The GUE/NGL group in the EU parliament published a report July 5th 2017 by Saila Stausholm of Copenhagen Business School and Richard Murphy of City, University London, entitled ‘The Big Four: a study in opacity’. The report is the first of its kind investigating the structure of the Big Four firms, and finds that while it is difficult to establish precisely how many offices and staff each of the Big Four firms have in each country due to their secrecy, it is clear is that the size of their operations in a jurisdiction is not always proportional to its population or GDP. For example, the Big Four have more staff in Luxembourg in proportion to the size of the local population than in any other country; the Cayman Islands come second in this ranking and Bermuda third, indicating that they are heavily overrepresented in tax havens.
The ownership structure of the Big Four, in which they are legally independent networks despite their global brand and central management organizations, further reduces their regulatory cost and risk by providing a ring-fencing mechanism between their presence in tax havens and elsewhere.
Together, these findings suggests that providing professional services directly related to the secrecy jurisdictions are a big part of the business model for the Big Four. The report suggests ways to increase transparency of these firms and commit them to separate auditing services and tax advice.
The report has attracted the attention of several European newspapers.
Link to the rapport can be found here
Link to artikler can be found below:
On 5 June 2017 Petr Janský of Charles University took part in the Tax Justice Annual Conference, an annual conference of Tax Justice Network at City, University of London. In his presentation titled “Scale of Profit Shifting and Country-by-Country Reporting”, he presented some recent findings from research with his COFFERS colleague Miroslav Palanský on the tax revenue losses due to tax havens, as well as some other research on the scale of profit shifting and the usefulness of the recently published banks’ country-by-country reporting data.
For more information please contact Petr Janský
Leyla Ates’s recently published a country report on Turkey entitled “Assessing BEPS: origins, standards and responses” within the framework of the 71st Congress of IFA which will take place in Brazil later this year (August 27-September 01, 2017). In her report, she identifies a number of specific issues pertaining to Turkey, including the problem of dedicating scare administrative resources to initiates that are not necessarily domestic priorities, even though Turkey is aligned in general policy terms with the BEPS principles.
The International Fiscal Association (IFA) is a leading non-governmental, international non-profit organization devoted to the study of international tax law. All country reports and the report of general reporters are published in Volume 102a, Cahiers de Droit Fiscal International. This volume’s aim is to gain insights from the BEPS project on how to improve the outcomes of future tax cooperation efforts. As well-known base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. To tackle BEPS, the OECD has initiated the BEPS project in 2013.
The online versions of the Cahier is available on the website of IFA’s sister organization, the International Bureau of Fiscal Documentation (IBFD).
Together with his co-author Max Schaub, COFFERS researcher Lukas Hakelberg just published an article in Regulation & Governance on the redistributive impact of the Foreign Account Tax Compliance Act (FATCA) and the multilateral automatic exchange of information (AEI) regime it precipitated.
The authors perform a difference-in-differences analysis comparing banks’ deposit and debt security liabilities to foreign non-banks in tax havens and non-havens before and after the adoption of FATCA in 2010. They find that tax havens on average lost more portfolio investment to the introduction of the AEI than to the 2008 financial crisis. In contrast, portfolio investment in non-havens grew rapidly between 2010 and 2014. This divergence becomes even stronger when including the US in the non-haven group, which suggests that its decision not to reciprocate the AEI has recently afforded the country a competitive advantage in the attraction of hidden capital.
You can access the article here.
Lukas Hakelberg and Thomas Rixen from COFFERS working package 3 at the University of Bamberg wrote an accessible popular science piece on the purported end of tax havens for the social science supplement of the German Bundestag’s weekly newspaper (Aus Politik und Zeitgeschichte).
They show how tax competition and tax havens emerged after governments had removed institutional barriers to international capital mobility but failed to harmonize their tax policies accordingly. By defending their de jure sovereignty in tax policymaking, governments unleashed competitive pressures that still limit their de facto sovereignty in the taxation of capital.
International initiatives towards more cooperation in tax matters have only been successful, where affected interest groups in powerful OECD countries lacked influence on the political process. This explains why we have recently seen progress – brought about by coercive pressure – in the fight against tax evasion by households, but relatively little change in the fight against tax avoidance by multinational firms.
You can read the full piece here (in German).
The European Union’s competition commissioner Ms Vestager sent a welcome, yet shocking wave around the globe when it ruled in 2016 that Apple has to pay around € 13bn in back taxes due to illegal state aid granted by the Irish fisk to the multinational.
This documentary portrays the intriguing experience by an association of small business owners in Germany who set out to use similar tax avoidance tricks as large multinational corporations do. It also discusses some of the the potential solutions for tackling the issues, including the proposal for public country by country reporting, a policy featuring centrally on COFFERS’ research and the EU’s current political agenda.
Available here at WDR here
Featuring COFFERS’ Markus Meinzer, working package 2 leader at [24:39-25:29; 36:18-36.58; 39:56-40:30]
As the German legislative process for the implementation of the 4th EU anti-money laundering directive hits the home straight, the draft law has become under increasing pressure from researchers and civil society. In a public hearing in the finance committee of the German Bundestag on Monday, 24th April, Tax Justice Network, Transparency International and others testified to the urgent need of improvements of the current legal text. TJN’s written statement can be read and downloaded here. Continue reading “Loopholes in German draft law regarding beneficial ownership registration likely in breach of the 4th EU Anti-Money Laundering Directive”
On 16 May 2017 Petr Janský took part in an annual workshop in Prague on tax havens for academic and private-sector experts as well as public officials (see http://danoveraje.pef.czu.cz/, in Czech, for details).
In his presentation titled “International corporate tax avoidance” he presented some research carried out within the COFFERS project as well as some earlier research findings relating to the scale of tax havens’ impact. A section of his talk presented a draft of a paper called “Estimating the scale of corporate profit shifting: Tax revenue losses related to foreign direct investment” written jointly with another COFFERS team member, Miroslav Palanský. The paper uses bilateral foreign direct investment data to estimate, at country level, tax revenue losses that result from some corporate profit shifting practices.
The work of the University of Limerick team on Work package 5 of COFFERS was covered extensively on Irish national and local media in April 2017.
An interview with WP leader Sheila Killian was covered in the main business segment of Morning Ireland, on RTE Radio One, the main radio station of Ireland’s national broadcaster, and in the Irish Times.
Similar interviews were also included in local Limerick press (The Limerick Leader and Limerick Live95FM)
Link for the Irish Times can be found here
And link for Morning Ireland can be found here
The Panama Papers revealed a systemic challenge to global governance, in which the big players are major banks, multinationals and the biggest financial centres of all. Unsurprisingly, much of the coverage of the Panama Papers focused on juicy, individual stories: political conflicts of interest, criminal money laundering and HNWI tax evasion in exotic locations. But when you look at all the data, you see a different picture.
With a few friends of TJN, we’ve been running some of the numbers on Panama, to see just where this small jurisdiction fits in the global game. The picture is inevitably partial – a leak from Jersey or Delaware would show other angles. But what is revealed is a clear snapshot of one part of the systemic business making use of secrecy. Not necessarily for corrupt purposes… but when your business is not engaged in some sort of unsavoury activity, you don’t need secrecy, so the use of secrecy is a pretty good red flag for further investigation.
Read the full blog post from TJN here