Press Releases: Italy, Belgium, Greece must not sign "Rubik" tax deals with Switzerland. They are a swindle

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Monday, Sept 24, 2012

Greece, Belgium and Italy are each currently talking to Switzerland about a tax deal under a model known as “Rubik”, which is supposed to raise big revenues from the Swiss bank accounts of wealthy Italian tax evaders, while keeping their accounts secret.

This would be a disaster for these countries, and for wider transparency. This is not just for ethical reasons but because the Rubik model, designed by the Swiss Bankers’ Association, is filled with as many holes as a Swiss cheese. The promised billions in revenues will never materialise. In fact, all things considered, such deals would most likely be revenue-negative for Europe and for the countries that sign them.

These deals are the centrepieces of a plot by Swiss bankers to sabotage progress on a major global initiative on financial transparency, the EU Savings Tax Directive which is in the process of being strengthened.  As we noted earlier, the SBA said the initiative was designed as an "independent counter-concept" to prevent the global emergence of the gold standard of transparency, automatic information exchange:

Our accompanying press releases explain the extreme upper limits of possible revenues for these countries from such a deal: for Greece, for example, these would constitute a one-off tax payment of just €650 million -- but the true figure would be far less than that. Even these small sums would soon be offset by bigger losses elsewhere because of Rubik.  Each press release is accompanied by a background note, outlining relevant background and our detailed calculations.

These countries must reject a Swiss tax deal.

The individual press releases and background notes are below.

Italy - Press Release
Italy - Background Note
Greece - Press Release
Greece - Background Note
Belgium - Press Release
Belgium - Background Note

Endnote: a cartoon (courtesy of The Best of Both Worlds) commenting on the differences between the U.S. Foreign Account Tax Compliance Act (FATCA) and the approach of individual European countries. 

New report: big countries are the worst offenders on shell companies

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 When we first published the Financial Secrecy Index many were amazed that the USA came top, and the UK high up the list.

In 2011 that changed slightly as we extended the range of measures used to determine the issue, but the top 15 still looked like this.

While some were surprised to see the USA, Germany, UK, Japan and Belgium revealed as secrecy jurisdictions, this table - created from objectively measured criteria - supported exactly what we have been saying for a very, very long time.

Jason Sharman, an Australian academic TJN has known for some time, has now confirmed this. He and his co-authors Michael Findley and Daniel Nielson have a new report out today, where they impersonated a variety of would-be money launderers, corrupt officials, and terrorist financiers to requesting anonymous companies.

The Economist describes it succinctly:

"SHELL companies—which exist on paper only, with no real employees or offices—have legitimate uses. But the untraceable shell also happens to be the vehicle of choice for money launderers, bribe givers and takers, sanctions busters, tax evaders and financiers of terrorism. The trail has gone cold in many a criminal probe because law enforcers were unable to pierce a shell’s corporate veil."

The international standard governing shells, set by the inter-governmental Financial Action Task Force (FATF), is clear-cut. It says countries should take all necessary measures to prevent their misuse, such as ensuring that accurate information on the real (or “beneficial”) owner is available to “competent authorities”. More than 180 countries have pledged to follow it. A forthcoming study* scrutinises the level of compliance worldwide. The results are depressing.

The data looks like this:

As The Economist concludes:

"This study, by far the most thorough of its kind, makes sobering reading for anyone who worries about the link between financial crime and corporate secrecy. OECD countries show little willingness to tackle their own weaknesses and end their hypocrisy. In America, by some measures the least compliant of all, the incorporation-friendly states and business groups opposing reform continue to have the upper hand, despite valiant attempts by Senator Carl Levin to push through legislation that would require the registration of beneficial owners. Movers of dirty money know where the best shells are to be had, and it is not on a Caribbean island."

It is important to note that this tests just one issue: that is all. It is an important issue, to be sure, but our Financial Secrecy Index considers 15 secrecy indicators, which cover a far broader range of issues.

But let’s not deny that this unearths an important point that many people have ignored and that we have been saying for years: this problem begins in rich, developed countries: not small islands.

Endnote: The report argues:

"The overwhelming policy consensus, strongly articulated in G20 communiqués and by many NGOs, is that tax havens provide strict secrecy and lax regulation, especially when it comes to shell companies. This consensus is wrong."

The way this section is written suggests that by 'tax havens' the report's authors mean small jurisdictions. As our long years of work (and this blog) make clear, we don't think that small jurisdictions are the heart of the problem, much that we like to criticise the relevant ones (and much that they deserve it). In fact, we argue that the world's previous obsession with small islands in this context has served to distract from the real problem, which is big countries - most importantly the United Kingdom, which runs its own 'spider's web' of satellite tax havens around the world.

Despite minor differences in the way tax havens are defined, we welcome this new report. Bring it on, may it get the coverage it deserves, and may the world's journalists and citizens continue to wake up to the gigantic threat it poses to the lives of the 99.9 percent of the world's population who aren't rich enough to be able to afford to send their money offshore and escape the rules of civilised society.

(Adapted from the Tax Research blog.)