Ethics and governance in the European Financial centers

The Spiegel has reported that Germany becomes tax haven for firms and wealthy.

A completely legal tax avoidance industry is flourishing right in Germany. It is an industry that thrives on the mistakes made by ministries and the parliament in drawing up tax legislation: millionaires and corporations use aggressive tax models to make themselves appear to be artificially poor, which is completely legal.

Germany is a tax haven for large companies," says Wiesbaden-based economist Lorenz Jarass quoted by the Spiegel. "People with normal incomes are being robbed.

Germany qualified in the “white list” in April.

So did France where there are similar advantages (les “niches”)

This is the reason why the no or nominal tax criterion is not sufficient, by itself, to result in characterisation as a tax haven.

The three other factors to be considered are:  

- Whether there is a lack of transparency

- Whether there are laws or administrative practices that prevent the effective exchange of information for tax purposes with other governments on taxpayers benefiting from the no or nominal taxation.

- Whether there is an absence of a requirement that the activity be substantial

This is the difference between France and Germany and other jurisdictions, that are actual tax havens where controls are perfectible despite a so-called regulation and above all where freedom of expression on issues does not exist.

Neither in France nor in Germany, would NGOs be blocked and threaten in their financing for reporting issues, as they were in Luxembourg.

Martin De Forest-Brown, director of international finance for the Chief Minister's Department in Jersey, recently published an article that is worth commenting.

The title was : "Don't demonise Jersey, it stands with the good guys on regulation".

To comment the list the list published by the OECD in April, he observes: "Jersey qualified as a jurisdiction that had substantially implemented the internationally agreed tax standard alongside the UK, US, Germany and France. But Austria, Luxembourg, Belgium and Switzerland, alongside Liechtenstein, Panama and Singapore did not. "

Luxembourg and the other jurisdictions that did not qualify in April will appreciate. But Luxembourg is now using the same communication as Jersey.

The point is the effectiveness of the exchange of information based on the OECD tax model.

The figures demonstrates it does not work.

Read Richard Murphy to know more

The British political-satirical magazine Private Eye has assessed the efficiency of the exchange of information"on request" for three tax havens (Jersey, Guernsey and the Isle of Man) in the last three years. Information was provited 17 times, which does not comply with the number of clients.

TJN observes that

1) a  back-of-the-envelope calculation puts this at 1.8 transfers of information per haven per year. Britain's revenue and customs authorities, in addition, made 141 requests - that is, 16 times a year from each haven - but we don't know the results.
2) Private Eye correctly notes how the secrecy jurisdictions like Jersey are using the OECD's appalling system of allowing anyone who signs 12 TIEAs to be put on their "white list."

In this context, what Angel Gurria recently said in the Guardian : "It seems almost unbelievable, but the era of banking secrecy for tax purposes will soon be over. In tomorrow’s world, there will be no more havens in which to hide funds from the taxman."

As Richard Murphy observes, Gurria’s statement feels horribly like that announcement by George W Bush on an aircraft carrier that the mission in Iraq had been accomplished – both horribly premature and horribly wrong. He suspects the causes are also common to both: a lack an understanding of what is happening on the ground and no strategic vision as to what to do about it.

As TJN observes, the tax havens (Jersey taking the lead again, ho-hum) are mounting a major public relations exercise to re-assure the public that the anti-tax haven mission is accomplished and everyone can go home safely to their families.