Tag Archives: tax avoidance

Latest Developments, January 26

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Tax breaks
Reuters reports that iron ore exports could propel Sierra Leone to 51.4 percent GDP growth in 2012, but the extent to which the country’s people will benefit may depend as much on two UK-based companies as on the government.
“Sierra Leone adopted a new mining law in 2009 designed to improve the state share of the country’s resource wealth by raising royalty rates. Previous legislation also established a tax rate of 37.5 percent for mining companies.
Both London Mining and African Minerals obtained substantial tax discounts in their contracts and are paying well below the percentages outlined, even after London Mining’s accord was renegotiated.
…
‘The limited tax contribution from the mining companies has huge implications for poor people in Sierra Leone,’ Danish watchdog DanWatch said in a recent report.”

Mining denial
The National Post is the first Canadian newspaper to report on last week’s death of a Mexican protester near a Canadian-owned mine, which Fortuna Silver says had nothing to do with its operations.
“A spokeswoman for the Canadian group MiningWatch criticized the company’s position.
‘There has been conflict over this project and worries over potential impacts on local water supplies for several years,’ said Jen Moore.
‘Instead of trying to deny any responsibility, the company should work to help diminish tensions.’ ”

Human-free bombing
The Los Angeles Times reports that the US Navy is testing a new drone that “has no pilot anywhere,” a development that raises a number of ethical questions.
“ ‘Lethal actions should have a clear chain of accountability,’ said Noel Sharkey, a computer scientist and robotics expert. ‘This is difficult with a robot weapon. The robot cannot be held accountable. So is it the commander who used it? The politician who authorized it? The military’s acquisition process? The manufacturer, for faulty equipment?’
Sharkey and others believe that autonomous armed robots should force the kind of dialogue that followed the introduction of mustard gas in World War I and the development of atomic weapons in World War II. The International Committee of the Red Cross, the group tasked by the Geneva Conventions to protect victims in armed conflict, is already examining the issue.”

Chevron lawyers up
The Am Law Daily reports oil giant Chevron has disclosed that it is employing “no fewer than 39 law firms” to defend itself against a multi-billion dollar lawsuit over pollution in the Ecuadorian Amazon.
“By the Ecuadorian plaintiffs’ count (which we did not verify), Chevron employs close to 500 outside lawyers or paralegals to counter their claims.
…
According to the plaintiffs’ unverified count, Chevron lists 60 lawyers from Gibson, Dunn & Crutcher alone. The plaintiffs estimate that Gibson Dunn charged Chevron $250 million in 2010, and the same amount again in 2011, but they don’t explain their calculations. This number seems at least two times too high, since according to The American Lawyer‘s published figures Gibson Dunn’s total litigation billings in 2010 were approximately $595 million.”

Genocide denial
In the wake of the recent report by a French judge on the events that triggered the Rwandan genocide, freelance journalist Julie Owono calls for France to re-examine its role in “the first genocide in Africa of the 20th century” perpetrated against the Bamileke people of western Cameroon in the early 1960s.
“Much less about this is known however, since the archives detailing direct French involvement remain under the seal of secrecy by the French state. The recent publication of a journalistic and historical thesis by two French journalists and a Cameroonian historian, recounts in detail the war by France on the edge of the independence of Cameroon to impose the first president, Ahmadou Ahidjo, to a population which in a majority supported the Cameroonian Independence Party, testimony in support of survivors of the massacres and actors, as well as the paradoxically more accessible archives of the Cameroonian army, and has gradually begun to open the wall of silence in which the French authorities had sealed the question of this genocide.
The answer given by French Prime Minister François during his official visit in Yaounde in 2009 might therefore attest the same memoricide will: ‘I absolutely deny that the French forces were involved in anything related to murder in Cameroon. All this is pure invention.’ ”

Counterintuitive capital movements
The London School of Economics’ Keyu Jin wonders why it is that “capital-scarce (and young) developing countries” are exporting rather than importing capital that they need for consumption and investment.
“China is a case in point. With its current-account surplus averaging 5.5% of GDP in 2000-2008, China has become one of the world’s largest lenders. Despite its rapid growth and promising investment opportunities, the country has persistently been sending a significant portion of its savings overseas.
And China is not alone. Other emerging markets – including Brazil, Russia, India, Mexico, Argentina, Thailand, Indonesia, Malaysia, and the Middle Eastern oil exporters – have all increased their current-account surpluses significantly since the early 1990’s. Collectively, capital-scarce developing countries are lending to capital-abundant advanced economies.”

Disputed hunger figures
The Guardian’s Claire Provost looks critically at the Food and Agriculture Organization’s oft repeated estimate that there a billion hungry people in the world, a figure from which even the UN body is distancing itself.
“Unfortunately, little of the uncertainty surrounding global hunger estimates is ever reported alongside the emotive, top-line figures.
…
While the FAO hunger indicator has long dominated discussions, it is not the only way to measure food insecurity. Over the years, it has been criticised on many fronts: for the poor quality of underlying data; for the focus on calorie intake, without consideration of proteins, vitamins and minerals; and for the emphasis on availability – rather than affordability, accessibility or actual use – of food. Some say we’d be better off focusing on improving household consumption surveys, opinion polls, and direct measures of height and body weight.”

Latest Developments, December 19

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Dividend arbitrage
The Bureau of Investigative Journalism says it has uncovered a “huge tax avoidance trade” run by some of London’s biggest banks, which may be costing European governments nearly $800 million per year.
“Markus Meinzer, applied researcher and analyst at the Tax Justice Network, said: ‘This issue highlights a structural flaw in our current international financial system. Governments refuse to institute robust transparency and cooperation mechanisms in view of aggressive financial sector lobbying and because of the bizarre, yet largely unchallenged view of alleged benefits flowing from competition between states.’ ”

Fighting dependency
The Guardian reports Nigeria is looking to reduce its dependence on foreign food, such as wheat and rice imports, and to rely more on locally grown cassava in an effort to boost the nation’s agriculture sector.
“Billed as a central part of the new administration’s ‘transformation’ agenda – a sign of how badly Nigeria needs fixing – proposals in a preliminary budget to slash a $68bn import bill include a 100% levy on rice and wheat imports next year. Wheat costs the government a staggering $3.9bn annually, while Nigeria is the world’s largest rice importer – at a cost of $6.25m a day – even though its climate is ideal for rice growing.
…
According to the UN’s Food and Agriculture Organisation, Africa has more than doubled cereal imports over the past three decades, a trend some countries have begun trying to reverse through proactive policies. In Uganda, for instance, rice output more than doubled in the space of four years after a 75% tax was imposed on imports. The duty also spurred the construction of new mills, lowering the price of locally refined rice. Malawi, meanwhile, one of Africa’s poorest countries, reversed its food deficit in just two years through a targeted subsidy programme that helped finance fertiliser for farmers.”

Drug tests
The Inter Press Service reports on the current state of international protections for human subjects of medical research.
“Fourteen patients died during the trials, which were conducted [by French and US pharmaceutical companies in a Bhopal hospital without the informed consent of the subjects] between 2007 and 2010. Drugs and treatments resulting from those trials have since been approved for sale in Europe and the U.S., according to a report in the Independent.
…
European law states that drugs tested in violations of protections guidelines such as the Declaration of Helsinki should not be granted market authorisation in Europe. [Annelies] Den Boer said [clinical trials watchdog] Wemos, with support of members of the European parliament, hopes to push the [European Medical Association] to block unethically tested drugs from the European market.
The U.S. Food and Drug Administration (FDA) abandoned the Declaration of Helsinki in 2008.”

Undeclared money
The Indian Express reports India is considering legal action against HSBC for allegedly encouraging customers to move undeclared money to its branch in Geneva.
“No prosecution or court cases have been filed. Reason: despite an official communication being sent by the [Central Board of Direct Taxes], HSBC Bank in Geneva has given no official acknowlegement of the data handed over by French authorities and without this endorsement from the Swiss or detailed banking transactions, officials feel the cases may collapse in economic offence courts.
But with the account-holders revealing that their Geneva accounts were being ‘operated’ from New Delhi by bank officials — both for deposits and withdrawals — and the balances were not reflected in their tax returns, a fit case for filing a prosecution against the bank itself may be made out.”

Brandeis tipping point
Yale University’s Ian Ayres and UC Berkeley’s Aaron Edlin argue the level of inequality in the US – the latest statistics show “the average 1-percenter” earns 36 times more than the median household – must be capped for the sake of the country’s democracy.
“Enough is enough. Congress should reform our tax law to put the brakes on further inequality. Specifically, we propose an automatic extra tax on the income of the top 1 percent of earners — a tax that would limit the after-tax incomes of this club to 36 times the median household income.
Importantly, our Brandeis tax does not target excessive income per se; it only caps inequality. Billionaires could double their current income without the tax kicking in — as long as the median income also doubles. The sky is the limit for the rich as long as the “rising tide lifts all boats.” Indeed, the tax gives job creators an extra reason to make sure that corporate wealth does in fact trickle down.”

The ‘trust me’ concept
The Washington Post reports the Obama administration’s increasing reliance on drone strikes may have resulted in 2,250 deaths in Pakistan over the last three years, but there is precious little information about the strategy or its results.
“Even outside experts who believe the program is legal find the secrecy increasingly untenable. ‘I believe this is the right policy, but I don’t think [the administration] understands the degree to which it looks way too discretionary,’ said American University law professor Kenneth Anderson.
‘They’ve based it on the personal legitimacy of [President] Obama — the “trust me” concept,’ Anderson said. ‘That’s not a viable concept for a president going forward.’ ”

Cost of doing business
Drawing on new information concerning the killing of 24 Iraqis by US troops, the Guardian’s Gary Younge issues a call to fight Iraq War revisionism that downplays the invaded country’s suffering.
“When he heard the news, Major General Steve Johnson, the American commander in Anbar province at the time, saw no cause for further examination. ‘It happened all the time … throughout the whole country. So you know, maybe, if I was sitting here [in Virginia] and heard that 15 civilians were killed I would have been surprised and shocked and done more to look into it. But at that point in time I felt that it was just a cost of doing business on that particular engagement.’ ”

Latest Developments, October 25

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Water grab
Corporate Accountability International argues a newly launched water-governance partnership between the World Bank and major corporations, such as Nestlé and Coca-Cola, amounts to an attempt at water grabbing.
“The Water Resources Group aims to “develop new normative approaches to water management,” paving the way for an expanded private sector role into best and common practices, worldwide. In order to be eligible for support from this new fund, all projects must “provide for at least one partner from the private sector,” not simply as a charitable funder, but “as part of its operations.” The group’s strategy is to insert the private sector into water management one country at a time, through a combination of industry-funded research and direct partnerships with government agencies.”

Puzzling growth
The Center for Global Development’s Charles Kenny looks at the 19 countries – nine of which are located in Sub-Saharan Africa – whose economies more than doubled in size over the last decade and concludes business-friendly regulations may not be as important as many believe.
“Whatever the secret, it doesn’t appear that it was simply a case of creating nirvana for private sector growth. The average 2010 ranking among the world’s 19 fastest-growing countries on the World Bank’s Ease of Doing Business index, which measures the conduciveness of a country’s regulatory environment to starting a new firm, was 114 out of 183. Even among those nine countries that don’t owe their growth to extractive industries, five — including India and Ethiopia — had a ranking below 100. That result echoes the conclusions of economists Dani Rodrik, Ricardo Hausmann, and Lant Pritchett. They looked at 80 periods of “growth acceleration” where an economy increased its growth rate by 2 percent or more for at least seven years. Nearly all were unrelated to economic reforms including liberalization of trade and prices.”

Swiss secrecy
A Bloomberg editorial calls Switzerland’s history of banking secrecy “shameful” and dismisses recent tax agreements with the UK and Germany, which allow holders of Swiss bank accounts to remain anonymous.
“Unfortunately, Switzerland has cooperated only grudgingly in meeting international banking standards, agreeing to do so in 2009 under threat of sanctions and being named as a tax haven by the Organization for Economic Cooperation and Development. Even so, the country this month was ranked at the top of a financial secrecy index developed by the London-based Tax Justice Network.
Switzerland should do itself a favor and abandon the financial opacity that has made it the world’s No. 1 destination for offshore wealth. It has no place in a globalized world where money can be electronically whisked from one place to another, except as a cloak for financial wrongdoing.”

Where dirty money goes
The UN News Centre reports on a new study that suggests 70 percent of the proceeds of international organized crime – about $1.6 trillion – were laundered through the world’s financial system, whereas less than one percent was seized or frozen.
“The findings suggest that most cocaine-related profits are laundered in North America and in Europe. The main destination to process cocaine money from other subregions is probably the Caribbean.”

EU extractive industry rules
Tax Research UK’s Richard Murphy is “delighted” that the European Commission has proposed requirements that EU-based extractive and forestry industries disclose their payments to foreign governments on a country and project basis.
“Now we have to get it through the Parliament.
And then make it global.
And apply it to all sectors.”

Hold the applause
But Christian Aid argues the proposal would address corruption but not the tax avoidance that costs poor countries billions each year.
“This information will help people hold their governments to account about what they are doing with the money they are receiving from multinational companies – and that is important,” according to Christian Aid’s Joseph Stead.
“However, corporate accountability is equally important. Unless these proposals are expanded to cover firms in all industries and to require greater financial detail than the Commission is currently suggesting, then companies will be able to keep siphoning profits out of developing countries on a massive scale.”

Letter from Ban
The UN has released a letter sent by Secretary General Ban Ki-moon to G-20 leaders ahead of next month’s summit, in which he reminds them of their responsibilities to the planet and its most vulnerable people.
“New sustainable development goals should build on the [Millennium Development Goals] and bring the needs of the planet and those of the poor into a single and mutually reinforcing framework.”

Nobel laureate
Politico reports that the Obama administration is facing opposition from both Democrats and Republicans over the decision to send US troops to central Africa – ostensibly to provide “information, advice and assistance to partner nation forces” in the fight against the Lord’s Resistance Army – just as missions in Iraq and Libya are winding down.
“What is the strategic interest of the United States in doing this? I mean, there are lots of unpleasant people in the world. There are lots of insurgencies and terrorist movements in the world. The United States obviously cannot try to dethrone every one of them,” Rep. Gerry Connolly (D-Va.) said at a House Foreign Affairs Committee hearing on the deployment.

Latest Developments, September 26

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Waiting for the politicians
Grist reports that 11 major engineering organizations have issued a joint statement saying a lack of political will, rather than technological shortcomings, are standing in the way of an 85-percent cut in global emissions by 2050.
“The statement calls on world leaders to reach a global commitment to emissions reduction and energy efficiency at December’s COP17 climate change talks. Once that commitment is in place and adequately backed up, say the engineers, the technology is there to carry it out.”

Killer profits
The Arms Trade Treaty Monitor has collected statements made last week to the UN General Assembly by the leaders of countries such as Mexico, Nigeria, Ghana and Costa Rica concerning the agreement which should be finalized in 2012.
“It is unjust and inhuman that the profits of the arms industry should decide the deaths of thousands of people,” according President Felipe Calderón of Mexico.

Untapped markets for unmanned aircraft
The Globe and Mail reports worldwide drone sales are expected to double over the next decade but with a sluggish US market, the quest for profits could trump proliferation concerns.
“Both surveillance and armed U.S. drones, which have been widely deployed in Afghanistan and Iraq, have received strong interest from Japan, Australia, Saudi Arabia and nuclear neighbours India and Pakistan, among others.”

Trafficking losses
The Financial Times reports on the Organisation for Economic Cooperation and Development’s growing interest in cracking down on loopholes that enable companies to play one country against another in order avoid paying taxes.
“The OECD last year highlighted its fears about the ability of banks to use losses accumulated since the financial crisis – calculated by the OECD to be worth $700bn – as a tool for aggressive tax planning. Among the concerns is ‘loss trafficking’ – schemes in which losses are sold to other companies to reduce their tax payment. In a report published in August, the OECD also warned about aggressive tax planning concerning the carry-forward of ‘vast’ corporate losses than can be as high as 25 per cent of gross domestic product in some countries.”

G20 and tax dodging
Christian Aid’s David McNair accuses G20 finance and development ministers of “backing away from their commitments to help poor countries collect more of the billions they lose to tax dodgers” at last week’s meeting in Washington.
“If the G20 were serious about harnessing the power of tax against poverty, they would have made a specific commitment to the big solution to tax dodging – financial transparency. Such transparency would make life far harder for companies and individuals hiding wealth in tax havens, not to mention the multinationals that use financial secrecy to dodge billions in tax in poor countries.”

Dodgy oil contracts
A new Global Witness report calling for reforms in Liberia’s oil sector also touches on some questionable behaviour by American oil giant Chevron.
“In 2007, Nigeria’s Oranto Petroleum authorized a bribe to be paid to the Legislature in connection with the passage of at least one of its contracts. In 2010, US company Chevron purchased a 70 % share of the same contracts, despite information about how they were obtained being in the public domain.”

Oversimplifying the economy
University of Toronto historian Michael Bliss suggests the thinking underlying the last few decades of Western economic policy reveal “a naive, self-serving misreading of history” and warns against anyone who suggests “obese and addicted societies” can painlessly right themselves by pushing the right fiscal buttons.
“The danger of listening to the people who oversimplify the past and then oversimplify the present… is that they really can make things worse, especially when they propose to dope us up on more of the same. The longer we avoid accepting complex, unmanageable realities, and the real discomforts involved in convalescence and recovery, the more we risk the long-term future for our children and grandchildren.”

The power of aid
The Guardian reports on the remarkable similarities between the UK’s “centre right development policy,” as described by the man who runs it, Andrew Mitchell, and the development policy of the ostensibly centre left Obama administration.
“Over the past 18 months, the US and the UK have been treading very similar development policy paths. As well as results, both talk about the important role to be played by the private sector, and by science and technology, in bringing about development. And both pepper speeches and announcements with mentions of national interests, security and power. The opening line of the executive summary in the USAid policy framework for 2011 to 2015, published earlier this month, provides a clear example. ‘International development co-operation is a key component of American power, along with diplomacy and defense,’ it reads.”

Latest Developments, August 24

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Libya’s rebels are calling for $5 billion in emergency funds to be unfrozen from Gadhafi regime assets. The US is working in the UN on getting $1.5 billion. Of course, as the Globe and Mail’s Eric Reguly writes, it is no secret that Libya has something everybody wants: “By Wednesday it was amply clear that NATO’s mission creep was lubricated by oil.” The question, he says, is “who will get the prizes.” Earlier in the week, a rebel spokesman said they had good relations with an eager bunch of NATO countries but “may have some political issues with Russia, China and Brazil” who were less keen on providing military support against Gadhafi. And although the rebels have pledged to honour all legal contracts, Reguly writes that “Libya is looking suspiciously like an oil war and the countries that delivered the bombs want their rewards.” But human rights NGO Global Witness is calling first for measures “to guard against a Libyan “oil grab” and ensure the Libyan people benefit fully from the exploitation of Libya’s natural resources.” It wants no new oil deals before democratic elections are held, extensive and “concrete” transparency measures, recovery of Gadhafi-regime money stashed abroad and sanctions against banks that sheltered such funds.

Anticipating a possible European oil embargo against Syria, international petroleum companies are not signing any new deals with the increasingly isolated country, which announced the discovery of a new gas field just last week. But for the time being, company executives said they “still had outstanding contracts that were signed months ago, to either supply refined products or buy crude,” according to the Financial Times. Former US Vice-President Dick Cheney took a much harder line with Damascus in his day, as he reveals in his upcoming autobiography that he wanted to bomb Syria in 2007. The New York Times reports he also defends the use of waterboarding in interrogations and is “happy to note” that current US President Barack Obama has not shut down the prison at Guantánamo Bay as promised.

Meanwhile, there is still a famine going on in Somalia and the African Union is holding a “pledge summit” to address the Horn of Africa food crisis. International Foundation for Agricultural Development President Kanayo Nwanze welcomed the intiative, saying Africa cannot wait for other countries to solve its problems: “No nation, no people ever had sustainable growth that sprang solely from external support. Africa’s development must be made in Africa, by Africans, for Africans.”

The UK and Switzerland have agreed on a new deal that would require taxes be paid in Britain on money held in by British citizens in Swiss bank accounts but would preserve the anonymity of the account holders. Drawing a parallel with the tough-on-crime frenzy that has taken hold in Britain since the riots, the Tax Justice Network’s Richard Murphy is livid: “So at a time when the government is demanding respect for the law, high moral standards and responsibility by all in society one group of criminals – those who have deliberately and knowingly broken the law by tax evading in Switzerland – are going to be let off without paying anything like what they owe even in tax, let alone in penalties and interest. What is more, instead of these people being brought before an all night court sitting to make sure justice is done with names and addresses being published for all to see anonymity is instead being guaranteed to those criminals so they can still held (sic) their heads up high in polite society.”

The Canadian Medical Association has denounced the federal government for blocking the inclusion of chrysotile asbestos on a UN treaty’s list of hazardous substances. “This is an important health care issue and a product that causes significant illness and even death,” according to the organization’s outgoing president Jeff Turnbull. “Canada should not be in the business of exporting such a dangerous product.”

The Guardian’s John Vidal says “plans for a US-based investment company to lease up to 1m hectares of South Sudan for only $25,000 a year appears to have stalled following protests by local communities over the potential “land grab“.” But Indian agribusiness investors are showing major interest in Ethiopia, Tanzania and Uganda, where they say there is as much arable land as in their home country. As in South Sudan, however, local populations are expressing misgivings: “No one should believe that these investors are there to feed starving Africans, create jobs or improve food security,” according Solidarity Movement for New Ethiopia’s Obang Metho.

Also writing in the Guardian, Rick Rowden argues that the UK’s Department for International Development’s new emphasis on promoting private sector growth in poor countries fails to distinguish “between the needs and interests of domestic private sector firms and those of foreign investors” and “perpetuates the foggy notion that the needs and interests of the two parties are somehow exactly the same. They are not.” He argues that, in countries where the private sector has taken off over the past decades, domestic companies got help from their own governments, whether in the form of temporary trade protection, cheap credit or R&D investment. But far from encouraging such measures today, the World Bank, the International Monetary Fund and the proliferating bilateral trade agreements between rich and poor countries proscribe them as “bad government intervention.”

Richard Falk, a retired Princeton law professor, argues “the Afghanistan war is being fought against the nationalist Taliban and on behalf of a corrupted and incompetent Kabul regime for political control of the country” and as such is hurting America’s image and giving “extremism a good name” in the region. “Such an analysis yields a single moral, legal and prudential imperative: when foreign intervention is losing out to determined national resistance, leave the country quickly, stop the killing immediately, and declare victory with pomp and circumstance.”