Loophole for All is a service to democratize offshore business for people who don't want to pay for their riches. It empowers everyone to evade taxes, hide money and debt, and get away with anything by stealing the identities of real offshore companies.
“The Offshore world is the biggest
force for shifting wealth and power from poor to rich in history... It harms
the big wealthy nations too,
even those that have turned themselves into
tax havens.” from Treasure Islands by Nicholas Shaxson.
Undeveloped countries are looted of
their own wealth, while developed countries face growing poverty, cuts to
social services and unaffordable education. These shifts are
facilitated by systematic mechanisms that multinational firms and global banks
use to transfer and hide wealth in legal loopholes, made possible with the
complicity of the governments of the UK, US and Europe.
Offshore centers are not a marginal
phenomenon. Today, using them is central to finance and the global economy.
Through the following interviews, produced for this project, major experts
unveil significant issues of abuses of the offshoring system, as well as offer
solutions to tackle offshore centers.
Video excerpts of interviews with experts of offshore centers 12 minutes long of selected excerpts. Full versions next to this.
John Christensen founder of Tax Justice Network UK
William Brittain-Catlin author of The Dark Side Global Economy
Jack Blum leader Tax Justice Network U.S.
Chris Taggart founder of Open Corporates
The statistics 98% of top 100 UK companies (FTSE)
use tax havens. 6 of 10 top tax haven countries are controlled by the UK . Over the 83% of top 100
U.S. companies (Fortune) use tax havens .
The use of offshoring has
increased vertiginously, at a rate of illicit financial flow growth of 18% a year.
The top 0.1 per cent of US taxpayer saw their effective tax rate fall from 60
per cent in 1960 to 33 percent in 2007, while their income soared. In 2007, the
700 biggest businesses in UK paid no tax at all on the previous year, which was
a boom. However, the banking sector makes the heaviest use of offshoring. Figures show that, in 2010, Barbados, Bermuda and the British Virgin Islands received more foreign direct investment than Germany or Japan .
Some numbers A December 2012 report found that from 2001 to 2010 developing countries lost US$5.86 trillion to illicit outflows .The same organization unmaskedthatmisinvoiced trade between
Chinese companies and the United States just from 2005-2011 is roughly US$2.83
trillion, flowing illicitly out of China .
The Tax Justice
Network in a 2011 report revealed estimates of tax
evasion for 145 countries around the world, covering 98% of world GDP. They
lost $3.1 trillion to illegal tax evasion between them .
Some names The financial sector has the greatest presence with the 'big four' UK banks
– HSBC, Barclays, Lloyds Group, and RBS – accounting for 1,649
companies located in jurisdictions classed as tax havens . This is the case also
for American banks such as JPMorgan, Chase,
Goldman Sachs and Bank of America . Just a few multinationals paying taxes on less than 10% of their
income: Coca-Cola, Intel, Del Monte, Seagate, Oracle, Pfizer  and American Airlines, Apple, Berkshire Hathaway, Cargill, Ford, General Electric, Google, Facebook, Amazon, Wal-Mart, Vodafone, Starbucks , among others.
Offshoring in detail, and what
It’s not only to hide money and avoid
taxes or manipulate prices. Sometimes it’s to hide debt, or often to manipulate
ownership, to misuse intellectual property, or to insure against high
environmental risks. After painstaking research, the artist assembled the
following list concerning the use and various instruments of offshore centers.
Toxic financial products.
Most of the banking sector uses offshoring not only
to hide assets but also to conduct unregulated speculations through special
financial instruments, often “toxic” and damaging to real economies. The
system of so-called "shadow banking," blamed for aggravating the
global financial crisis, grew to $67 trillion globally in 2011 .
technically known as Transfer Pricing or Misinvoicing. Multinationals can shift
profit into a low-tax haven and costs into high-tax countries, where they can
be deducted against tax. For example: Apple produces iPhones in China for a low
production cost which is invoiced through an offshore subsidiary. Then it sells
the iPhone to rich countries by invoicing a price a little lower than the
retailers price, not paying tax on the huge difference between the production
cost and the retail price. This loophole is very common for manufacturing
industries and especially for raw material from undeveloped countries .Developing
countries lose $98 to $106 billion each year solely due to misinvoicing .
Patents, Trademarks, and Intellectual property.
Many multinationals register patents of their technology or trademarks in
offshore centers in order not to be taxed. Major Internet companies make strong
use of offshore by transferring patents for technology or offices to offshore
centers. Example: Google, a US company located its European head office in
Dublin, where corporate income taxes are low. Google Ireland is owned by a
company based in Bermuda where corporate profits are not taxed. As a result, the
company cut its taxes by $31 billion in the last three years, moving foreign
profits through Ireland and the Netherlands to Bermuda .
There is an estimated hundreds of billions of dollars hidden in tax havens.
Example: A study has uncovered a discreet
$102bn market in European shares whose central purpose is tax avoidance, operated
only in the City of London. The analysis suggests the European tax loss –
mainly to France, Germany and Italy – is up to €595m a year .
Debt and bad investments.
Offshore centers are also used to hide the huge debts of bankrupted companies.
Scandals like Enron were possible because the companies hid huge amounts of
debt in offshore accounts. Example:
Two of Greece’s largest banks,
Piraeus Bank and Eurobank, have moved significant non-performing loans to
offshore entities .
Illicit payments and money laundering. Most
of the bribery in the political and corporate world happens through payments
made offshore, in addition to the huge money laundering activity managed in
secretive offshore bank accounts.
Asset manipulation. Often,
companies with subsidiaries offshore are able to issue financial products
offshore to speculate on their own assets. In
some other cases offshore subsidiaries are used to simulate losses to have
bigger gains onshore .
Real estate speculation.
An example in the UK: In 2011 alone, more than £7bn of offshore money flooded
into potentially tax-exempt purchases of UK houses, flats and office blocks . Buying in this
way, which is entirely legal, grants the purchaser total anonymity and
confidentiality in UK records, and – as the registered owner of
the house does not change – also allows the buyer to avoid
Bankruptcy and Insolvency.
Some subsidiaries are opened in offshore centers in order to declare bankruptcy
without future legal consequences or repayment obligations. Example:
bankruptcies in Ireland must wait 12 years before they are discharged from
their debts, but in UK everyone can be free of debts within 12 months .
Concentration of ownership and monopoly.
Many multinationals split ownership of different companies in the same industrial
sector through offshore subsidiaries, and thereby monopolize sectors of the market .
Insurance for risking operations.
Most of the oil-drilling companies have insurance issued offshore. Example:
Transocean’s platforms that leaked in the Gulf of Mexico were insured in the
Marshall Islands and they attempted to limit the legal responsibility to that
The pharmaceutical sector also uses offshoring to insure against health risks,
avoiding social responsibility in the places where the companies operate.
Pharmacy and chemical licenses.
Corporations in the chemical and biological industry acquire licenses for risky
and toxic products through offshore centers in order to produce and sell the
Vulture funds are private companies that try to
scavenge profit from the debts of some of the world's poorest countries. In
2010 the Debt Relief Act was passed which severely
actions of vulture funds
in the UK. But this law does not apply to Overseas Territories and Crown
law firms already forced debt repayments from countries like Congo and Libya .
E-commerce selling exemption. VAT-avoiding
websites based in Jersey and Guernsey, allow the sale of hundreds of millions
of pounds of CD, DVDs and other goods over the Internet . Other Internet
companies book their worldwide selling in offshore centers to avoid taxes
everywhere else. Example: Amazon.co.uk is based in Luxemburg, as well as
Data Centers and information technology. Offshore centers can be considered jurisdictions with lax digital data
protection, like the different privacy regulations between U.S. and Europe, or
for content tied to illegal activity like pornography and online casinos.
Recently, offshore centers have been used to evade copyright protection of
digital content. Example: Antigua is planning to open a website selling media
and software without paying any fees to American copyright holders .
Libel haven. It’s possible to register “Image Rights”
and protect them under the offshore legislation, which may result in oppression
of free of speech onshore .
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