Asian logging companies 'use British islands for tax dodging'

Calls for crackdown as investigation finds huge Indonesian corporations evading tax through network of secret shell companies in British Virgin Islands and other tax havens

The Guardian, The Observer, John Vidal, environment editor,  Saturday 10 May 2014

In the British Virgin Islands it is easy to set up shell companies, which makes
them popular with companies and the wealthy. Photograph: Neil Rabinowitz/Corbis

Giant Asian logging companies that make billions from destroying rainforests use a labyrinth of secret shell companies based in a UK overseas territory, the British Virgin Islands (BVI), which operate as a tax haven, according to documents seen by the Observer. The 13 companies own millions of acres in Indonesia, provide much of the world's palm oil, timber and paper, and use complex legal and financial structures to keep their tax liabilities low.

An unpublished two-year investigation by anti-corruption experts, and seen by the Observer, says Britain should launch a major investigation into the use of the BVI and other tax havens by "high-risk" sectors such as Indonesian forestry. This follows a court case in Jakarta in which one of the world's largest palm oil companies, owned by billionaire Sukanto Tanoto, was fined US$205m after being shown to have evaded taxes by using shell companies in the BVI and elsewhere. The company has agreed to pay the fines.

Documents arising from the case show that Tanoto's company, Asian Agri, systematically produced fake invoices and fake hedging contracts to evade more than $100m of taxes.

According to evidence contained in more than 8,000 papers, the company, which employs 25,000 people in 14 subsidiaries and owns 165,000 hectares of plantations, was engaged in "routine and systematic fraudulent accounting and book-keeping practices" using British jurisdictions.

It is easy to set up shell companies in the BVI, and this makes them a favourite destination for Asian corporations and individuals. A cache of leaked documents obtained by the International Consortium of Investigative Journalists showed last year that nine of Indonesia's 11 richest families had used tropical tax havens.

Although there are legitimate uses for offshore companies, critics say tax havens fuel corruption and allow corporations and individuals to dodge taxes. "Powerful forest and palm oil conglomerates have set up shell companies in the BVI, Cayman Islands and Bermuda, but lack of transparency – including public access to the names of the actual owners of shell companies – makes it difficult for governments to monitor the legality of their activities," said Stephanie Fried of Ulu Foundation, a US organisation that tracks international financial flows. "Clearly, a full international investigation is needed not only by Indonesian authorities, but also by those in the BVI, the UK and other jurisdictions."

A government spokesperson said: "The government put tax and transparency at the heart of the UK's G8 presidency. As a result, the UK's overseas territories are consulting on establishing a central registry of beneficial ownership and on whether it should be publicly accessible. We believe a registry of this kind would provide the best outcome for sound corporate behaviour and for helping authorities, including those in developing countries,prevent misuse of companies for illicit purposes." 

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China Offshore Secrets

Asian logging companies 'use British islands for tax dodging' - New
Wealthy in China need new tax haven as Switzerland U-turns on banking privacy - New
Offshore tax-dodging piece shows anti-Chinese bias: report
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Swiss bank accused of helping clients evade US taxes
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Dutch savers have €1.1bn in Luxemburg and Austria: tax office
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The nation at the heart of the offshore scandal: Britain
Leaks reveal secrets of the rich who hide cash offshore

Wealthy in China need new tax haven as Switzerland U-turns on banking privacy

Want China Times, Staff Reporter 2014-05-10

The Credit Suisse Group building in Zurich, Switzerland, March 12, 2012.
(Photo/CFP)

The agreement of Switzerland to disclose information on banking accounts in its territory, at the risk of its time-honored status as the world's foremost tax haven, may prompt the wealthy worldwide, including Chinese nationals, to search for new shelters for their fortunes.

Switzerland, the world's largest offshore financial center, announced the sea change in its policy on May 7, pledging to turn in detailed information on the banking accounts of foreigners in the nation, which represents a breakthrough in the global crackdown on tax evasion. The change marks a departure from the nation's insistence over several hundred years on protecting the privacy of bank customers.

The change has been made apparently in response to the long-standing pressure of Western nations, notably Germany, France, and the UK, which have urged other nations to include Switzerland on a blacklist of "uncooperative tax havens," due to the convenience for some enterprises and individuals worldwide to use their accounts in the country to evade tax and launder money.

The US and other Western nations have stepped up their pressure on Switzerland to change its banking policy, as part of their effort to crack down on tax evasion amid their dire financial straits.

The development coincides with an anti-graft campaign sweeping China. In 2013, the State Council issued a decree requiring Chinese residents to report their overseas assets and liabilities, violation of which are liable to just under 300,000 yuan (US$48,200) in fines for institutions and just under 50,000 yuan (US$8,000) for individuals.

According to Shanghai-based China Business News, Huo Jianguo, president of the Institute for International Trade, Economy, and Cooperation, under the Ministry of Commerce, pointed out the decree was meant to improve transparency with regard to the assets of Chinese nationals. Yang Xianyong, researcher at the Institute of Finance and Economy, under the Chinese Academy of Social Sciences, said that the decree means the government is preparing to levy tax on overseas assets.

As the world's largest offshore financial center, Switzerland boasts over 300 private banking institutions, which manage US$2 trillion of offshore assets, or one third of global savings.

Many experts believe that with Switzerland facing mounting pressure on its operations of offshore financial centers, Singapore may overtake its status in the future. As the world's second largest offshore center now, Singapore boasted US$1.3 trillion of assets, mainly owned by customers from Asia-Pacific and the Middle East, under the custody of its fund managers as of the end of 2012. Singapore also agreed on May 6 to disclose information on the banking accounts of US nationals and enterprises, in order to facilitate a crackdown on tax evasion by the US government.

Although most other tax havens, such as Liechtenstein, Cypress, Luxembourg, Monaco, Bermuda, and the British Virgin Islands, have pledged to take similar steps, rich people around the world can still transfer their assets to Panama and Dubai, among others, which have yet to pledge information disclosure for their foreign-owned bank accounts.

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Tax dodging: George Osborne plans to strengthen criminal law

Chancellor wants to make it easier to impose fines and jail terms on tax avoiders exploiting offshore havens

The Guardian, Phillip Inman in Washington, Saturday 12 April 2014

George Osborne during the IMF/World Bank 2014 Spring Meetings in
Washington Photograph: Joshua Roberts/Reuters

George Osborne is planning to make it easier to impose jail terms or heavy fines on British residents using offshore tax havens to cheat the exchequer out of billions in revenue.

The chancellor, who is in Washington at the International Monetary Fund's spring meeting, has drafted a criminal offence of failing to declare offshore income as he steps up a long-running campaign to crack down on tax dodging.

At present, HMRC has to prove a British resident has deliberately sent funds abroad to dodge tax. The need to prove intent has undermined several prosecutions and allowed those under investigation to escape with only light fines, Treasury officials said.

HMRC estimates £5bn a year is lost to the exchequer from tax evasion by wealthy individuals, out of a £35bn overall loss to evasion and non-payment.

"It is totally unacceptable for people not to pay tax that is due in the UK," Osborne said between meetings at the IMF spring conference. "The vast majority of wealthy people pay their taxes and their share of tax income has been going up. HMRC believes it has been difficult getting the outright tax evader."

The UK government is working with 50 other countries in a pilot project to share information about potential tax avoiders. The project is co-ordinated by the Organisation for Economic Co-operation and Development, which has laid out rules for information sharing between governments on potential tax dodgers.

Osborne said previous governments had failed to put rigorous rules in place. "It has been a problem in the British crown dependencies, which have not done enough in the past to be transparent. But we have been tough and as a result they have fallen into line."

While much of the discussion of tax havens has focused on the British Virgin Islands and the Cayman Islands, ministers believe a larger proportion of untaxed cash is in Lichtenstein, Luxembourg and Switzerland.

In a document available for consultation from Monday, the Treasury says: "Our published criminal investigation policy will still apply, meaning criminal investigation will be pursued where there is a need to send a strong deterrent message or where conduct is serious enough that only a criminal sanction is appropriate.

"We have committed to increase the number of investigations fivefold. This will result in over 1,000 additional prosecutions for tax evasion by the end of the 2014-15 financial year."

In 2010-11, HMRC secured only 165 prosecutions, compared with a projected haul of 1,174 next year.

The government has a chequered history in its pursuit of tax avoidance and evasion. Osborne said £1.5bn in extra tax was recovered in the last two years after HMRC stepped up the number of investigations. But last year HMRC came under fire after it recovered less than £800m following a deal with Switzerland that was expected to reap £3.1bn in extra tax.

Margaret Hodge, chair of the public accounts committee, criticised the original estimate as "completely unrealistic".

HMRC's tax assurance commissioner, Ed Troup, blamed the constraints of Swiss bank secrecy even though the deal was billed as overcoming previous restrictions on disclosure by Swiss bank account holders.

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Letterbox in Luxembourg one way Apple avoids paying billions in worldwide tax

Smh.com.au, Charles Duhigg, David Kocieniewski, April 30, 2012

RENO, Nevada: Apple, the world's most profitable technology company, doesn't design iPhones in Nevada. It doesn't run AppleCare customer service from Reno. And it doesn't manufacture MacBooks or iPads anywhere nearby.

Yet, with a handful of employees in a small Reno office in a company subsidiary named Braeburn Capital, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other US states.

Apple's headquarters are in Cupertino, California. By putting an office to collect and invest the company's profits in Reno, just 350 kilometres away, Apple sidesteps state income taxes on some of those gains.

California's corporate tax rate is 8.84 per cent. Nevada's, zero.

Setting up an office in Reno is one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars a year.

As it has in Nevada, Apple has created subsidiaries in low-tax countries such as Ireland, the Netherlands, Luxembourg and the British Virgin Islands - some little more than a letterbox in Luxembourg or an anonymous office in Nevada - that help cut the taxes it pays.

Almost every large corporation tries to minimise taxes. For Apple, the savings are especially alluring because the company's profits are so high. Wall Street analysts predict Apple could earn up to $US45.6 billion ($43.5 billion) this fiscal year - a record for a United States business.

Braeburn is a variety of apple that is simultaneously sweet and tart. When someone in the US buys an iPhone, iPad or other Apple product, a portion of the profits from that sale is often deposited into accounts controlled by Braeburn, and then invested in stocks, bonds or other financial instruments, company executives say. Some profits from those investments are shielded from California tax authorities by virtue of Braeburn's Nevada address.

Since founding Braeburn in 2006, Apple has earned more than $US2.5 billion in interest and dividend income on its cash reserves and investments around the globe. What's more, Braeburn allows Apple to lower its taxes in other states because many of those jurisdictions use formulas that reduce what is owed when a company's financial management occurs elsewhere.

While Apple's Reno office helps the company avoid state taxes, its international subsidiaries - particularly the company's assignment of sales and patent royalties to other nations - help reduce taxes owed to the US and other governments.

The Luxembourg subsidiary, named iTunes S.ar.l., has just a few dozen employees, according to corporate documents filed in that nation and an executive. But when customers across Europe, Africa or the Middle East - and potentially elsewhere - download a song, television show or app, the sale is recorded in this small country, present and former executives say.

In 2011, iTunes S.ar.l.'s revenue exceeded $US1 billion, an Apple executive said, representing about 20 per cent of iTunes' worldwide sales.

Apple, say former executives, has been particularly talented at identifying legal tax loopholes.

Apple was a pioneer of an accounting technique known as the ''Double Irish with a Dutch Sandwich'', which reduced taxes by routing profits through two Irish subsidiaries - Apple Operations International and Apple Sales International - and the Netherlands and the Caribbean.

Without such tactics, Apple's federal tax bill in the US would have been $US2.4 billion higher last year, a recent study by a former Treasury Department economist, Martin Sullivan, said. As it stands, the company paid cash taxes of $US3.3 billion around the world on its reported profits of $US34.2 billion last year, a tax rate of 9.8 per cent.

Apple, in a statement, said it ''pays an enormous amount of taxes which help our local, state and federal governments. In the first half of fiscal year 2012, our US operations have generated almost $US5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of US income tax''.

The New York Times

Tax havens must name evaders, says Ed Miliband

Labour leader demands Jersey, Guernsey and the Isle of Man reveal identities of those with money hidden on islands

guardian.co.uk, TheObserver, Daniel Boffey, policy editor, Sunday 15 January 2012

The Channel islands are among the areas Ed Miliband has demanded
 reveal the identities of tax evaders on the islands.
Photograph: Travel Ink/Getty/Gallo Images

Ed Miliband, the Labour leader, is to demand that the government forces Jersey, Guernsey and the Isle of Man to reveal the identity of British tax evaders with money hidden on the islands.

The tax havens, which are crown dependencies, are costing the government billions every year as the rich protect their money from Revenue and Customs probes through front companies and trusts.

Miliband will this week call for negotiations to begin with the governments on the three islands. He will also demand ministers follow up the talks with threats to shame the islands on the international stage by placing them on a globally recognised blacklist drawn up the Organisation for Economic Co-operation and Development (OECD)..

The move is part of the Labour leader's attempt to define himself as the foremost campaigner in British politics against the excesses of capitalism. He will claim that every £1m raised by his policy on tax havens is equivalent to a year's salary for 50 newly qualified teachers.

UK residents with money abroad are required to pay tax in Britain on the income they receive, but many do not declare that they have money stashed away.

Jersey, Guernsey and the Isle of Man have not been co-operating with UK authorities' requests for the identity of people with money on the islands. Richard Murphy, of Tax Research UK, said the country could recoup £2.4bn.

The OECD has previously been criticised for not blacklisting the three islands amid speculation that the explanation was their status as UK-owned. The US state of Delaware is also not on the list despite its lack of co-operation with tax officials. The G20 countries have threatened the use of sanctions against OECD- blacklisted tax havens that have not lived up to demanded levels of transparency.

Potential sanctions for transgressors include extra audits of those who are found to use tax havens and curbs on tax deductions claimed by businesses using the territories. Such sanctions would be hugely damaging to Guernsey, the Isle of Man and Jersey, which would be concerned that the super-rich on the islands would take their wealth elsewhere.

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On the trail of the offshore tax dodgers

BBC News, by Ian Pollock, Personal finance reporter, 13 December 2011 

Related Stories 

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Greg Skyte, the man in charge of the search for
offshore tax dodgers

The government's attempts to squeeze more money from offshore tax dodgers is being run from just about the most nondescript set of offices you could possibly imagine.

Based at the back of a tax advice centre in the middle of Birmingham, the Offshore Co-ordination Unit (OCU) is the latest measure of HM Revenue & Customs (HMRC) to tackle offshore tax evasion.

As the name of the OCU suggests, it will try to co-ordinate the Revenue's scrutiny of the extra information it is now receiving on UK taxpayers with money abroad.

That includes data generated by recent tax deals with the Liechtenstein and Swiss governments.

"The information HMRC holds is vast and we hold about 80 times more data than the British Library," says the new unit's boss Greg Skyte.

"It's about getting a grasp on all the data we have. The unit is about placing the right data with the right people and making the best use of the data we have."

Time to confess

The unit's first salvo has been to write to the first 1,000 of about 6,000 UK residents who were recently revealed to own accounts with the HSBC bank in Switzerland.

They will be asked to certify that they do not owe anything to HMRC - or confess that they do.

The betting must surely be that money will soon come in.

The deal struck with the Liechtenstein authorities in 2009 has already flushed out 1,721 people who have voluntarily admitted they hold untaxed money there.

As of March this year they had already paid over an extra £140m.

All that has happened even before the banks in Liechtenstein start writing, next March, to their account holders from the UK.

They will ask those customers to confirm they are in a regular position with the UK authorities, or tell them to close their accounts and take their money elsewhere.

Surely collecting hidden tax from the HSBC customers will now be a piece of cake, given that the UK authorities know their names and addresses, and details of their Swiss bank accounts as well?

Greg Skyte says previous experience suggests it will not be so easy.

"A lot of it [the money] is put through trust structures, there are company structures involved, and numerous individuals who are linked together and it's not always straightforward," he says.

"It is not always immediately apparent who has ownership of that bank account - we have to establish that before we can establish a liability."

Who are they?

It is no surprise to anyone that there are tax dodgers hiding their money offshore.

So what has the Revenue learned about the ones it has been uncovering recently?

"Anecdotally, people are hiding money offshore not necessarily just for tax purposes, the hiding of the tax is a secondary motive for them," says Greg Skyte.

"We do have cases where individuals have simply stashed significant sums offshore, purely for the purpose of keeping it hidden from the rest of their family," he explains.

That does not make it legal, of course.

His colleagues have also come across a few cases where the money has, apparently, originated in attempts to keep cash and assets out of the hands of the Nazis before and during World War II.

"What we have found under the Liechtenstein disclosure facility is that there are quite a number of individuals, some in the Jewish community, who have hidden their investments and assets from the war," Greg Skyte says.

"This has been passed down from generation to generation, and the assets have built up significantly due to the interest and we are finding instances where those assets run from hundreds of thousands to millions of pounds."

What has motivated the owners of all this cash to come clean now, apart from the fact that the Revenue is on to them?

"Those individuals who have now had it passed down to them are now asking if they really have to disclose this income," Greg Skyte explains.

"There are a lot of individuals who are in their twilight years who have had this playing on their conscience for quite a few years, maybe decades, and who want to come forward to put their tax affairs on the right footing before they die so they don't pass their concerns and liabilities to their children."

Thwarted no longer

The OCU's existence is part of the Revenue's grand plan to squeeze an extra £7bn from tax dodgers in the next few years.

Starting with just 25 staff, the Birmingham unit plans to expand to 100 or so in the next few years.

They are using computer programmes to scrutinise existing HMRC data, and numerous databases the Revenue is building with the information now being supplied to it by offshore banks and investment firms.

The Revenue's efforts to claw back potentially hundreds of millions of pounds of uncollected tax were kick-started in 2006.

After years of being thwarted, it finally won a breakthrough legal case, giving it the right to demand that banks operating in the UK reveal the names and addresses of UK customers with accounts offshore.

Since then, vital deals have been struck to exchange individuals' tax information with the governments of Liechtenstein and Switzerland, after both governments caved in under international pressure.

These countries had been two of the world's most notorious tax havens where secrecy had been the watchword of their banks.

As well as overseeing the existing operation of the Liechtenstein "disclosure facility" and the HSBC cases, the OCU will also directly scrutinise the affairs of up to 500 people a year, whose bank details the Revenue will soon be able to request from the Swiss authorities.

Not enough staff

Greg Skyte expects that quite a significant number of people his unit contacts will end up owing nothing to the UK tax authorities.

"Maybe they are not UK resident although they have a UK address, and [then there are] those who are non-domiciled. They may not fall under the UK tax umbrella," he points out.

"Because of their non-domiciled status, provided they hold their investments offshore, and they don't remit any of that income to the UK, they won't be chargeable on that liability."

What if people simply do not respond to a letter from the Revenue, or the UK's tax inspectors don't believe the person's claim that there is nothing to declare?

Greg Skyte says each case will be assessed, and if there is reasonable evidence the person has been less than frank they will receive further scrutiny.

But he admits that his department will not have the staff or resources to, for instance, call in all 6,000 people on the HSBC list for a grilling.

"It just isn't practical to issue letters inviting each and every one of those to come in," he says.

"We don't have the resource, short term, to take forward enquiries on such a scale. But we will ask questions on a significant number of those cases."

That does not mean someone can expect to get away scot-free simply by lying and signing a certificate saying they have no UK tax to pay.

Anyone who responds this way, even if they are not followed up immediately, will find they stay on file, with the information they supplied cross-checked in the future against other records held by both HMRC and foreign tax authorities.

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Occupy London sets out agenda on how it wants to change the economic world

Campaigners' policy statement calls for an end to tax havens and tax avoidance

guardian.co.uk, Peter Walker, Sunday 27 November 2011

Occupy London protesters have been camping outside St Paul's Cathedral
 in London for more than a month and have now issued a statement on how
 they want to end the injustices of the global financial system.
Photograph: Paul Hackett/Reuters

The Occupy London movement has agreed its first specific set of proposals about corporations, just over six weeks since it first set up camp outside St Paul's cathedral to campaign against the perceived excesses and injustices of the global financial system.

While the protest has gathered considerable publicity and expanded to three sites – as well as St Paul's, there are offshoot camps in Finsbury Square, further east, and inside a vacant office complex nearby owned by the Swiss bank USB – it has faced criticism about a lack of concrete demands. Agreeing these has proved a complicated process, as all decision are reached by consensus at mass meetings.

The first policy statement on corporations calls for an end to tax havens and tax avoidance, more transparency over business lobbying, and legal reforms to make individual executives more liable for the consequences of their decisions.

"Globally, corporations deprive the public purse of hundreds of billions of pounds each year, leaving insufficient funds to provide people with fair living standards. We must abolish tax havens and complex tax avoidance schemes, and ensure corporations pay tax that accurately reflects their real profits," the statement said.

On lobbying, it calls for laws to ensure "full and public transparency of all corporate lobbying activities". Finally, the statement argues that executives must be "personally liable for their role in the misdeeds of their corporations and duly charged for all criminal behaviour".

Soon after the first camp was set up on the western edge of St Paul's, after police prevented activists basing themselves near the headquarters of the London Stock Exchange, the group issued a general list of proposals, calling the current economic system "unsustainable" and opposing public spending cuts. The only other such statement called for more transparency and democracy within the Corporation of London, the governing authority within the City district, which owns some of the land adjoining St Paul's and which is taking legal action to evict the campers.

"From the moment the Occupy London Stock Exchange occupation started, in the full glare of the media and in the court of public opinion, we have continually been asked, 'What do you want?' "What are your demands?'" said Jamie Kelsey, a member of the corporations policy group.

"We are calling time on a system where corporates and their employees pursue profit at all costs. Just as corporates have played their role in the iniquities of the current system, they are also part of the solution and we invite them to join this important conversation."

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