13th June 2007, Transnational Institute / TJNederland
The Long and Winding Road
John ChristensenDirector, TJN International Secretariat
“The Tax Justice Network agenda is a direct threat to America’s
economic interests. The U.S. is a tax haven, and
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, President7th April 2005
The ProblemThe 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.
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.
“”
30th May 2007
In the belly of the beast:
insider trading
market rigging
avoiding disclosure of conflicts of interest
illicit arms trading
illicit political donations
contract kickbacks
bribery
fraudulent trading and tax evasion
“living of lax regulation”
Wall Street Journal17th September 1996
The openness of tax havens
to proceeds from crime,
corruption, and tax dodging
might explain why flows of
capital have been from South
to North, from the poor
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)
$billions
/ year
High
Low High Low
Criminal 549 331 238 169
Bribery, etc
50 30 40 20
Commercial
1000
700 500 350
Total 1599
1061 778 539
GlobalDeveloping and
transitional economies
“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.”
Country rank
Tax haven countries
2006 CPI score
5 Singapore 9.4
7 Switzerland 9.1
9 Netherlands 8.7
11 Luxembourg / UK 8.6
15 Hong Kong 8.3
16 Germany 8.0
18 Ireland 7.4
20 Belgium / USA 7.3
24 Barbados 6.7
26 Macau 6.6
28 Malta 6.4
31 U.A.E.(Bahrain/Dubai/RAS)
6.2
Country rank
African countries
2006 CPI score
156 Chad / DCR / Sudan
2.0
155 Cote d’Ivoire / Equatorial Guinea
2.1
142 Angola / Congo Kenya /Nigeria / Sierra Leone
2.2
138 Cameroon / Niger 2.3
130 Burundi / CAR / Ethiopia / Togo
2.4
the geography of corruptionTransparency International’s Corruption Perceptions Index: 2006
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.
tackling the corruption interface