Tackling

Tax Havens Toolkit Spread the word about tax justice!

Dear Tax Justice campaigner, Thank you for downloading the Tackling Tax Havens Toolkit.

Tax dodging by multinationals, financial institutions and individuals has become big news, both in the UK and in poor countries. According to research by the Tax Justice Network, global elites are hiding legally and illegally an extraordinary 13 trillion ($21tn) of wealth offshore as much as the American and Japanese GDPs put together! In the UK alone there is an estimated tax gap of 120 billion in money lost to tax avoidance, tax evasion and tax simply left uncollected enough to plug the deficit. For developing countries the situation is much worse. Collectively, developing countries lose more to tax dodging by multinational companies than they receive in aid each year. That is money urgently needed to pay for essential public services, like teachers, doctors, roads and sanitation. Christian Aid estimates that every year aggressive tax avoidance and evasion deprives the developing world of at least US$160 billion (100 billion) in lost corporate tax. (This puts the UK aid budget of 7.36 billion in perspective.) Such an amount, if used according to current spending patterns, could save the lives of 350,000 children under the age of five a year. When companies or wealthy individuals pay less tax, ordinary people either end up paying more, or public services get cut. Its high time that companies cleaned up their act and governments got on with closing the international loopholes

Several organisations are already working hard on the campaign for tax justice. But to put a stop to this systemic tax avoidance, we need to keep building momentum. As someone already interested in the issues, you can help build the campaign. You dont need to be a world expert on tax to explain the key points and inspire others to get involved. We have done all the preparation for you! The Tackling Tax Havens toolkit offers everything you need to run meetings, workshops, presentations and discussion groups about tax justice. It consists of: An easy-to use 30 minute PowerPoint presentation (with guidance notes for the presenter) 3 Audio clips A printable handout including: Introduction and questions for further discussion Countering the Arguments crib sheet List of further resources Together we can Tackle Tax Havens. So, get out there and spread the word! Good luck! From the Tax Justice Network

How to use the Toolkit

This toolkit can be used with any size group. Its aim is to get participants thinking and talking about tax and tax havens and the link between them and important issues such as poverty, income inequality and corruption in the UK and developing countries. It will make participants aware of the need for Tax Justice and how they can get involved in the campaign to achieve it. It is up to you how you want to use the toolkit; the PowerPoint presentation and related discussion activities. However, we recommend that you try to make the session as interactive as possible. This will work best if you have at least 1 hour for your session. Materials: A willing group A venue with computer facilities, speakers and preferably a large screen A printer and some paper A voice and buckets of enthusiasm Timing: Presentation only (no audio clips/ activities) 30 mins Presentation + audio clips and 1 or 2 activities 1hr Presentation + audio clips and all extended activities 1- 2hrs (Timings will vary depending on how you use the materials, the length of the discussion and how fast you speak keep a watch with you if you are on a strict schedule.) Delivery: The presentation consists of 30 slides. If possible, when presenting position yourself so that you can see everybody in the room, have your notes in front of you and reach the button to change the slide. Remember that people need time to take in the information on a slide although weve tried to keep large chunks of text to a minimum. As a rough guide keep each slide visible for at least 1 minute. Each slide comes with explanatory notes that you can read out to the group. Feel free to add/ delete information as you wish but remember to practice speaking each slide so that you are comfortable with delivering the content. It might sound like common sense but when presenting try to speak clearly and audibly. Look up and make eye-contact with people when you can. Also remember to breathe and pause occasionally! Preparation: There is no need to become an expert to deliver the presentation just download and print out the slides, notes and guidelines and make sure you feel comfortable with the content. If you are interested or want to check anything, the sources of information used are: www.taxjusticenetwork.com - a wealth of articles www.takletaxhavens.com - the main site for the campaign N. Shaxson; Treasure Islands: Tax Havens and the Men who Stole the World (Vintage Books, 2011) Then: 1. Choose a group and tell them how important and great it would be for them to learn about tax 2. Confirm a time and a venue make sure that this has computer facilities with a screen and speakers so you can play audio clips (it is possible to give the presentation without audio) 3. Download all the files for the Toolkit onto your computer or storage device 4. Print out your notes and the handouts for the group 5. Practice and away you go!


The offshore system is a vast global network of financial centres that has grown exponentially during the last thirty years encouraged by deregulation and free-market ideology. They are a feature of globalisation that has hindered national governments in their pursuit of development, encouraged a dangerous dependency on debt and increased the gap between rich and poor. The lack of transparency in offshore dealings has been a major factor in the economic crisis, which started in 20j08. They continue to facilitate the transfer of wealth from public to private interests. Governments, after largely being complicit in the offshore system or forced into compliance through regulatory competition, are now suffering the strain of huge public deficits and unpopular austerity measures. They have begun to see the benefit in tackling tax havens and are enacting new regulation. What is needed, however, is a coordinated international effort to tackle this systemic problem. Currently the UK government is resisting or watering down (with an army of legal, financial and business experts) any proposed legislation, we need to keep up momentum, build pressure and put an end to this unfair system. This presentation explains: what tax havens are; the damage they do; what needs to be done to combat them; how people can help. 1. ACTIVITY: Introduction (10 15 mins divided equally between discussion/feedback) Get participants to spend 10 minutes discussing the questions in pairs: What is tax? What do you know about tax havens (and the recent scandals)? Listen to their answers (you could write their answers on a flipchart) 2. PRESENTATION: (30- 40 mins depending on length of discussion) Deliver the presentation 3. FINAL DISCUSSION/ ACTIVITY (choose these depending on time but leave at least 10 mins): 1. Using slide 26,get participants in 2s or 3s to discuss the links between tax havens and all the associated issues. Can they think of any more? Feedback to the group 2. ROLE PLAY: Using slide 29, get participants in 2s or 3s to think of all the arguments in favour and against taxation that they can think of. Then get them into pairs one plays a member of the pin suit army (pro tax) and the other is the tax justice campaigner. Listen to their answers. Decide in the group which arguments win. Get the participants to check their arguments with the crib sheet on the handout 3. Return to the questions from 1, have participants changed their mind about anything? 4. Activity: Get participants to draw up an action plan for what they will do to help the tax justice campaign.

Presentation Guidelines

Plan

 Tackling Tax Havens Jargon Buster

Adapted from www.tackletaxhavens.com

The person who has the right actually to enjoy the income or capital associated with owning something. The term is contrasted with legal or nominee owners, who may just be fronts who get no benet from the asset, but hide the real benecial owner. This would require companies to publish their nancial results separately Country By Country for each country in which they operate. Currently, companies are allowed to Reporting scoop up all these details into a single global (or regional) gure, making it impossible to find out what is happening in each country. This principle allows tax authorities to ignore any transaction, or step in a General Tax transaction, that is designed only or primarily to get a tax advantage. The Avoidance Principle principle is intended to steer courts away from being too permissive towards tax avoidance. One of these is currently being discussed by the UK parliament. Illicit Financial Flows Financial ows across borders that are either illicitly earned, transferred or used. Frequently described as dirty money. Breaking laws anywhere along the way earns such funds the label. Information Exchange Countries exchange information with each other about the assets of each others citizens, either for tax purposes or for other legitimate reasons. Information exchange treaties can be agreed between two countries (bilaterally) or multilaterally, i.e. between more than two countries. Shadow Banking Shadow banks behave like banks in that they borrow money and lend it on, at a prot. But they dont take deposits from regular customers, and they System fall outside regulation. The global nancial crisis that emerged from 2007 was, to a large degree, a run on the shadow banking system. The shadow banking system contains a wide array of shadow institutions, many of which are located offshore. Tax Avoidance/ By denition, tax evasion is an illegal usually criminal activity, by which a taxpayer escapes tax through deception. Tax avoidance, also by denition, Evasion means getting around the spirit of the law and the will of legislatures, but without actually breaking the law. There is a large grey area between the two. Transfer Pricing (and Multinational corporations have subsidiaries all over the world. When subsidiaries inside a company trade with each across borders, they can Transfer Mispricing) manipulate the internal transfer prices for the trade, in order to shift prots into tax havens (where they wont get taxed) and to shift their costs into high-tax countries, where they can be offset against tax. Trusts/Offshore Trusts A trust is a three-way arrangement that separates out different aspects of ownership of an asset. Under a standard trust a person (the trust settlor) gives up an asset for the benet of someone else (the beneciary) under a set of rules (the trust deed.) These rules are enforced by a third person, the trustee. Trusts are used extensively in tax havens, whose laws cover the arrangements in great secrecy and allow the settlor to merely pretend to have given away the asset (thus potentially escaping the tax bill on its income, for example), while in reality still controlling it. Unitary Taxation Under unitary taxation, the income of all the related parts of the company are combined and the prots are shared between the different countries where they were actually created by using an agreed formula based on a ratio of sales, employment costs and capital invested. The tricky part of this process is to get the different countries to agree the appropriate formula for apportioning the prots. Brazil has just adopted a form of this system. Beneficial Owner

 Role play Tackling Tax Havens

In pairs, one person should choose to be a banker/ accountant/ lawyer and use arguments from column A, whilst the second person should be a tax justice campaigner using column B. Swap pairs and see who wins! A B Tax avoidance is legal, so its Tax avoidance, by definition, involves getting around the spirit of the OK law. It is profoundly anti-democratic. It enables corporations that avoid tax to free-ride on the rest of us: taking the benefits from healthy and educated workforces, publicly guaranteed independent courts and safe contracts, roads, and so on, while passing the costs onto everyone else. It entrenches inequality and engenders disrespect for the law. It helps some (normally bigger) companies out-compete smaller ones. Company directors must Tax is not simply a cost. It is a distribution to society, out of profits; a serve shareholders, so they payment in exchange for services provided that allow them to make must minimise tax by all those profits the healthy and educated workforces, the infrastructure, the guarantee of contracts and the rule of law and lawful means so on. Tax havens help companies Tax havens do indeed do this, and its right that a company shouldnt avoid getting taxed twice on get taxed twice on the same income. But, you can sort these the same income problems out in several other ways. (Such as tax credits, proper tax treaties, or unitary tax for instance). Also, when tax havens are used to prevent this so-called double taxation, they also create something equally harmful: double non-taxation. Our tax haven is well- Some havens are cleaner than others, to be sure, but all fall woefully regulated, co-operative and short of acceptable behaviour. As a rule, the people in tax havens wont steal your money. In this sense, many of them are (reasonably) transparent well regulated. What they will do, however, is help you steal other peoples money, whether through tax evasion or avoidance, sophisticated insider trading, complex financial dealings, or whatever. Tax havens are outposts of Freedom is double-edged. As the economist John Maynard Keynes and many others have explained, and as the latest crisis shows, freedom freedom for elites and for financial interests in particular can mean bondage for ordinary citizens. In fact, many tax havens, particularly small ones where its easiest for financial interests to capture political institutions and even the media, can be rather repressive places, highly intolerant of criticism e.g. Jersey. Tax havens are pro-free We say: tax havens corrupt and distort global markets. They give markets and pro-business advantages to multinationals over their smaller, more locally-based competitors, which have nothing to do with the quality or price of their goods and services. They provide secrecy, which goes directly against the proper functioning of markets. Financial secrecy is necessary Legitimate confidentiality is one thing. But offshore secrecy is to protect peoples privacy another thing altogether. Tax and criminal authorities or financial regulators have legitimate reasons for obtaining information about their citizens or corporations financial affairs, even when their affairs are overseas. The alternative is tax evasion and other criminal activity, where already rich elites take the cream of globalisation and push the costs and risks onto the shoulders of everyone else.


False. A lot of journalists bought into the claim made by G20 leaders in April 2009 that the era of banking secrecy is over. But despite some modest steps such as a very limited penetration of Swiss bank secrecy by a few countries, for example, the OECD (a club of rich countries that the G20 tasked with implementing this) has delivered very little in practice. The offshore secrecy system is alive and still thriving. It is not tax havens, but high Demonstrably false. Tax evasion has always been with us, but some taxes, that cause tax evasion people will try to dodge taxes no matter what the tax rate is. and avoidance But the great global tax evasion epidemic really took off from around the 1980s exactly when the modern offshore system exploded onto the scene, and exactly at the time when marginal tax rates for high earners started to come down dramatically Tax competition is a good The process of competition between companies in a market bears no thing. It disciplines economic relation to the process of competition between countries spendthrift governments, on tax. The former is generally a good thing; the latter is always bad: forcing them to cut taxes and a race to the bottom. Think about it like this. When a company to compete with other cannot compete in a market it goes bankrupt, and a better one takes governments to provide the its place. For all the pain involved, this is a source of economic best services for the lowest dynamism. But what do you get when a country cannot compete? price A failed state that cant provide even basic essential services. This word forces says it all: this competition from tax havens is undermining democracy and accountable government. Its not tax havens that drain Providing elites in developing countries with untaxed, criminalised developing countries, but financial bolt-holes actively and dramatically undermines governance rapacious despots pillaging in these countries. Consider this. How many Nigerians stash their money secretly in London or Switzerland? How many British or Swiss their resources residents stash their cash in Lagos? There is a huge one-way net flow from poor to rich countries, and Global Financial Integrity estimated annual illicit outflows from developing countries at US$850 billion US$1 trillion in 2008, and growing fast. Tax havens had nothing to do False. First you need to understand the geography and business with the latest global model of tax havens. The International lists of tax havens produced by the OECD, the IMF and others promote the fantasy that tax financial crisis havens are mostly Caribbean islands or wealthy Alpine nations, and are mostly about tax. No, the most important secrecy jurisdictions are OECD countries, notably the United States and Great Britain, hosting offshore sub-jurisdictions such as Delaware and the City of London, and offshore satellites such as the Cayman Islands and Jersey. Luxembourg, Ireland and the Netherlands are major tax havens too. Their model is to get rich by offering wealthy individuals and corporations escape routes from the laws, rules and regulations of democratic societies elsewhere. Armed with these two insights, the havens central role in the crisis comes into view at last. They offered a get out of regulation free card to banks and other financial firms helping major global banks grow far faster than their onshore competitors and to become too big to fail. All this before we even look at illicit capital flows and the corporate use of the system. Worse still these problems have not seriously been tackled. Just as tax havens were central to the latest crisis so they will be behind the next one. And as if that were not bad enough by helping wealthy individuals and corporations shake off their tax burdens, tax havens are taking away our ability to pay for the gigantic mess they have created. Adapted from www.tackletaxhavens.com Bank secrecy is dead. The G20 and OECD have ushered in a new era of transparency

Book: Nicholas Shaxon (2011), Treasure Islands: Tax Havens and the Men Who Stole the World Audio: http://www.tackletaxhavens.com/taxcast/ - listen to a monthly 15 minute podcast about tax justice Film: http://vimeo.com/44017057 - The Missing Billions film about UKUncut Legal Action against HMRC Websites: http://www.taxresearch.org.uk/Blog/ - a blog by tax expert Richard Murphy www.tackletaxhavens.com - the website of the tackle tax havens campaign www.taxjustice.net - The Tax Justice Network: a wealth of articles and resources on important issues http://www.actionaid.org.uk/index.asp?page_id=102017 - Actionaids Tax Justice Campaign http://taxjustice.blogspot.co.uk/ - regular international tax justice blogs http://www.pcs.org.uk/en/campaigns/tax-justice/ - tax justice: public and commercial services union http://www.church-poverty.org.uk/taxbus - Church Action on Poverty http://www.christianaid.org.uk/ActNow/trace-the-tax/index.aspx - Christian Aid http://www.ethicalconsumer.org/ethicalcampaigns/taxjusticecampaign.aspx - Ethical Consumer Magazine http://www.ukuncut.org.uk/ - UKUncut http://www.guardian.co.uk/news/datablog/2011/oct/11/ftse100-subsidiaries-tax-data - FTSE 100 companies and tax avoidance data http://www.38degrees.org.uk/ - 38 Degrees campaign organisation For the view from a company offering offshore services, see: http://www.offshorecompany.co.uk/taxhavens/corporate.htm

Where to find more information