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HAVENS CRUMBLE



16 June 2021



Dear Richard and Montserrat,


Originally from a 1973 meeting of finance ministers in the White House Library what is now the G7 sits to address economic problems which also frames the G20 Agenda and the 120 countries involved in their talks with actions that shape the world.

This June the G7 facing huge levels of C-19 debt and the need to fund regenerative infrastructure have addressed the offshoring of the tech giants profits and created a level basis for Corporate Tax.


As the G7 met, co-incedently ProPublica published the tax returns of thousands of wealthy Americans. For key US Barons, they estimated “true tax rates” of 0.10% for Buffett, 3.27% for Musk, and 0.98% for Bezos who, in 2011, claimed a $4,000 tax credit for his children. Adding to public ire the press reports Amazon’s 2020 European Euro 44 billion of sales generated zero tax. A 2018 study saw some 40% of overseas multinationals’ profits were in low-tax jurisdictions.


Discordant internal tax laws and intranational tax competition fuelled a situation where Tax Havens could feed on the chaos.


Havens range from tax-less islands to tax-light jurisdictions of Europe and Asia. For the tax-less islands, professional fees provided the BVI, for example, with 60% of its 2018 revenue. EU countries, such as Ireland and Cyprus, have lured investment, with low CT and additional breaks as with Ireland’s “Double Irish” which funnelled profits to subsidiary Irish Companies domiciled in such as Bermuda; an estimated 10 year saving to Google of some tens of billions of dollars. In 2019 the IMF noted “phantom” investment valued Luxembourg’s stock of foreign-direct investment at $4trn (a tenth of global value)! Winners will be the large economies where the digital behemoths do their business. The losers will be the tax-less islands, but Ireland too is to lose an estimated Euro 2 Billion + of its annual Corporation Tax take.


For Yellen, a “global minimum tax would…..ensure fairness for the……working people in the U.S. and around the world.” In May Germany’s finance minister predicted a “revolution” in global tax rules.


The G7 announced two Pillars of action. The first that the largest and most profitable multinationals are to pay tax in the countries of operation and not just where ‘headquartered’. The second being a 15% global minimum corporation tax. The G20 is to agree a final legislative draft in July.


Going forward taxpayers will demand transparent accountability both corporately and personally. In Wisconsin, all the state personal tax returns are publicly available as are those in Sweden, Norway and Finland. Expect more jurisdictions to follow.


Nations will rigorously address tax avoidance. The US House Democrats have just announced Anti-Trust bills and related anti-conflict of interest legislation. A difficult process but international tax laws will change with inevitable wider reporting of those with such as Foundations and Trusts.


The tax havens golden era is over and make sure that arrangements are not caught up in their demise. The change will be relentless.


All the Best

Alistdair

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