Tax havens and the FTSE100: the full list http://www.guardian.co.uk/news/datablog/2011/oct/11/ftse100-subsidiaries-tax-data

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Monitoring the OECD’s Campaign Against Tax Competition, Fiscal Sovereignty, and Financial Privacy: Strategies for Low-Tax Jurisdictions “The Paris-based Organization for Economic Cooperation and Development has an ongoing anti-tax competition project. This effort is designed to prop up inefficient welfare states in the industrialized world, thus enabling those governments to impose heavier tax burdens without having to fear that labor and capital will migrate to jurisdictions with better tax law. This project received a boost a few years ago when the Obama Administration joined forces with countries such as France and Germany, which resulted in all low-tax jurisdictions agreeing to erode their human rights policies regarding financial privacy. The tide is now turning against high-tax nations – particularly as more people understand that ever-increasing fiscal burdens inevitably lead to Greek-style fiscal collapse. Political changes in the United States further complicate the OECD’s ability to impose bad policy. Because of these developments, lowtax jurisdictions should be especially resistant to new anti-tax competition initiatives at the Bermuda Global Forum.” http://freedomandprosperity.org/files/OECD-Bermuda.pdf

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Tax havens: the heart of the global economy “[...] tax havens have grown so fast in the era of globalization, since kind of the 1970s, that they have now become right—they are now right at the heart of the global economy and are absolutely huge. I mean, there are 10—anywhere between 10 and 20 trillion U.S. dollars sitting offshore at the moment. Half of world trade is processed in one way or another through tax havens. It’s all around us, and it’s absolutely huge. [...]” http://www.australia-offshore.com/offshore-banking-and-tax-havens-have-become-the-heart-of-global-economy/

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Download a free version of Policy and Choice – on the impact of behavioral economics on government tax and spending policies. The authors take a stream of research which had highlighted particular ‘nudges’ and turn it into a comprehensive framework for thinking about policy in a more realistic world where psychology is incorporated into economic decisionmaking. http://www.brookings.edu/press/Books/2011/policyandchoice.aspx

Cf. http://www.amazon.com/Policy-Choice-Finance-Behavioral-Economics/dp/0815704984/

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How to Pay No Taxes: 11 shelters, dodges, and rolls—all perfectly legal—used by America’s wealthiest people http://www.businessweek.com/magazine/content/11_16/b4224045265660.htm

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Don’t Tax the Rich “[...] some on the left are better at posturing than thinking.” http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2011/03/the-intelligent-question-posed-by-saturdays-march-is-what-alternative-is-there-to-osbornes-spending-cuts-theres-on.html

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Cross-Country Comparisons of Corporate Income Taxes
“To our knowledge, this paper provides the most comprehensive analysis of firm-level corporate income
taxes to date. We use publicly available financial statement information for 11,602 public corporations
from 82 countries from 1988 to 2009 to estimate country-level effective tax rates (ETRs). We find
that the location of a multinational and its subsidiaries substantially affects its worldwide ETR. Japanese
firms always faced the highest ETRs. U.S. multinationals are among the highest taxed. Multinationals
based in tax havens face the lowest taxes. We find that ETRs have been falling over the last two decades;
however, the ordinal rank from high-tax countries to low-tax countries has changed little. We also
find little difference between the ETRs of multinationals and domestic-only firms. Besides enhancing
our knowledge about international taxes, these findings should provide some empirical underpinning
for ongoing policy debates about the taxation of multinationals.” http://www.nber.org/papers/w16839.pdf

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Tax competition at work: Amazon vs Illinois

Hello,

For well over a decade, the Amazon Associates Program has worked with thousands of Illinois residents. Unfortunately, a new state tax law signed by Governor Quinn compels us to terminate this program for Illinois-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by Illinois-based affiliates like you – even if those retailers have no physical presence in the state.

We had opposed this new tax law because it is unconstitutional and counterproductive. It was supported by national retailing chains, most of which are based outside Illinois, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that its enactment forces this action.

As a result of the new law, contracts with all Illinois affiliates of the Amazon Associates Program will be terminated and those Illinois residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, or SmallParts.com. Please be assured that all qualifying advertising fees earned prior to April 15, 2011 will be processed and paid in full in accordance with the regular payment schedule. Based on your account closure date of April 15, 2011, any final payments will be paid by July 1, 2011.

You are receiving this email because our records indicate that you are a resident of Illinois. If you are not currently a permanent resident of Illinois, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state after April 15, please contact us for reinstatement into the Amazon Associates Program.

To be clear, this development will only impact our ability to continue the Associates Program in Illinois, and will not affect the ability of Illinois residents to purchase online at http://www.amazon.com from Amazon’s retail business.

We have enjoyed working with you and other Illinois-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to Illinois residents.

Regards,

The Amazon Associates Team

http://directmatchmedia.com/amazon-terminates-illinois-affiliates.php

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Forget about the Gates Foundation. The world’s biggest charity owns IKEA—and is devoted to interior design: “[...] The overall set-up of IKEA minimises tax and disclosure, handsomely rewards the founding Kamprad family and makes IKEA immune to a takeover. And if that seems too good to be true, it is: these arrangements are extremely hard to undo. [...]” https://www.economist.com/node/6919139?story_id=6919139

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I want to thank John H, one of my avid readers, for sharing this important information with us.

Below you will find a machine translation of the Tax agreement that is to be signed by Panama and the U.S. on the 30th of November. I have also included an article from La Prensa with comments by the Minister of Finance and other interested parties.

My understanding after reading these brief 12 articles is that it gives the U.S. complete access to any information it may request on any U.S. resident or citizen who it believes may hold assets in Panama. [...]

http://primapanama.blogs.com/_panama_residential_devel/2010/11/us-panama-tax-agreement-in-english.html

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“Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization [...]

Google, the third-largest U.S. technology company by market capitalization, hasn’t been accused of breaking tax laws. “Google’s practices are very similar to those at countless other global companies operating across a wide range of industries,” [...]

The tactics of Google and Facebook depend on “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue [...]

Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google’s tax disclosures.

“Who is it that paid for the underlying concept on which they built these billions of dollars of revenues?” Briloff said. “It was paid for by the United States citizenry. [...]

In February, the Obama administration proposed measures to curb shifting profits offshore, part of a package intended to raise $12 billion a year over the coming decade. While the key proposals largely haven’t advanced in Congress, the IRS said in April it would devote additional agents and lawyers to focus on five large transfer pricing arrangements.

Income shifting commonly begins when companies like Google sell or license the foreign rights to intellectual property developed in the U.S. to a subsidiary in a low-tax country. That means foreign profits based on the technology get attributed to the offshore unit, not the parent. Under U.S. tax rules, subsidiaries must pay “arm’s length” prices for the rights — or the amount an unrelated company would.

Because the payments contribute to taxable income, the parent company has an incentive to set them as low as possible. Cutting the foreign subsidiary’s expenses effectively shifts profits overseas.

After three years of negotiations, Google received approval from the IRS in 2006 for its transfer pricing arrangement, according to filings with the Securities and Exchange Commission.

The IRS gave its consent in a secret pact known as an advanced pricing agreement. Google wouldn’t discuss the price set under the arrangement, which licensed the rights to its search and advertising technology and other intangible property for Europe, the Middle East and Africa to a unit called Google Ireland Holdings, according to a person familiar with the matter.

That licensee in turn owns Google Ireland Limited, which employs almost 2,000 people in a silvery glass office building in central Dublin, a block from the city’s Grand Canal. The Dublin subsidiary sells advertising globally and was credited by Google with 88 percent of its $12.5 billion in non-U.S. sales in 2009.

Allocating the revenue to Ireland helps Google avoid income taxes in the U.S., where most of its technology was developed. The arrangement also reduces the company’s liabilities in relatively high-tax European countries where many of its customers are located.

The profits don’t stay with the Dublin subsidiary, which reported pretax income of less than 1 percent of sales in 2008, according to Irish records. That’s largely because it paid $5.4 billion in royalties to Google Ireland Holdings, which has its “effective centre of management” in Bermuda, according to company filings. [...]

Tax planners call such an arrangement a Double Irish because it relies on two Irish companies. One pays royalties to use intellectual property, generating expenses that reduce Irish taxable income. The second collects the royalties in a tax haven like Bermuda, avoiding Irish taxes.

To steer clear of an Irish withholding tax, payments from Google’s Dublin unit don’t go directly to Bermuda. A brief detour to the Netherlands avoids that liability, because Irish tax law exempts certain royalties to companies in other EU- member nations. The fees first go to a Dutch unit, Google Netherlands Holdings B.V., which pays out about 99.8 percent of what it collects to the Bermuda entity, company filings show. The Amsterdam-based subsidiary lists no employees. [...]

Microsoft, based in Redmond, Washington, has also used a Double Irish structure, according to company filings overseas. Forest Laboratories Inc., maker of the antidepressant Lexapro, does as well [...]

While the administration “remains concerned” about potential abuses, officials decided “to defer consideration of how to reform those rules until they can be studied more broadly,” said Sandra Salstrom, a Treasury spokeswoman. The White House still proposes to tax excessive profits of offshore subsidiaries as a curb on income shifting, she said.

The rules for transfer pricing should be replaced with a system that allocates profits among countries the way most U.S. states with a corporate income tax do — based on such aspects as sales or number of employees in each jurisdiction, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan Law School. [...]”

http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html

Update: http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/After-news-of-Google-tax-dodges-Obama-raises-money-with-Google-execs-105513473.html

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“Panama is one of the most well kept secrets when you look at what media publishes about offshore banking. [...] When it comes to Switzerland then what happened to them with the UBS case was pretty much U.S. blackmailing account holders data by threatening to damage UBS business through it’s branches in jurisdictions where U.S. has power. Many offshore banks are open to such attacks and history has shown that governments who don’t like tax havens have taken advantage of this.

“Now what makes Panama so great is their Panama canal which is needed currently by most of the Western nations. Experts agree that this canal provides Panama with a unique type of immunity against international pressure. It is very unlikely for any country to force Panama to loosen it’s banking secrecy because they risk with loosing access to the canal. This canal is really like a golden goose for Panama and hasn’t only been beneficial to offshore banking but for many different offshore services.

“Offshore-dervied income is not taxed and does not need to be reported in Panama. You can register a company or a Foundation that banks in there and has an office in Panama. You will not pay any Panama taxes if all the income is derived from offshore. Income tax has to be paid on revenue generated from Panama though. Bearer Share Corporations is another good reason why you might want to consider Panama. You can have full anonymity with Bearer Share which most of the jurisdictions have eliminated these days thanks to international pressure.

“Panama uses U.S. dollar so there are no currency conversion costs to worry about and no currency devaluation problems either that plague most of the little tax haven countries. It is a stable and free country. They have free elections and they care about their people. About 15%-20% of the work force are employed by the 135 banks and there are about 400,000 corporations registered in there. Only information sharing that is going on is related to criminal cases on file in a court as a criminal prosecution. This means serious criminal cases like money laundering, narcotics trafficking, terrorism and child pornography. They have little interest in pursuing fiscal crimes. Income tax violations in Panama are considered civil offenses only.

“Their savings and loan guarantees aren’t the best $10,000 per account but since there are so many banks to choose from this is nothing to worry about. [...] They also have their own ACH system for online transfers.

“[...] One of the most exciting movements that could make you consider Panama though is that they are very much supported by United States. In fact with the world banking crisis it was found that people backing the Panama Free Trade Agreement including Citigroup and AIG have subsidiaries in Panama that would be empowered with the new rights if the FTA goes through. So this is a sign that even though there is a lot of fight against tax havens it might be that U.S. just wants to concentrate the tax haven customers into jurisdiction where they can benefit from this offshore money.”

http://www.offshorebankingcompanies.com/offshore-banking-in-panama/

Cf. http://www.superbancos.gob.pa/advertencia/offshore_eng.asp

Cf. “Austria, Andorra, The Bahamas, Chile, Hong Kong, China, Liechtenstein, Macao, China, Malaysia, Panama, the Philippines, San Marino and Singapore have passed legislation aimed at implementing their commitments to the international tax standard.” http://www.oecd.org/dataoecd/32/45/43757434.pdf

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