any of the above countries or whose directors or shareholders are resident of those countries is going to be quite difficult. Individuals with ties to these countries should be aware of this when looking to set up an offshore company.