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Information about Shaxson

Published on December 27, 2007

Author: Elena


Why multilateral and global institutions can matter:  Why multilateral and global institutions can matter Risks of relying only on country-by-country or regional approaches Three points:  Three points My focus: African Oil, “Resource Curse” Financial flows are international. Country-by-country approaches fail. (Not only oil.) Tax havens are fundamental. Multilateral institutions can be allies on transparency. Global, not national problems :  Global, not national problems Three examples: Angola - Gaydamak Elf Affair Transparency International’s CPI Example 1: Angola:  Example 1: Angola 2m bpd by the end of this year $30bn budget for 2007 (compares with $30bn OECD countries’ aid to sub-Saharan Africa) Unicef: Under-5 mortality 260/1000: second worst in world More generally: “Resource Curse:” Nigeria, etc. etc. Governance, transparency key Example: Angola’s Russian debt dealers:  Example: Angola’s Russian debt dealers $5bn debt from Cold War era; Debt rescheduled Businessmen Arcadi Gaydamak, Pierre Falcone inserted themselves into this deal $750m flowed from Geneva into mysterious accounts: Luxembourg, Cyprus, Moscow, Amsterdam, etc. Swiss investigating magistrate called this “criminal organisation”, but case was dropped. The money disappeared into the interstices between states. Judges got little co-operation Oil transparency Campaign:  Oil transparency Campaign Global Witness transparency campaigns evolved first out of Angola Led to Publish What You Pay (PWYP), Extractive Industries Transparency Initiative (EITI) Global Witness, IMF/Wbank, broadly aligned on Angola transparency Example 2: The “Elf Affair”:  Example 2: The “Elf Affair” Magistrates (Paris, Geneva) from 1994 uncovered African oil as offshore source of slush money For bribing African and other leaders (20-60c/barrel) For financing / supporting French and European political parties French foreign policy assignments French companies overseas French intelligence domestic and foreign Personal corruption The Elf System:  The Elf System Elf Gabon / African oil central Military relationships / mercenaries Freemasonry and secret societies link French and African politics Money through international banks and tax havens Other oil countries e.g. Congo, Angola Africans could only see a part of it, never the whole. African oil corrupted politics around the world e.g. France, Biafra, Taiwan, Germany, Spain, Uzbekistan, Venezuela, etc. etc. - all involved. French investigators didn’t get co-operation from many jurisdictions - notably London. Country by country approaches: could EITI tackle the Elf Affair?:  Country by country approaches: could EITI tackle the Elf Affair? No: Separating African oil corruption from French corruption misses the point. Elf Affair was transnational, via tax havens. Splitting flows internationally is key to secrecy. Result: “Africans are corrupt, we are not.” Eva Joly (Norway), investigating magistrate in the Elf Affair: “The magistrates are like sheriffs in the spaghetti westerns who watch the bandits celebrate on the other side of the Rio Grande. . . they taunt us—and there is nothing we can do.” Dealing with tax havens “phase two” in the corruption debate Was the Elf Affair unique?:  Was the Elf Affair unique? No: think Britain, United States, Saudi Arabia. Oil-based, transnational character, tax havens, secrecy, “Strategic,” underpinned by military relationship, corrupting democracy in the west Elf System is the only one ever broken open by forces of law & order. Not just oil-related: entire international financial system is fragmented. Countries compete to suck capital out of each other, leading to secrecy, tax havens, inequality. Poor, badly governed countries most vulnerable One country cannot take a lead: global, multilateral approach needed Example 3: Corruption surveys:  Example 3: Corruption surveys Transparency International’s CPI: more than half of “cleanest” 20% in CPI are tax havens. CPI 2007: Switzerland is seventh “cleanest” (BPI: Switzerland is “cleanest”) Reflects “demand side” of corruption. Ignores “supply side” (international financial infrastructure is ignored) Result of country-by-country approach: “Africans are corrupt, West is not” Global approach would change everything Nature of problem?:  Nature of problem? Countries/financial centres e.g. London compete to suck capital out of each other. Poor countries weakest: result is financial flows South-North. Capital flight Public debts, private assets offshore. E.g. Africa Elites escape responsibilities, others pay “Free-rider” problem - only global co-operation works. Multilateral approach. Biggest tax havens: not small islands but Switzerland, London, New York Magnitude of problem?:  Magnitude of problem? Tax Justice Network: $11.5 trillion offshore- leading to losses of $255bn annually - c/w MDG efforts World Bank - StAR: “The cross-border flow of the global proceeds from criminal activities, corruption, and tax evasion is estimated at between $1 trillion and $1.6 trillion per year.” Raymond Baker/GFIP: “for every $1 that we have been generously handing out across the top of the table (in aid), we in the West have been taking back some $10 of illicit money under the table. More analysis, better analysis in the future may make this a narrower picture or make it a wider picture. But no analysis will make this a pretty picture.” Why has the tax haven/tax issue not been tackled?:  Why has the tax haven/tax issue not been tackled? Complex, hard to understand Secrecy: hard to study, blind spots “Economics” and “tax” - unattractive for many Public/private interface - confusing Huge vested interests (companies/countries) Narrow focus on money-laundering, bribery Somebody else’s problem: spaceship Focus on aid (north-south) and not on (bigger) leakages (south-north) Tax haven problem falls between rich-world and poor-world campaigns All poor excuses. This is the missing link in development debates, democracy debates. Role of multilaterals?:  Role of multilaterals? World Bank waking up: StAR Initiative 2007 “The traditional focus of the international development community has been on addressing corruption and weak governance within the developing countries themselves, this approach ignores the “other side of the equation”: stolen assets are often hidden in the financial centers of developed countries.” “Global cooperation is needed to ensure that new financial havens do not replace the existing ones and developing countries receive the legal support they need.” IMF ROSCs could be changed to reflect financial transparency: e.g. London, Manhattan as tax havens. IMF 2002: Monterrey FFD Initiative: IMF, OECD, World Bank “propose to facilitate increased cooperation on tax matters among governments and international organizations by establishing a dialogue to share good practices and pursue common objectives in improving the functioning of national tax systems.” A role for Civil Society?:  A role for Civil Society? International tax policies formulated by tax “experts” who are: Beholden to vested interests, companies Focus on technical issues, less on politics or democracy Civil society has been almost absent till recently Multilaterals are essential: civil society needs to focus their attention Governments have vested interests, e.g. Britain’s financial services 10% of GDP. Conflict with development policy. Civil society is more “pure” Multilaterals e.g. World Bank has explicit development mission In the IMF’s words:  In the IMF’s words “Developing countries must be able to raise the revenues required to finance the services demanded by their citizens and the infrastructure (physical and social) that will enable them to move out of poverty. Taxation will play the key role in this revenue mobilization. Perhaps the greatest challenge facing these countries is to improve the effectiveness of their tax administrations.” In this context, the increasing globalization of the economy is relevant both for developed and developing countries. The constraints that it places on countries' ability to set and enforce their own taxes are felt increasingly keenly. THE END:  THE END

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