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The tax official leant across the table in a sign he was revealing a secret. As a person who had been both a corporate tax payer and a corporate tax chaser, he was keen to explain the problem.

“A few years ago, the aim was to cut your tax by 20 or 30 per cent,” he said.

“If you cut it by 30 per cent, that was seen as pretty good and everyone, from the board down, was happy.

“But now, you’ve got the same businesses saying they want to cut their tax bill by 80 or 90 per cent or just not pay anything at all.”

And there is the problem.

At the G20 summit in Brisbane, there was again much debate about how to deal with the efforts of multinational firms to shift their cash around the globe to avoid tax.

As the release of highly confidential documents out of Luxembourg showed recently, the breadth of companies which are trying to wipe away their tax bill is staggering.

The lengths they are going to are astounding. Tax havens are a new industrial pursuit by some countries.

More than 15 per cent of total American foreign direct investment goes into The Netherlands (with an economy half the size of Australia’s), with 80 per cent of that $700 billion going into various holding companies.

Luxembourg, a principality not much bigger than Canberra, attracted $US2.4 trillion in foreign direct investment, more than Germany and France combined. Luxembourg really only has one industry, however, and that’s tax minimisation.

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Shane Wright: Companies dodging tax on an industrial scale

EXCLUSIVE

Countries may have to battle for revenue from digital companies once the global plan to stop tax avoidance succeeds, says the OECD’s head of tax Pascal Saint-Amans, but at least they now have something to fight for.

In an exclusive interview with Fairfax Media as global leaders arrive in Brisbane for the G20 to tackle tax avoidance by multinationals such as Apple and Google, Mr Saint-Amans said the OECD’s plan against base erosion and profit shifting (BEPS) would put an end to tax havens, but would not eliminate tax competition.

In fact, the next decade was likely to see intensified tax competition between nations as they compete for business investment, but at least they would be competing on an even playing field. “If there’s no zero-tax havens left, then countries will be keen on competing with more attractive rates,” he said.

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“BEPS puts an end to harmful tax competition, but not tax competition. Some countries might move to be more attractive by reducing their [tax] rates. We think that’s fine.”

Treasurer Joe Hockey said it was “hugely important” for the globe that companies pay tax where they earn profits. “Now, it is theft when someone does not pay the tax that is due to a nation and it undermines the ability of that nation to be able to deliver the sorts of services that are essential to alleviate poverty and to reduce inequality,” he said. “We are focused on driving hard the taxation agenda that ensures that companies pay tax where they earn profits, that individuals pay tax where they should be paying the tax.”

Mr Saint-Amans said recent media reports showing Australian companies not paying tax on profits because they had shifted it through Luxembourg was an issue that had already been addressed in the BEPS plan.

Under the old rules, he said the Australian tax authorities were not told that companies had secured deals with Luxembourg authorities to lower their Australian tax bills, but under the new rules proposed by the OECD, and which G20 governments had agreed to, they would be notified.

Mr Saint-Amans said he was hopeful the OECD plan would result in governments working within a multilateral framework and come to some sort of agreement between themselves about where profits should be taxed.

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Killing tax havens could start new battle, warns OECD

EXCLUSIVE

Countries may have to battle for revenue from digital companies once the global plan to stop tax avoidance succeeds, says the OECD’s head of tax Pascal Saint-Amans, but at least they now have something to fight for.

In an exclusive interview with Fairfax Media as global leaders arrive in Brisbane for the G20 to tackle tax avoidance by multinationals such as Apple and Google, Mr Saint-Amans said the OECD’s plan against base erosion and profit shifting (BEPS) would put an end to tax havens, but would not eliminate tax competition.

In fact, the next decade was likely to see intensified tax competition between nations as they compete for business investment, but at least they would be competing on an even playing field. “If there’s no zero-tax havens left, then countries will be keen on competing with more attractive rates,” he said.

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“BEPS puts an end to harmful tax competition, but not tax competition. Some countries might move to be more attractive by reducing their [tax] rates. We think that’s fine.”

Treasurer Joe Hockey said it was “hugely important” for the globe that companies pay tax where they earn profits. “Now, it is theft when someone does not pay the tax that is due to a nation and it undermines the ability of that nation to be able to deliver the sorts of services that are essential to alleviate poverty and to reduce inequality,” he said. “We are focused on driving hard the taxation agenda that ensures that companies pay tax where they earn profits, that individuals pay tax where they should be paying the tax.”

Mr Saint-Amans said recent media reports showing Australian companies not paying tax on profits because they had shifted it through Luxembourg was an issue that had already been addressed in the BEPS plan.

Under the old rules, he said the Australian tax authorities were not told that companies had secured deals with Luxembourg authorities to lower their Australian tax bills, but under the new rules proposed by the OECD, and which G20 governments had agreed to, they would be notified.

Mr Saint-Amans said he was hopeful the OECD plan would result in governments working within a multilateral framework and come to some sort of agreement between themselves about where profits should be taxed.

Continued here:
Killing tax havens could start new battle

Nov 142014

Tempests in tax havens

By Nikos Konstandaras

The claim that Luxembourg has been offering negligible tax rates to multinational companies might just convince Europeans of the need to harmonize their tax systems. It is clear we cannot continue in a situation whereby some countries and parts of countries can go on providing services which, in the end, deprive others of revenues. When Greece has been sucked dry by austerity, high taxes and a lack of investment, when almost all EU countries are struggling to meet their obligations to their citizens and partners, it is inconceivable that tiny Luxembourg should have attracted at least 340 major companies and investment funds with almost 3 trillion euros. With this, Luxembourgs citizens enjoy the second-highest per capita income in the world, after Qatar.

A recent report by the US-based International Consortium of Investigative Journalists claimed that some companies were offered tax rates as low as 0.25 percent. Officially, corporate income tax in Luxembourg is 22.5 percent. Among EU countries, tax rates in Ireland (12.5 percent) and Germany (15.8 percent) are at the low end, whereas in France (34.4 percent) and Belgium (33.9 percent) they are at the top. In Greece the rate is 26 percent. With various breaks and benefits, in many countries the final rate is much lower than the nominal one, but the very low rates that companies were asked to pay in Luxembourg (as well as in Ireland and the Netherlands, with a nominal tax rate of 25 percent) indicate that the system is skewed.

The chasm between 12.5 percent in Ireland and 34.4 percent in France is already too great and needs fixing. According to EU treaties, each country has the right to set its own tax rates. Even when Ireland was forced to ask its EU partners for a bailout, French President Nicolas Sarkozy failed in his effort to force Dublin to raise taxes. In this way, European Commission President Jean-Claude Juncker is correct when he says that Luxembourgs tax regulations are not illegal. What many observe, though, is that they are unethical, offering companies and individuals the opportunity to avoid paying taxes in the countries where they earned their profits. There is also the question of whether any companies received special treatment.

Defending himself in the European Parliament, Juncker, who dominated politics in Luxembourg for over two decades, declared that the Commission will investigate the issue and will propose ways to harmonize tax systems and exchange information between countries. The G20 summit in Brisbane this weekend is expected to deal with tax evasion, among other issues. Everywhere there is a pressing need for more funds and greater justice, so the time has come for many countries (and parts of countries, such as the Channel Islands) to lose the privileges which allowed them to get rich at the expense of others. Greece will gain from this only if it combines tax harmonization with greater stability in its tax system and with a fundamental improvement in the dispensation of justice in issues pertaining to investment and taxation. This is our challenge.

Continued here:
Tempests in tax havens

EXCLUSIVE

Countries may have to battle for revenue from digital companies once the global plan to stop tax avoidance succeeds, says the OECD’s head of tax Pascal Saint-Amans, but at least they now have something to fight for.

In an exclusive interview with Fairfax Media as global leaders arrive in Brisbane for the G20 to tackle tax avoidance by multinationals such as Apple and Google, Mr Saint-Amans said the OECD’s plan against base erosion and profit shifting (BEPS) would put an end to tax havens, but would not eliminate tax competition.

In fact, the next decade was likely to see intensified tax competition between nations as they compete for business investment, but at least they would be competing on an even playing field. “If there’s no zero-tax havens left, then countries will be keen on competing with more attractive rates,” he said.

Advertisement

“BEPS puts an end to harmful tax competition, but not tax competition. Some countries might move to be more attractive by reducing their [tax] rates. We think that’s fine.”

Treasurer Joe Hockey said it was “hugely important” for the globe that companies pay tax where they earn profits. “Now, it is theft when someone does not pay the tax that is due to a nation and it undermines the ability of that nation to be able to deliver the sorts of services that are essential to alleviate poverty and to reduce inequality,” he said. “We are focused on driving hard the taxation agenda that ensures that companies pay tax where they earn profits, that individuals pay tax where they should be paying the tax.”

Mr Saint-Amans said recent media reports showing Australian companies not paying tax on profits because they had shifted it through Luxembourg was an issue that had already been addressed in the BEPS plan.

Under the old rules, he said the Australian tax authorities were not told that companies had secured deals with Luxembourg authorities to lower their Australian tax bills, but under the new rules proposed by the OECD, and which G20 governments had agreed to, they would be notified.

Mr Saint-Amans said he was hopeful the OECD plan would result in governments working within a multilateral framework and come to some sort of agreement between themselves about where profits should be taxed.

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Brisbane G20 2014: tax deal aims for even playing field

Over the last couple of decades, large firms have become increasingly adept at using complex international arrangements to reduce their taxes. This has become a big political issue in the United States (where there is increasing pressure to get U.S. firms to start paying their taxes) and in Europe (where the incoming president of the European Commission is in political trouble over his possible previous role in facilitating dubious tax arrangements for foreign firms). However, it is difficult to measure the extent of the problem, exactly because these tax-dodging arrangements are so complicated. If, for example, profits pass through a chain of artificial subsidiaries located in a number of different countries (as in the notorious double Irish plus a Dutch sandwich) to take advantage of loopholes, then its difficult to measure and count them.

Gabriel Zucman, in a new article in the Journal of Economic Perspectives has figured out a possible way to measure the extent to which U.S. firms use tax havens to lower taxes on foreign profits. By looking at national accounts and balance of payment statistics, its possible to get aggregate figures on how much money is being funnelled through foreign tax havens. And the answer is quite a lot. Zucman:

The balance of payments provides a country-by-country decomposition of this total, indicating that 55percent are made in sixtax havens: the Netherlands, Bermuda, Luxembourg, Ireland, Singapore, and Switzerland. The use of tax havens has steadily increased since the 1980s and continues to rise. Moreover, the trend toward more widespread use of tax havens by US-owned corporations shows no particular sign of slowing down. As tax havens rose as a share of foreign profits (to 55percent today) and foreign profits rose as a share of total US corporate profits (to about one-third), the share of tax havens in total US corporate profits reached 18percent (that is, 55percent of one-third) in 2013. That is a tenfoldincrease since the 1980s

The figure below shows the increase in profits flowing through tax havens over the last 30 years.

Zucman estimates that these artificial tax avoidance schemes have provided U.S. firms with the equivalent of somewhere between a 6 percent and 8 percent tax cut over the last decade and a half. Thats quite a lot of money.

Henry Farrell is associate professor of political science and international affairs at George Washington University. He works on a variety of topics, including trust, the politics of the Internet and international and comparative political economy.

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Monkey Cage: U.S. firms funnel more than half their foreign profits through tax havens

Published November 12, 2014

BRISBANE, Australia The politically-fraught issue of forcing big, multinational companies to pay more tax will be high on the agenda at this weekend’s G-20 summit in Brisbane.

There has been an ongoing effort by governments to crack down on tax avoidance, with companies such as Google and Amazon facing criticism for moving profits earned in one country to other countries with lower tax rates. The G-20 also tackled the issue at last year’s summit, vowing to set up a system that would compel companies to pay tax in the countries where they make money.

Last month, 51 countries signed an agreement under which they will automatically exchange data collected by financial institutions as early as 2017. The move is designed to increase transparency and discourage tax cheats.

The problem, known as “base erosion and profit shifting,” has stoked public fury at a time when the global economy is still struggling to recover from the 2008 financial crisis. Critics see it as an outrageous example of the powerful being given an unfair advantage, while the poor suffer the consequences. The companies argue they’re not breaking any laws.

Just last week, leaked documents suggested that hundreds of big companies such as Pepsi and IKEA had organized tax-lowering deals with the tiny nation of Luxembourg. The news prompted swift condemnation from Luxembourg’s European neighbors, many of whom have imposed harsh and hated austerity measures to keep government budgets afloat following the global recession.

Public anger is likely the reason the issue has taken such prominence on the G-20′s agenda. But will the group, which represents the 20 biggest industrialized and developing economies, take any concrete action?

“They can’t, because the problem is, multinationals operate across many jurisdictions all those jurisdictions want to claim taxing rights,” says Rick Krever, head of the Department of Business Law and Taxation at Australia’s Monash University.

“Under the current system, multinationals can decide where in the world their profits are located. The shareholders are absolutely indifferent. And if you can locate them in the place that reduces your taxes, the shareholders are happy.”

In other words, there’s little motivation to change the system.

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Make 'em pay: G-20 to take on big companies that use tax havens. But will anything change?



Nightly Business Report: Is Luxembourg a tax haven?
U.S. companies are setting up shop in Luxembourg to create tax havens, which is not illegal.

By: NBRbizrpt

Excerpt from:
Nightly Business Report: Is Luxembourg a tax haven? – Video

The revelations about Luxembourg tax agreements negotiated by PricewaterhouseCoopers for some of the largest corporations in the world have been described as a game changer by an expert on international tax.

The revelations about Luxembourg tax agreements negotiated by PricewaterhouseCoopers for some of the largest corporations in the world have been described as a game changer by an expert on international tax.

Ronen Palan, professor of international politics at City University London and author of a number of books on globalisation, including Tax havens: How Globalisation Really Works, published by Cornell University Press, said the reports illustrate how the EUs smallest member state is a tax haven.

It was an open secret among tax experts that Luxembourg is among the leading tax havens in the world, he told The Irish Times.

Whereas Switzerlands financial centre has been in decline for the past few years, largely because of the high profile tax evasion cases brought by the US justice department against a number of leading Swiss banks, Luxembourg has developed into a large financial centre eclipsing Switzerland and nearly matching Singapore and Hong Kongs financial centres in asset size, he said.

Yet Luxembourg has managed to remain under the radar not least because its politicians and bankers have been denying for years that it is, or ever was, a tax haven.

He said the leaked PwC documents, published by the Washington DC-based International Consortium of Investigative Journalists (ICIJ), provided the necessary proof that it is a tax haven.

The revelation are likely to prove as damaging to Luxembourg as previous revelations were to Switzerland and Liechtenstein.

Prof Palan said that for the first time, there was clear evidence linking not an isolated and supposedly rogue bank, but one of the big four accounting firms, PwC.

I cannot stress enough the importance of the role played by the big four accounting in the development of the offshore world. The vast majority of the tax schemes that we have heard about in the past few years are organised by one [ or other] of the big four accounting firms.

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Luxembourg leaks controversy a game changer

Cabinet Minister Tony Clement has moved to distance the federal government from a Crown corporation’s decision to set up a complex arrangement of offshore companies as part of a tax “avoidance scheme” on pension investments in Europe.

CBC News reported today that the federal Public Sector Pension Investment Board, also known as PSP Investments, used a web of 24 corporations and other entities in Luxembourg and Germany to hold about $390 million in real estate in Berlin between 2008 and last year.

The investment structure allowed PSP Investments which manages $94 billion in pension funds for federal civil servants, RCMP officers and Canadian Forces members to avoid close to $20 million in German taxes.

While entirely legal, PSP’s own advisers label it an “avoidance scheme.”

The Public Sector Pension Investment Board bought these Berlin apartments, and many others, through a complex web of companies based in Luxembourg. A German tax official called it ‘a very aggressive way to avoid’ Germany’s real-estate tax. (Harvey Cashore/CBC)

A senior German tax official called it “a very aggressive way to avoid taxes” and a German MP said it was “hypocritical.”

Clement, who as Treasury Board president appoints the pension board’s 11 members, emphasized that it is separate from the government.

“PSP Investments operates at arm’s length from the federal government. It is not part of the federal public administration, and its business and affairs are managed by a board of directors,” he said in a statement Tuesday in response to an interview request.

The revelation that a federal Crown corporation is using an offshore haven like Luxembourg to anchor the very type of complex international tax stratagem Western countries are now attacking could prove embarrassing to the government.

Just on Monday, during House of Commons debate over a budget implementation bill, Revenue Minister Kerry-Lynne Findlay repeated the Conservatives’ message that “one of our government’s key areas of concern is the issue of international tax evasion and aggressive tax avoidance.”

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Government distances itself from Crown corporation's offshore tax 'scheme'



Lithuania: Iron Sword NATO drills get underway
VideoID: 20141103-014 W/S Soldiers M/S Soldiers taking position W/S Soldiers lined up M/S US soldiers M/S Soldiers holding Lithuanian, German, Hungarian, Luxembourg, US, UK flags M/S Soldiers.

By: RuptlyTV

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Lithuania: Iron Sword NATO drills get underway – Video

BERLIN:More than 80 countries signed an agreement in Berlin on Wednesday (Oct 29) that could end banking secrecy in the global battle against tax evasion and fraud, even though critics pointed to shortcomings in the deal. Among the signatories were EU countries but also previously staunch proponents of banking secrecy such as Liechtenstein and tax havens like the Cayman or Virgin Islands.

The deal – known as the Multilateral Competent Authority Agreement – crowned two days of talks by the Global Forum on Transparency and Exchange of Information for Tax Purposes. The meeting was hosted by German Finance Minister Wolfgang Schaeuble.

Fifty-one countries signed one agreement to put in place an automatic exchange of information between the participating countries beginning in September 2017. The agreement designates the national authority in each country which will be responsible for collating the data and transferring it to the other countries. The aim is for every country to be kept fully informed about the offshore holdings of its citizens.

Around 30 other countries – including Austria and Switzerland, the Bahamas and the United Arab Emirates – pledged to join the agreement from 2018. “Banking secrecy, in its old form, is obsolete,” Schaeuble told the mass-circulation daily Bild in an interview. The danger of being caught is now “very high”, Schaeuble said.

The forum was set up under the auspices of the Organisation for Economic Cooperation and Development in Paris, which estimates that “offshore tax evasion is a serious problem for jurisdictions all over the world”. Economist Gabriel Zucman, a specialist in fiscal fraud, has calculated that about 5.8 trillion (US$7.4 trillion) is stashed away in tax havens, depriving authorities all over the world of around 130 billion in revenue each year.

US ACT AGAINST EVASION

The international movement to end banking secrecy has gained new momentum recently with the enactment in the United States of its 2010 Foreign Account Tax Compliance Act or FATCA. FATCA obliges foreign banks to report to the US Internal Revenue Service (IRS) on the offshore holdings of US clients in excess of 50,000.

The move prompted five European countries – Britain, France, Germany, Italy and Spain – to call for a generalised automatic exchange of information in 2011. Following months of talks, amid fierce resistance in countries such as Luxembourg and Austria where banks continue to uphold banking secrecy, the EU finally came up with an accord two weeks ago.

“The more countries sign up, the more difficult it will be for others to attract investment,” said the OECD’s director for tax policy and administration, Pascal Saint-Amans. However, a number of financial centres remained a “source of concern”, he said. Panama, for example, still had not set a concrete date for its exchange of information.

Saint-Amans said the OECD will compile a list of countries that do not automatically exchange information, a measure which could act as a disincentive for investment funds and international organisations looking to invest in those countries. But experts in fiscal fraud, such as Andres Knobel of Tax Justice Network, believe such a “blacklist” would prove a rather feeble deterrent.

See original here:
80 countries back deal that could end banking secrecy

Exchange in the context of finance often conjures up images of busy trading floors where traders gesticulate and shout in deafening din. In the world of Bitcoin, things are much quieter. The Bitcoin exchanges, as many of them are, can be little more than a website and a piece of program running behind it. Many of these exchanges, often registered in offshore tax havens such as British Virgin Islands, dont have much of a physical existence.

Given how new Bitcoin is, it may not be surprising that the Bitcoin exchanges at large resemble the banking industry in the early days a little bit They often fail. This year, the industry is stigmatised by the fall of Mt. Gox, the longest lasting and erstwhile largest Bitcoin exchange based in Tokyo, Japan. In the aftermath, there was a wave of criticism of incumbent exchanges, which were referred to as single point of failure. Contrary to the popular demand, however, the single point of failure persisted. On the ruins of the failed Mt. Gox, new exchanges emerge and many prosper. Among them, China-based OKCoin and Huobi impress many with their meteoric rise from obscurity.

Both Huobi and OKCoin, the largest Chinese exchanges, had been questioned over the veracity of their claimed trading volumes. After one of the first accusations being reported by Bitcoin news website CoinDesk last year, despite consistent denials from these exchanges,similar suggestions popped up fairly regularly on the social media. However, skepticism notwithstanding, the China-based exchanges, exemplified by the two aforementioned, are making strides. Both have grown from nothing to be relatively large companies within a period of a year Both Huobi and OKCoin have over 150 employees each. Both appear to be on solid ground financially, at least judging by the way they spend and speed of expansion. In a recent interview, OKCoins CEO Star Xuconfirmed that his company had been profitable.

From left to right: Yan Chuan, Elon Zhao, Mike Gropp

All these lead to a question: Are the Chinese exchanges, despite their shortcomings, possess some special quality that makes them more successful?

Will Chinese Exchanges Dominate The World?

In a high-rise office building in Sanyuanqiao, Chaoyang district in Beijing, I met Elon, Mike, and Yan Chuan, three cofounders of BitBays, a new Bitcoin exchange. I first met Mike and Elon at the Shanghai Bitcoin Expo a week before, where they gave a presentation. Although a secure and globalized Bitcoin exchange sounded to me just vanilla marketing talk, I was curious as to how they implemented the concept. I was also interested to learn what they have to say about the exchange environment as well as other questions that many are concerned with.

I started the interview by asking what are the competitive advantages and disadvantages of the large Chinese exchanges such as Huobi and OKCoin. Acknowledging the success of the two, Elon listed three factors that he believed are behind the growth: The appeal of zero-fee, general lack of speculative assets in China and a highly developed Internet industry.

In spite of these advantages, Elon didnt believe that any of the two, in their current shape, stand much of a chance to be global leaders. First, there is the negative image associated with being Chinese. It is like an American sees an Arabic exchange or a North Korea exchange. Then, Chinese companies generally performed badly in terms of globalisation. Elon cited the example of WeChat: despite its phenomenal success in China, the mobile communication app remains a Chinese phenomenon. It is hard to imagine that a Bitcoin exchanges can do what Tencent, a much larger and deeper-pocketed company, cant.

However, Elon believed BitBays had the advantage as a late-starter. The company had little burden; it would be much harder to switch direction when you are halfway in the journey. Elon compared BitBays that he envisioned with Blockchain.info. Blockchain.info is the worlds largest online Bitcoin wallet service. Headquartered in Luxembourg, the wallet provider has employees distributed in many countries across the globe. According to an email reply from Roger Ver, cofounder of Blockchain.info: People help from Blockchain from all over the world. North and South America, Europe, Asia, and even South America. I dont think we have anyone in Africa yet though.

More here:
Interview With BitBays – A Bitcoin Exchange That Tries To Make A Difference

September 17, 2014

Plansfor a major rewriting of international tax rules unveiled onTuesday could eliminate structures that have allowed companies likeGoogle Inc and Amazon.com Inc to shave billions of dollars offtheir tax bills. The Organisation for Economic Co-operation andDevelopment (OECD) announced a series of measures that, ifimplemented by members, could stop companies from employing manycommonly-used practices to shift profits into tax havens.

Corporate tax avoidance has become a hot political topic following media coverage and parliamentary investigations into the arrangements many big companies use to cut their tax bills. Amazon and Google say they pay all the taxes they should. Analysts say competitive pressures force companies to seek to minimise all costs, including tax.

Last year, the Group of 20 leading economies asked the OECD to develop an action plan to tackle the problem. Big US technology companies could be those most affected by the OECD’s plans but others could also be impacted including pharmaceuticals and branded consumer goods, as well as many European companies.

The draft proposals announced have been agreed by all G20 members and OECD members, which include most major industrialised countries, the OECD said in a statement. But the measures form part of a larger ‘(tax) base erosion and profit shifting’ programme that will conclude next year. Only then will countries look at enshrining the results of the programme in law.

For more than 50 years, the OECD’s work on international taxation has been focused on ensuring companies are not taxed twice on the same profits. The fear was that this would hamper trade and limit global growth. Over the years, the OECD has formulated a standardised model tax treaty which allows countries to split taxation rights and avoid double taxation, partly by providing reliefs from measures intended to stop tax avoidance, like withholding taxes.

But companies have been using such treaties to ensure profits are not taxed anywhere. For example, search giant Google takes advantage of tax treaties to channel more than $8 billion in untaxed profits out of Europe and Asia each year and into a subsidiary that is tax resident in Bermuda, which has no income tax. Google Executive Chairman Eric Schmidt has said changes to tax rules that increased its tax bill would hit innovation. The OECD’s proposals would make amendments to its model treaty so that cross-border transactions would not benefit from the reliefs in tax treaties if a principal reason for engaging in the transactions was to avoid tax.

“We are putting an end to double non-taxation,” OECD head of tax Pascal Saint-Amans said in a call with journalists. The think tank, which also advises members on economic policy, also wants curbs on how much profit companies can report in centralised inter-company lending and purchasing arms, which are often based in tax havens. Where such subsidiaries generate large profits on the back of intra-company trade, the OECD said the profits should be shared across the group.

This could hit UK telecoms provider Vodafone Group Plc , which has a Luxembourg subsidiary that buys telephone equipment for the group. Vodafone Procurement Company’s 200 staff generated profits of over 400 million euros (518.52 million US dollar) last year, making it one of the group’s smallest but most profitable divisions. An unusual Luxembourg tax rule allowed the subsidiary to pay no tax on that profit.

Vodafone said businesses across Europe already benefited from savings achieved by the Luxembourg operation and that it did not expect a significant impact on its business from the OECD measures. The OECD has also proposed changes in the rules on tax residence that allow US tech giants to generate billions of dollars in sales in many countries but not have those revenues assessed for tax by those countries’ tax authorities.

Originally posted here:
New global plans unveiled to crack down on corporate tax avoidance | Business Recorder

Published May 20. 2014 4:00AM

Top American companies including pharmaceutical giant Pfizer Inc. are saving at least $550 billion in taxes by holding profits in overseas tax havens, according to a report Monday by the advocacy group Citizens for Tax Justice.

The report said 28 U.S. corporations acknowledge paying less than 10 percent in taxes on foreign holdings totaling $409 billion. Pfizer, which the report said has subsidiaries in Bermuda, the Cayman Islands, Ireland, the Isle of Jersey, Luxembourg and Singapore, “does not disclose how much of its $69 billion in offshore profits are stashed in these tax havens.”

“Corporations exploit all manner of loopholes to avoid paying their fair share, and then they get their lobbyists and allies on Capitol Hill to say this tax dodging is justified because the U.S. corporate income tax rate is too high,” Robert McIntyre, director of the advocacy group, said in a statement.

But McIntyre said U.S. corporate tax rates are not much different from those in other developed countries, where these corporations make most of their profits.

In addition to New York-based Pfizer, the report looks into a variety of multinational corporations from all 50 states.

In Connecticut, General Electric, United Technologies, Praxair, Xerox, Priceline.com, Terex, Pitney Bowes and W.R. Berkley are among the companies placing money in foreign accounts to save on taxes.

The report said U.S.-based Fortune 500 corporations are holding profits of nearly $2 trillion in offshore accounts.

“While congressional hearings over the past few years have focused attention on the tax avoidance strategies of technology corporations like Apple and Microsoft … a diverse array of companies (is) using offshore tax havens,” the report said.

Among these are U.S. Steel, pharmaceutical marketer Eli Lilly, apparel maker Nike, financial powerhouse American Express, gaming empire Wynn Resorts and banking giant Bank of America.

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Pfizer, other companies accused of dodging taxes

May 122014

A weekly column that puts the fun into learning

Lets admit it. Most of us get a little thrill out of finding new ways to save taxes. This is exactly what corporate biggies such as Google, IBM and Amazon have been doing too. Theyve been cleverly routing their global profits through subsidiaries set up in destinations called tax havens. This has been going on for long. But, having been denied their fair share of taxes, governments are now cracking the whip.

What is it?

Tax havens are countries that have low or near-zero tax rates, especially for some kinds of transactions. Switzerland, Singapore, Hong Kong and Mauritius are the popular ones. But the list includes others such as Luxembourg, British Virgin Islands, Cayman Islands, the Netherlands and Bermuda too.

Multinationals set up their holding companies in these locations which then invest in operations located at other high-tax locations. So, even as the company carries out its real business in a high-tax regime such as the US or India, its able to dodge the taxman by showing a large share of profits as emanating from a tax haven.

But its not just companies; tax havens have something on offer for rich individuals too, promising complete confidentiality. Now youre wondering if everything about tax havens is so clandestine, why havent they been banned at the outset? Well, this is not how things were meant to be. When tax havens first sprang up, they came up in small countries endowed with limited natural resources or other competitive advantages. Such nations saw near-zero tax rates as a good way to attract reluctant foreign capital. But with corporations and affluent individuals taking advantage of the secrecy to save taxes, the whole thing went awry.

Why is it important?

Irked by tax revenue losses, governments have now begun to come down heavily on the menace of tax havens, threatening to revoke tax treaties and demanding more disclosures from them. In India, the phenomenon of routing black money to tax havens has given birth to what is called round-tripping. Foreign direct inflows from Mauritius, Indias second biggest source, totalled $4.5 billion during April-Feb of the last fiscal. But is the tiny island nation really such as industrial powerhouse? Not really. Cynics suspect a large part of the investment flowing in from Mauritius is actually Indian money sent abroad and routed back to avoid taxes. If its Mauritius for us, its British Virgin Islands for UK and Luxembourg for Russia.

The worry is that the anonymity that tax havens offer allows other kinds of illegal activity to flourish too. The world over billions made through illegal routes such as drug trafficking and arms smuggling are said to be laundered through tax havens.

Why should I care?

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Friendly game Luxembourg-Cape Verde Islands

By: Sasa Greorgiev

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Friendly game Luxembourg-Cape Verde Islands – Video

WASHINGTON The largest U.S.-based companies added $206 billion to their stockpiles of offshore profits last year, parking earnings in low-tax countries until Congress gives them a reason not to.

The multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent from a year earlier, according to securities filings from 307 corporations reviewed by Bloomberg News. Three U.S.-based companies Microsoft, Apple and IBM added $37.5 billion, or 18.2 percent of the total increase.

“The loopholes in our tax code right now give such a big reward to companies that use gimmicks to make it look like they earn their profits offshore,” said Dan Smith, a tax and budget advocate at the U.S. Public Interest Research Group, which seeks to counteract corporate influence.

Even as governments around the world cut tax rates and try to keep corporations from shifting profits to tax havens, Congress remains paralyzed in its efforts. The response of U.S.-based companies over the past few years has been consistent: book profits offshore and leave them there.

Congress hasn’t acted because of disagreements over whether to be tougher on U.S. companies operating abroad amid broader disputes over government spending and taxation. The stalemate has prevented the U.S. from tapping a pot of money that President Barack Obama and the top Republican tax writer in Congress have eyed for such projects as rebuilding highways.

Meanwhile, the companies are deferring hundreds of billions of dollars in U.S. taxes as they lobby to end a system they describe as a competitive disadvantage in world markets. The top 15 companies now hold $795.2 billion outside the U.S., up 10.6 percent.

That increase was slower than the 15.9 percent rise in stockpiled profits those same companies had the previous year. Pfizer reported a decrease in offshore profits this year, and General Electric and Citigroup each reported growth of less than 3 percent.

The Bloomberg analysis covers the two most recent annual filings from 307 companies in the Standard & Poor’s 500 Index. It excludes purely domestic corporations, those that don’t disclose offshore holdings, companies with headquarters outside the U.S. and real estate investment trusts that aren’t subject to corporate taxes.

The increase in profits held outside the U.S. has been particularly large and steady at technology companies, many of which have moved patents and other intellectual property to low- tax locales.

U.S. multinational companies reported earning 43 percent of their 2008 overseas profits in Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland, more than five times the share of workers and investment they have in those jurisdictions, according to a 2013 Congressional Research Service report.

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Cash abroad rises to $206B as Apple to IBM avoid taxes



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By: SHUUOO DGUIOK

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Watch Cape Verde Islands v Luxembourg – live Football streaming – Friendly – Video

WASHINGTON: The U.S. has expanded its action against tax cheaters to countries such as India, Israel and Liechtenstein, a top U.S. official told lawmakers. So far, the U.S. action was primarily focused against tax cheaters on Switzerland. “While the (Justice) Department’s initial efforts and this hearing have focused on Switzerland, we have expanded our investigations to go after tax cheats and the banks assisting them in India, Israel, Liechtenstein, Luxembourg, and several Caribbean countries,” the Deputy Attorney General, James M Cole, told a Congressional committee.

Since 2009, the Department has publicly charged 73 account holders and 35 professionals with violations arising from their offshore banking activities, and 72 individuals have pleaded guilty or were convicted at trial, he said. “Just as importantly our enforcement efforts have driven over 43,000 taxpayers with secret offshore accounts to identify themselves to the IRS, disclose their offshore accounts, and to pay a total of over $6 billion in back taxes, penalties and interest. And that number is growing,” he said.

Cole said in 2013, the Department obtained four separate orders authorizing the Internal Revenue Service (IRS) to issue John Doe summonses seeking records from banks in the U.S. for the U.S. correspondent accounts of banks located in the Caribbean, Switzerland, and other European countries and America has successfully compelled account holders to provide the U.S. with personal records of their foreign banking activities.

Since the UBS deferred prosecution agreement in February 2009, the Department has taken public action against two other banks, he said, adding that in January 2013, Wegelin Bank, one of the oldest financial institutions in Switzerland, pleaded guilty to conspiracy to defraud the U.S. and was ordered to pay substantial fines and to forfeit funds.

“As a result of its criminal conviction, Wegelin was forced to close its doors, which sent a shockwave through the community of banks and bankers in Switzerland that had been engaged in facilitating U.S. tax evasion. In July 2013, Liechtensteinische Landesbank AG entered into a non-prosecution agreement, and paid substantial fines,” he said. What is particularly notable about this case is that we were able to have Liechtenstein actually change its bank secrecy laws retroactively. This enabled the department to obtain files relating to non-compliant U.S. account holders,” he said. “In August 2013, the department publicly stated that 14 banks have been authorized for investigation concerning the use of Swiss bank accounts. This is in addition to on-going investigations concerning cross-border activities by banks in India, Israel, Liechtenstein, Luxembourg, and several Caribbean countries,” Cole added.

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U.S. Expands Investigations Against Offshore Tax Evasion To India, Israel



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