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Thursday, June 02, 2016

The World of International Tax Avoidance Is a Colorful One

Roberto Saviano added he had been influenced by fellow Italian writer Primo Levi, whose book If This Is a Man about life in Auschwitz laid bare the daily horrors of life in the Nazi death camp. “He brought the reader to Auschwitz,” explained Saviano. “I wanted to say to the reader, this story is about you – that way the reader becomes a problem for organised crime.” Roberto Saviano: London is heart of global financial corruption

      * Following The Money: Lessons From The Panama Papers, Part 1: Tip Of The Iceberg  

Tax Policy Center, Kogod School of Business, American University,  Shortchanged: The Tax Compliance Challenges of Small Business Operators Driving the On-Demand Platform Economy

Panama Papers: Mossack Fonseca closes Channel Island offices  

The Value Of Offshore Secrets – Evidence From The Panama Papers 

This case may help states gain billions in tax dollars from online companies

KPMG dodge questions about  the sale and leaseback of properties from BHS to Carmen Properties Ltd, a company registered in Jersey

France 'to go all the way' to make multinationals pay their taxes  

Australia to sell £8m of seized bitcoins - US US government auction 10m worth bitcoins


Andrew Hayashi (Virginia), Putting a Face to International Tax Avoidance, JOTWELL (May 20, 2016) (reviewing Omri Marian (UC-Irvine), The State Administration of International Tax Avoidance, 7 Harv. Bus. L. Rev. ___ 2016)):
The world of international tax avoidance is a colorful one. There are the legal structures, with names like the “Double Irish Dutch Sandwich,” the exotic locales, like Bermuda and the Cayman Islands, and the identity crises presented by “hybrid” entities and financial instruments. But rarely does international tax avoidance have a human face and one could be forgiven for getting the impression that falling effective corporate tax rates are as inevitable as water flowing downhill. Corporations, acting in the interests of their shareholders, maximize their after-tax profits. States, acting in the best interests of their residents, set tax policies that are incongruous with the policies of other states. The “bad actors,” if there are any in this story, are corporate aggregates of one sort or another, multinational corporations and tax haven countries.
But the LuxLeaks scandal has given us one human face that stands out from the crowd of aggregates. This is the face of Marius Kohl or “Monsieur Ruling,” the former head of the Luxembourg agency, who gave rulings to taxpayers on the tax treatments of their proposed transactions. In The State Administration of International Tax Avoidance, Omri Marian does a wonderful job of explaining how this one bureaucrat acted to facilitate massive tax avoidance by engaging in “arbitrage manufacturing.” Marian argues that rogue individuals pose an ongoing threat to international tax cooperation. His paper clearly explains how arbitrage can be manufactured, documents how it was done in Luxembourg, and draws from the LuxLeaks episode an important lesson about the need to integrate micro reforms of tax administration into the macro project of international tax harmonization efforts. ...
CULTURE OF CORRUPTION: Head of the IMF Christine Lagarde in court charged with embezzlement and fraud


Leith van Onselen who has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. You can follow him on Twitter attwitter.com/leithvo. Originally published at MacroBusiness
I wrote yesterday how the new mayor of London, Sadiq Khan, had spoken-out about foreign investors using homes in London as “gold bricks for investment” following an investigation which found that the UK’s tallest residential skyscraper is now more than 60% foreign-owned and is under-occupied.

Now The Guardian’s Simon Jenkins has followed-up with a piece claiming that London’s empty high-rise is a mark of corruption

The Whistleblower Full Measure. Bradley Birkenfeld, who blew the whistle on UBS offshore accounts held by wealthy Americans, was prosecuted and jailed by the DOJ, and then awarded $104 milllon by the IRS.
The Bank Robber The New Yorker - No, not the executives. The whistleblower.

Want to end corruption? Crack down on tax havens. Nicholas Shaxson, Washington Post

 Scott Sumner, Why most regulations are harmful (Econlog):
I’m writing this post to remind people that economic theory suggests that the vast majority of regulations are counterproductive, and many actually hurt the people they are intended to help. I’d guess that over 90% are not justified, including almost all occupational barriers to entry, trade restrictions, health and safety regulations, tax rules, employer mandates, landlord mandates, etc., etc.
This should be read along with Megan McArdle’s recent post on why the multiplication of regulations is a plague, especially to small and startup businesses.

Benjamin M. Leff (American), Tax Benefits of Government-Owned Marijuana Stores, 50 U.C. Davis L. Rev. ___ (2016):
Over a year ago (March 7, 2015), a little store called the Cannabis Corner opened up in the small town of North Bonneville, Washington, about an hour by car from Portland, Oregon. The Cannabis Corner is the first marijuana store to be operated by a “public development authority,” an independent entity created by a state or local government. Public development authorities are generally exempt from federal income taxes under section 115 of the Internal Revenue Code. For a marijuana business, this exemption is especially valuable because section 280E of the Code currently prevents marijuana businesses from deducting many of the ordinary expenses other businesses regularly deduct, resulting in extremely high federal income taxes.
This Article is the first to address whether independent governmental affiliates that sell marijuana are exempt from federal income tax under section 115 of the Internal Revenue Code.

The Internet has become our new public forum. We advertise, sell, shop, publish, bank, flirt, and more. It offers every person a public platform that can be seen by millions. The Internet is now the place where, for many, life happens.
But has the legal world kept up with this development?  How do legal professionals record evidence in this new format?
“It’s crazy, what we’ve seen some legal professionals still doing,” says Patrick Schweihs, attorney and VP of Customer Solutions at Page Vault. “The same person who buys best-in-class software for e-discovery or practice management is still limping along with webpage capture methods that are unreliable, unwieldy, and that introduce undue risk into their case.”
The Need For Better Webpage Capture Products For Legal Professionals

In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations:
Michael J. Graetz (Columbia), Follow the Money: Essays on International Taxation (Yale May 2016) (free download (PDF, EPUB (iPad, Noble), MOBI (Kindle)), book (amazon)):
Publicity about tax avoidance techniques of multinational corporations and wealthy individuals has moved discussion of international income taxation from the backrooms of law and accounting firms to the front pages of news organizations around the world. In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations. Public anger has, in turn, brought previously arcane issues of international taxation onto the agenda of heads of government around the world.

 Tax Dodgin’ Silicon Valley and What It Means to You and Me CityWatch

 I ken that. Last year I got lost looking for a friend’s house in rural Scotland. I stopped my car by a man walking his dog and asked if he knew where my friend lived. He thought for a second, smiled, and said “I ken ye. I ken that!” It’s the only time I’ve heard “ken” used that way in the wild.
I ken what the U.K. (which still includes Scotland) is going through with its film tax credit program. From Dailymail.co.uk:
Two film producers created a ‘web of lies’ to get taxpayers to finance a BAFTA nominated film, a court heard today.

Related: AUDITOR REPORT: MILLIONS OF REAL TAXPAYER DOLLARS PAID FOR IMAGINARY FILM EXPENSES

Cristobal Young (Stanford),Charles Varner (Stanford), Ithai Z. Lurie (U.S. Treasury Department, Office of Tax Analysis) & Richard Prisinzano(U.S. Treasury Department, Office of Tax Analysis), Millionaire Migration and Taxation of the Elite: Evidence from Administrative Data, 81 Am. Sociological Rev. 421 (2016)



Tax Policy Center, Kogod School of Business, American University,  Shortchanged: The Tax Compliance Challenges of Small Business Operators Driving the On-Demand Platform Economy


This case may help states gain billions in tax dollars from online companies

KPMG dodge questions about  the sale and leaseback of properties from BHS to Carmen Properties Ltd, a company registered in Jersey

Andrew Hayashi (Virginia), Putting a Face to International Tax Avoidance, JOTWELL (May 20, 2016) (reviewing Omri Marian (UC-Irvine), The State Administration of International Tax Avoidance, 7 Harv. Bus. L. Rev. ___ 2016)):
The world of international tax avoidance is a colorful one. There are the legal structures, with names like the “Double Irish Dutch Sandwich,” the exotic locales, like Bermuda and the Cayman Islands, and the identity crises presented by “hybrid” entities and financial instruments. But rarely does international tax avoidance have a human face and one could be forgiven for getting the impression that falling effective corporate tax rates are as inevitable as water flowing downhill. Corporations, acting in the interests of their shareholders, maximize their after-tax profits. States, acting in the best interests of their residents, set tax policies that are incongruous with the policies of other states. The “bad actors,” if there are any in this story, are corporate aggregates of one sort or another, multinational corporations and tax haven countries.
But the LuxLeaks scandal has given us one human face that stands out from the crowd of aggregates. This is the face of Marius Kohl or “Monsieur Ruling,” the former head of the Luxembourg agency, who gave rulings to taxpayers on the tax treatments of their proposed transactions. In The State Administration of International Tax Avoidance, Omri Marian does a wonderful job of explaining how this one bureaucrat acted to facilitate massive tax avoidance by engaging in “arbitrage manufacturing.” Marian argues that rogue individuals pose an ongoing threat to international tax cooperation. His paper clearly explains how arbitrage can be manufactured, documents how it was done in Luxembourg, and draws from the LuxLeaks episode an important lesson about the need to integrate micro reforms of tax administration into the macro project of international tax harmonization efforts. ...
CULTURE OF CORRUPTION: Head of the IMF Christine Lagarde in court charged with embezzlement and fraud

By Leith van Onselen who has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. You can follow him on Twitter attwitter.com/leithvo. Originally published at MacroBusiness
I wrote yesterday how the new mayor of London, Sadiq Khan, had spoken-out about foreign investors using homes in London as “gold bricks for investment” following an investigation which found that the UK’s tallest residential skyscraper is now more than 60% foreign-owned and is under-occupied.

Now The Guardian’s Simon Jenkins hasfollowed-up with a piece claiming that London’s empty high-rise is a mark of corruption:

Want to end corruption? Crack down on tax havens. Nicholas Shaxson, Washington Post

Scott Sumner, Why most regulations are harmful (Econlog):
I’m writing this post to remind people that economic theory suggests that the vast majority of regulations are counterproductive, and many actually hurt the people they are intended to help. I’d guess that over 90% are not justified, including almost all occupational barriers to entry, trade restrictions, health and safety regulations, tax rules, employer mandates, landlord mandates, etc., etc.
This should be read along with Megan McArdle’s recent post on why the multiplication of regulations is a plague, especially to small and startup businesses.

Benjamin M. Leff (American), Tax Benefits of Government-Owned Marijuana Stores, 50 U.C. Davis L. Rev. ___ (2016):
Over a year ago (March 7, 2015), a little store called the Cannabis Corner opened up in the small town of North Bonneville, Washington, about an hour by car from Portland, Oregon. The Cannabis Corner is the first marijuana store to be operated by a “public development authority,” an independent entity created by a state or local government. Public development authorities are generally exempt from federal income taxes under section 115 of the Internal Revenue Code. For a marijuana business, this exemption is especially valuable because section 280E of the Code currently prevents marijuana businesses from deducting many of the ordinary expenses other businesses regularly deduct, resulting in extremely high federal income taxes.
This Article is the first to address whether independent governmental affiliates that sell marijuana are exempt from federal income tax under section 115 of the Internal Revenue Code.

The Internet has become our new public forum. We advertise, sell, shop, publish, bank, flirt, and more. It offers every person a public platform that can be seen by millions. The Internet is now the place where, for many, life happens.
But has the legal world kept up with this development?  How do legal professionals record evidence in this new format?
“It’s crazy, what we’ve seen some legal professionals still doing,” says Patrick Schweihs, attorney and VP of Customer Solutions at Page Vault. “The same person who buys best-in-class software for e-discovery or practice management is still limping along with webpage capture methods that are unreliable, unwieldy, and that introduce undue risk into their case.”
The Need For Better Webpage Capture Products For Legal Professionals

In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations:
Michael J. Graetz (Columbia), Follow the Money: Essays on International Taxation (Yale May 2016) (free download (PDF, EPUB (iPad, Noble), MOBI (Kindle)), book (amazon)):
Publicity about tax avoidance techniques of multinational corporations and wealthy individuals has moved discussion of international income taxation from the backrooms of law and accounting firms to the front pages of news organizations around the world. In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations. Public anger has, in turn, brought previously arcane issues of international taxation onto the agenda of heads of government around the world.

Tax Dodgin’ Silicon Valley and What It Means to You and Me CityWatch

I ken that. Last year I got lost looking for a friend’s house in rural Scotland. I stopped my car by a man walking his dog and asked if he knew where my friend lived. He thought for a second, smiled, and said “I ken ye. I ken that!” It’s the only time I’ve heard “ken” used that way in the wild.
I ken what the U.K. (which still includes Scotland) is going through with its film tax credit program. From Dailymail.co.uk:
Two film producers created a ‘web of lies’ to get taxpayers to finance a BAFTA nominated film, a court heard today.

Related: AUDITOR REPORT: MILLIONS OF REAL TAXPAYER DOLLARS PAID FOR IMAGINARY FILM EXPENSES

Cristobal Young (Stanford),Charles Varner (Stanford), Ithai Z. Lurie (U.S. Treasury Department, Office of Tax Analysis) & Richard Prisinzano(U.S. Treasury Department, Office of Tax Analysis), Millionaire Migration and Taxation of the Elite: Evidence from Administrative Data, 81 Am. Sociological Rev. 421 (2016)



Tax Justice Network – “The 2015 Financial Secrecy Index (FSI) focuses on 93 jurisdictions, including several that are not traditionally considered to be tax havens, such as China, France, Germany and Japan. Secrecy jurisdictions set up laws and systems which provide legal and financial secrecy to others, elsewhere. Our index shows that there is no clear dividing line between “secrecy jurisdictions” (or tax havens) and others. They exist on a wide spectrum. The FSI measures two things, one qualitative and one quantitative. The qualitative measure looks at a jurisdiction’s laws and regulations, international treaties, and so on, to assess how secretive it is. It gets assigned a secrecy score: the higher the score, the more secretive the jurisdiction. The second, quantitative, measurement attaches a weighting to take account of the jurisdiction’s size and overall importance the global market for offshore financial services. We explain the weighting here; full details of our methodology are here; and we provide full details of how we calculate each secrecy indicator here…”







Andrew Hayashi (Virginia), Putting a Face to International Tax Avoidance, JOTWELL (May 20, 2016) (reviewing Omri Marian (UC-Irvine), The State Administration of International Tax Avoidance, 7 Harv. Bus. L. Rev. ___ 2016)):
The world of international tax avoidance is a colorful one. There are the legal structures, with names like the “Double Irish Dutch Sandwich,” the exotic locales, like Bermuda and the Cayman Islands, and the identity crises presented by “hybrid” entities and financial instruments. But rarely does international tax avoidance have a human face and one could be forgiven for getting the impression that falling effective corporate tax rates are as inevitable as water flowing downhill. Corporations, acting in the interests of their shareholders, maximize their after-tax profits. States, acting in the best interests of their residents, set tax policies that are incongruous with the policies of other states. The “bad actors,” if there are any in this story, are corporate aggregates of one sort or another, multinational corporations and tax haven countries.
But the LuxLeaks scandal has given us one human face that stands out from the crowd of aggregates. This is the face of Marius Kohl or “Monsieur Ruling,” the former head of the Luxembourg agency, who gave rulings to taxpayers on the tax treatments of their proposed transactions. In The State Administration of International Tax Avoidance, Omri Marian does a wonderful job of explaining how this one bureaucrat acted to facilitate massive tax avoidance by engaging in “arbitrage manufacturing.” Marian argues that rogue individuals pose an ongoing threat to international tax cooperation. His paper clearly explains how arbitrage can be manufactured, documents how it was done in Luxembourg, and draws from the LuxLeaks episode an important lesson about the need to integrate micro reforms of tax administration into the macro project of international tax harmonization efforts. ...

By Leith van Onselen who has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. You can follow him on Twitter attwitter.com/leithvo. Originally published at MacroBusiness
I wrote yesterday how the new mayor of London, Sadiq Khan, had spoken-out about foreign investors using homes in London as “gold bricks for investment” following an investigation which found that the UK’s tallest residential skyscraper is now more than 60% foreign-owned and is under-occupied.

Now The Guardian’s Simon Jenkins hasfollowed-up with a piece claiming that London’s empty high-rise is a mark of corruption:

Want to end corruption? Crack down on tax havens. Nicholas Shaxson, Washington Post

Scott Sumner, Why most regulations are harmful (Econlog):
I’m writing this post to remind people that economic theory suggests that the vast majority of regulations are counterproductive, and many actually hurt the people they are intended to help. I’d guess that over 90% are not justified, including almost all occupational barriers to entry, trade restrictions, health and safety regulations, tax rules, employer mandates, landlord mandates, etc., etc.
This should be read along with Megan McArdle’s recent post on why the multiplication of regulations is a plague, especially to small and startup businesses.

Benjamin M. Leff (American), Tax Benefits of Government-Owned Marijuana Stores, 50 U.C. Davis L. Rev. ___ (2016):
Over a year ago (March 7, 2015), a little store called the Cannabis Corner opened up in the small town of North Bonneville, Washington, about an hour by car from Portland, Oregon. The Cannabis Corner is the first marijuana store to be operated by a “public development authority,” an independent entity created by a state or local government. Public development authorities are generally exempt from federal income taxes under section 115 of the Internal Revenue Code. For a marijuana business, this exemption is especially valuable because section 280E of the Code currently prevents marijuana businesses from deducting many of the ordinary expenses other businesses regularly deduct, resulting in extremely high federal income taxes.
This Article is the first to address whether independent governmental affiliates that sell marijuana are exempt from federal income tax under section 115 of the Internal Revenue Code.

The Internet has become our new public forum. We advertise, sell, shop, publish, bank, flirt, and more. It offers every person a public platform that can be seen by millions. The Internet is now the place where, for many, life happens.
But has the legal world kept up with this development?  How do legal professionals record evidence in this new format?
“It’s crazy, what we’ve seen some legal professionals still doing,” says Patrick Schweihs, attorney and VP of Customer Solutions at Page Vault. “The same person who buys best-in-class software for e-discovery or practice management is still limping along with webpage capture methods that are unreliable, unwieldy, and that introduce undue risk into their case.”


In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations:
Michael J. Graetz (Columbia), Follow the Money: Essays on International Taxation (Yale May 2016) (free download (PDF, EPUB (iPad, Noble), MOBI (Kindle)), book (amazon)):
Publicity about tax avoidance techniques of multinational corporations and wealthy individuals has moved discussion of international income taxation from the backrooms of law and accounting firms to the front pages of news organizations around the world. In the words of a top Australian tax official, international tax law has now become a topic of barbeque conversations. Public anger has, in turn, brought previously arcane issues of international taxation onto the agenda of heads of government around the world.

I ken that. Last year I got lost looking for a friend’s house in rural Scotland. I stopped my car by a man walking his dog and asked if he knew where my friend lived. He thought for a second, smiled, and said “I ken ye. I ken that!” It’s the only time I’ve heard “ken” used that way in the wild.
I ken what the U.K. (which still includes Scotland) is going through with its film tax credit program. From Dailymail.co.uk:
Two film producers created a ‘web of lies’ to get taxpayers to finance a BAFTA nominated film, a court heard today.


Cristobal Young (Stanford),Charles Varner (Stanford), Ithai Z. Lurie (U.S. Treasury Department, Office of Tax Analysis) & Richard Prisinzano(U.S. Treasury Department, Office of Tax Analysis), Millionaire Migration and Taxation of the Elite: Evidence from Administrative Data, 81 Am. Sociological Rev. 421 (2016)

Government Accountability Office, Federal Agencies Need to Address Aging Legacy Systems (GAO- 16-696T)



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