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13th June 2007, Transnational Institute / TJNederland The Long and Winding Road John Christensen Director, TJN International Secretariat “The Tax Justice Network agenda is a direct threat to America’s The U.S. is a tax haven, and economic interests. this policy has helped attract trillions of dollars of job-creating capital to America’s economy. The left-wing groups participating in today’s briefing believe that foreign governments should have the right to tax income earned by non-residents in America and other low tax jurisdictions – a policy that is fundamentally inconsistent with President Bush’s tax reform agenda.” Grover Norquist, President 7th April 2005 The Problem The deliberate and illicit disguised expatriation of money by those resident or taxable within the country of origin. Tax evasion is often the motive for capital flight. 30th May 2007 “ For each dollar of aid that goes into Africa, at least five dollars flows out under the table. The time has come to confront the ” tax haven monster. In the belly of the beast: insider trading market rigging avoiding disclosure of conflicts of interest illicit arms trading illicit political donations “living of lax contract kickbacks regulation” bribery Wall Street Journal fraudulent trading and tax 17th September 1996 evasion “ The openness of tax havens to proceeds from crime, corruption, and tax dodging might explain why flows of capital have been from South the poor to North, from nations of the world to the wealthy ones, rather than the other way round, as economic theory would predict. ” Who owes what to whom? Despite the massive debt incurred in the past, Sub-Saharan Africa is a net creditor to the rest of the world in the sense that external assets (i.e. the stock of flight capital) exceeds external liabilities (i.e. external debt). The stock of capital flight from SSA (estimated at $274 billion including interest earnings) was equivalent to 145 per cent of the total debt owed by the countries in the mid-1990s. Boyce, J.K. and Ndikumana, L. (2005) Developing and Global transitional economies $billions High Low High Low / year Criminal 549 331 238 169 Bribery, 50 30 40 20 etc Commerci 1000 700 500 350 al Total 1599 1061 778 539 “Any survey of the main uses of offshore funds would have to conclude that low tax is not the main benefit at all; the real attraction is their total confidentiality. This makes them perfect places to lodge capital in flight from tax, politics or the law.” Financial Times “Protected Cell companies have - in concert with other entities - been used to construct what has been called "an impenetrable wall" against creditors and prying eyes. Whilst these claims can only be tested by time, this novel use of a PCC for asset protection and financial privacy is an interesting approach and a valuable piece of intellectual property.” the geography of corruption Transparency International’s Corruption Perceptions Index: 2006 Country Tax haven 2006 CPI Country African 2006 CPI rank countries score rank countries score 5 Singapore 9.4 156 Chad / DCR / Sudan 2.0 7 Switzerland 9.1 155 Cote d’Ivoire / 2.1 9 Netherlands 8.7 Equatorial Guinea 142 Angola / Congo 2.2 Kenya /Nigeria / 11 Luxembourg / UK 8.6 Sierra Leone 15 Hong Kong 8.3 138 Cameroon / Niger 2.3 16 Germany 8.0 18 Ireland 7.4 130 Burundi / CAR / 2.4 Ethiopia / Togo 20 Belgium / USA 7.3 24 Barbados 6.7 26 Macau 6.6 28 Malta 6.4 31 U.A.E.(Bahrain/Dub 6.2 ai/RAS) tackling the corruption interface Perceptions of corruption need to be re-evaluated The role of facilitators and their professional organisations needs to be scrutinised The role of tax havens as a supply side stimulant of corruption needs to be recognised Banking secrecy and non-disclosure of beneficial ownership should be a criteria for comparator rankings Capital flight and tax evasion need to be included in anti money-laundering programmes The role of accounting standards in creating a framework for corporate transparency needs greater scrutiny.
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