Tag Archives: tax havens

Latest Developments, October 11

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In today’s latest news and analysis…

Playing footsie with tax havens
A new ActionAid report entitled Addicted to Tax Havens indicates that 98 of the UK’s FTSE 100 companies have subsidiaries (over 8,000 in all) based in tax havens.
“Corporate tax avoidance, which is one of the main reasons companies use tax havens, is having a massive impact on rich and poor countries alike. Developing countries currently lose three times more to tax havens than they receive in aid each year.”

SLAPP-happy mining companies
Candice Vallantin writes in the Walrus about a pair of lawsuits involving mining companies and the authors of a book critical of Canadian-owned overseas mining operations in order to highlight the issue of so-called strategic lawsuits against public participation (or SLAPPs) and their potential to make it impossible to criticize powerful entities.
“In December, the same week the Noir Canada lawyers filed their motion for the court to declare Barrick Gold’s case abusive, Pierre Noreau, a law professor at L’Université de Montréal, published an editorial in Le Devoir. Co-signed by more than two dozen law professors from around the country, it laid out the stakes. ‘Behind [this case] remains a fundamental question: Can we still be critical in our society? Should power (and money) always prevail over the right to know, or at least the right to question publicly?… The future of thought rests on this case.’”

Maintaining EU farm subsidies
The Guardian’s Mark Tran reports trade campaigners are unhappy with proposed reforms to the EU’s common agricultural policy (CAP), arguing the changes would have little impact on the massive subsidies that make it virtually impossible for farmers in poor countries to compete.
“CAP reform comes against the background of the EU’s commitment to what it calls policy coherence for development, which seeks to ensure that all policies, not just development, promote growth in developing countries. The continuing high level of farm subsidies will make it hard for EU policymakers to square the circle.”

Grim food forecast
The State of Food Insecurity in the World 2011, a new UN report, foresees no let-up in high, volatile food prices, a scenario that could have wide, long-lasting economic consequences.
“Price volatility makes both smallholder farmers and poor consumers increasingly vulnerable to poverty while short-term price changes can have long-term impacts on development, the report found. Changes in income due to price swings that lead to decreased food consumption can reduce children’s intake of key nutrients during the first 1000 days of life from conception, leading to a permanent reduction of their future earning capacity and an increased likelihood of future poverty, with negative impacts on entire economies.”

Hooray for brain drain
The Center for Global Development’s Charles Kenny argues everybody benefits when skilled professionals migrate from poor to rich countries.
“Michael Clemens at the Center for Global Development finds no evidence that medical brain drain from developing countries leads to shortages of medical staff back home, probably because the opportunity to migrate is one of the things that attracts people to medical school in the first place. For years, nurses have left the Philippines in huge numbers to work abroad, but the country still has more nurses per person than Britain.”

Breakthrough or setback?
Intellectual Property Watch’s William New reports the Medicines Patent Pool has negotiated a new deal for an Indian generics producer to manufacture cheap antiretrovirals, but it remains unclear whether the MPP has addressed concerns expressed over its first agreement signed in July.
“Meanwhile, a newly launched petition against the MPP-Gilead agreement is being led by the International Treatment Preparedness Coalition, and is based on their assessment that the deal with Gilead represents a “setback” for people living with HIV, and that the process is not sufficiently transparent.
The petition…calls for a renegotiation of the voluntary licence agreement, and a moratorium on agreements by the Patent Pool with Indian generics producers until a model can be created. The petition followed a 2 October meeting between activists and the MPP, and has dozens of signatures of individuals and groups.”

Dissecting Millennium Villages
The Guardian’s Madeleine Bunting puts Columbia University economist/development industry superstar Jeffrey Sachs’s Millennium Villages Project under the microscope, asking if it really represents a replicable model for development.
“The nub of the issue was well put by Chris Blattman when he asked on his blog what the MVP will prove. That ‘a gazillion dollars in aid and lots of government attention produces good outcomes’? This is hardly surprising, says Blattman. The point, he adds, is how we test ‘the theory of the big push: that high levels of aid simultaneously attacking many sectors and bottlenecks are needed to spur development; that there are positive interactions and externalities from multiple interventions’.”

Development perks
Global Integrity’s Nathaniel Heller sounds off about the development industry’s self-importance (“Only in the Diplo-Development Universe™ does a trip to a boring industry conference in Toronto turn into a breathless, dramatic ‘mission.’”) and excessive per diems (“The fixed sum for each destination is calculated based on the following process: a large team of economists closely monitors a common basket of goods across geographies, calculates the cost of that basket in local currency, and then apparently multiplies the result by thirteen.”), arguing these seemingly minor flaws may be symptomatic of more serious problems.
“Habits like “going on mission” and fat per diems perpetuate a mindset of process trumping outcomes in international diplomacy and development. International travel becomes the whole point of some people’s jobs, especially in large international organizations and governmental agencies. Achieving actual outcomes (reducing poverty, reforming institutions, promoting peace) somehow gets swept aside in the frenzy to upgrade to business class…”

 

Latest Developments, September 20

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Drones in paradise
The Wall Street Journal reports the US military will begin launching armed drones from the Seychelles as it steps up its campaign against perceived terror threats in East Africa.
“The U.S. has used the Seychelles base for flying surveillance drones, and for the first time will fly armed MQ-9 Reapers from the Indian Ocean site, supplementing strikes from a U.S. drone base in Djibouti.”

Radical corporate transparency
A new Publish What You Pay report on 10 major extractive industry companies details the extent to which they rely on subsidiaries in “secrecy jurisdictions” – 2,083 such subsidiaries between the corporations examined – to maximize profits and, according to PWYP, deprive poor countries of massive amounts of income.
“This is why, in order to combat this veil of secrecy, PWYP Norway believes every company should publish their full revenues, costs, profits, tax and the amount of natural resources it has used, written off and acquired in any given year in every country it operates. This is known as country-by-country reporting (CBCR).”

Resource extraction and indigenous rights
The UN’s top expert on the rights of indigenous peoples, James Anaya, has released the results of an extensive questionnaire-based study that suggests natural resource extraction and other major construction projects are having adverse effects on indigenous communities around the world.
“The vast majority of indigenous peoples’ responses, many of which stemmed from the direct experience of specific projects affecting their territories and communities, rather emphasized a common perception of disenfranchisement, ignorance of their rights and concerns on the part of States and businesses enterprises, and constant life insecurity in the face of encroaching extractive activities,” according to Anaya.

Taking the long view
Mongolian President Tsakhia Elbegdorj spoke to Reuters about a law that bans mining in his country’s river and forest areas.
“Half of the territory is covered by exploration licenses. I think that’s enough,” he said.
“We have to save our wealth (for) our next generation.”

Massive Chevron payout looming?
A US appeals court has overruled a lower court’s decision that prevented Ecuadoran plaintiffs from collecting billions in damages (awarded by an Ecuadoran judge) from oil giant Chevron over pollution in the Amazon rain forest.
“In February, a judge in Ecuador ruled that Chevron should pay to clean up contamination in the oil fields where Texaco, bought by Chevron in 2001, once worked. But the company persuaded a U.S. judge to block enforcement, arguing that the verdict was the result of fraud. Chevron even filed a criminal conspiracy case against the Ecuadorans.”

Fraud refund
The Institute for Accountability in Southern Africa’s Paul Hoffman draws attention to a legal precedent he thinks should be relevant to the inquest called last week by South African President Jacob Zuma into a 1999 arms deal that is alleged to have involved bribes from a number of foreign companies.
“These findings, still good law, on the effect of bribes on contracts are the key to obtaining the refund of purchase prices paid to arms dealers who allegedly bribed their way into contention in the arms deals. A R70bn [US$ 9 billion] bonanza for taxpayers is surely a worthwhile endeavour.”

Abetting repression
The BBC reports UK-based Gamma International is denying that it supplied software to the ousted Egyptian regime so that it could monitor online voice calls and emails.
“The files from the Egyptian secret police’s Electronic Penetration Division described Gamma’s product as “the only security system in the world” capable of bugging Skype phone conversations on the internet.
They detail a five-month trial by the Egyptian secret police which found the product had ‘proved to be an efficient electronic system for penetrating secure systems [which] accesses email boxes of Hotmail, Yahoo and Gmail networks’.”

With friends like these…
Development consultant Ian Smillie says Western governments and the humanitarian organizations that serve as “fig leaves covering up the inattention” of the international community will have to start behaving very differently in Somalia if they want to help provide long-term solutions to the conflict-racked, famine-stricken country.
“None of the humanitarians, [the Canadian International Development Agency] included, has anything to say about the roller-coaster involvement of the West in Somalia, alternately arming, then aiding, then invading, then abandoning the country – then supporting an Ethiopian invasion that led to the rise of the extremist al-Shabaab militia and their brutal but entirely logical expulsion of Western aid workers.”

Intellectual property vs. cancer treatment
The Guardian’s Sarah Boseley writes that the UN conference on non-communicable diseases has focused almost exclusively on prevention rather than treatment, an outcome the US and EU lobbied hard to achieve.
“The pharmaceutical industry and its supporters in the EU and US where research and manufacturing takes place are very keen that nobody should get the idea that a declaration which allowed poor countries to bypass patents and obtain cheap copies of normally expensive Aids drugs should in any way be mentioned in the context of NCDs. That might open the doors to developing nations using the legislation to obtain new cancer and heart drugs – which make huge profits for the companies in the rich world.”

Patents around the world
The UN News Centre reports new figures showing the number of international trademark and patent application rose in 2010, though global distribution remains highly uneven.
“The top 10 patent offices accounted for approximately 87 per cent of all [trademark] applications in 2009, with the United States, Japan and China filing about 60 per cent of the total.”

Latest Developments, August 18

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In the latest news and analysis…

As the violent crackdown on Syrian protestors continues, Western leaders have called for the country’s president, Bashar al-Assad, to step down and are threatening more sanctions. “We call on him to face the reality of the complete rejection of his regime by the Syrian people and to step aside in the best interests of Syria and the unity of its people,” said a joint statement by the leaders of France, Germany and the UK. “For the sake of the Syrian people, the time has come for President Assad to step aside,” US President Barack Obama said. And while there were no threats of international military action, a new UN report says the Syrian regime may have committed crimes against humanity and calls for an investigation by the International Criminal Court.

Peru’s new left-leaning government has suspended its US-funded coca eradication program while it rethinks its drug fighting strategy. Though saying the move is meant only to be a “pause,” the country’s anti-drug czar also suggested 12 years of eradication efforts had done little to reduce cocaine production in the Andean nation that could soon become the world’s top exporter of the drug. And in Mexico, there are growing questions about the human and economic toll of the country’s war on drugs. But in a move designed to crack down on planes smuggling drugs through Central America, the Honduran government is proposing a no-fly zone over an area representing more than a quarter of the country’s total territory.

Apparently not swayed by a recent Economist article suggesting “shale gas should make the world a cleaner, safer place,” South Africa’s government has extended by six months its moratorium on drilling for the controversial energy source. The country’s mining minister imposed the ban earlier this year and commissioned a study on the impacts of fracking but still has some lingering questions. Anglo American and Shell are among the companies eager to extract South Africa’s shale gas but they have encountered opposition from farmers concerned about water contamination risks.

The UK government is vowing to resist any “Robin Hood” tax on financial transactions, following noises from France and Germany that they intend to introduce such a measure to generate revenue and discourage market speculation. “Any financial transaction tax would have to apply globally — otherwise the transactions covered would simply relocate to countries not applying the tax,” according to a British Treasury official.

“No clear evidence exists that microfinance programmes have positive impacts,” according to a new study by the UK’s Department for International Development, citing a lack of “rigorous quantitative evidence” on the subject. The study’s lead researcher has urged “a more holistic approach to financial services for the poor, which would put more focus on savings, remittances and financial literacy rather than on the obsessive interest in microcredit of the last few years.” Another, as-yet unpublished DFID study on microfinance in Africa is said to reach similar conclusions but, according to the Guardian, the department has already locked in funding to expand African microfinance programs.

Christian Aid has blasted the anticipated UK tax deal with Switzerland, saying it will undermine efforts to tackle international tax dodging, which the NGO estimates costs poor countries $160 annually, “far more” than the amount of aid they receive. “Poor countries lack the political and economic clout to do such deals with Switzerland – but they too lose billions as a result of money being illegally hidden in tax havens,” according to a Christian Aid press release. “And just like the UK, they need that money to fund vital public services such as schools, hospitals and justice systems.”  The statement calls on G20 countries to put a stop to “the tax haven secrecy exemplified by Switzerland” by forging “a new system of automatic information exchange between Governments – including those of poor countries – to help them to detect when citizens hide wealth offshore.”

Like Christian Aid, the French government does not like Switzerland’s so-called Rubik plan – which Germany has accepted and the UK looks set to do the same – that allows Swiss banks to retain their secrecy while falling into line with European tax rules. “We understand the choices made by Germany and Great Britain who, not so long ago, held similar positions to our own,” a French finance ministry source told Le Monde. “It’s only human to want the money right away.” But the source said transparency remains the French priority. Meanwhile, a number of African governments are reportedly looking to set up their own tax havens in order to “modernise the African financial sector.”

Columbia University economist Jeffrey Sachs paints a picture of the world economy in which the super-rich have used the “global tax competition” argument to secure tax cuts from their home governments and tax havens have multiplied despite feeble protests from politicians: “In the end the poor are doubly hit, first by global market forces, then by the ability of the rich to park money at low taxes in hideaways around the world.” One of the essential steps he believes governments must take in order to end the current economic crisis is the balancing of budgets “in no small part through tax increases on high personal incomes and international corporate profits that are shielded by loopholes and overseas tax havens.”

Hexayurt Project director Vinay Gupta writes “we must acknowledge that the field of human rights has become a gridlock of rights, entitlements, preferences and theology. Rights directly conflict with each-other, as in the right to property directly conflicting with the right to assured access to water. Without a global jurisdiction, no government can enforce any kind of coherent rights doctrine, particularly in the face of borderless problems like terrorism or environmental crisis.”

University of South Carolina geographer Edward Carr argues development (as well as humanitarian) workers need to think more about their own work’s environmental impact: “While an intervention appropriate to a community’s current needs may result in improvements to human well-being in the short term, the changes brought on by that intervention may be maladaptive in ten or twenty years and end up costing the community much more than it gained initially.”

Latest Developments, August 15

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With Switzerland’s currency looking like a safe bet to investors and getting stronger by the day, there is growing concern the franc could become a threat to the Alpine nation’s economy: “It’s the curse of the diligent student,” Bank Sarasin’s Ursina Kubli told the Globe and Mail. “It’s being punished for doing its homework very nicely in recent years.” But Global Financial Integrity sees Switzerland in a less flattering light, as an important part of a worldwide network of tax-friendly regimes where individuals stash “US$12 trillion of assets in jurisdictions other than their own countries of residence that are not declared in their own countries of residence; the lost tax revenue annually from such undeclared assets is estimated at US$255 billion,” in addition to avoidance by corporations and other organizations. The Washington-based financial transparency advocates argue the recent tax deal Switzerland has made with Germany and another anticipated one with the UK involves “handing over money and some account information without making substantive changes to a system that puts tax collection and law enforcement officials at a disadvantage.” The solution, as GFI sees it, is a global agreement “to end tax haven secrecy.”

A deal has been struck to end a dispute in Gaza between Hamas and the US Agency for International Development that looked like a role reversal from aid-threatening rows elsewhere that saw Somalia’s Al Shabab – and Sudan’s government before them – accusing Western aid agencies of political interference. This time around, it was USAID who decided to stop humanitarian assistance because of perceived meddling by the host government.

The World Health Organization is looking into the emergence of a mysterious non-fatal illness that seems to be striking Angolan schoolchildren: “Although the cause of these outbreaks still remains unknown, this may be related to exposure to irritant chemicals.” Angola’s economy has grown rapidly since a decades-long civil war ended in 2002, due mainly to oil and supporting industries that account for roughly 85% of GDP. But it remains mired near the bottom of the UN’s Human Development Index rankings, behind Haiti and Uganda.

The UN is calling for investigation of possible war crimes in Sudan’s Southern Kordofan state, which sits on the border of newly independent South Sudan. But a Guardian editorial entitled “United Nations: Weak leaders wanted” strongly criticizes current secretary Ban Ki-moon for, among other things, his seemingly selective attention to evidence of serious human rights violations: “The myopia of powerful governments is clearly shown in their preference for weak candidates for UN secretary-general. Occasionally they misjudge their man, with interesting results. With Dag Hammarskjöld, it was peacekeeping. Kofi Annan’s staff devised the millennium development goals. This time – with the quiet reappointment of secretary-general Ban Ki-moon this summer – they got what they wanted. Mr Ban presides over the slow decay of the UN secretariat, an institution that should be working, as Hammarskjöld said, on the edge of progress.”

New York University economist Nouriel Roubini writes that global capitalism as currently practiced is doomed: “To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken.” Among his prescriptions are “stricter supervision and regulation of a financial system run amok.”

James Lindsay of the Council on Foreign Relations is “depressed” to see Western pre-eminence slipping to the point where countries that are home to over 80 percent of the world’s population could soon account for half its wealth. But while the Globe and Mail’s John Ibbitson concedes “it’s natural for people to worry about their daughter or son finding a good job in a depressed Western economy, and for them not to care that billions of people have been lifted out of the very worst poverty as a result,” he is a firm believer in linear human progress and sees the rise of the world’s most populous countries as another big step in the right direction. “The more wealthy countries there are, the more wealth they will make together, which in turn will lift more people out of poverty and make them more free, reducing the chances of great wars, the kind that kill tens of millions, possibly including your daughter or son, or you.” And the Economist happily announces the BRIC countries are embarking on a path that could fundamentally alter the world of aid: “The establishment donors’ aid monopoly is finished.”

Following up on his recent rejection of the view “that history is something to be left to historians,” the Overseas Development Institute’s Jonathan Glennie looks at the recent history of measuring poverty. Concerning the World Bank’s practice of dividing countries into low-, medium- and high-income countries (LICs, MICs and HICs) and the apparent trend towards upward mobility, he cautions against a too-linear view, pointing out that “of the 26 countries that went from LIC to MIC status in the last decade, 18 had been MICs in the past but had relapsed to LIC status, mostly in the early 1990s.” On the other hand, membership in the UN’s Least Developed Country club has been depressingly stable.

Focusing mainly on Oprah Winfrey’s philanthropic activities, Cambridge University’s Priyamvada Gopal writes about “how billionaire benevolence is closely tied to the big neoliberal political manoeuvres of our time.” While Gopal stresses she does not question the sincerity underlying what she terms “humanitarian privatisation,” she worries about the combination of ignorance and “missionary zeal” the mega philanthropists display: “The billionaire “humanitarianism” of Winfrey, Gates and Murdoch is deeply compromised not only by its failure to acknowledge the causal relationship between extreme wealth and great poverty but by participating in an ideological assault on the welfare state. It posits itself as the only way to change the world – from above and with a wealthy few firmly in control.”

Latest Developments, July 29

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As the Horn of Africa food shortage continues to intensify, most analysts agree that drought is an insufficient explanation for the extent of the crisis. Abdikarim Abdi Buh, writing for the Mogadishu-based news site Raxanreeb Online, blames both rebel group Al Shabab’s leadership and American foreign policy for how bad things have gotten. One the one hand, he believes Al Shabab’s refusal to allow food deliveries to starving people amounts to genocide, but on the other, he says the US government “has no long-term or comprehensive policy towards Somalia other than tactical policies which are geared towards hunting down few Al Qaida individuals.” He calls on “the international community to funnel food aid through the Al Shabab approved agencies to alleviate and mitigate the depth of the famine” while simultaneously trying to strengthen the disastrously week Transitional Federal Government (TFG). But the Rift Valley Institute’s Mark Bradbury argues it was “international support for the TFG that included the provision of weapons and training of its security forces, the assassination of al-Shabaab leadership and overt attempts to deploy aid in support of the TFG” that led to restrictions and violence against foreign aid workers in the first place.

Al Shabab leaders are said to fear foreign NGOs will provide intelligence necessary for further CIA drone strikes, which the US first admitted to carrying out in Somalia last month. But speaking at a security forum in Colorado, former US intelligence chief Dennis Blair “said the administration should curtail U.S.-led drone strikes on suspected terrorists in Pakistan, Yemen and Somalia because the missiles fired from unmanned aircraft are fueling anti-American sentiment and undercutting reform efforts in those countries,” according to Politico. In Blair’s words: “I think we need to change — in those three countries — in a dramatic way.”

At the same time, UK director of Islamic Relief Jehangir Malik writes in the Guardian his organization has mostly been operating within 50 km of Mogadishu, but “on a recent assessment visit to central and southern Somalia we found it safe and practicable for us to scale up our existing operation and help many more families further afield.” And Columbia University economist Jeffrey Sachs is encouraged by the significant role nearby wealthy Gulf countries and the Islamic Development Bank have taken on to help in the current crisis.

Meanwhile, less than two weeks after the US and its allies recognized the rebel Transitional National Council as the “legitimate governing authority” in Libya, witnesses say those same rebels have killed their top military commander and two of his aides. At today’s funeral, the dead man’s son reportedly cried out “We want Moammar to come back! We want the green flag back!” – an outburst described by Associated Press reporters as “a startling and risky display in a city that was the first to shed Gadhafi’s rule nearly six months ago.”

Citing fears of a “race to the bottom,” civil society groups are calling on East African governments to stop offering tax breaks as a way to attract foreign investment, arguing such “incentives hinder the entry of revenue and have no empirical results to prove their efficacy and impact to investment,” according to Uganda’s Daily Monitor. As the Guardian’s Felicity Lawrence writes, poor countries are actually ahead of their wealthier counterparts in terms of understanding the balance of power in international business: “Developing countries, dealing with corporations whose revenue often exceeds their own GDPs, have long been aware of their own lack of power. They are familiar with the way world trade rules have been written to benefit corporations and limit what any one country can impose on them…For an affluent country like the UK, it has come as more of a shock.”

A new study by the Greenlining Institute reveals that 77 of America’s Fortune 100 companies have subsidiaries based in tax havens and the number of said subsidiaries has increased by 44 since 2008. On the flipside, “low-tax jurisdiction” Barbados is suffering from the ailing global economy and is stepping up efforts to attract investment from Canada, a country whose companies account for 31 percent of foreign subsidiaries in Barbados and 78 percent of the international banks. “As an island nation, we don’t have natural resources unless you count sea, sand and sun. We import most of what we consume here, so it’s very important we bring in foreign exchange,” Invest Barbados CEO Wayne Kirton told the Globe and Mail.

In a piece entitled “Offshoring the boat people,” the Economist reports on a new deal between Australia and Malaysia, under which “Australia will send the next 800 boat people who sail into its northern waters to Malaysia. There they will join about 90,000 other asylum-seekers who have been waiting, some of them for years, to have their claims assessed. In return, Malaysia will send 4,000 certified refugees to Australia and receive compensation for the programme’s costs.” In other immigration news, the US State Department has denied entry visas to Uganda’s youth baseball team, the first African squad ever to qualify for the Little League World Series. And Al Jazeera reports Vietnamese children as young as 13 are being trafficked to the UK to work as cannabis-growing labourers and are then treated as criminals when British police raid such operations.

Earlier this week, Global Witness released a report entitled “Pandering to the Loggers: Why the WWF’s Global Forest and Trade Network Isn’t Working” in which the authors claim “the scheme has never, in Global Witness’s opinion, been adequately evaluated in terms of its rules, 
operation, membership and, crucially, its impact on forests.” In the accompanying press release, Global Witness accuses the World Wildlife Federation of “allowing companies to reap the benefits of association with WWF and its iconic panda brand, while they continue to destroy forests and trade in illegally sourced timber.” WWF has responded with a statement from the criticized certification program’s head, George White, who believes the private sector “can be a significant positive force” in protecting endangered forests: “By mainstreaming responsible forestry practices among the forest-related sector, GFTN creates market conditions that help conserve the world’s forests, while providing social and economic benefits for the businesses and people that depend on them.”

The Trade Justice Movement’s Ruth Bergan slams rich countries for their unwillingness to make even minor concessions to poor countries in the decade-old Doha round of world trade talks, which ostensibly aimed to “improve the trading prospects of developing countries.” Lamenting the fact that, to date, the rich countries have not even honoured “their commitment to tackling their own damaging practices,” Bergan argues “that serious and democratic debate on the purpose and powers of the WTO is long overdue.”