Matthew Jones 23 rd April 2016 Manchester & Stockport District Synod
The Methodist Tax Justice Network was set up in 2012 Currently based primarily in the Birmingham District, but growing Membership is not restricted to Methodists – despite the name!
To see tax systems set by democratically elected governments, not corporations To see all individuals and companies paying their taxes To see the end of tax havens through changes to international regulations To see the Methodist Church take on tax justice as a fundamental mission objective
Produce educational resources Engage with church groups, students etc, and run public events and workshops Work with partner organisations (e.g. Christian Aid) to promote their campaigns Get out there and campaign ourselves!
Take a few minutes to talk to your neighbour and try and think of as many of the following as you can: ◦ Companies recently involved in tax avoidance scandals ◦ Countries/jurisdictions that have been called tax havens
Tax Evasion – Deliberately breaking rules to deceive the authorities. Failing to file a tax return, hiding taxable assets, not declaring full income etc. Illegal, up to 10 years prison. Tax Avoidance – Exploiting loopholes in tax law to pay low (or zero) tax rates in ways that governments did not intend. Often involves using tax havens and networks of shell companies. Legal but morally dubious. “The difference between tax avoidance and tax evasion is the thickness of a prison wall.” Denis Healy, former UK Chancellor of the Exchequer.
“Taxes are what we pay for civilized society” – US Supreme Court Justice, Oliver Wendell Holmes Jr. Tax is frequently seen as a cost, something to be reduced to increase profit. It is not – tax is a responsibility , taken into account after profit/loss, and should accurately reflect real economic activity (turnover, employees and assets) in each country where that company/individual operates. Eroding a country’s tax base means it cannot afford crucial public services and infrastructure. It also widens the inequality gap between the wealthiest and poorest in society.
UK Budget Deficit 2014/15 – £87.7bn bn George Osborne wants to reclaim £5bn n from tax avoiders... The UK’s ‘Tax Gap’ – between £3 £35b 5bn n (HM HMRC RC) ) and £119.4bn bn (Tax Resear arch h UK) George Osborne wants to save £12bn n through welfare cuts... Benefit Fraud cost to the UK - £1 £1.2b 2bn n (0. 0.7% 7% of DWP’s budget)
$160 Billion on denied to developing countries through tax dodging every year (Christian Aid). $814 billion ion denied to Sub-Saharan countries from 1970-2010 (Boyce & Ndikumana 2012) “Globally, our estimate is that the amount of money flowing out of developing countries is 10 times the amount of foreign aid flowing into developing countries.” ( Ra Raym ymond ond Bak aker er, , Director ector of Global bal Financ ncia ial l Integr tegrity ity)
Leak of 11.5 million files from Panama law firm Mossack Fonseca by unknown whistleblower. Contains details of tax avoidance on an industrial scale. Mossack Fonseca created networks of offshore shell companies and trusts for clients including politicians, criminals and corporations. Vast majority of these shell companies and trusts incorporated in UK Overseas Territories.
Release of files from PricewaterhouseCooper in Luxembourg, dating from 2002-2010, by former employee Antoine Deltour. Showed that PwC routinely negotiated beneficial tax rulings between multinational corporations and the Luxembourg tax administration, allowing MNCs to easily shift profits into the low-tax country. Deltour due to stand trial in Luxembourg on April 26 th 2016.
Tax Avoidance is a multinational industry. The world’s wealthiest individuals and corporations are routinely stashing vast amounts of money offshore, to the detriment of developed and developing countries alike. Law firms and the ‘Big 4’ accountancy firms facilitate this, creating vast networks of offshore companies, lobbying governments to relax tax legislation and giving advice on secrecy and loopholes.
All Tax Havens share Two key characteristics: o Low Tax/Relaxed Legislation o High financial secrecy Finding out who owns tax-haven based accounts and subsidiaries is nearly impossible without the necessary transparency measures.
Welcome to THE CAYMAN ISLANDS – a UK Overseas Territory 0% Corporati poration on Tax 0% Income come tax 0% VAT Popular with banks - Barclays have over 120 subsidiaries here.
Welcome to LUXEMBOURG. 29% corporation tax... BUT only on profits made in Luxembourg. ‘Participation Exemption’ = profits derived from foreign subsidiaries of companies based in Luxembourg are EXEMPT.
Welcome to THE NETHERLANDS ‣ Home to 12,000 ‘mailbox companies’ channelling € 4bn a year. ‣ No source taxes on interest or royalties ‣ Network of double taxation treaties ‣ Ability to negotiate tax rulings before payment
What has struck you so far? Why would a country want to be a tax haven? What might happen if all countries tried to bring in business by lowering tax rates?
0% tax paid on £1.2bn UK sales over the last three years. Only £8.6m paid over 14 years. Paid royalties to Dutch subsidiaries for use of trademarks, bought coffee beans from Switzerland, and paid interest on loans from other parts of the company.
Key Starbucks branches = Money = = Coffee fee ‘Transfer Subsidiary in Mispricing’ Consumers Switzerland Coffee Bean producing country
Starbucks branches ‘Loss’ made in (Europe and Middle operating countries – no tax paid here... East) Loss thanks to profits being shifted into Netherlands as IP royalties... Where they are Dutch ‘mailbox’ untaxed. The perfect company middleman... Profits moved on again – Dutch double tax treaties mean taxes are liable offshore... Where there is a close to zero tax rate – no tax paid here either! Low Tax Jurisdictions
“God has blessed us with such an abundance of natural resources. The paradox is that Zambia gets ranked among the bottom 20 in terms of poverty... We are wealthy, yet we are poor.” Wyl ylbur bur Simuusa, uusa, Zambian bian Minister ster of Mines. s.
Switzerland-based Glencore (now Glencore Xstrata) bought Mopani Copper Mines in 2000 at knock- down price. Sold copper to Switzerland at under market value, artificially inflated running costs to make a loss in Zambia and pay no tax. 2006: ◦ $3bn worth of copper. ◦ $50m of tax revenue. ◦ $150m electricity bill for the mines. If Zambia had Switzerland’s copper export tax revenue, their GDP would double.
Tax Justice campaigning is not just about targeting companies – it’s also about changing the rules through advocacy and lobbying. The current system is deeply flawed, and doesn’t recognise the complexities of the modern financial system. Subsidiaries of a corporation treated as individual entities trading fairly with each other – clearly not the case!
The European Commission recently announced a package of tax and transparency reforms – they’re not up to scratch. No involvement for developing countries, not publicly available, won’t apply to 85% of corporations. These reforms were based on the recommendations of the OECD – a club of 28 rich countries who currently control global tax and transfer pricing legislation. The OECD’s BEPS (Base Erosion & Profit Shifting) Action Plan which led to these recommendations was a flawed process lasting only two years.
What has struck you from the last few slides? What have you learnt? Which do you think is the more effective method for tackling tax dodging – targeting companies or political advocacy? Why?
Greater financial transparency: ◦ Compulsory Automatic Information Exchange worldwide ◦ Public Registers of Beneficial Ownership A complete overhaul, not a patch-up: ◦ Compulsory Public Country-by-Country Reporting across all sectors ◦ Prevention of exploitative tax treaties ◦ Unitary Taxation – tax paid where real economic activity takes place.
A new international body to create tax legislation, under direct UN control. National governments closing loopholes and eliminating tax breaks with no public benefit. National tax infrastructures which are transparent and accountable.
“We read the Gospel as if we had no money, and we spend our money as if we know nothing of the Gospel.” James es Ha Haughey, ghey, Jesui suit t Theolo logian gian
Ched Myers; economic and social justice are ‘woven into the warp and weft of the Bible’. Three points: ◦ The world as created by God is abundant, with enough for all provided that human communities live within limits. ◦ Disparities in wealth and power are not ‘natural’ but the result of human sin, and must be mitigated – at least within faith communities – by the regular practice of redistribution. ◦ The prophetic message calls people to the practice of redistribution, characterised as ‘good news to the poor’.
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