by Francesco Guarascio
European Union institutions are stepping up their
efforts against tax havens, shifting their attention from remote islands
or alpine mini-states to actual EU member states - such as the United
Kingdom
The financial crisis has sharpened the weapons of European leaders to counter fiscal evasion and tax avoidance. Shrinking budgets stiffen the stance against the clever ones, who skip proper taxation. The old argument that 'tax planning' helps companies do their jobs better and boosts economic growth seems to be sidelined now. On the contrary, the most radical voices against creative finance and accounting are getting louder, and more ears are ready to listen to them. "Fiscal havens are the central feature of the globalised economy; they are the core feature of contemporary capitalism and contributed to shape the current financial crisis," said John Christensen, economic adviser to Jersey's fiscal haven between 1987 and 1998 - and later founder of the Tax Justice Network or TJN.
"They favour a criminal environment where embezzlement, fraud and tax evasion flourish. His view has been well known since the early 2000s, but is being increasingly listened to by EU decision-makers today. Indeed, the explosive sentence above was delivered during a conference in the heart of Brussels in front of several EU officials. Christensen was one of the key speakers at the event entitled Tax and financial havens: a threat to the EU's internal market , organised by the European Economic and Social Committee - an official advisory body to the EU institutions.
During the conference, Christensen reiterated his theory about how Britain sits "at the centre of a vast international web of tax havens", and gave his ranking of global fiscal havens according to the level of secrecy of their jurisdictions. "Secret is the supply side for corrupted activities", he added. According to the latest TJN index, Switzerland is by far the number one global fiscal haven because it remains the most secretive jurisdiction. In third position comes Luxembourg, a member of the EU and the eurozone. Its president Jean-Claude Juncker has been head of the Eurogroup - the informal council of finance ministers of countries which have adopted the single currency - for years. Britain is in 13th position, ahead of notorious hubs of dubious economic activities such as Panama, the Bahamas, Macao and Liechtenstein. Ahead of the UK in the TJN's ranking come satellites of the British "spider's web", including some of its overseas territories - namely the Cayman Islands in second position, the British Virgin Islands in 11th position and Bermuda coming 12th. Britain's Crown Dependency of Jersey comes in seventh and the former British colonies of Hong Kong and Singapore are fourth and sixth respectively.
In his opening speech at the conference on tax havens, the president of the EESC section on internal market Bryan Cassidy plainly pointed at Switzerland, Luxembourg and the UK as onshore fiscal havens within Europe. He underlined how "money laundering and tax havens are closely connected". And he praised the work of a former Reuters journalist Nicholas Shaxson, whose book on tax havens Treasure Islands is now on the desk of many decision-makers in Brussels. In his well-documented book, Shaxson argues that the UK and the United States are the biggest fiscal havens in the world. The exotic islands and alpine resorts, usually indicated as shelters against taxmen, are mere subsidiaries of Wall Street and the City of London in carrying illicit activities, Shaxson says. Phrases such as "tax efficiency" and "transfer pricing", enabled by a vast network of double-taxation agreements, make it possible for international individuals and global corporations to reduce their tax payments to nil through both legal tax avoidance and illegal tax evasion - Shaxson explains.
Global action seems to be following on the heels of these accusations. The European Commission has intensified efforts against offshore and onshore tax havens. The UK has been forced to amend a bilateral deal with Switzerland, which was aimed at collecting taxes owed to the British taxmen by wealthy Britons who deposited their savings in Swiss banks. The deal, known as 'Rubik' after the complex puzzle cube, allows Switzerland to maintain secrecy over the names of its clients but forces the alpine state to pay a conspicuous sum to the British fiscal authorities.
Brussels strongly opposed the initial deal. A tax agreement with a third state should be negotiated by the bloc, and not bilaterally by its members, goes the argument of the European Tax Commissioner Algirdas Semeta. A revised deal between London and Berne was signed this week. It is still unclear whether the new deal is in line with EU provisions. President José Manuel Barroso made it clear that "the commission will never accept a bilateral agreement by a member state with a third party like Switzerland if it does not fully respect community law". Earlier, Berlin signed a similar deal with Switzerland, but the German Parliament is likely to block it.
Meanwhile, the group of the 20 biggest economies in the world, the G20, is pushing forward with its agenda against tax havens - under pressure from some European countries and emerging powers, such as India. The Organisation for Economic Cooperation and Development, which brings together the world's most industrialised countries, set up a code of conduct for its members to exchange fiscal information "upon request" – according to Donald Godfrey, head of the unit on harmful tax practices at the OECD. And the United Nations has a dedicated committee for cooperation on tax matters, although it has limited power. Despite these efforts, the overarching goals of introducing a global automatic exchange of information on tax issues and eliminating secrecy are still far from being achieved. It would not be the first time that a global outcry against tax avoidance ends in nothing. As Christensen pointed out: "We are moving forward at snail's pace. The process is very long and slow and involves steps ahead and steps back. Rubik agreements are clearly steps back." And so the fight goes on.
The financial crisis has sharpened the weapons of European leaders to counter fiscal evasion and tax avoidance. Shrinking budgets stiffen the stance against the clever ones, who skip proper taxation. The old argument that 'tax planning' helps companies do their jobs better and boosts economic growth seems to be sidelined now. On the contrary, the most radical voices against creative finance and accounting are getting louder, and more ears are ready to listen to them. "Fiscal havens are the central feature of the globalised economy; they are the core feature of contemporary capitalism and contributed to shape the current financial crisis," said John Christensen, economic adviser to Jersey's fiscal haven between 1987 and 1998 - and later founder of the Tax Justice Network or TJN.
"They favour a criminal environment where embezzlement, fraud and tax evasion flourish. His view has been well known since the early 2000s, but is being increasingly listened to by EU decision-makers today. Indeed, the explosive sentence above was delivered during a conference in the heart of Brussels in front of several EU officials. Christensen was one of the key speakers at the event entitled Tax and financial havens: a threat to the EU's internal market , organised by the European Economic and Social Committee - an official advisory body to the EU institutions.
During the conference, Christensen reiterated his theory about how Britain sits "at the centre of a vast international web of tax havens", and gave his ranking of global fiscal havens according to the level of secrecy of their jurisdictions. "Secret is the supply side for corrupted activities", he added. According to the latest TJN index, Switzerland is by far the number one global fiscal haven because it remains the most secretive jurisdiction. In third position comes Luxembourg, a member of the EU and the eurozone. Its president Jean-Claude Juncker has been head of the Eurogroup - the informal council of finance ministers of countries which have adopted the single currency - for years. Britain is in 13th position, ahead of notorious hubs of dubious economic activities such as Panama, the Bahamas, Macao and Liechtenstein. Ahead of the UK in the TJN's ranking come satellites of the British "spider's web", including some of its overseas territories - namely the Cayman Islands in second position, the British Virgin Islands in 11th position and Bermuda coming 12th. Britain's Crown Dependency of Jersey comes in seventh and the former British colonies of Hong Kong and Singapore are fourth and sixth respectively.
In his opening speech at the conference on tax havens, the president of the EESC section on internal market Bryan Cassidy plainly pointed at Switzerland, Luxembourg and the UK as onshore fiscal havens within Europe. He underlined how "money laundering and tax havens are closely connected". And he praised the work of a former Reuters journalist Nicholas Shaxson, whose book on tax havens Treasure Islands is now on the desk of many decision-makers in Brussels. In his well-documented book, Shaxson argues that the UK and the United States are the biggest fiscal havens in the world. The exotic islands and alpine resorts, usually indicated as shelters against taxmen, are mere subsidiaries of Wall Street and the City of London in carrying illicit activities, Shaxson says. Phrases such as "tax efficiency" and "transfer pricing", enabled by a vast network of double-taxation agreements, make it possible for international individuals and global corporations to reduce their tax payments to nil through both legal tax avoidance and illegal tax evasion - Shaxson explains.
Global action seems to be following on the heels of these accusations. The European Commission has intensified efforts against offshore and onshore tax havens. The UK has been forced to amend a bilateral deal with Switzerland, which was aimed at collecting taxes owed to the British taxmen by wealthy Britons who deposited their savings in Swiss banks. The deal, known as 'Rubik' after the complex puzzle cube, allows Switzerland to maintain secrecy over the names of its clients but forces the alpine state to pay a conspicuous sum to the British fiscal authorities.
Brussels strongly opposed the initial deal. A tax agreement with a third state should be negotiated by the bloc, and not bilaterally by its members, goes the argument of the European Tax Commissioner Algirdas Semeta. A revised deal between London and Berne was signed this week. It is still unclear whether the new deal is in line with EU provisions. President José Manuel Barroso made it clear that "the commission will never accept a bilateral agreement by a member state with a third party like Switzerland if it does not fully respect community law". Earlier, Berlin signed a similar deal with Switzerland, but the German Parliament is likely to block it.
Meanwhile, the group of the 20 biggest economies in the world, the G20, is pushing forward with its agenda against tax havens - under pressure from some European countries and emerging powers, such as India. The Organisation for Economic Cooperation and Development, which brings together the world's most industrialised countries, set up a code of conduct for its members to exchange fiscal information "upon request" – according to Donald Godfrey, head of the unit on harmful tax practices at the OECD. And the United Nations has a dedicated committee for cooperation on tax matters, although it has limited power. Despite these efforts, the overarching goals of introducing a global automatic exchange of information on tax issues and eliminating secrecy are still far from being achieved. It would not be the first time that a global outcry against tax avoidance ends in nothing. As Christensen pointed out: "We are moving forward at snail's pace. The process is very long and slow and involves steps ahead and steps back. Rubik agreements are clearly steps back." And so the fight goes on.
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