BEHIND THE HEADLINES: Tax haven hypocrisy
A BALANCING ACT in London, folly and redemption in America’s District of Columbia and sheer hypocrisy in Brussels. And in every case, Barbados and many of its Caribbean neighbours were placed in the negative international spotlight at a time when some of the world’s major financial centres are casting about for unreasonable plans designed to bring many small countries to their financial knees.
In the past six months, the world has been given an exhibition of how the rich and powerful behave: they routinely excuse their own conduct while seeking to penalise small countries by blacklisting or accusing them of being “non-cooperative” jurisdictions. Guess what? Some of the chickens are coming home to roost.
Just the other day, the Tax Justice Network (TJN) in England, a small but independent international organisation whose “core mission” is “to change the weather” on several issues that range from tax and financial globalisation to tax havens released its Financial Secrecy Index 2015. It ranked nearly 100 countries acccording to their levels of openness on financial managers.
The index is catching fire. That’s because the authors have confirmed what the world has known for decades: the United States (US), a leading voice against “tax havens”, is one of the world’s biggest jurisdictions for tax evasion and avoidance. Actually, the US was ranked third on the global financial secrecy list, meaning it was behind Switzerland and Hong Kong but ahead of Singapore, the Cayman Islands, Luxembourg and Germany. If anything the index seems much more even handed than some of the others floating around.
Barbados, which finds itself on a plethora of lists reserved for countries that allegedly aren’t cooperating with the European Union, the US and others, was ranked 22 in the world by the TJN. The island was behind the United Kingdom, Japan, Turkey, China, Guernsey, Jersey, and Macau, but ahead of Austria, The Bahamas, Brazil, Malta, Bermuda, Liechtenstein, Ireland, Belgium, Sweden, Australia and a host of other jurisdictions.
“While the US has pioneered powerful ways to defend itself against foreign tax havens, it has not seriously addressed its own role in attracting illicit financial flows and support tax evasion,” insisted the TFN. “Washington’s independent-minded approach risks tearing a giant hole in international efforts to crack down on tax evasion, money laundering and financial crime.”
We said. Indeed, the quintessential example of chutzpah came from the US when it declined to participate in the Organisation for Economic Cooperation and Development’s programme for exchanging financial information, but has enacted legislation that forces rich and poor countries alike to provide Washington with details about the financial dealings of any American or immigrant living and working in the US, while doing business abroad. Called the Foreign Account Tax Compliance Act (FATCA), the law is perhaps the most intrusive step taken by any country to gather information on its citizens or foreigners living on its soil.
“FATCA is really very sweeping and unique,” said Bruce Zagaris, a tax expert in Washington and a legal adviser to Barbados, who recently helped the Caribbean jusirdictions in their fight against an ill conceived list of “tax havens” devised by the Council Of The District of Columbia to raise money to help balance its budget.
The list was subsequently dropped, at least for now. But if the US is monarch of the kingdom of financial hypocrites, Europe is the crown prince. In June, the European Union (EU) released its full list of international tax havens which it said were the “top non-cooperative jurisdictions consisting of those countries or territories featured on at least ten EU member states’ blacklists. Others on the EU’s list were Hong Kong, Barbados, The Bahamas, Vanuatu, St Vincent and the Grenadines, Belize, Bermuda, the US Virgin Islands, Monaco, Liechtenstein, Panama, Mauritius, Grenada and several other island nations and coastl territories.
Absent were many of the countries in the top tier of the financial secrecy index. Switzerland, the US, Luxembourg, Germany, the UK, Austria, Ireland and Belgium weren’t on it. Surprise? Not all all. True to its instincts, the EU circled community’s wagon of protection while it soiled the image of small island states that, admittedly, it has often helped financially, technically and otherwise.
The list of 30 territories seemed designed to achieve an important objective: distract global attention from the community’s refusal to grapple with its tax evasion scandals, including the “lux-leaks” nightmare that brought to light Luxembourg’s scheme to save Apple, IKEA, Pepsi and several other foreign corporations tens of billions of dollars in taxes.
Little wonder that Pierre Moscovici, the EU’s Economic Affairs Commissioner, in accouncing the list and his package of proposed tax reforms, was forced to admit that “corporate taxation in the EU needs radical reform”. The thundering criticisms of the EU’s unconscionable action that flooded the international tax marketplace were partly answered in the Caribbean by Mikael Barfod, the EU’s top diplomat in Barbados, when he said that Europe’s approach was “not likely” to trigger “any consequences for credit ratings or private investments in the Caribbean countries”.
Still, the key question remains: how come Switzerland, Ireland and The Netherlands, to name a few key promoters of corporate inversions and tax evasion and avoidance schemes, were omitted, but Barbados, The Bahamas and Grenada were included? The answer is obvious. The “lux-leaks” sweetheart deal with Luxembourg was designed when Claude Juncker was that country’s prime minister, long before be became EU president.
