Taxcast: The Corporate Tax Haven Index, Solving the World’s Broken Tax System

Originally published at the Tax Justice Network

In this month’s June 2019 podcast we look at the new Corporate Tax Haven Index released by the Tax Justice Network. What does it tell us about the global economy and the international tax system? And how can we fix it? We also look at how India is pushing the G20 into action on global tax rules – if they don’t act it will implement its own rules.

The Corporate Tax Haven Index provides one of those really rare glimpses of what actually happens underneath the bonnet of the global economy. It tells several disturbing stories…in what we can only describe as a full frontal assault on the national tax sovereignty of every country on the planet. That’s what they’re doing. They’re attacking the tax regimes of other countries. What it reveals is a really disturbing picture of international failure. We see the powerful European countries and especially Britain lying behind their clusters of tax havens and they have wrecked economies across the world and are now threatening social stability and democracy across the world.

But when countries like India say, no, that doesn’t work for us, we’re going our own way, then it gets very serious indeed. And the G20 simply cannot afford to ignore this any longer. So the road is open for the next steps. And of course the next steps are going to take us in the direction the Tax Justice Network has always been talking about. And that is in the direction of proper apportionment of profits to the countries where the profits are aligned with the economic substance. In other words, we’re moving towards unitary taxation and formula apportionment…And I think we should all welcome the opportunity now to create a framework for taxing multinational companies that suits the entire world, not just the most powerful countries in the world.

John Christensen, Tax Justice Network

I think it is important to point out that the term of tax haven has done us a big disservice for many decades now. That is used instead of claiming what we think is much more accurate nowadays, instead of claiming a spectrum of secrecy, a spectrum of tax haven-ness each country now embodies. We have to be more specific than just tax havens, there are so many dimensions to this and that is why we prefer to speak on the one hand about secrecy jurisdictions…and the other element that we need to complement this terminology is the corporate tax haven, which designates those places that play a more important role for multinationals in shifting their profits across borders. And this is why we have complemented the Financial Secrecy Index with the Corporate Tax Haven Index. [They] paint a different picture, much more nuanced where we can see that many countries nowadays have joined the bandwagon, and have joined the race to the bottom

Markus Meinzer, director of the Corporate Tax Haven Index and Financial Secrecy Index research teams

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11 comments

  1. Ignacio

    Regarding fiscal complexity, different tax systems in different coubtries, I don’t believe it should be that hard to corps to manage that unless tax management means indeed tax avoidance.

    Reply
  2. Ignacio

    The CTHI page provides a weigthed measure of corporate tax avoidance in 2019 which is a must and follows Pareto rule (20% of countries account for >80% tax avoidance). The following list of 10 accounts for 1/3 of cotporate tax avoidance. I guess that US tax avoidance is mainly in Delaware.

    US: 12,88%
    Netherlands: 12,76%
    Luxembourg: 10,53%
    UK: 7,53%
    Caribb.Comm.: 5,86%
    Honk Kong: 4,37%
    China: 3,67%
    Switzerland: 3,41%
    Germany: 3,32%
    Ireland: 3,11%

    With the exception of China Germany and UK CTH concentrates in small wealthy juristictions

    Reply
    1. PlutoniumKun

      Thanks, its an excellent website and the Index is very useful – unfortunately the topic is so complex that many people end up arguing about it without really understanding the core issues (I confess to only having a superficial understanding). In particular, there is a huge focus on the small island tax havens while offenders like the City of London and even the Netherlands are given something of a free pass. I’ve had English people, with a straight face, accuse me of coming from a ‘tax haven, taking our tax money’. Yes, Ireland has disgraceful tax laws, but they are a model of rectitude compared to the UK and its chain of havens.

      Reply
      1. Ignacio

        This may sound antisemitic but the UK is the octopus of tax havens. –A Joke that very few will understand–

        Reply
        1. PlutoniumKun

          I think its more the case that people pretend to understand (or not understand).

          Its amazing how many people can become experts in early 20th Century cartoon iconography when it suits their arguments.

          Reply
          1. barefoot charley

            Ignacio, America’s financial innovators created cheap ‘n easy small-time limited liability corporations in a few Western states in the 1970s, which had the knock-off effect of making ownerships easily anonymous. While it’s illegal for Americans to hide taxable wealth from the IRS, we have *no* problem with you getting an llc in Nevada to own your hot-money penthouse in NYC that your own country’s tax authorities will never hear of. America is the easiest full-service tax haven in the world (for everyone but us), as regulated by states that don’t believe in government. Our new Delawares include Nevada and Wyoming, which I believe started the llc scam in the first place.

            Reply
            1. Ignacio

              Thank you b.c. But isn’t it true that most corporate tax avoidance occurs through Delaware emmm associates?

              Reply
          2. Synoia

            Its amazing how many people can become experts in early 20th Century cartoon iconography when it suits their arguments…

            I wish I understood you point. I’m feeling a bit thick.

            Reply
            1. Ignacio

              Synoia, Rev Kev posted in links few days ago about Penguin not printing more copies of a book that was found “antisemitic” by some sources. The book in its cover showed a cartoon showing a blue octopus controlling the world. One of the critics said that because in Hitler’s Mein kampf an octopus was used also metaphorically in control of the world, any cartoon showing the same would be antisemitic.

              Reply
  3. Geo

    “Spectrum of tax haven-ness” doesn’t really have a catchy flair for it to catch on.

    Maybe:
    Tax Treason
    Tax Subversion
    Seditious Tax Crypt
    ?

    Reply

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