- 1 Top Tax Havens
- 2 Tax Rates - A Global Race to the Bottom
- 3 Tax Evasion
- 4 Tax Avoidance
- 5 The Idiot's Guide to Money Laundering
- 6 EU Blacklist + Greylist
- 7 Tax Havens
- 8 Tax Loopholes
- 9 Public Registers
- 10 Articles
- 11 To Research
- 12 References
|In 2018, 60 of the largest companies in the USA paid no taxes on pre-tax income of $79bn.|
Why Tax-Dodging Matters: Take Amazon as an example. Its delivery vehicles use the roads and trains; its
warehouses fulfilment centres use electricity, heating and water; its underpaid employees claim Universal Credit, etc. All of these are paid for from the public purse. The less that goes into that purse, the more must be found from otherwhere - or cut. So holes in the roads aren't repaired; utility bills forever increase; school budgets are cut; the NHS gets it in the neck; and so on, and so on. The IMF estimated that ~$200bn per year is lost to tax avoidance.ref Why exactly are you supporting this by clicking on "Buy Now"?
Current international accounting standards allow corporations to publish their accounts on a regional or global basis, with no country detail. This means they can shift their profits from the countries where they earned them to no/low-tax jurisdictions, sometimes with the connivance of tax authorities, and definitely with the help of the Big Four accountancy firms. Tax Justice Network estimates global annual tax losses from corporate tax-dodging at $500bn.
Country by country reporting would require all multinationals to report publicly on each country in which they operate. A strong light would shine on the misalignment between economic activity and profits.ref,ref
Top Tax Havens
|84||Bahamas||Traditional tax haven; 12th largest Sink OFC. link|
|73||Bermuda||2nd only to Ireland for USA tax inversions.ref|
|69||British Virgin Islands||Largest Sink OFC in the world. ref link|
|72||Cayman Islands||Major USA corporate tax haven; favourite for US corporate tax inversions.ref|
|75||Curacao||8th favourite tax haven; 12th largest Sink OFC.ref|
|61||Cyprus||Very low tax rates; sought as a base by offshore firms. ref|
|71||Gibraltar||Once a favourite tax haven, now declining due to dodgy practices.ref|
|71||Hong Kong||Almost as large a Sink OFC as Luxembourg.|
|51||Ireland||Major corporate tax haven; USA favourite for tax inversions (eg. Perrigo Company plc). 5th largest Conduit to Offshore Financial Centres. Leader in base erosion and profit shifting. ref|
|64||Isle of Man||A traditional tax haven, but "failing".ref link|
|65||Jersey||Major tax haven; a very strong connection with Conduit OFC Switzerland.[ref]|
|78||Lichtenstein||Long-term favourite European tax haven. ref link|
|58||Luxembourg||One of the largest Sink OFCs in the world. link|
|61||Malta||an emerging tax haven inside the EU.ref|
|72||Mauritius||Major tax haven for SE Asian and African economies.ref|
|66||Netherlands||Major corporate tax haven; the largest Conduit to Offshore Financial Centres. ref|
|78||Samoa||Traditional tax haven; 14th largest Sink OFC.|
|67||Singapore||Major corporate tax haven for Asia; 4th largest Conduit to Offshore Financial Centres.|
|76||Switzerland||3rd largest Conduit to Offshore Financial Centres; is also a Sink OFC. link|
|76||Taiwan||Major corporate tax haven for Asia; largest Conduit to Offshore Financial Centres. ref|
|42||United Kingdom||Europe's leading corporate tax haven; 2nd largest Conduit to Offshore Financial Centres. In 2009-2013 it lowered its corporate tax rate to 19%, brought in new IP-based BEPS tools, and moved to a territorial tax system, which limits corporate taxation to profits earned domestically.ref In 2016, the govt enacted legislation reducing the UK corporate tax rate to 17% from Apr.01.2020 onwards.|
Tax Rates - A Global Race to the Bottom
- May.31.2016: When a mafia expert tells us Britain is the most corrupt country in the world, it's time to start listening. Mafia expert Roberto Saviano was right this week when he said that it’s Britain which is the most corrupt country in the world. London is the drug money laundering capital of the world, and 90% of drug cash ends up in the US and Europe via London. In London, the financial mafia don't take out death warrants on truth tellers, but powerful financial firms will destroy the lives and reputations of whistleblowers without a moment’s hesitation, ensuring they never work in the financial services sector again. According to a 2012 Newsnight report from the BBC's Joe Lynam, these City firms have a 100% success rate. It turns out Britain's perceptions of corruption, which are based on the NGO Transparency International's global corruption perceptions index, only measure perceived corruption based upon the abuse of public office for private gain, ie. the payment of bribes. Whilst nepotism and subservience to finance capital is rife in Britain and its overseas dependencies, it is not illegal. Many of the criminal corporate activities within the City of London which have dominated the headlines over the past decade are not classified as corruption by Transparency International. Instead, the media and financial regulators refer to these institutionalised corporate crimes as "inappropriate conduct" or “mis-selling”.
As an alternative metric for financial corruption, the Tax Justice Network § Financial Secrecy Index instead ranks countries based on the number of tax havens and financial secrecy jurisdictions, with Britain and its spider web of crown dependencies and overseas territories including Jersey, Guernsey, Bermuda, the Cayman Islands and British Virgin Islands topping of the list. Rather than cleaning up the UK’s global network of offshore secrecy jurisdictions and tax havens under British jurisdiction which allow criminal cash to flood into London property, Cameron is instead planning to privatise the UK Land Registry which tracks the (often foreign) ownership of UK properties. An investigative journalist hired by 38 Degrees found 4 companies (General Atlantic, Hellman and Friedman, OMERS and Advent International Corporation) in line to buy the UK Land Registry are all based in, or have close links to, the offshore tax havens of Jersey, Cayman Islands or Delaware. Joel Benjamin, The Independent.
Excellent article on Transfer Pricing from World Tax. See also articles tagged Transfer Pricing, and When Pearson US took a tax break - Courtesy of PwC.
- 2015: Tax, Lies and Videotape: Britain's Shadow Tax System Revealed. The Coalition’s frequent claim to be clamping down on corporate tax avoidance is a sham, an undercover investigation by Private Eye and the BBC’s Panorama reveals. The Treasury, HM Revenue & Customs and Britain’s biggest accountancy firms all connive to allow the biggest companies and richest individuals to deny the UK exchequer £billions, while undermining the global fight against tax dodging too. Richard Brooks, Private Eye.
The Idiot's Guide to Money Laundering
- The Sanctions and Anti-Money Laundering Bill 2017-19, Parliament.uk. Various papers on it: Sanctions and Anti-Money Laundering Bill
It's easy to launder money these days. All you need do is disguise your identity behind a company, then open a bank account in the company's name rather than your own.
- Step 1: Register your company in a place that keeps the names of the people who own it and run it secret.
- Step 2: Make sure you look legit by having some of your companies in above-board sounding places.
- Step 3: Give yourself some extra protection by finding some other people to be the owners and directors of your company.
- Step 4: Open your company direct with the corporate registry – they don't do any checks on you!
- Step 5: Finally, open a bank account in the name of your new company and get spending!
- Mar.16.2018: Dark underbelly of the European financial system is being exposed. Something is rotten in the European financial system. Britain’s status as the global capital of money-laundering is once again back in the spotlight. ...exposed the dark underbelly of the European financial system. In October the Maltese journalist Daphne Caruana Galizia, who had been investigating corruption in the country, was blown up by a car bomb. Last month Latvia’s third largest bank collapsed after the US Treasury accused it of “institutionalised money-laundering”. A few weeks ago a Slovakian investigative journalist and his girlfriend were shot dead... These stories raise uncomfortable questions about the extent of organised crime in three eurozone countries. (more) Simon Nixon, The Times.
- Dec.17.2014: Europe to disclose the true owners of companies - but not trusts. After days of high level negotiation and intense lobbying by campaigners, the EU last night agreed to introduce registers that will list the ultimate owners of companies. The EU’s 4th Anti-Money Laundering Directive aims to make it harder for criminals and tax cheats to evade detection. The registers will be accessible in all 28 member states to people “that can demonstrate a legitimate interest” such as investigative journalists. The Directive will also force member states to collect details on the ultimate owners of trusts - but this information will not be made available to the public. The UK and Germany have blocked the public disclosure of trust owners. The directive still needs to be endorsed by EU member states' ambassadors and by the EU Parliament's Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees before being put to a vote by the full parliament next year. Nick Mathiason, The Bureau of Investigative Journalism.
EU Blacklist + Greylist
- Jan.23.2018: EU tax haven Blacklist: Finance ministers remove 8 countries, including Panama. EU Finance ministers agreed on Tuesday to remove 8 jurisdictions from its 17-country tax haven Blacklist after they committed to cooperating on tax and abiding by EU standards. "Eight jurisdictions have been removed from the EU's list of non-cooperative jurisdictions for tax purposes, following commitments made at a high political level to remedy EU concerns," an EU statement said. Barbados, Grenada, South Korea, Macao, Mongolia, Tunisia and the United Arab Emirates joined the most controversial, Panama. The 55 countries that initially made the pledge are currently on a so-called Greylist, and will have their efforts evaluated in Brussels at the end of 2018. Those that fulfil their promises will be removed from the Greylist, while those that fail to will be Blacklisted. The 9 remaining Blacklisted countries are American Samoa, Bahrain, Guam, Marshall Islands, Namibia, Palau, Saint Lucia, Samoa and Trinidad and Tobago. Markus Ferber, vice chair of the European Parliament's economic committee, said crossing Panama off teh list was a confession of failure. He suggested that the list should expand to include EU member states and their jurisdictions with tax policy loopholes, including Malta, Cyprus and the British Virgin Islands. Oxfam's EU Policy Advisor, Aurore Chardonnet, urged the EU to crack down on tax havens within the bloc, adding that four members states would actually fail the EU's own blacklisting criteria. Deutsche Welle.
- Dec.05.2017: EU names and shames 17 countries in tax haven blacklist. The EU has named and shamed 17 countries on a new tax haven Blacklist. But the bloc's effort to crack down on tax avoidance has come under fire, with no EU member states on the list. EU Finance ministers adopted the Blacklist following months of wrangling from nations seeking to avoid being named. American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates were all found to be non-compliant. An additional 47 jurisdictions were also placed on a newly established "Greylist" — a roll call of countries which are also deemed non-compliant, but have committed to changing their tax rules. However, the list stops short of introducing concrete sanctions for violating EU standards, and lacks teeth to truly serve as a force for change. Oxfam's report "Blacklist or Whitewash," listed four EU countries it believes would have been on the list had they been assessed under the EU's own criteria — Luxembourg, Malta, the Netherlands and Ireland. Charlotte Chelsom-Pill, Deutsche Welle.
aka Tax Shelters, when one is being polite.
See ActionAid's work on tax havens.
Is the UK a tax haven? Many think so. Under George Osborne's tender care, the final transition was made. Ireland most certainly is.
- Aug.20.2020: How tax havens like the Netherlands are draining developing countries of precious public funds. There are a number of countries that play a key role in the global structure of profit shifting. One of the most important is the Netherlands, which is depriving other countries of €22bn a year. Non-Dutch companies structure their international businesses by using ‘letterbox companies’, allowed partly because of the employment it creates for consultants, lawyers, tax advisors and accountants. A second reason is the Dutch govt's expectation that some mailbox companies will eventually change into real companies with real economic activities in the Netherlands. Maarten Hietland, openDemocracy.
- Oct.16.2018: ‘Golden passports’ threaten European security, warns EU commissioner. Malta and Cyprus were named in the OECD's blacklist of 21 nations operating passport schemes that are deemed to pose a high risk of tax evasion. The Guardian's Daphne Project raises questions about Henley & Partners, leading players in the “golden passports” industry. The investigation focuses on how Henley established its business in the Caribbean and communicated extensively with the now-disgraced British election consultant, Alexander Nix, and his firm SCL. Led by France’s Forbidden Stories, the Daphne Project includes the Guardian, Reuters, Switzerland’s Tamedia, Germany’s Süddeutsche Zeitung, and France’s Le Monde. Juliette Garside, Hilary Osborne, The Guardian.
- Deforestation: UK letterbox firms have continued to be connected to illegal timber activities in Ukraine since Sivets was removed from office in early 2014. Most of the UK firms previously exposed for wrongdoing in relation to Ukrainian timber exports were Limited Liability Partnerships (LLPs), or the similar Scottish ‘Limited Partnerships’ (SLPs), and all were ultimately owned or controlled by other companies registered in secrecy jurisdictions such as Panama and Belize. Because all the ‘partners’ of such companies are allowed to be companies registered in such places, these kinds of firms are especially effective in hiding the true identity of the individuals in control. As a result, they have been repeatedly used to shield criminal activity in recent years, from money laundering to arms dealing.150 They are particularly commonly used to launder money from Russia and other ex-Soviet states such as Ukraine.151 One recent UK government study found that SLPs had been used to move $80bn out of Russia in just 4 years and that there were more than 17,000 SLPs registered at just 10 letterbox addresses. One London address which crops up repeatedly is 43 Bedford Street in Covent Garden. The sheer number of companies linked to corruption and registered at this address prompted Ukrainian anti-corruption outfit Nashi Groshi to dub it London’s dormitory for Yanukovych. A very large proportion of Ukraine’s wood exports to the EU continue to be traded via UK letterbox companies. A quarter of all the ‘fuelwood’ trade from Ukraine to the EU continues to pass through these firms, as does at least 7% of all the sawn wood. (ref, p.24)
- Aug.13.2018: Most illegal fishing boats found to sail from tax havens. More than two in three boats involved in illegal or unregulated fishing sail under the flag of a tax haven, a study has found. The researchers behind the finding said it showed that tax havens did not only present a social and political problem, but also an environmental one. Illegal and unregulated fishing is believed to account for 26m tonnes of catch every year, with a value of up to £15bn. Conservation organisations believe it to be one of the greatest threats to the health of our oceans, in some places seriously undermining the viability of marine reserves. As well as looking at fishing, the research also looked at soya and beef production in the Amazon. One of the main causes of deforestation of the rainforest is its use for agriculture, some of which is illegal. Professor Galaz and his colleagues found that among the biggest companies in the two sectors, 68% of foreign capital came via tax havens. Tax havens are more than just a financial issue. Tom Whipple, The Times.
- Sept.25.2017: The countries which are conduits for the biggest tax havens. A new study from Amsterdam Institute for Social Science Research has found that the Netherlands, the UK, Switzerland, Singapore and Ireland are the leading intermediary countries that corporations use to funnel their money to and from tax havens. Intermediate countries act as conduits for corporate profits as they make their way to tax havens. What makes a tax shelter: Tax havens are a popular, legal and often secret instrument for multinational corporations to move capital across borders. By taking advantage of loopholes in various national legislations and placing operations in countries with low taxes, companies can reduce their tax rate from around 35% to 25% to 15% or lower. The EU Blacklist, OCD list and IMF list are all equally worthless, as their outcomes are highly politicised. Far better are Tax Justice Network's #Financial Secrecy Index, and Oxfam's #Worst Corporate Tax Havens. What none of these measures can tell us, though, is the origin of the foreign investment reported by these tax havens. How does Apple's money get from California to Bermuda anyway? Excellent explanation + pics on the mechanism. Raidió Teilifís Éireann.
- Jul.25.2017: These 5 countries are channels for the world's biggest tax havens. A new study has now uncovered all the world’s corporate tax havens and, for the first time, revealed the intermediary countries that companies use to funnel their money into these places. Published on Jul.24 in the academic journal Scientific Reports, the paper "Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network" shows that offshore finance is not the exclusive business of exotic, far-flung places such as the Cayman Islands and Bermuda. The Netherlands and the UK also play a crucial – although a heretofore obscure – role in the tax-avoidance game, acting as conduits for corporate profits as they make their way to tax havens. Javier Garcia-Bernardo, Eelke Heemskerk, Frank Takes, and Jan Fichtner, Business Insider.
- May..11.2016: Is Britain The World’s Most Corrupt Country? One third of tax havens on the planet are actually states which have as head of state the Queen of England. That makes the Queen of England assuredly one of the greatest head of organized crime in the history of civilization. That criminal network pervades the USA. A full 50% of the companies in the Panama Papers are from the British Virgin Islands. Patrick Ayme, Newscream.
- Apr.2016: Where are the world's tax havens, and what are they used for? The Panama Papers, the largest collection of leaked documents ever recorded, has revealed where some of the world’s wealthiest people keep their assets, and how the global offshore industry helps them do it. Rosamond Hutt, World Economic Forum.
- 2016: Tax Havens: Selling England By The Offshore Pound. For oligarchs, arms dealers, money launderers, kleptocrats and run-of-the-mill tax dodgers, British property is the investment of choice. But where is it and how is it owned? In 2015, Private Eye journalists Richard Brooks and Christian Eriksson set about untangling the great offshore corporate web that covers the country. Richard Brooks, Christian Eriksson, Private Eye.
- 2013: Offshore Tax Havens. U.S. corporations use offshore tax havens and other accounting gimmicks to avoid paying as much as $620 billion a year in federal income taxes. A large loophole at the heart of U.S. tax law enables corporations to avoid paying taxes on foreign profits until they are brought home. Bank of America, Citigroup, ExxonMobil, FedEx, General Electric, Honeywell, Merck, Microsoft, Pfizer, Verizon. OnePercentTakers.com.
- Jul.21.2012: Wealth doesn't trickle down – it just floods offshore, research reveals. A far-reaching new study suggests a staggering $21tn in assets has been lost to global tax havens. If taxed, that could have been enough to put parts of Africa back on its feet – and even solve the euro crisis. James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research "The Price of Offshore Revisited" for the Tax Justice Network. Globalisation has exposed low-skilled workers to competition from cheap economies such as China, while the surging profitability of the financial services industry – and the spread of the big bonus culture before the credit crunch – led to what economists have called a "racing away" at the top of the income scale. Henry's research suggests that this acknowledged jump in inequality is a dramatic underestimate. Some experts believe the amount of assets being held offshore is so large that accounting for it fully would radically alter the balance of financial power between countries. Heather Stewart, The Guardian.
- May.20.2014: The ‘dark side’ of the Netherlands. There is a very dark side to the Netherlands: it is a tax haven. A staggering 4 trillion euros are funnelled through the country yearly by 12,000 mailbox companies, which hardly pay any taxes. SOMO has now developed an explanatory infographic that shows at a glance both the magnitude of this complex problem and the possible ways to address it. SOMO.
- Apr.21.2011: The Truth About Tax Havens "Tax havens have grown so fast in the era of globalization, since the 1970s, that they are now right at the heart of the global economy and are absolutely huge," says our guest, British journalist Nicholas Shaxson. "There are anywhere between $10-$20tn sitting offshore at the moment. Half of world trade is processed in one way or another through tax havens." Shaxson is the author of the new book, "Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens". Tangible Info.
Financial Secrecy Index
Tax Justice Network § Financial Secrecy Index ranks jurisdictions according to their secrecy and the scale of their offshore financial activities.
Worst Corporate Tax Havens
- Dec.12.2016: Tax Battles: the dangerous global race to the bottom on corporate tax. Oxfam's report exposes the world’s worst corporate tax havens – extreme examples of a destructive race to the bottom on corporate tax which has seen govts across the globe slash corporate tax bills in an attempt to attract business. Oxfam.
- 2016: Where There's Muck... ...There's Brass Plates. How UK ghost companies made Britain the capital of global corporate crime. As this Private Eye investigation reveals, the world’s most corrupt, least transparent companies are not located in fragile states or faraway tax havens. They are to be found here, in offices across the UK from Clapham to Cardiff, facilitating the most serious international crimes while the government ignores one of Britain’s few growth industries: corporate corruption services... Richard Brooks, Andrew Bousfield, Private Eye.
Offshore Financial Meter
CorpNet's OFC Meter ... An Offshore Financial Center (OFC) is a jurisdiction (often a country) that provides corporate and financial services to non-resident companies on a scale that is incommensurate with the size of its economy. Traditionally, OFCs are assumed to be small, low-tax jurisdictions in remote location. In practice, determining which countries are in fact OFCs is nontrivial and as such a highly debated topic. We use network analysis to identify two types of OGCs: (1) Sink-OFC, a jurisdiction in which a disproportional amount of value disappears from the economic system, and (2) Conduit-OFC: a jurisdiction through which a disproportional amount of value moves toward sink-OFCs.
- Mar.2012: Collateral damage: How govt plans to water down UK anti-tax haven rules could cost developing countries – and the UK – billions. The govt plans to open up a huge new tax loophole specifically for multinational companies. It will make it much easier for UK-based global businesses to avoid taxes in the developing countries they operate in, at an estimated cost of £4bn a year. The govt has refused to assess the impact of the proposed changes on developing countries. It will also allow the multinationals to enjoy a tax rate of just 5.75% on the profits of their companies based in tax havens, costing HMRC £1bn a year. Some 30 companies, with a total of 3,000+ subsidiaries located in tax havens, lobbied for the changes through advisory groups set up by the Treasury. Proposed changes in the 2012 budget will water down Controlled Foreign Company (CFC) rules, which are designed to deter British multinational companies from exploiting the low tax rates offered by tax havens. Under the CFC rules, if a multinational shifts its profits into a tax haven in order to lower its bills anywhere in the world, the UK tops up its tax bill at home, bringing it into line with the standard UK rate. The Treasury is proposing to reduce the scope of the UK’s anti-tax haven rules, so the standard UK tax rate is only imposed if profits are shifted out of the UK, into tax havens. SAB Miller, Glencore, Vodafone, Barclays, Anglo American, WPP, ... ActionAid.
Opco/Propco: an operating company/property owning company structure is a business arrangement whereby a special purpose property-holding vehicle (the propco) owns the revenue-generating properties instead of the operating company. The objective is to release capital that is locked up in real estate assets so it can be used in the operating business, without selling the properties. Propco borrows against its property assets, and uses the rental income from Opco to service its debt. In return, Opco obtains a capital sum that it can use in its business, rather like a loan advance.
In the UK, Opco/Propco deals are very popular. The parent company can create a real estate income trust (REIT), which owns, operates and/or finances its real estate assets that produce income. REITs then pass on collected rent payments to its investors in the form of dividends. Investors put upwards pressure on the income stream by pushing for upwards-only rent reviews or ratcheted/fixed rent mechanisms. In sectors which are highly dependent on govt spending such as private care homes, a reduction can result in lower occupancy rates, leading to much-reduced income streams; one example is Southern Cross Healthcare.
Sale-and-Leaseback is attractive as a method of raising capital, instead of taking out a loan or effecting an equity financing (issuing stock). A loan must be repaid and shows up on the company's balance sheet as debt. With a leaseback, current assets are increased (in the form of cash and the lease agreement) and the company gains access to capital through the sale of assets. Additionally, the rents/lease payments are tax deductible, whereas principal payments on a mortgage are not. In this way, a business owner can continue to use a vital asset but ceases to own it. The primary benefit to the purchaser, who becomes the landlord, is the income stream from the lease and the value of the real estate.
- Jan.11.2019: MPs attack ministers over delay to tax havens' public registers. British overseas territories win reprieve after threatening legal action or secession. The govt has been accused of defying parliament by delaying plans to require British tax havens such as the British Virgin Islands to bring in public registers that reveal the true identity of owners of companies sheltering assets. Foreign Office ministers have caved in after a rebellion in the British overseas territories, including threats to take the govt to court or even to secede from the UK. The Foreign Office told them they did not need to introduce compulsory public registers until 2023 – 3 years after the date MPs had thought they had set by law in a fractious debate in May.2018. ...David Cameron first raised the issue as a flagship anti-corruption mesure. A cross-party alliance of MPs last May, led by former Conservative cabinet minister Andrew Mitchell and former chair of the public accounts committee Margaret Hodge, had forced the govt to concede that it would introduce an order in council by 2020 requiring public registers to be set up if the overseas territories had not done so voluntarily by that date. Lord Ahmad said if by 2020 there is no public register, for whatever territory, we will then issue an order in council. He said the only obligation provided in the legislation was to pass an order in council by 2020, but no date for the actual introduction of the public register was set. Kicking the issue into the long grass. Patrick Wintour, The Guardian.
- Feb.06.2018: "The Great British Money Laundering Service". In 2016, the UK govt was the first to establish a public register of the true owners of companies - but nearly 350,000 companies haven't declared who owns or controls them; but even when they do, there are no checks on the data to ensure validity. The BBC's "File on Four" radio programme looks at how people are flouting these new rules to register true owners of UK companies. It is clear there are thousands of companies that either aren't complying with the regulations or are filing suspicious returns. 4,000 beneficial owners are listed under the age of 2, including one who has yet to be born. Over 40% of all Scottish Limited Partnerships (SLPs) list one beneficial owner as either a national of a former-Soviet country, or a company incorporated there. 5 beneficial owners control more than 6,000 companies - raising the question of whether some of these individuals are simply stooges put in place by the real owners. In collaboration with DataKind UK, we have undertaken the largest ever analysis of UK beneficial ownership company data. Looking across more than 10m corporate records from Companies House, we’ve used cloud computing and artificial intelligence to monitor the data and identify addresses, individuals and companies being used for potentially nefarious purposes. In the coming months we’ll be releasing more information on the UK register, comparing it with new data sets including high risk 'politically exposed' people from all over the world, and those listed on international sanctions lists. Nienke Palstra, Sam Leon, Global Witness.
|Meet Global Corruption's Hidden Players|
- Jan.30.2018: Theresa May still too slow on tax avoidance. The global elite gathered once again last week at Davis to discuss the world’s economic outlook. Many are getting away with tax avoidance on an industrial scale. Progress on tax avoidance has been slow, with Theresa May only appointing John Penrose as anti-corruption champion in Dec.2017. The promised register of the true owners of overseas companies that own UK property has been pushed back to Summer 2019. We know that the UK’s tax havens are providing luxury vehicles to the corrupt to launder and spend their money. If Penrose wants to make a difference, he must add a renewed focus and pressure the govt to reform the financial services industries in these crown dependencies and overseas territories, which must have public registers of beneficial ownership. And anti-corruption provisions should be made in all trade agreements. The upcoming commonwealth heads of govt meeting is a huge opportunity to push for this. Movement has simply been too slow. Catherine West, The Guardian.
- Jan.29.2018: Global Witness data analysis reveals London's secret property scandal. "Westminster is at the heart of the UK's dirty money problem. In the face of an unprecedented housing crisis, it is staggering that Westminster alone is home to over 10,000 secretly owned properties. The govt first promised to reveal the true owners of UK properties with a public register back in 2015. But their current plans will allow the criminal and corrupt another three years to do what they want with our property market – that's three years too many." Research published today shows that around 85,000 properties across the UK are owned by companies incorporated in UK tax havens. In 2015, David Cameron promised to introduce a property register detailing the ownership of UK property in a bid to tackle corruption. The govt has now said this will not be in place until after 2020. The use of companies incorporated in secrecy jurisdictions to purchase property is increasing in some areas. Since 2015, the London borough of Tower Hamlets has seen an 11% increase; Greater Manchester has experienced a 10% increase. Press Release, Global Witness. See Commitment 1: Beneficial Ownership on Gov.uk.
- Oct.23.2017: Learning the lessons from the UK's public beneficial ownership register. In 2016, the UK became one of the first countries to create a public register of the beneficial owners of companies. There are now at least three countries implementing public beneficial ownership registers for companies, at least 12 countries committed to doing so, and 20 countries planning public registers for extractive industries. In addition, the EU is considering the establishment of public registers of beneficial ownership for companies across all 28 EU Member States. This joint briefing with OpenOwnership seeks to learn the lessons from the experience of the UK beneficial ownership register, both where it is a model of best practice and where there is room for improvement. Nienke Palstra, Global Witness.
- Apr.21.2016: Ultimate owners of UK property may be forced into spotlight. Offshore companies buying UK property could be forced to reveal their ultimate owners under plans being considered by ministers to crack down on tax evasion and money laundering. David Cameron is already forcing all UK companies to reveal their ultimate owners under the new plans for a register of beneficial ownership from June, so the plans would bring foreign owners of British property into line with those rules. The move comes after the Guardian and other global media organisations published the leaked Panama Papers. Home Secretary Theresa May is preparing to unveil an aggressive new set of powers to tackle money laundering and terrorist financing, including a new "unexplained wealth order". Rowena Mason, Alan Travis, The Guardian.
- May.12.2016: David Cameron to introduce new corporate money-laundering offence. David Cameron is to counter claims that his campaign against international corruption is hobbled by London's reputation as the ""money laundering capital of the world"" by introducing a new corporate offence for executives who fail to prevent fraud or money laundering inside their companies. He plans to require all foreign companies buying property in the UK to disclose their true owners in a public register for the first time. Cameron has registered his displeasure with the BVI’s refusal to join the automatic exchange initiative by refusing to invite its officials to the summit. Some were unhappy that the BVI and the Caymans, two of the largest offshore centres, had not been signed up to the ownership register. Alex Cobham of the Tax Justice Network said: "This looks like a major climbdown. The UK has full legal authority to require this change so if the govt has chosen not to, it is a comprehensive indictment of its willingness to fight corruption." Patrick Wintour, Heath Stewart, The Guardian.
- Nov.2015: Transparency over beneficial ownership of companies, trusts and UK properties. Following the G20 meeting in Brisbane in Nov.2014, and the subsequent meeting in Turkey in Nov.2015 where various transparency proposals were agreed, the govt has now published an update reiterating its commitment to implement the proposals to increase the transparency of beneficial ownership information. The govt's statement confirms that the UK will require UK-incorporated companies to report beneficial ownership information to a central register. This information will be accessible to domestic authorities without alerting companies and the govt is committed to making this register publicly accessible. The public register is expected to be operational in June 2016. The govt has now also proposed a central register for trusts. It is intended for these proposals to be implemented in 2017. It is not yet clear whether these will extend to overseas trusts. Another transparency proposal is a register of UK properties owned by overseas companies. This was discussed in Jul.2015, but there have been no further developments with this proposal. It was not discussed further in the govt's recent statement other than stating that the govt is committed to consult on extending beneficial ownership transparency to foreign companies investing in high value property or bidding on UK public contracts. Moore Stephens, Steve Wheeler
- Jul.28.2015: Prime Minister David Cameron Vows to Clamp Down on Corrupt Money in UK Property Market. David Cameron announced today that the govt will take steps to stop corrupt money from entering the UK's property market. Specifically, the govt has committed to: (a) Consulting on ways to make property ownership by foreign companies much more transparent; (b) Publishing Land Registry data on which foreign companies own which land and property title in England and Wales. According to Transparency International UK, at least £122bn worth of property in England and Wales is now owned by companies registered offshore, and 75% of properties whose owners are under investigation for corruption made use of this kind of secrecy. Global Witness, Press Release
- Jul.28.2015: David Cameron vows to fight against 'dirty money' in UK property market. Prime minister David Cameron will use a speech in Singapore to hit out against corrupt foreigners who launder money by buying up British homes through holding companies. The Guardian, Patrick Wintour
- Jul.22.2015: Mystery on Baker Street. London’s high-end property market is one of the go-to destinations to give questionable funds a veneer of respectability. At least £122bn worth of property in England and Wales is now owned by companies registered offshore, and 75% of properties whose owners are under investigation for corruption made use of this kind of secrecy. Global Witness is calling for all companies that own UK property to be required to tell the Land Registry who their beneficial owners are, and for the UK to convince the British Overseas Territories and Crown Dependencies to create their own public registers of beneficial ownership. Global Witness is calling for an investigation into these companies, the properties they own, and real person behind them. Systemic changes are also needed, following the UK's recent commitment to creating a public registry of the real owners of UK companies. Global Witness, Oliver Courtney
- Dec.14.2018: The Ethical Failure at the Heart of Corporate Tax Avoidance. Explores the belief system that underpins tax avoidance by multinational corporations and reflects on the ethical failures revealed by their unbelievable behaviour. Why do tax avoiding multinational corporations believe their behaviour is acceptable? The social contract theory between citizens and state seems to be hold the answer. Tristan Shirley, Tax Justice Network.
- Nov.3.08: Top law firm linked to subject of UK's first unexplained wealth order. One of London’s most prestigious law firms, Mishcon de Reya, and the Swiss arm of Barclays Bank, advised British Virgin Islands company owned by Zamira Hajiyeva. Hajiyeva is now under investigation by the National Crime Agency, on a mortgage provided to it by Barclays Suisse. David Pegg, The Guardian.
- Nov.0.08: Money-laundering crackdown on public schools and law firms. Security minister Ben Wallace pledges to focus on where illegal cash is spent. Pippa Crerar, The Guardian.
- Jul.31.2018: Channel Island banks fund IEA research defending tax havens. A recent report by the Institute of Economic Affairs (IEA) pushing back against a crackdown on tax havens was funded by Jersey-based banks. The IEA used the report to try to persuade a cabinet minister not to increase regulations on Jersey and Guernsey offshore financial centres, according to its director general Mark Littlewood. Jersey Finance. Another recent IEA report on financial services – published in May and authored by IEA trade expert Shanker Singham – was funded by the financial services industry in Guernsey. It also funded a trip by Singham to Guernsey where he gave a talk about the report’s findings. Lawrence Carter, Alice Ross, Joe Sandler Clarke, Unearthed@Greenpeace.
- Jul.31.2018: Jersey Finance paid for IEA report rubbishing 'hotbeds of tax evasion' claims. A report by the Institute of Economic Affairs rubbishing the idea that offshore financial centres were “hotbeds of tax evasion” was paid for by Jersey Finance. The IEA did not disclose the support in what it billed as an IEA discussion paper. The paper was written by Diego Zuluaga, an economist at the rightwing Cato Institute in Washington DC. The financial services industry in neighbouring Guernsey, another tax haven, funded a separate report about financial services regulation and hosted its author, Shanker Singham, for an event at a hotel in St Peter Port, which billed him as “the Brexiters’ brain”. This was published as an IEA paper, but had been written when Singham was working at the Legatum Institute. Legatum confirmed it was paid by Guernsey to produce the report and host the event. Jersey alone is home to wealth worth more than £1.3tn in trusts, corporate structures and funds, according to a previous report published by Jersey Finance. The IEA also faces an investigation by the govt’s lobbying watchdog, Alison White, to determine whether it should be registered as a lobbyist and be obliged to disclose its financial donors. Greenpeace’s undercover investigation this week revealed how the IEA offered potential donors the ability to shape “substantial content” in its research reports. Steve Baker Small IEA profile in article. Robert Booth, David Pegg, The Guardian.
- May.28.2018: Richer Sounds boss puts tax avoiders on the record. Julian Richer, founder of Richer Sounds, the hi-fi chain, has taken aim at Sir Philip Green, saying that he plans to bankroll a new watchdog to expose people and companies that avoid paying tax. Julian Richer said that he was launching TaxWatch to help to fix Britain’s “broken” tax system, having become exasperated at the different ways in which people avoid paying their bills. The not-for-profit venture will involve journalists and tax experts working together to expose abuses of the system. Mr Richer, who was drafted in by Marks & Spencer recently to advise on workplace culture, said that he reserved a special anger for “people who think it’s funny and clever not to pay tax”. The tax affairs of giant technology companies and celebrities also have been under the spotlight; companies such as Starbucks and Apple have been criticised for their complex tax structures and in some cases have bowed to public pressure to increase their tax payments over and above what is required by law in the UK. Tabby Kinder, The Times.
|The Grin: Exposing Anonymous Companies|
- May.26.2018: Tax evasion isn’t just for the west: it conspires to keep Africa poor too. Many economists believe life in the developing world is improving fast. It certainly isn’t in the sub-Saharan region. Fast-rising populations across the region are one reason govts struggle to combat poverty. The other reason can be found in the pernicious activities of western companies, western govts and the Chinese state, which want to maintain access to important minerals and to make sure they stay as cheap as possible. The devious nature of the conspiracy to keep Africa poor has most recently been exposed by the work of journalists who have banded together as the Norbert Zongo Cell for Investigative Reporting in West Africa. The report revealed how western banks and govts turn a blind eye to £billions worth of wealth, generated across West Africa, that is squirrelled away offshore, often out of sight of the tax authorities. Working with the International Consortium of Investigative Journalists, it details how Nigerian billionaire Sayyu Dantata bought 6 subsidiaries across the region from US oil firm Chevron. The $1bn deal would have been subject to multiple tax regimes depending on the laws of the countries involved. Tax experts working with the ICIJ say the transaction, at the very least, “skilfully avoided the withholding tax regime”. Tax evasion on the continent is a colossal problem. The Organisation for Economic Co-operation and Development said the extent of tax evasion in the region is dramatic, with more than $50bn per year funnelled out through illicit flows – a sum more than all the aid the continent receives from individual countries and agencies. The head of the International Monetary Fund, Christine Lagarde, recently said that, after several years in the job, she had concluded that interventions by her agency should come with more strings attached, and one of the strings should be a demand for anti-corruption drives. Jason Hickel, in his new book The Divide, not only argues against what we might call the “Niall Ferguson view” that colonialisation, or at least the British empire, improved the lives of those it affected: he also rails against more recent attempts to show that trade and liberalisation are benefiting the poor. He uses research by the US-based campaign group Global Financial Integrity and the Centre for Applied Research at the Norwegian School of Economics which shows that in 2012, the last year of recorded data, $3.3tn flowed out of developing-world countries. This contrasts with the $1.3tn – including all aid, investment and income from abroad – that flowed in. Totting up the net outflow of funds since 1980 delivers the alarming figure of $16.3tn, says Hickel, an anthropologist based at the London School of Economics. To get a sense of the scale, $16.3tn is only a couple of trillion short of total US GDP. Hickel joins a growing number of academics who have argued that aid and investment, especially in Africa, is far outweighed by what is stolen. Phillip Inman, The Guardian. See also Foreign Aid on this topic.
- May.01.2018: How Labour and Tory duo teamed up to win tax haven U-turn. Margaret Hodge and Andrew Mitchell were quick to recognise they could succeed in forcing the govt to act on financial secrecy in the overseas territories if they joined forces. Signing up Tories was particularly important but not difficult, partly because a pragmatic Hodge was careful to emphasise that this was a policy proposed by David Cameron in 2013 before it was allowed to wither away under Theresa May. Kenneth Clarke, Nicky Morgan, Anna Soubry and Grant Shapps appeared on the supporters list last week and rebel numbers were immediately sufficient to make it clear to No.10 that a defeat on the issue was a realistic prospect. The tax affairs of giant technology companies and celebrities also have been under the spotlight; companies such as Starbucks and Apple have been criticised for their complex tax structures and in some cases have bowed to public pressure to increase their tax payments over and above what is required by law in the UK. Dan Sabbagh, The Guardian.
- Dec.02.2015: Less than 1% of tax avoidance will be stopped under the General Anti-Abuse Rule (GAAR). The conclusion is based on HMRC data, but also on a report by me on the General Anti-Abuse Rule. New TUC research (undertaken for us by Richard Murphy of Tax Research) shows how weak the govt’s latest anti-avoidance measure really is. You might think that an initiative labelled as an ‘anti-avoidance’ rule would make some inroads to the UK’s tax dodging industry. But in fact the govt’s own estimates show that its General Anti-Avoidance Rule will, at best, limit 1% of the estimated £25bn that we lose each year through tax avoidance measures. Richard Murphy, Tax Research UK.
- Mar.25.2015: Surrey Mansion Used to Hide Suspect Funds. How the UK's property market is serving as a money-laundering vehicle for the world’s criminal and corrupt. "Our property market is serving as a money-laundering vehicle for the world’s criminal and corrupt." Lawyers, real estate agents and company formation agents are enabling suspect individuals to gain access to the UK's property market. This is supported by the recent findings of Transparency International UK that over £180m worth of UK property has been brought under criminal investigation as the suspected proceeds of corruption in the last decade (and this is only "the tip of the iceberg"). Global Witness,
- Nov.06.2014: We know how to eradicate tax abuse. So why aren’t businesses doing it? Executives claim they're acting in shareholders’ interests, yet aggressive avoidance harms a company and all its stakeholders. The Guardian, Richard Murphy
- Apr.11.2014: Why do we let the corrupt hide their loot in London? London is home to some of the world's most corrupt officials and their front men and women. Having stolen vast wealth from their people, they need a place to hide the loot and spend the money. The UK, with its booming property market, top-class private schools and banks who ask few questions, is an obvious draw. It doesn’t need to be like this. The UK has powers to ban such people, but does not routinely say if it's done so – so it's hard to know whether or not these powers are being exercised. This lack of transparency around the process was highlighted in a parliamentary debate last week by Dominic Raab MP, who was calling for those responsible for the death of Magnitsky to be banned from the UK and have their assets frozen. Despite his position as MP, he’s not been able to find out what whether the UK has banned these individuals. The UK’s powers to get corrupt funds frozen and returned to the countries they came from are also in need of an overhaul. Transparency International UK recently published a report showing a myriad of road-blocks in place to effective asset recovery for grand corruption. Global Witness, Eleanor Nichol
- See links at the bottom of this article: Guardian
- The Benefits Of Opco/Propco Financing. Duncan Hubbard, Catherine Richardson, Mondaq, Feb.02.2020.
- Runaway REIT Train? Impact of Recent IRS Rulings. Peter E Boos, TaxAnalysts, Apr.03.2015.
- Operating Company/Property Company Deal (OPCO or PROPCO). James Chen, Investopedia, Oct.15.2019.
- The opco-propco: How it works. Sarah O’Connor, Rob Minto, Cleve Jones, The Financial Times, May.30.2011.
- Leaseback. Carla Tardi, Investopedia, Mar.16.2020.