Ethics and governance in the European Financial centers

09/17/2009

Keynote Address by Senator Carl Levin at the Conference on Increasing Transparency in Global Finance

Senator Carl Levin was speaker at the Conference on Increasing Transparency in Global Finance.

What he stated is worth quoting:

"It is highly encouraging that you are meeting to discuss how illicit money arising from tax scams, corporate misconduct, foreign corruption, and other wrongdoing has hurt economic development, emerging civil societies, and the rule of law."

"Hiding assets offshore is blatantly unfair to the vast majority of taxpayers who comply with their civic obligations and have to shoulder the additional tax burden when others don’t pay what they owe. It deprives government treasuries of money needed to protect our citizens and provide the services that make our nations more secure and prosperous.

"As G-20 leaders signaled a new willingness to take action against uncooperati"ve tax havens, the changes made by Liechtenstein and Switzerland set off a chain reaction in other bank-secrecy nations. Places like Luxembourg, Austria, Andorra, Monaco, and others also pledged for the first time to share tax information and cooperate with international tax enforcement."

"The battle to end offshore tax abuse is far from over."

"While 87 nations have now pledged to adopt the OECD’s model tax information exchange agreement, it is critical that the international community ensure that these pledges are followed by concrete actions – that tax havens not only sign tax sharing agreements but implement them. If words are not followed by deeds, the international community must have a way to respond."

"The G-20 or a smaller subset like the G-7 nations could act as a group to bar their financial institutions from doing business with uncooperative tax haven banks or jurisdictions. Tax haven banks facing that type of united action would have a much harder time turning law enforcement away empty handed. And putting the necessary legal mechanism in place now to stop tax haven abuses in the future would give the international community a powerful new tool to use when the next offshore tax scandal hits."

"We have the means to end offshore tax abuse if we have the political will to act. Offshore tax evasion currently deprives countries of billions of dollars in needed revenues, benefiting the wealthy few who have the resources to hide assets offshore while offloading their tax burden onto the backs of honest taxpayers. When that happens, tax haven abuse undercuts the tenets of fairness and shared sacrifice on which free societies rely."

"Tax evaders reap enormous benefits from civil society -- they enjoy the security our military and law enforcement agencies provide; they invest and prosper thanks to the rule of law and sanctity of contract which our regulators and court system enforce; and they build their economic future on the financial, communications, and transportation infrastructure that taxpayers finance. What we ask in return is that all members of society pay that share of their income that they owe, so that governments can continue to protect fundamental rights and provide basic services. If that social contract breaks down and some refuse to pay their share, the effects on civil society are caustic. Ending offshore tax abuse is about more than money; it is about protecting the principles upon which our economic and political systems are built. "

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09/16/2009

Levin Calls for Action on Offshore Tax Abuse

The United States should encourage its G20 partners to sanction offshore banks and jurisdictions that fail to cooperate with international tax enforcements efforts, Sen. Carl Levin (D-Mich.) said yesterday in a letter to President Obama urging U.S. leadership on tax haven issues at the G-20 summit in Pittsburgh next week.

In his letter, Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, calls for the G20 nations to bar tax haven banks from participating in the global financial system if they refuse to cooperate with law enforcement investigations of tax evasion

In his letter, Levin encourages the President to push the G20 nations to adopt an approach on tax havens similar to successful methods currently in use in the United States to target international money laundering. With those methods, U.S. financial institutions can be barred from doing business with nations or financial institutions engaged in money laundering. A provision allowing the same measures to be applied to nations or financial institutions that impede U.S. tax enforcement is included in the Stop Tax Haven Abuse Act, which Levin introduced this year and which Congressman Lloyd Doggett has introduced in the House. President Obama has endorsed that bill and cosponsored similar legislation in the last Congress when a member of the Senate.

“If the legal mechanisms were in place, and a tax haven bank refused to cooperate with a tax investigation, the United States, acting on its own, could stop that tax haven from taking advantage of the U.S. financial system,” said Levin. “If other countries adopted the same legal mechanisms, our G-20 partners or a subset like the G-7 could act as a group to lock the offending bank out of the global financial system. Tax haven banks facing that type of united action would have a much harder time turning law enforcement away empty handed.”

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PwC: Who else?

The Chamber of Commerce and PwC published a brochure and a video to promote Luxembourg and PwC.

« Une vision pragmatique et réaliste d’un pays qui propose un cadre attractif et innovant pour établir et développer une entreprise en Europe » (a pragmatic and realistic vision of a country that offers an attractive and innovative framework to set up and develop a company in Europe), the Chamber of Commerce wrote.

There are testimonies of companies of which Paypal that is a PwC Client.

As Richard Murphy observed in June 2007, Pay Pal went to Luxembourg for all the wrong reasons:

Officially, tt was said that the transfer would enable management to market the service to online merchants across Europe and allow consumers to use PayPal in more places and ways across the web. Other eBay group companies, such as Skype and eBay, have an important presence in Luxembourg, so it makes sense for PayPal Europe to co-locate with them.”

Richard stated the three real reasons:

- Pay Pal would pay less tax;

- Pay Pal would not be as effectively regulated;

- Information exchange would be harder. Luxembourg tries hard not to play that game. And tax authorities are increasingly asking for data. If that information is located in the UK tax authorities can now get it. That will be harder from Luxembourg. It’s a tax haven that still promotes secrecy, after all.

We have seen with Madoff and Luxalpha that the regulation is perfectible in Luxembourg : professionals admit they influence the regulator in its duties : the small size of the jurisdiction creates the risk all the more than professionals decide what is to be done for the regulation:

“The Luxembourg Investment Fund Industry has regularly had a very close and direct say on the evolution of the Luxembourg prudential regulatory environment governing the collective Investment Industry (...) This influence has been exerted directly and indirectly by the lobbying initiatives taken on the level of the different professional associations, be it ALFI or ABBL , but also and more importantly, trough a direct association with the Luxembourg Supervisory Authorities by means of a number of standing committees" (Rafik Fischer, Vice Chairman, ALFI, in 2005)

This is confirmed by the CSSF: "The internal committees assist the CSSF in the analysis of the development of the different financial sector segments, give their advice on any question relating to their activities and participate in the drawing-up and the interpretation of regulations relating to their specific field."

In other words professionals require changes in the transposition of directives and other international texts whatever matter (AML, tax, audit...) and therefore influence the regulator in its duties.

What about Paypal as a Luxembourg-registered company in this so-called regulated center?

There are actually 6 companies registered:

1) PAYPAL (EUROPE) S.A R.L.

No Reg. de Commerce: B0127485

Forme juridique: Société à responsabilité limitée de droit luxembourgeois

Date de constitution: 18.4.2007