The Offshore Wrapper: the week in tax justice, Olympic edition

Welcome to the Olympic Edition of the Tax Justice Network’s Offshore Wrapper.

Going for gold 

There have been many reports in the world’s media focusing on how the $51bn spent by the Russian state has sparked virulent corruption.

On the eve of the games, the Head of Transparency International UK, Robert Barrington asked how much the UK financial sector has helped with the Olympian task of shifting money out of Russia.

He also criticized the International Olympic Committee for saying nothing about corruption in Sochi, which has stained the Olympic movement’s reputation.

Fair play indeed. Photo credit: Very Daily Photos

But is this any surprise? The Olympics has a notorious tax avoidance history. Like many international sports organisations, it is based in Switzerland, which gives it a substantial tax break on its staggering income – an estimated $8bn between 2008-2012).

A report by Ethical Consumer estimated that the UK government lost £700m in taxes during the 2012 summer games from tax exemptions to the IOC and the London Olympic Organizing Committee. This was even before the corporation tax lost through tax breaks given to multinationals supplying the games.

Most worryingly of all, it seems that turning the Olympic village into a temporary tax haven for large and wealthy international businesses was a price demanded by the IOC for hosting the games. It’s a bit like the “tax bubble” stripping revenues out of poverty-stricken South Africa during the World Cup.

And let’s not forget that there’s only one Olympics, and only one World Cup: these are monopolies – and ultimately the super-normal economic profits that accrue, over and above the costs, are for private gain. Every reasonable economist knows what we ought to do with unearned rents from monopolies and their like: tax them, and at very high rates. Which is, of course, the very opposite of what’s happening.

Billions Flowing in and Out of the Philippines 

This week we reported on a study from the Washington-based thinktank, Global Financial Integrity which has documented the vast quantities of illicit financial flows moving through the Philippines over the last 50 years.

The report found that $410bn flowed in and out of the country during the period, including US$132.9 billion in illicit financial outflows from crime, corruption and tax evasion. The report also found that a staggering 25% of the value of all goods imported into Philippines goes unreported to customs officials.

Offshore Surfing 

An article in thisismoney.co.uk provides a fascinating insight into the careers of former Olympians.

Former British Windsurfer Simon Goody, who competed in the 1988 games in Seoul, is now apparently a “tax mitigation expert” advising small time property speculators how to avoid taxes on rental properties in the North East of England.

He is quoted at a seminar in London promoting an offshore scheme and boasts:

‘I have cleared inheritance tax, I have cleared capital gains tax, I have cleared income tax, I’ve cleared national insurance. Any other kind of tax you can think of? I have cleared corporation tax. 

‘This has got a 1,000-year shelf-life. The taxman cannot tax you retrospectively because you have given them full disclosure and signed it off. I have a lovely piece of paper from HMRC saying all your expenses have been cleared.’ 

The article, looking at how a modern day Gordon Gekko, Raj Shastri, wants to help us all become property millionaires, is well worth a read.

European Corruption Clampdown 

This week the delayed Anti Money Laundering Directive returns to the European Parliament. The Directive will, among other things, insist that European Union nations set up a register of beneficial owners of companies.

This will mean that people controlling companies in Europe will find it harder to hide behind shell companies in secrecy jurisdictions to hide their identities, and should make it easier to combat money laundering, corruption and tax evasion. Crucially, the register should be publicly accessible to journalists, NGOs and other civil society organisations.

France goes to war on tax avoidance (lets hope they win this one) 

This week President Hollande continued his campaigning on this issue. During a visit to an online retailer in Paris the French President said that France would not tolerate the tax avoidance strategies used by global tech firms.

This came just days after the country slapped a billion-Euro tax bill on Google, ahead of a visit to the US where President Hollande will discuss the issue with President Obama.

The Offshore Wrapper was written by George Turner. To subscribe to our news output, please click here.

The week’s links

Delayed European Parliament vote crucial for corporate transparency Eurodad

See also: Time for action on financial transparency euobserver

Bankers take fight over U.S. anti-tax dodge rules to appeals court Reuters

Bettel- Luxembourg won’t block expansion of EU savings directive Reuters
Lip-service, or a real commitment? Note the report states “in the long term”.

Swiss Finance Directors Push For Corporate Tax Reform Tax-News
“Despite the privileged taxation of international companies, they are nevertheless a key source of income for the state”

Avi-Yonah Posts Tax Papers on SSRN TaxProf
Reuven S. Avi-Yonah has posted several tax papers on SSRN:
Is it Time to Coordinate Corporate Tax Rates? A Note on Horst
The One Percent Solution: Corporate Tax Returns Should Be Public (And How to Get There)
No Country is an Island: Is a Radical Rethinking of International Taxation Needed?
Splitting the Unsplittable: Toward a Formulary Approach to Allocating Residuals Under Profit Split

Equatorial Guinea: Squandered riches Financial Times

Angola’s Biggest Threat Is Offshore – and It’s Not Piracy Think Africa Press

Illicit flows pick Africa’s pockets Business Report

Germany: Merkel party treasurer to resign over tax haven investments europe online magazine
See also: Germany’s SPD Seek Tougher Action On Tax Evasion Tax-News

Google’s tax returns are trop petite says Hollande The Register “French prez spits out Dutch sandwich”, Yahoo! move a blow to France The Irish Times, France will not tolerate tax avoidance, says François Hollande The Telegraph, andFrançois Hollande attacks US tech firms’ tax schemes The Guardian

U.S.: New IRS Commissioner Wants to Move Forward – We Should Let Him Tax Analysts Blog

Jamie Dimon’s Raise Proves U.S. Regulatory Strategy is a Joke Rolling Stone/Taiibblog

Citywealth International Financial Centre awards announced: winners include Jersey and Credit Suisse Financial Secrecy Media Monitor

Global version of FATCA could be a reality in a few years, say industry officials Thomson Reuters / Compliance Complete

See also: No more delays for FATCA, says IRS STEP

Greek-Swiss tax deal remains elusive Reuters
Is Switzerland retreating on Rubik?