Luxembourg Takes a Leak

The ICIJ has obtained a trove of leaked documents detailing the nefarious tactics of massive multi-nationals to evade taxes all over the world using the "squeaky clean on the outside, corporate friendly on the inside" Grand Duchy of Luxembourg and their secret tax agreements.  See this video from the ICIJ to see how it all works.  The Corporate cast of villains includes a cast of usual suspects including AIG, Deutchse Bank, IKEA and more.  According to Wikipedia:

In March 2010, the Sunday Telegraph reported that most of Kim Jong-Il's $4bn in secret accounts is in Luxembourg banks.^[45] Amazon.co.uk also benefits from Luxembourg tax loopholes by channeling substantial UK revenues as reported by The Guardian in April 2012.^[46] Luxembourg ranked third on the Tax Justice Network's 2011 Financial Secrecy Index of the world's major tax havens, scoring only slightly behind the Cayman Islands.^[47] In 2013, Luxembourg is ranked as the 2nd safest tax haven in the world, behind Switzerland.

 Additional ICIJ background is here and here.

Tax Havens Under Fire

Ever since the ICIJ published their report on Tax Haven use, the tax fairness issue has finally gained traction in the press and the world governments have taken notice. 

• The UK Prime Minister David Cameron is escalating the issue as a top priority in a G8 summit this month.
• The normally defensive Bloomberg News is reporting that offshore cash holdings by US entities is growing fast, it's up to an estimated $1.9 Trillion at the end of 2012.
• The US PIRG organization reports Academic studies conclude tax haven abuse costs the United States approximately $150 billion in tax revenues every year. Multinational corporations account for $90 billion and individuals the rest.

 Hopefully we will eventually get some deficit relief when the tax dodgers start paying their share.

Hidden Money Costs 99% of Us

In this Opinion Story, an Economics professor talks about the revelations brought by the Secrecy For Sale project and the ICIJ.

The heads of the worlds major banks - those who demanded and got trillion dollar bailouts and who now demand austerity programs to balance government budgets - preside over institutions that make money helping the rich escape taxation. Hiding money in the ways and amounts lately revealed by the ICIJ is a deep kind of social corruption. It goes beyond questions of legality to the heart of modern political economy.

The real question is whether the people hurt by this behavior will change the system that promotes and rewards it.

See this video on how easy it is to hide money.

Humpty Dumpty and offshore tax havens 2

The ICIJ revelations are starting to ripple around the world as many nations realize they're being ripped off and are starting to react.  See my earlier post on the subject here.  The report has set off a scramble by governments to calm public anger over widespread tax dodging by the rich when governments are cutting budgets and calling on citizens to pay higher taxes.

In another announcement last week, Luxembourg Prime Minister Jean-Claude Juncker said his country plans to lift bank secrecy rules for European Union citizens who have money stashed in the country, ending decades of bank secrecy in Luxembourg.

“We are following a global movement,” Juncker told parliament in a state-of-the-nation address. The new transparency regime would begin in January 2015. 

The New York Times also weighed in on the issue as well as documenting how our tax policy is stacked in favor of the one percent who own about 40 percent of the nation’s wealth.

"Over the years, some of the wealthy have been enormously successful in getting special treatment, shifting an ever greater share of the burden of financing the country’s expenditures — defense, education, social programs — onto others. Ironically, this is especially true of some of our multinational corporations, which call on the federal government to negotiate favorable trade treaties that allow them easy entry into foreign markets and to defend their commercial interests around the world, but then use these foreign bases to avoid paying taxes.
General Electric has become the symbol for multinational corporations that have their headquarters in the United States but pay almost no taxes — its effective corporate-tax rate averaged less than 2 percent from 2002 to 2012 — just as Mitt Romney, the Republican presidential nominee last year, became the symbol for the wealthy who don’t pay their fair share when he admitted that he paid only 14 percent of his income in taxes in 2011, even as he notoriously complained that 47 percent of Americans were freeloaders. Neither G.E. nor Mr. Romney has, to my knowledge, broken any tax laws, but the sparse taxes they’ve paid violate most Americans’ basic sense of fairness."

Humpty Dumpty and offshore tax havens 1

The International Consortium of Investigative Journalists.  Gerard Ryle. 

Remember those names, as they are about to rip open the world of offshore tax havens for all to see, and it isn't pretty.  This is a story so huge it's tough to get your mind around it.  As I was going to links to get information, their web site kept crashing, probably getting millions of hits.

It began several years ago when Gerard worked for the Sydney Morning Herald investigating a financial fraud case perpetuated by an Australian company Firepower International, and he followed a trail of leads to Hong Kong and other tax havens.  In 2011 he moved to head the Center for Public Integrity and the ICIJ.  One day, probably in late 2011 or early 2012 (he isn't saying, for reasons that will become clear) he received a computer hard drive with millions of documents (it came by mail in a plain brown envelope).  The total mass of data is reported to be 160 times larger than the trove of State Department cables published by WikiLeaks in 2010.  Somehow he had to analyze the mass of emails, Databases, Spreadsheets and images.   He activated the Secrecy for Sale project and got assistance from hundreds of people around the world to clean, organize and analyze the data.

They are naming names and taking no prisoners in disclosing the movement of about $21 Trillion in tax havens around the world.  There are 130,000 names, details of more than 122,000 offshore companies or trusts, and nearly 12,000 intermediaries (agents or "introducers").  By the way, that sum is about the GDP of US and China combined!

This will perhaps be the biggest story of the decade, maybe of the century.  The people who control this $21 Trillion are not happy campers, they include Russian Gangsters, Drug Lords, major politicians, criminals, big bankers and just plain millionaires.  I hope the person who provided the information never gets revealed.  Here are some links to stories. 
The Guardian - UK  The Sydney Morning Herald The Toronto Star.