COFFERS Research to be presented in London

Richard Murphy, Len Seabrooke, and Saila Stausholm will present their COFFERS research in the Research Seminars in Accounting & Financial Management series at King’s College London, Bush House, Room (SE)1.01 on November 20th 2019, 16.00-17.30. The presentation is based on COFFERS Working Paper 4.6. The details are below (and link to the working paper):

 

A Tax Map of Global Professional Service Firms:

Where Expert Services are Located and Why

 

Richard Murphy

City University of London

 

Leonard Seabrooke

Copenhagen Business School

 

Saila Stausholm

Copenhagen Business School

  

This research was funded by the European Union’s Horizon 2020

Research and Innovation Programme under grant agreement #727145 (COFFERS).

 

Abstract 

The role of multi-disciplinary Global Professional Service Firms (GPSFs) in the architecture of international tax abuse has been very little studied. Although it has been known that some of these firms operate in many of the world’s secrecy jurisdictions the scale of their activity in these, and other, locations has been little understood. Nor has their own representations of their tax services been appropriately considered. This working paper seeks to redress this deficiency. We locate the activities of these firms in the broader context of their activities around the globe, since it is the boast of many of them that they operate in more than 140 jurisdictions, worldwide. The research has revealed the opacity of the data surrounding these firms, and the unusual nature of their ownership structures. Financial reports of these firms are not available for most jurisdictions in which they work, whilst common control through ownership structures rarely crosses national boundaries. Using global directories of the firms as indication of presence in a location and the number of employees by jurisdiction as an indication of scale, our research indicates the disproportionate activity of particular GPSFs firms, namely the ‘Big Four’ accountancy firms, providing tax based services in secrecy jurisdictions. This suggests that they are major suppliers of offshore financial services.  We consider the evolution of these GPSFs since the 1990s, suggesting they have been conscious participants in this activity but that their behaviour has adapted over time to reflect prevailing taxation morés to preserve the reputations of those supplying these services. As we show, these morés are reflected in their own presentation of their services as promoted on their web sites, which have changed significantly over time to reflect this fact, with little evidence that there has been any real underlying change in behaviour. As a result we suggest that these firms display a form of adaptive behaviour worthy of further study.

Richard Murphy on Tax Spillovers

Richard Murphy’s recently published work on tax gaps, tax spillovers and their implications for  modern monetary theory, to which we referred here when it was published in the Real World Economic Review in September 2019, has received a significant boost.

Prof Randy Wray, one of of the founders of  modern monetary theory has said of the special edition in which the price was published “There is one good contribution made to MMT that doesn’t come from the inner circle of MMTers. This might be a first—at least, it is the first case I can recall. … So, this issue of RWER contains what I believe to be a first—an article that tries to fill a perceived gap. … Richard [Murphy] argues that “cash paid in tax is a residual figure arising from a plethora of decisions on tax bases, reliefs and allowances, as well as tax gaps that result from non-compliant taxpayer behavior”. Recognizing MMT’s argument (based on Ruml) that taxes are not really for revenue purposes, he argues for seeing “use of tax [instead] as a critical instrument in economic and social policy management”. I agree.

This is Coffers delivering new theoretical insights into a developing area of economic thought.

http://neweconomicperspectives.org/2019/10/mmt-report-from-the-front-part2.html#more-11599

‘Sabotage’ by Nesvetailova and Palan

Two members of WP1, Professor Anastasia Nesvetailova and professor Ronen Palan, drew on their research on financial engineering as tax avoidance for the COFFERS project (formal deliverables D.1.6 and D.1.7) in their new book, entitled Sabotage: The Hidden Nature of Finance. The two deliverables informed in particular chapters 11, ‘The Bad: Derivatives, Tax Avoidance and Evasion’ and chapter 12, ‘The Crypto: Mining the Money’. The book will be released by Public Affairs in the US in January, 2020 and Penguin, in the UK in March 2020, followed by translation to German and Chinese. Here are the links from the UK publication and the US publication.

Baker and Murphy: The Political Economy of ‘Tax Spillover’

A seminar on the use of tax spillover analyses created using the methodology described by Professor Andrew Baker and Professor Richard Murphy of City, University of London in a paper in Global Policy, published in March 2019, was discussed at a seminar at City, University of London on 5 September 2019.

The seminar was attended from members of the academic community from a number of universities; a range of NGOs working in international tax issues including Oxfam, ActionAid and the Tax Justice Network; economic think tanks such as Demos and the Institute for Public Policy Research; the press, including The Financial Times and International Tax Review; and representatives from the OECD and the IMF and World Bank funded Global Initiative for Financial Transparency, based in Washington DC.

The seminar was split into two parts. In the first part the issue of tax spillovers was discussed in general. Tax spillovers are defined as the positive or negative impacts that one part of a tax system has on the effectiveness of another part of the same tax system or the tax system of another jurisdiction. They have achieved much greater attention since the publication of a seminal IMF paper on the issue in 2014. The desirability of undertaking reviews of these impacts and the ways that they might be managed was the focus of this session. It was widely agreed that the issue was worth pursuing because of the significant, and largely unknown or unappraised risk of  tax spillovers in many jurisdictions’ tax systems.

A discussion of what might be called the Baker-Murphy approach was the focus of the second part of the seminar. The detailed nature of the qualitative methodology used was discussed: it contrasts with the qualitative approach used by the IMF in 2014. In addition, the ability of the system to generate positive recommendations for change was highlighted: the focus of this system is to assist and empower regulators in the course of their work.

Discussion as to how the methodology might be developed, and most importantly put to use, was lively and encouraging. A number of parties present agreed to cooperate on this issue with Professors Baker and Murphy.

If G7 are serious about tackling inequality they should implement our global tax framework

‘A major priority for the French government in hosting the 2019 G7 summit at Biarritz is to combat inequality, both within advanced economies and between countries. But if the G7 are serious about tackling inequality, there is a need to tackle the “race to the bottom” in taxation that affects governments around the world.’ Click here to read the Conversation article by Andrew Baker and Richard Murphy.

Andrew Baker and Richard Murphy: Tax Spillover Assessments

Andrew Baker, professor of political economy, University of Sheffield, and Richard Murphy, professor of practice in international political economy, City University, London, call on the G7 to task agencies with carrying out fairer assessments of global tax systems using a new framework. Read more in this article.

Webinars from the Tax Justice Network

In July 2019, following the launch of the Corporate Tax Haven Index in May 2019, the Tax Justice Network offered the Inter-American Center of Tax Administrations (CIAT) two free, online webinars in English and Spanish. The webinars aim to train tax authorities to use the Corporate Tax Haven Index to evaluate and address their exposure to multinational corporate tax abuse. Over 100 officials from the tax administrations of 16 CIAT member countries from the Americas and Africa participated in the webinars, including Angola, Argentina, Bolivia, Brazil, Chile, Mexico, and the United States.

Both our Financial Secrecy Index and the Corporate Tax Haven Index, enable tax authorities, among others, to identify the biggest financial risks their country faces based on the secrecy and tax avoidance provisions; as well as to renegotiate or decide with which countries to establish double tax agreements to prevent lower withholding taxes that have an impact on their country’s tax revenues. For more information see here.

Utrecht COFFERS Team in the News: Money Laundering in the Netherlands

COFFERS made it to the headlines of the Dutch newspaper Trouw. The new money laundering estimates made by the Utrecht COFFERS team in The Netherlands found it to be €16 billion. This accounts for 2.5% on average of the Dutch GDP in the last few years. “The danger for the Dutch economy is that criminals undermine the legal economy, because they are active in many sectors of the Dutch economy,” Coffers project leader Prof. Dr. Brigitte Unger said. Coffers team member Ass. Prof. Dr. Joras Ferwerda mentioned increasing fraud as the biggest danger.

Brigitte Unger on de Volkskrant

On S aturday, March 9, 2019, COFFERS project coordinator Prof. Dr. Brigitte Unger was asked to comment by the Dutch newspaper de Volkskrant on the money laundering scandal of Troika Bank. Regarding the alleged wrongdoing of some Dutch banks funneling billions of Euros through Russia using Lithuanian banks, Dr. Unger said, “It is a game of cat and mouse, in which the mice are winning at the moment”.