But who are they really going after?
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
Credit Suisse is once again under international investigation for allegedly helping its clients evade the prying eyes of national tax authorities. This comes after the bank was fined $2.6 billion by the U.S. government in 2014 for helping Americans evade taxes.
Helping high net worth private clients and corporations evade taxes, and then getting caught is not unique to Credit Suisse. Fellow Swiss megabank UBS and UK giant HSBC were fined hundreds of millions of dollars for their troubles.
The banks are not just helping their clients evade taxes. In a report titled Opening the Vaults, UK-based charity Oxfam International revealed this week that in 2015, Europe’s 20 largest banks registered over a quarter of their profits in tax havens – well out of proportion to the level of real economic activity that occurs there. Once again, Luxembourg was a top destination for funds, while in Ireland the same banks recorded profits that were 76% higher than the global average in 2015. Only the Cayman Islands was found to have a higher profitability rate.
None of this should come as a surprise. If any organization knows how to bend the rules and use and abuse the tools and levers of global finance to minimize a company or individual’s tax “footprint,” it’s today’s generation of global banks. And no matter how many fines they are made to pay, they’re not going to change their ways.
And that is bad news for today’s governments, which need increasing amounts of money to meet their obligations and service their debts, as well as rescue the banks every time they get in trouble. It is also bad news for regular taxpayers since they will have to make up the difference, until that’s no longer possible.
The U.S. government alone loses $188 billion of tax revenue each year as a result of tax avoidance, according to calculations by the International Center for Tax and Development. In China, it’s $66 billion; in Japan, $46 billion; in France, $19 billion and in Germany, 15 $billion. But it’s the resource-strained economies of the Global South that pay the highest price. Between 2001 and 2010 alone, it is estimated that developing countries lost US$5.86 trillion to illicit outflows — outflows that in most cases flowed to and through banks in places like Switzerland, Luxembourg, the Netherlands, and the City of London.
According to Oxfam’s report, there is one obvious solution to this global problem:
Create a global tax body to lead and coordinate international tax cooperation. This process could start with an International Framework Convention on Tax. Establish a clear and objective list of tax havens.
What Oxfam fails to mention is that such a body already exists — the Global Forum on Transparency and Information Exchange for Tax Purposes (GFTIETP). Most people have never heard of it, but nonetheless its influence is growing.
GFTIETP works under the auspices of the Organization for Economic Cooperation and Development (OECD) and G20. Developmental NGOs like Oxfam would much prefer to see it fall under the purview of the United Nations where developing nations might have some semblance of influence over proceedings. The Global Alliance for Tax Justice, of which Oxfam is a sponsor, is calling for the creation of an intergovernmental UN Global Tax Body as part of its Global Week of Action to End Tax Havens, which began today.
For now, however, it’s the OECD that’s running the show. And the show is getting bigger all the time. GFTIETP boasts a membership list of over 120 jurisdictions, as well as the Member States of the European Union. That’s over 150 out of the world’s roughly 200 nations, representing over 90% of the global economy, that have agreed to share the financial details of their citizens, both private and corporate.
In an article ominously titled “Why Taxation Must Go Global“, German Finance Minister Wolfgang Schäuble was barely able to contain his excitement at the prospect of technological advances and global cooperation making it possible for tax authorities to keep ever closer tabs on the people’s money (emphasis added):
“Under the CRS (global Common Reporting Standard), tax authorities receive information from banks and other financial service providers and automatically share it with tax authorities in other countries. In the future, virtually all of the information connected to a bank account will be reported to the tax authorities of the account holder’s country, including the account holder’s name, balance, interest and dividend income, and capital gains.”
Over 50 of the Forum’s member governments have pledged not only to share tax information on request but also automatically. The aim is not just to create homogenized standards of financial information sharing that are broadly accepted by governments all over the world, but to have them implemented, says Pascal Saint-Amans, the director of the OECD Centre for Tax Policy and Administration. Ultimately, the OECD wants to “build a sound and reliable international tax system for all.”
The proposals and ideas are all cloaked in positive soundbites, with words like “development,” “inclusiveness” and “justice” particularly prominent. It’s also largely true that in an increasingly globalized economy, the only realistic hope national governments have of tapping into the gargantuan — and ever increasing — fortunes of the world’s wealthiest individuals and corporations is through cooperating with other national governments and closing down tax havens.
But is that really the main objective here? After all, it’s hard to imagine the same political leaders who casually meet up with CEOs and chairmen of the world’s largest corporations in fora such as the annual Bilderberg meeting or the American or European chapters of the Council for Foreign Relations suddenly deciding to throw their primary constituency overboard.
It’s more likely that the main targets of the global tax crackdown are not the world’s biggest banks and corporations but the proceeds of the informal economy, the fastest growing part of the global economy that is estimated to represent as much as 45% of total global economic activity.
By creating a global cross-reference of everything that moves in the financial world, and by implementing increasingly draconian measures to limit the use of cash-in-fist while promoting the use of digital alternatives, governments will be able to track every penny people earn, spend, or save. By Don Quijones.
To protect citizens from threats as defined by apparatchiks in Brussels, they’ve come up with something new. Read… Things Just Got Serious in Europe’s War on Cash
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// … And that is bad news for today’s governments, which need increasing amounts of money to meet their obligations and service their debts, as well as rescue the banks every time they get in trouble. //
Obligations to the banks, from the same banks.
Rescue the banks by borrowing from the same banks.
Banks will fail again, let them remain prostrate. Problem solved!
I don’t think any of this applies to something like Bit Coin which I easily see as becoming a lot more popular. What the human mind can create it can overcome. That’s why you don’t have unpick-able locks.
One wonders how and why this matter is any of Oxfam’s business. I would suggest taxing non profits, churches and NGOs would raise just as much money. Foundations too might be made to cough up or at least distribute the bequest that created them with in 20 years. Giant Foundations were intended to be philanthropic organizations not permanent gravy trains for their managers.
Foundations were created to be tax dodges masquerading as philanthropies. if you are so eager to tax churches et.al why not go after the very ones who created these tax dodges? The foundation’s managers are not the ones on the gravy train but the super wealthy that financed them. Along with ever shrinking taxes for corporations the real money is in the hands of the ones who have done phenomenally well since the crash. Why not outlaw offshore accounts and make them the refuge of the Mafia? Why give the wealthy another tax break if you are so eager to tax something or someone?
This is like the instructions for how to boil a frog. If you put a frog into boiling water, he’ll immediately jump out. But if you put him into cool water and slowly raise the temperature, he won’t realize the danger until it’s too late.
The corrupt politicians are raising the temperature of our communal water at a slow but steady pace. Will the public sense the danger and jump out of the politicians pot in time ? I don’t know, but I suspect that there are more people watching Kim Kardashian’s behind than the politicians machinations.
Start with releasing a few tax returns. :-)
Humanity must wake up and treat these politicians, 1%, and corporations like the scum they are or another Dark Ages will be the only future.
I have this vision of governments cracking down on the “informal” (read grey/black) economy by gradually stopping the existence of cash – all transactions to be electronic transfers. Aha! But what about using gold “jewelry” as a form of cash, as in “I’ll sell you my car for $2,000 plus 2 ounces of gold”? Of course, then people will not be sure whether the gold is 95% pure, so your friendly neighbourhood gold dealer will stamp the gold “jewelry” with his special stamp. In fact, you might occasionally go to such a gold dealer just to buy some “jewelry” knowing that you can use the “jewelry” in the informal/grey/black economy. But rather than carry all that gold around, the gold dealer might issue certificates in which the bearer can demand 1 ounce of gold, and these certificates can be used in the informal/grey/black economy. And these certificates can be traded as in “I’ll swap 7 1-ounce certificates from Big Joe for 6 of Sneaky Peter”. Etc. etc. etc.
That’s what the Lombards did during the Middle Ages in Italy. And that’s where banks started. Example : Banca de Monte Paschi di Siena, 700 years old and NOW bankrupt ( after adopting “modern” criminal banking practices ). Fractional reserve banking was invented by the Lombards – but gold-covered. Now, it’s not even paper covered anymore and the fractional reserve is in some cases 3% or less – depending on what one considers as Tier-1 capital ( government bonds from Greece, e.g. , or the loans agreed upon by the bank with a “special purpose vehicle” created by the bank itself – that is a phony enterprise where a bank dumps all its non-performing loans and lo and behold : the banks’ balance sheet is clean again ).
Hedge funds are doing the shifting shifty assets over to insurance companies
Fuggers, don’t forget about those Fuggers.
Ironic that people are talking as if the Globalization people had lost, but the truth is every politician on earth is salivating at the thought of ‘global taxation’, it means the power for everybody to grab from anybody and no fear of back-slash as the people your taxing most likely never went to your country nor voted there.
Once the global-tax is in place, probably start at 0.0001% of asset’s, and of course gradually go astronomic in a short time.
All the global tax admin’s are already in place FATCA for USA, and a global version is already there in time anybody wordwide opening a bank account will have to file a form to disclose their account globally to the global tax authority’s.
The beauty of this is that even the populists ( people who voted for Trump ) will sign on because the mere thought of ‘taxing’ another guy is sure fire win. Lastly Trump is already talking about Mexican’s paying for his wall, the global tax will be sold as a means of making it easier for the USA to tax those Mexicans for their wall.
When the first government realizes that success will come from an absolute commitment to reduce taxes, whatever they are capital, land income, corporate, VAT, and they see the result of blooming entrepreneurial and economic growth, by castrating bureaucracies, killing corruption and cronyism, and jailing criminal politicians and bankers who collude and connive to raise taxes and bureaucracy to steal the maximum from a state, and hands real economic freedom to its citizens, instead of slavery victimization, surveillance, and iron boots on necks, then perhaps there will be hope.
It is really simple, I have business, off-shored, evading bureaucracy, not tax evasion or tax avoidance, but legal bureaucracy evasion.
yes, I use tax havens, tax havens used by off shored companies,m
But if this worldwide grab for taxes, which, face it, is nothing more than a grab to feed the troughs of the elites and the bankers, and absolutely f*ck all to do with making the world a better place, and far more likely to be spent on arms bombs and wars than anything else, then what are my options.
1) pay the taxes and lose the growth I can create that enriches the people i employ and around me.
2) find alternative ways to avoid the theft
3) or finally, if that doesn’t work, take what I have and stop working to create wealth.
No. 1) I will not even countenance.
The world sees ever clearer the depths of depravity corruption, theft and fraud that goes on in the elitist circles. More and more, refuse to be fleeced, having the skin ripped from their backs. They quit. They stop having families, they cut expenses and slow their work rate, gradually over time this turns from growth to stagnation to recession to depression.
Demographics, arguably the most expensive cost to bear is that of having children, is in rapid decline, housing, less needed, because less families and nothing but bubbles wherever you look caused by govt and central bank fraud. Already a generation lost.
Stock and bond bubbles, in some cases so gigantic it is beyond belief, creating fictional paper wealth for a few but the average guy whose sole connection to those markets, his pension, is going to see his pension unpaid and its assets dissipated as it becomes more and more insolvent everyday.
The world wide debts of hundreds of trillions is created by the elitist mob to keep then in power, but the burden is on your backs and your children’s backs.
See the reality, then do the sensible thing. Evade them by moving from their jurisdiction.
In Canada our regulators of banking investment industry claim they have investors backs
In reality they aren’t even covering off the basics like vetting contracts to ensure they are compliant with industry code of conduct, when retail open accounts before they can start to save.
Consider tax rates for the average citizen compared to the loopholes enabling tax light for the financial megalithes
Consider that retail are really only cannon fodder to feed the very profitable banking investment entities
And our lax gappy regulators merely fronts fencing for the white collar criminals.
Canadas banks did get a 114 billion dollar bailout. Arranged via the back stairs. Rather than voted on in Parliament. Thus our politicians were able to play we are the most pure.
Fyi the US federal reserve provided some of this ballast to support Canadian banks while our media were pointing fingers at the banks everywhere but in Saintly pure Canada
There are historic methods of redress when governments decide to tax excessively: guerilla warfare, pitchforks, nooses, guillotines, etc. Couldn’t happen to a more deserving bunch.
$188 billion in lost tax revenues . And thats not even counting all the money lost in money laundering etc – et al – ad nauseam .
And yet what is this administration doing about it ?
Hmmm … I wonder why that might be ………..
I’m sure under the Great Obama everything functioned so well.
There seems to be this underlying theme with many comments here that the government has a right to vast sums of personal property, as if individuals exist for the state. I reject this wholeheartedly. Taxation at a point becomes theft, and nothing more. Moreover it goes very much against the Bill of Rights.
You will never see me defend companies that take from the public (this does not mean reasonable tax cuts), but you won’t find me demonizing all rich people either. If they made it fair and square it is their property. By the way cronyism functions just as well with a massive government as it does without any government.
Promise a flat tax but never promise scrap existing code
Billionaires need to train on government employee ” low hanging fruit” to justify position!
Oh come now this isn’t rocket science people. Corporation A has hidden offshore accounts that it refuses to open the the IRS. The IRS immediately places the CEO under arrest without bail until such time as that information is fully disclosed AND the full corporate tax rate has been applied and paid by said corporation. Simple is pie.
It is like illegal aliens. Every time an illegal is caught working for a corporation or individual the head of the household of the CEO is immediately arrested along with the illegal of course. The illegal is extradited back home and the head of household gets an automatic 5 years jail time in a regular (not country club) jail. No parole, no time off for good behavior.
Massachusetts has been doing something similiar with its gun laws for decades. It works. The fact of the matter is that if Donald Trump or the US Congress wanted to stop corporations and high net worth individuals (like themselves) to stop ripping off the government they could easily do so in one day. They have not which tells me they just don’t want to.
Consider that you can get up to 10 years and a $250,000 fine just for copying a CD than you realize just who warped, twisted and incredibly unjust our legal system really is.
Houses are large, illiquid assets for the taxman, especially in corrupt, Democrat-maladministered municipalities like Chicago.