EU Transparency International for action against offshore secrecy jurisdictions

LAHORE: Transparency International European Union Tuesday called upon member states in Europe to step up efforts in tackling offshore secrecy jurisdictions in a bid to stop money-laundering, tax evasion and tax avoidance after the recent Paradise revelations.

Transparency International EU states on its website: “The European Commission has proposed legislation that would disclose information to the public on offshore companies and offshore transactions, however European governments have been reluctant to give their approval.”

The Transparency website quoted its European Union Director Carl Dolan as saying: “EU governments such as Germany have been standing against the rising tide of financial transparency. This latest leak shows that in the digital age transparency is inevitable, the only choice is whether or not to control the flow of information. After the Panama Papers the European Commission sprang into action, but national capitals have yet to sign up to two EU proposals which would help shed light on this kind of money laundering, tax evasion and avoidance.

The website asserted: “Transparency International EU have long been calling for two instruments which would give the public a better insight into the use of offshore structures, namely public country by country reporting requiring multinationals to publish key financial data for each country of operation (including tax havens), and beneficial ownership transparency to put an end to anonymous companies and trusts, and make it harder for the corrupt to hide stolen assets. Transparency International EU hence calls on European governments to take immediate action and end this kind of secrecy which allows corruption to flourish.”

Research into discussion at the European Union: It is imperative to note that quite recently, a Spanish firm handling and specializing in various fields of the Law, ranging from corporate and commercial aspects to fiscal or bankruptcy matters, had viewed: “Offshore Companies are incorporated with the aim of managing, registering, conducting or operating businesses in foreign countries (any country outside of which the business was originally registered and/or the place of residence of the shareholders and board of directors). They are typically set up for financial, legal and tax benefits. If a company sets up or relocates to a foreign country, they may enter into contracts, open bank accounts, own, purchase and sell property, which is essentially the same as any other company The EU has made efforts to crackdown on companies that are trying to avoid paying taxes.

The EU published a list of international tax havens in June 2015, which included Hong Kong, Brunei, Cayman Islands, British Virgin Islands and Panama.”

The aforementioned Spanish law company had added: “The European Parliament estimates that tax avoidance by multinationals costs European Union Countries around 70 billion euros per year in lost revenues. The EU’s efforts to tackle tax havens are weakened by the fact that some Member States engage in harmful practices. Tax havens have proven difficult to influence and there is a general lack of commitment not only within the EU but also internationally to eliminate these havens, as countries have been historically linked to tax havens. If the EU can influence the behaviour of citizens and businesses that operate within the EU, they can reduce if not remove the harmful effects of tax havens. Europeans and businesses that are playing fair are the ones suffering and paying higher taxes as a result. The billions of euros lost in tax avoidance annually could be spent bettering Member States’ public services, employment and growth.”

Offshore wealth and the United States:

Research shows that in April 2016, an “Oxfam America” report had revealed: “America's biggest companies are holding about $1.4 trillion in cash offshore to avoid paying billions in US taxes. This policy has encouraged some firms -- including Apple, Microsoft and Google etc to hold huge amounts of cash overseas. Even though large companies have faced public outrage for stashing cash outside their home country, the practice is legitimate and the companies say it would be detrimental to repatriate the money.”

The famous “Forbes,” magazine had opined: “The US government levies a 35 per cent tax rate on repatriated cash. That's a much higher rate than many companies currently pay, according to Oxfam. It said Apple's effective corporate tax rate was 25.9 per cent between 2008 and 2014. The new Oxfam report shows that Apple holds the most money offshore of any major U.S. company, at $181 billion.”

Research further found out that in August 2013, another “Forbes” report had stated: “Apple may get the brunt of the attention for its use of offshore havens to offset the taxes it pays in the U.S., but it’s hardly alone. Six of the biggest names in technology -- Apple, Microsoft, IBM, Cisco Systems, Hewlett-Packard and Google – ranked in the Top 15 of the 100 publicly-traded companies (as measured by revenue) with the most money held offshore, according to a new report called “Offshore shell Games” by a federation of public interest research groups.”

The report had revealed: “By booking profits to subsidiaries registered in tax havens, multinational corporations are able to avoid an estimated $90 billion in federal income taxes each year. These subsidiaries are often shell companies with few, if any employees, and which engage in little to no real business activity.” The Top 15 companies for 2012 are: General Electric, Apple, Pfizer, Microsoft, Merck, Johnson & Johnson, IBM, Exxon Mobil, Citigroup, Cisco Systems, Abbott Laboratories, Procter & Gamble, Hewlett-Packard, Google and PepsiCo. Together, they held $776 billion off shore through a combined 859 tax haven subsidiaries.”

As of 2012, 82 out of the top 100 publicly-traded US companies operated, collectively, 2,686 subsidiaries in tax haven jurisdictions and only 21 of the top 100 disclose what they would expect to pay in taxes if they didn’t keep profits offshore. 

These companies collectively owe over $93 billion in additional federal taxes, an amount equivalent to entire state budget of California and more than what the American federal government spends on education!

Research further shows that in 2009, the US Government Accountability Office had reported that 83 of the 100 largest American publicly traded corporations and 63 of the 100 largest contractors for the U.S. federal government were maintaining subsidiaries in countries generally considered havens for avoiding taxes.

The United States Department of Treasury had estimated that in 2011 the Caribbean Banking Centers, which include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama, held almost $2 trillion dollars in United States debt..

Of this, approximately US$1.4 trillion was then estimated to have been held in the Cayman Islands alone.

Meanwhile, the “Wall Street Journal” in a study of 60 large American companies had found out that they deposited $166 billion in offshore accounts in 2012, sheltering over 40 per cent of their profits from American taxes

A 2012 report by the British Tax Justice Network had estimated that between US$21 trillion and $32 trillion was sheltered from taxes in unreported tax havens worldwide

Last but not least, a 2014 study had estimated that the amount of global offshore wealth at US$7.6 trillion. However, this estimate included financial assets only.