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(English) Switzerland Must Stand Up For Its Financial Centre, Says Geneva Professor

Philippe Braillard, University of Geneva , Emeritus Professor, 4 March 2016

A senior academic figure in Switzerland says the Alpine state needs to be more assertive in protecting its banking sector and condemns what he sees as the double standards of countries such as the US.

The following opinion item, written by Philippe Braillard, emeritus professor at the University of Geneva, argues that Switzerland must be assertive in protecting the interests of its financial industry. He writes as a recent US/Switzerland programme comes to an end; that programme required Swiss banks and other financial institutions to state if they were at risk of, or had, sheltered US persons against tax. The programme has seen banks sign non-prosecution agreements and pay fines. Professor Braillard’s views are a most welcome addition to debate and the editors here invite readers to respond. (An earlier version of this article appeared in Le Temps, and in Finanz und Wirtschaft.)

In early 2016, the programme to settle the tax dispute between Swiss banks and the US authorities reached an important milestone when the “category two” banks – of which there are around 80 – formed an agreement with the US Department of Justice under which they will face no criminal prosecution in return for paying fines in excess of $1.3 billion. The total bill, including banks in all categories and sums already paid by UBS and Credit Suisse in 2009 and 2014, will probably exceed $6 billion, a figure that excludes the huge legal and audit fees incurred by banks as a result of the US authorities’ actions, which in some cases equal the size of the fine. This is an opportune moment to take a step back and take a critical look at the programme, which has damaged the Swiss financial market because of a lack of clear-sightedness among the Swiss political authorities.

Firstly, we must not forget that the programme has not yet been completed. Swiss banks will be required to work closely with the US authorities for four years, and in particular will have to send them various kinds of data. The US will be able to use the information thus obtained to make mutual assistance requests to Switzerland, enabling the US to identify taxpayers guilty of tax fraud. Another threat remains: the US authorities are reserving the right to prosecute certain Swiss bank employees and third parties such as external advisors and asset managers.

How did we get to this position? The US government’s desire to make its taxpayers comply with their tax obligations is perfectly legitimate. However, it does not justify the unilateralism and imperialist behaviour adopted by the US: using its decisive power over the operation of financial, economic and technological networks in our globalised world, the US is seeking to force the extraterritorial application of its laws.

Moreover, although it claims to be acting in the name of virtue and universal moral values, the main aim of the US’s strategy is the pursuit of economic and political interests. It is clearly in the US’s interests to weaken the Swiss financial market, which is a formidable rival to its own. The US’s stance is therefore hugely hypocritical: there is a glaring contradiction between what it is saying and what it is doing. The US has zero credibility when it criticises tax havens and Swiss banking secrecy, since the US itself is one of the world’s largest centres of tax evasion. One just has to think of the entirely opaque legal vehicles offered by several US states (Delaware, Nevada, Wyoming, South Dakota). This was confirmed recently by a Bloomberg analysis, which said that large amounts of untaxed assets are being transferred from Switzerland and exotic tax havens to the US, which is sheltering those assets from the eyes of foreign tax authorities. In addition, the US does not want any genuinely reciprocal arrangement with other states, despite imposing full tax transparency on them via FATCA. This is why the US will not genuinely implement the OECD’s new global standard on the automatic exchange of information, for fear that it will damage the US financial market, which is sheltering large amounts of untaxed assets owned by foreign taxpayers.

A critical examination of the US Tax Program also clearly highlights the weakness and lack of lucidity shown by the Swiss authorities when it engaged with the programme in order to seek a global political agreement.

The Swiss authorities agreed to and even encouraged the delivery of information to the US concerning several thousand bank employees who had done no wrong under Swiss law. The Swiss Federal Council negotiated badly, putting itself in a position of weakness and failing to anticipate correctly the effects of the programme that the US wanted to impose on it. It was unable to denounce the hypocrisy and cynicism of its partner and to frame the argument in terms of interests and competitiveness. That resulted in Switzerland ending up as the only country to be targeted so comprehensively by the US and to have a programme of this kind imposed on it. Many of the problems currently facing Swiss banks could have been avoided if FINMA had given clear directives after the UBS affair in 2008.

In addition, after almost forcing the Swiss banking sector to take part in the programme while refusing to get involved in its execution, the Swiss authorities now want to change the law to prevent Swiss financial intermediaries from deducting their US fines against tax, even though they have already been taxed on the revenue from the activities on which they are being fined. This change of policy will only increase the damage done by the programme to the Swiss financial market.

The Swiss Federal Council must quickly learn from the mistakes it has made and remember that Switzerland is a financial centre that strictly applies international standards on transparency, and that requires its rivals to do the same, starting with those who claim to set an example. It must be resolute with its resistance in the event that this programme, which is proving so lucrative for the US tax authorities, inspires other countries attracted by the fines that they could seek to impose on Swiss banks.

It is high time for Switzerland to stop the self-flagellation and show that it is a strong financial centre, determined to defend its interests and stay competitive without apology.

(English) Common Reporting Standard must include all major financial centres to be effective, warns the IFC Forum

February 25, 2016

Written by IFC Forum

Published in Legal

The global tax compliance landscape has significantly evolved in recent years as governments, international bodies and financial institutions have come together to share information to tackle cross-border tax evasion. Most recently, the OECD launched the Common Reporting Standard (CRS) to fight international tax evasion.
Over 90 jurisdictions have agreed to implement CRS: the latest standard by which governments automatically exchange financial account information to prevent tax evasion. The British international financial centres – including Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, Jersey and the Isle of Man – are all early adopters of the new standard.
However, the US has declined to join CRS, citing the extensive network of intergovernmental agreements it already has under the Foreign Account Tax Compliance Act (FATCA). Yet, FATCA was designed to require information reporting to the US, including information on accounts indirectly owned by individuals and trusts. Although US has agreed to supply basic information to other countries, it will not include information on accounts which are indirectly owned. CRS requires full exchange of information on indirectly held financial accounts so goes further than the obligations that the US accepts under FATCA, and would require the US to match the obligations of fully effective disclosure which the US has imposed on others.
As jurisdictions prepare to exchange CRS information from January 2017, the IFC Forum, which represents financial and professional services firms in the British international financial centres, questions whether the new OECD system will be effective without US participation. The IFC Forum is responding to a recent article in the Economist[1] which reports on the US’ decision to decline to join CRS and suggests that money is flowing into the US to minimise disclosure.
Jack Marriott, Chairman of the IFC Forum, said: “In order to be effective, CRS must be truly global. Is it viable without participation from the world’s largest financial centre? Similar concerns apply to other proposed transparency measures such as the availability of ultimate beneficial ownership information.”
Richard Hay, Counsel to the IFC Forum, adds: “Clients who wish to avoid CRS may move money to the US to take advantage of the lower disclosure standards which will apply there. As the OECD already appears to have recognised, it only takes one hole in the balloon for all of the air to go out. The US must participate if CRS is to be effective.”

(English) Forget Panama, try Belgium for a cozy tax deal

The European Commission has concluded that selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under EU state aid rules.

George M. Mangion
Published on Malta Today
3 March 2016, 8:03am

The European Commission is looking at Member States to assess compliance with EU state aid rules in the context of aggressive tax planning by  multinationals, with a view to ensure a level playing field. A number of Member States seem to allow multinational companies to take advantage of their tax loopholes and thereby reduce their tax burden.

Only two months ago came the revelation that the EU is investigating Belgium for the cozy tax deals it signed with dozens of multinationals. A recent EU ruling forces Belgium to reclaim millions of undercover deals on tax avoidance signed with mega business in many other countries.

The European Commission has concluded that selective tax advantages granted by Belgium under its “excess profit” tax scheme are illegal under EU state aid rules. The scheme has benefitted at least 35 multinationals mainly from the EU, who must now return €700 million in unpaid taxes to Belgium. The hybrid scheme made use of a twisted logic to assume that a taxpayer being a multinational generates an “excess profit” so it redeems this factor by slashing its tax charge.

Critics of the scheme argue that even if in fact a multinational does have a Midas touch, then the benefits should be shared between its group companies in a way that reflects economic reality. But nothing of the sort happens in this Belgian tax fable. Contrary to what Belgium claims, the scheme cannot be justified by the need to prevent double taxation.

The discounted profits are not taxed elsewhere and the scheme does not even require companies to demonstrate any evidence or even risk of double taxation. Instead of preventing double taxation, in reality the scheme gives a ‘carte blanche’ to double non-taxation.

According to the information assessed at this investigation at least 35 multinationals benefitted from the scheme yet it cannot name the companies at this stage because the Commission assessed and found the scheme itself illegal. Ironically Brussels, being the cradle of a monolithic EU administration adorned with its lofty palaces housing thousands of bureaucrats, has been on attack after it was disclosed that it gave shelter to multinational companies to avoid taxes at the expense of others.

It makes use of tax havens by taxpayers such as Panama an expensive and far away destination – when Belgium is so central and convenient. But the game is up as tax commissioner Pierre Moscovici has promised a more comprehensive approach to reform.

Some may ask how did such a drain of such mega proportion ever go undetected when it was administered under the noses of Brussels “long in tooth” technocrats? The so-called excess profit scheme, (or simply double-non taxation) has been in place for over 15 years and financial tax advisers were not too shy to recommend it to fee paying patrons.

Unashamedly it was branded as exclusive to the “French fries and Moules” community and marketed by the tax authority under the logo “Only in Belgium”, as it gallantly allowed mega corporations to reduce their tax base by half or even pay as low as ten percent.

But it failed the Robin Hood test since tax rulings by the Belgian authorities favoured exclusively the rich and powerful corporations that obtained a ruling on profit recorded in Belgium, skillfully adjusted downward by excluding from the tax base “excess profits” arising from the company’s membership of a multinational group. It discriminated against companies not forming part of groups as these could not claim similar benefits.

The famous “excess profits” scheme which has been operating on the quiet for more than a decade is a classic case of distortion of competition within the EU’s Single Market. In a most uncanny way the scheme found a foolproof method of how to exempt legitimate profits from mainstream tax. It did this simply by issuing one-to-one tax rulings.

A devious logic was behind the Belgian fudge. This just compared the actual profit of a multinational with the hypothetical average profit of a stand-alone company and the difference in earning capacity was siphoning off as “excess returns” – hitherto untaxed or taxed at a ridiculous low rate.

This is based on a convoluted premise that multinational companies make “excess profit” as a result of being part of a multinational group, e.g. due to synergies, economies of scale, a Midas reputation, client and supplier networks, access to new markets. Imagine if tax havens copy this technique by pretending that they are a high tax jurisdiction and prima facie levy a 30 % tax on profits but secretly concede that the mega companies deserve a hefty deduction to cream off excess profits allegedly generated due to their size and dominance in the market.

Certainly incentive legislation to attract FDI needs to be ingenious and each country tries its utmost to invent schemes to lure business to their fold. However, to ensure a level playing field and eliminate unwarranted state aid the schemes have to be fair. Certainly with unemployment within the EU still high at 17 million there is nothing wrong for governments to try to create jobs and boost economic growth.

But it will be abuse of competition rules for national tax authorities to grant favours to foreign business, however large or powerful they are, as this constitutes an unfair competitive advantage when compared to others. Undoubtedly, such schemes put SMEs at an unfair disadvantage since they too are competing in the same markets and have to pay the full brunt of national taxes.

Readers may recall the Luxleaks that was discovered two years ago and wonder whether the Belgium scheme pales by comparison. Of a higher magnitude was illegal state aid afforded to Fiat in Luxembourg and Starbucks in the Netherlands. Naturally the investigative arm at EU level is over-stretched to secure sufficient resources to weed out unfair tax competition as this calls for an effective combination of both legislative action and enforcement of state aid rules.

It comes as no surprise that as an interim measure it announced last month its four legged Action Plan for fair, transparent and efficient corporate taxation. Later this year, the Commission will present a package of proposals which aims for a coordinated and efficient implementation of international tax good governance standards: that companies should pay taxes where they make profits.

This avoids the situation where multinational companies earn their profits in a number of high tax jurisdictions but the holding company is located in a country which permits them secret tax rulings to lower their liabilities. It also calls for a comprehensive country by country report where taxes are paid.

In conclusion, the Commission established that Belgium must cease applying the excess profit ruling system and recover the full, unpaid tax from the companies involved. Belgium has announced it will likely appeal the decision. Several companies are considering to appeal as well or to intervene in the Belgian procedure. With Belgium setting the standards for lower tax there is little appetite left for tax consultants to travel to South American tax havens such as Panama.

El nuevo paraíso fiscal es EU

By Alvaro Tomas

Published on La Prensa

February 1st, 2016

The title of this article is not my responsibility. Bloomberg Businessweek, one of the most prestigious financial news agency in the world, published an article by Jesse Drucker, on January 27th of this year, entitled The World’s Favorite New Tax Haven Is the United States (see:

Here, the author details how the United States has masterfully deceived its European minions with FATCA and the cry of “transparency” with the intention of monopolizing the business of fund management, financial assets and the formation of corporations. This Article is a slap in the face to the members of the private club called OECD and the reason Panama must continue to defend its financial services platform.

Drucker proceeds, with the composure of a surgeon, to describe the positive effect that the United States has created for their financial and legal services platform by requiring fiscal transparency from the whole world with its famous FATCA agreement while at the same time refusing to sign the agreements of transparency the OECD demands from other countries. He quotes an executive named Andrew Penney from the Rothschild & Co. Company who last September gave a conference in San Francisco, California, where he presented examples of what happens when a foreigner opens a bank account in the US and concludes with the following “You can help your customers move their fortunes to the United States tax free and hidden from their governments. Some call it the new Switzerland. ”

Inspired by FATCA, warns Drucker, the OECD has set stricter standards to prevent tax evasion. Since 2014, ninety-seven (97) jurisdictions have signed the OECD’s so called  “Common Reporting Standards” with total opposition only from Vanuatu, Bahrain, Nauru and … the United States. I want to remind you all that Panama, like the Bahamas, agreed to join this year, much to the dismay of the OECD, since as a condition Panama established that it should be bilateral in nature, upon request and only with countries it considers would benefit its interests. In other words the United States, which in the first place started all the fuss about fiscal exchange, gave the finger to Pascal Saint-Amans and his entourage of bureaucrats who live the “grande vie” in Paris without paying a penny in taxes. But it seems that already some Europeans are starting to take notice of the great contradiction. Sven Giegold, member of the German parliament, said: “I have great respect for the Obama administration since without its first initiatives we would not have reached the standards of exchange.” Then he adds, (I presume with a tone of resignation): “On the other hand, it is time for the US to give the Europeans what the Europeans are willing to give the US”. Dear friend Giegold, Europe will receive the automatic tax information, as the Americans would say, when hell freezes over.

Sooner or later, our neighbor Colombia will emerge from its state of ecstasy caused by becoming a member of the  OECD and realize that the funds deposited in Panama by Colombians, will not return to Colombia, but will rather end up in the United States, under US corporations in Delaware, Nevada or Wyoming. On top of that, when the time comes for Colombian authorities to request tax information from them, they will receive the following response from US authorities: that they can not give them the information because they do not know who the corporation’s ultimate beneficiary is or, if someone has a bank account, because they are covered by the right to confidentiality. Colombia will have to submit to the exchange upon request rather than to the automatic exchange to which they strive for and that is required by the rich nations club previously mentioned. By then, Colombia will have forever affected trade and diplomatic relations with Panama.

Foreseen, announced and warned by several local lawyers, Europeans are now beginning to realize the real components and results of the American strategy whose goal has always been to dominate the financial and legal services’ market. Now they must acknowledge that they fell into a trap, a trap that Panama cannot afford to fall into. And to those who think that the Americans are not capable of planning this and economically conspire against other countries with such premeditation, I recommend you read Confessions of an Economic Hit Man (2005) by John Perkins.

¿Paraíso Fiscal o Plataforma de Servicios y Negocios Internacionales?

By Eduardo Morgan Jr.

Colombia´s Decree
Decree # 1966 of 2014.
The President of the Republic of Colombia considers:
That as part of harmful tax competition between jurisdictions, tax havens offer attractive tax advantages for capital, financial activities of non-residents and other activities susceptible to geographical mobility, by means of a lax legislation and controls with little or no transparency in relation to services provided to third countries, with inexistent or nominally low tax rates compared to those applicable to similar operations in Colombia; the existence of laws or administrative practices that restrict sharing of information; the lack of transparency at legal or regulatory level or in administrative functions; the no demand of a substantive local presence or real activity of economic substance; all of which can cause distortions in both, investment and commercial decisions, and because of its effect erode the tax base of the Colombian State.

President Santos- Statement
The president of Colombia, Juan Manuel Santos, stated that the measures taken by his government, to declare Panama a “tax haven” is not “a decision against” the Central American country, but a measure to prosecute tax evaders.
Colombia, he added, has to implement a policy that includes these type of measures because Colombia wants to be recognized as “a serious country which fights tax evasion.”
This policy is part of the Colombian commitments in order to join the Organization for Economic Cooperation and Development (OECD).

OECD Organization for Economic Cooperation and Development
Comprised by 34 countries.

What is it?
The Economist magazine calls it a “Rich Countries Club” and Paul Krugman sees it as a Think Tank. I identify as a CARTEL.

The Cartel
It seeks to eliminate competition of countries like Panama, to their financial centers.
So they confessed:
In paragraph 36 of “Improving Access to Bank Information” says the OECD:
“The liberalization (of financial markets) was a response to the threat to the financial markets by “Offshore” financial centers”. These centers, in the 60s and 70s decades, managed to attract foreign financial institutions offering banking systems with minimal regulation and low taxes … at a time when technological advances made them of easy access… ”

Pascal Saint-Amans – Director: OECD Centre for Tax Policy and Administration

Note: Pascal forgot the existence of the U.S.A. and the fact that it is the world’s largest financial center.

The most important note of the report

“Paradoxically, the United States, which set the ball rolling with FATCA, does not want to sign up to the new OECD standard, which would require full reciprocity between countries, preferring to stick to its own law instead.”
This was not even mentioned in the local journalist extensive report
Source: Tax Summit in Berlin aims to say goodbye to banking secrecy

Through the administrative act 2014-62 US Federal Government indicates with which countries it has obligations to exchange information and with which ones on the list they actually exchange

  • Países con los que tiene obligación
  • Antigua & Barbado
  • Aruba
  • Australia
  • Austria
  • Azerbaijan
  • Bangladesh
  • Barbados
  • Belgica
  • Bermuda
  • Brazil
  • British Virgin Islands
  • Bulgaria
  • Canada
  • Cayman Islands
  • China
  • Colombia
  • Costa Rica
  • Croatia
  • Curazao
  • Cipré
  • República Checa
  • Dinamarca
  • Dominica
  • República Dominicana
  • Egipto
  • Estonia
  • Finlandia
  • Francia
  • Alemania
  • Gibraltar
  • Grecia
  • Grenada
  • Guernsey
  • Guyana
  • Honduras
  • Hong Kong
  • Hungria
  • Iceland
  • India
  • Indonesia
  • Irlanda
  • Isle of Man
  • Israel
  • Italia
  • Jamaica
  • Japón
  • Jersey
  • Kazakhastan
  • Korea del Sur
  • Latvia
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Malta
  • Marshall Islands
  • Mauritius
  • Mexico
  • Monaco
  • Morocco
  • Netherlands
  • Netherlands
  • Netherlands ilsand territories (Bonaire, Saba, and St. Eustatius)
  • New Zealand
  • Noruega
  • Pakistan
  • Panama
  • Perú
  • Philippines
  • Polonia
  • Portugal
  • Romania
  • Russian federation
  • República Eslovaca
  • Slovenia
  • Sur África
  • España
  • Sri Lanka
  • St. Maarten (Dutch Part)
  • Sweden
  • Switzerland
  • Tailandia
  • Trinidad y Tobago
  • Tunisia
  • Turquia
  • Ucrania
  • Reino unido
  • Venezuela
  • Australia
  • Canadá
  • Dinamarca
  • Finlandia
  • Francia
  • Alemania
  • Guernesey
  • Irlanda
  • Isle of Man
  • Italia
  • Jersey
  • Malta
  • Mauritius
  • México
  • Netherlands
  • Noruega
  • España
  • Reino Unido

Countries the USA gives information:

  • Australia
  • Canadá
  • Dinamarca
  • Finlandia
  • Francia
  • Alemania
  • Guernesey
  • Irlanda
  • Isle of Man
  • Italia
  • Jersey
  • Malta
  • Mauritius
  • México
  • Netherlands
  • Noruega
  • España
  • Reino Unido

We are no Tax Haven
Panama has none of the factors Colombia identifies as tax haven.
1. Our tax law contains no law that gives special treatment for investments in Panama, to foreigners or to foreign investors, in general. Tax law is equal for all domestic and foreigners, whether or not residents. Example: Interest on bank deposits. Both nationals and foreigners are exempted. On the other hand, U.S. nonresident aliens are exempted, not so Americans or residents who do have to pay taxes. This is, clearly, a law to attract foreign investment.
2. We do not have “lax” controls. Our tax laws are transparent; there are no powers to negotiate fiscal agreements on taxes and our banking center is acknowledged as one of the strictest in the world. Our Banking system has the distinction of having survived unharmed the severe crisis during the Noriega’s period when banks were closed for several months (no depositor lost neither principal nor interest when the system was reinstated). We also passed without damage the banking crisis that began in 2008 when many banks in OECD countries went bankrupt caused, precisely, by “lax” controls on subprime mortgages.

3. Our income tax is at the same level, and sometimes higher than some OECD States (example: tax on corporations in England 21% vs 25% in Panama; individuals who earn up to 11k pay no taxes; above 50k pay 15% and then up to 25%. We pay property taxes. Sales and service taxes range between 7%-10%.

4. It is untrue to say that foreign enterprises do not have substantial presence in Panama. Some of the most important Colombian companies (banks, cement factories, etc., and more than 106 regional headquarters of multinational companies operate in Panama, some very important. We also have our banking center, (no letterbox banks), the Colon Free Zone, ports, and the Panama Pacific Area where huge global companies like Caterpillar operate.

5. Panama has signed assistance agreements with many countries, including fiscal matters. We are founding members of the United Nations; we belong to the WTO and other authentic international organizations.

6. Our stock corporation system is acknowledged for its public registry and for the obligation of the registered agent (who must be an attorney) to document the identity of their clients. History shows that whoever uses a Panamanian corporation to commit a crime is identified. No one gets away. Such are the cases of presidents of Nicaragua and Costa Rica; the Peruvian, Montesinos and the Colombian, Murcia. This does not happen in England or in the United States where since 2008 they have been trying to pass the law to “know the client” but because of the opposition of some States (Delaware, Nevada and Wyoming, mainly), which are in the business of selling companies.

What is Panama?
It is a platform of services and international businesses built on three pillars:
1. Geographical Position
• Panama Canal
• Ports
• Internet connectivity with five optical cables
• COPA Air Hub
• Free of natural disasters (hurricanes, earthquakes, etc.)
2. Legal and financial system
• The Dollar as currency
• Territorial Tax System
• No central bank
• Well-regulated banking center
• Registration of ships and registration of companies, both transparent
• Consular representation in major world ports
• Colon Free Zone
• Law or Multinational Headquarters
• Panama Pacific Area
• City of Knowledge
3. Panamanian society and its people
• A friendly country with no tradition of civil wars; without discrimination of any kind, (race, sex or religion, nationality)
• Excellent schools and health centers

1. Panama does not have, according to our laws, none of the characteristics that defines a tax haven.
2. The aggression received by including us in a list of tax havens with the consequences that entails, had the positive effect of uniting Panama to defend its platform of services and international businesses that account for 82% of its economy, and therefore is a matter of national security.
3. Also, and very important, that before the threats we can apply our law of retaliation which would affect enterprises that participate in options for important infrastructure projects; that uses our platform of services and international business in Panama as well as our own local economy.

Colombia, la OCDE y el exabrupto galo


By Alvaro Tomas

Faced with the impossible task of negotiating the signing of a treaty to avoid double taxation between Panama and Colombia, I would like to clarify my position in opposing the signing of any such agreement that would result in the automatic exchange of tax information with that country. It would be ideal to not sign anything, but realistically speaking and for the sake of diplomacy and bilateral relations, Panama should impose a model agreement for the exchange of information that would defend our service platform and that could also be used as a template for other agreements we might sign in the future with any country we’d want  (just as the FATCA model Americans have). I feel that the stubbornness of the Colombian government undermines the historical relations between two sister nations. I am opposed to Colombia calling Panama a “tax haven” and I feel offended that its inclusion in their blacklist seems to be a wink to the Organization for Economic Cooperation and Development (OECD). The government of President Juan Manuel Santos forgets that Panama has welcomed its Colombian brothers for decades. Throughout the conflict with the guerrillas, the drug mafia and during their most difficult economic situation, Colombians from every social class, race and profession have found refuge here. With the expansion of its industries to foreign countries, Panama opened its doors to Colombian investment in the cement, beer, fast food and food in general industries and recently in the banking, insurance and financial industries. Panamanians have been allies in the fight for democracy, when the region became infected with the leftists’ cancerous and wild populism. But now, the government of President Santos has become infatuated with the idea of subduing Panamanian sovereignty, trampling our pride and violating public international law governing nations, under the premise of reducing the Colombian fiscal deficit and pleasing the European countries, members of that bureaucratic monstrosity called the OECD whose purpose is seeking to turn Latin countries into its minions. They do not understand that aside from affecting our diplomatic and trade relations, they will not achieve their purpose of taxing funds held abroad. The funds will move to the United States (US), one of the largest and less transparent tax havens in the world. The US does not accept the common standard for automatic exchange of information “required” by the OECD and, therefore, Colombia will not receive the information they yearn. Given the serious damage to Panama’s economy and service platform that our neighboring country could cause, if they insist on pleasing the OECD, I would support suing Colombia before the World Trade Organization in order to apply retaliatory measures and, also, request a compensation for the billions of dollars Panama spends annually in human, military and material resources to prevent the drugs that Colombia fails to stop producing and exporting from getting to our shores. There is still time for the Colombian government to reconsider its diplomatic, commercial and historical mistake, and assess what unites us as nations. Finally, the outburst of French Finance Minister Michel Sapin, declaring that France will monitor the exchange of information with Panama, even though we have a double taxation treaty signed and in force between the two countries, is unacceptable. The French bore us already, for their arrogance, their inflated self-esteem, their insistence on being considered a world power, their desire to sit at the adult table and for their failed socialist policies. The French minister warns that if Panama does not subject to the OECD’s tax information exchange standard, it must face the consequences. I imagine that the brave Sapin does not dare issue the US (who does not  -nor will they ever- subject themselves to the OECD’s automatic exchange standard) the same threats.  May 2016 be a good year for you all, and may this be a year in which Panama takes a stand against the attacks from the OECD.

(English) Letter from James Bacchus to Jose Angel Gurria

OMC falla a favor de Panamá en pugna comercial con Colombia


Fri Nov 27, 2015

(Adds Colombia saying it will appeal)

GENEVA Nov 27 A World Trade Organization dispute panel ruled against Colombia’s tariff on textiles, clothes and shoes on Friday, dismissing its argument that the measures were needed to fight -money laundering.

The WTO panel backed a complaint from Colombia’s neighbour Panama that the tariffs, which consisted of a fixed 10 percent and a variable component, breached the maximum allowable 35-40 percent tariff on those products.

Colombia’s Ministry of Trade and Industry immediately said it would appeal against the ruling.

Colombia had argued that the imported goods constituted “illicit trade” because they were imported as artificially low prices in order to launder money, vindicating its use of a higher tariff than was permitted under its WTO agreement.

But the panel said it had failed to demonstrate that the tariff was either designed or necessary to fight money laundering, and because the tariff did not apply to imports from various countries or trade zones with special trade deals, it was illegally discriminating against Panama.

Colombian Trade Minister Cecilia Alvarez-Correa said in a statement the ruling was an unfortunate hindrance to the battle against smuggling and illicit trade and there were “legal and logical inconsistencies” in the panel’s reasoning.

Panama brought the case to the WTO in 2013, having previously lodged two complaints against its neighbour. Colombia settled the first out of court in 2006, and Panama won the second dispute in 2009. (Reporting by Tom Miles, additional reporting by Julia Symmes Cobb in Bogota, Editing by Catherine Evans and Angus MacSwan
Read more at Reuters

(English) Pfizer Chief Defends Merger With Allergan as Good for U.S


Published November 23,2015

The New York Times

In phone calls to Washington lawmakers and Obama administration officials, the chief executive of the largest drug maker in the nation had a surprising message: A deal that would allow the company to move its headquarters to Ireland was actually good for the United States.

The Scottish-born chief executive of Pfizer, Ian C. Read, told them that a merger with Allergan, the maker of Botox that is based in Dublin, would significantly cut Pfizer’s tax bill and give it more cash that it could invest in the United States and ultimately add jobs, according to people briefed on the calls. He made the calls in recent days as the two companies were hammering out a $152 billion deal.

Monday’s announcement of the deal — the biggest merger in 15 years — has revived a fierce public debate over whether mergers that allow a company in the United States to relocate to a lower-tax country are, in fact, good for America.

Pfizer, founded by German immigrants in Brooklyn in 1849, is becoming the biggest company yet to shed its American citizenship to lower its taxes. While not structured as what is known as an inversion, it achieves the same goal of a lower tax rate abroad.

An aborted bid by Pfizer to acquire AstraZeneca of Britain in an inversion last year set off a public uproar — leading President Obama to call such deals “unpatriotic” — and prompted moves by the Treasury to curb them.

The latest merger announcement has stirred a similar outcry across the political spectrum.

Hillary Rodham Clinton, a Democratic candidate for president, said, “We cannot delay in cracking down on inversions that erode our tax base.”

Donald J. Trump, a Republican candidate for president, said in a statement: “The fact that Pfizer is leaving our country with a tremendous loss of jobs is disgusting. Our politicians should be ashamed.”

Yet the two companies and their advisers are betting that the Treasury Department will not be able to come up with new rules to block the union, and that Congress will fail to revamp the tax code before the merger’s expected close late next year.

And as Mr. Read has made clear publicly and privately, his main priority is doing well by his shareholders — and that means finding a way to compete with huge foreign rivals that enjoy much lower tax rates.

“We’ve assessed the legal, regulatory and political landscape and are moving forward with our strategy to combine these two great companies for the benefit of the patients and to bring value to shareholders,” Mr. Read said on Monday on a call with analysts. “That is our obligation.”

Mr. Read and those close to him have noted that Pfizer, based in New York, has been upfront about its intentions. Even after its takeover campaign for AstraZeneca collapsed, the Pfizer chief made no secret of his desire to try again, while criticizing a tax code that he said leaves his company fighting with one hand tied behind its back.

The drug maker, which manufactured penicillin during World War II, has complained that its tax rate last year was 26 percent, compared with the approximately 5 percent that Allergan’s predecessor company paid during that same time.

Bigger international rivals, from GlaxoSmithKline and AstraZeneca of Britain to Novartis of Switzerland, also pay substantially less in taxes, potentially letting them win takeover contests with higher bids.

Perhaps more important, Pfizer kept overseas $74 billion in profits that were earned abroad last year, because bringing them home would have racked up billions of dollars in taxes.

Since the AstraZeneca bid, the Obama administration has introduced new rules that have made it harder for companies to do inversion deals, scuttling efforts by companies like AbbVie, a large drug maker based in Illinois, to relocate abroad.

From the beginning of their deal discussions nearly three months ago, Pfizer and Allergan agreed that the best way forward was to forgo an inversion altogether, according to people with direct knowledge of the matter. Instead, Allergan would serve as the buyer despite being substantially smaller.

Mindful of the sensitivity in Washington, Pfizer included in its advisory team the boutique investment bank Moelis & Company, whose vice chairman is Eric Cantor, the former House majority leader.

While Mr. Cantor will not lobby lawmakers, people with direct knowledge of the matter said, he has advised the company on political aspects of the deal and maintains friendly contact with his former colleagues.

Despite the political uproar, the merger is not expected to encounter significant resistance from the American regulator that will review the transaction, the Federal Trade Commission, according to the people with direct knowledge of the deal.

A spokesman for the Treasury Department said on Monday that it did not comment on specific transactions. Still, the department has clearly signaled its distaste for deals that move a company’s tax home.

The particular design of Monday’s transaction, however, effectively shields Pfizer and Allergan from the administration’s efforts to curb such deals.

When the Treasury Department announced its latest rule changes on Thursday, advisers to both companies sat down to review the changes — and quickly went back to work on their negotiations, the people with direct knowledge of the matter said.

“Treasury’s proposals don’t touch them,” said Robert Willens, an independent tax consultant who examined the deal.

Presidential candidates offered swift condemnation of the transaction all the same.

Such transactions, Mrs. Clinton said, “take advantage of loopholes that litter our tax code, distort incentives for investment and disadvantage small businesses and domestic firms that cannot game the international tax system.”

Senator Bernie Sanders of Vermont, a Democratic candidate for president, said, “The Obama administration has the authority to stop this merger, and it should exercise that authority.”

Yet others said a broader tax overhaul was needed.

Senator Orrin G. Hatch of Utah, the Republican chairman of the Senate Finance Committee, said the news of the merger “only further underscores the arcane, anticompetitive nature of the U.S. tax code.”

Executives at both Pfizer and Allergan are betting that Congress will continue to be conflicted about how to deal with inversions. Republicans, who control the House and the Senate, have called for a comprehensive regulatory overhaul and have shown reluctance to focus on particular companies.

“It’s not clear what Washington’s wishes are,” said one person close to the transaction. “We tried to tell them to fix our tax system. It’s not like this is a surprise.”

At the same time, both Mr. Read and his counterpart at Allergan, Brenton L. Saunders, have emphasized that the deal isn’t being done just to cut taxes.

Both executives contend the deal gives Pfizer access to fast-growing treatments in the eye care and dermatology space, as well as brands like Botox and the cosmetic treatment Juvéderm.

Moreover, it will give Pfizer enough size and product diversity to break itself up in three years’ time, dividing itself into a company focused on faster-growing innovative drugs and another built on more mature treatments that face competition from generic competitors. The company said on Monday that it would decide in late 2018 whether to proceed with a split.

Buying Allergan will bring more fast-growing treatments to Pfizer’s portfolio. That would complement Pfizer’s $17 billion acquisition of the generic drug maker Hospira earlier this year, meant to bulk up its so-called established treatments division.

Under the terms of the deal, Pfizer would essentially pay $363.63 for each Allergan share, representing a nearly 30 percent premium to Allergan’s share price in late October before news emerged that they were in talks. That values the acquisition at $152 billion. Including debt and subtracting cash, the deal is worth $160 billion.

After the transaction, Pfizer shareholders are expected to own about 56 percent of the combined company, with the remaining 44 percent owned by Allergan shareholders. Mr. Read will be chief executive of the new Pfizer P.L.C., to be based in Dublin, while Mr. Saunders will become president, and will be in line to take over one of the company’s businesses if and when it decides to break itself up.

Investors appeared unimpressed. Shares of Allergan fell 3.4 percent, while Pfizer’s ended down 2.6 percent.

The expected cost savings of about $2 billion over the first three years announced after the deal was made were well below most analysts’ projections. And the $5 billion in planned stock buybacks that also were announced on Monday were in line with Pfizer’s previous efforts.

Some analysts still regarded the deal positively, so far as it ties into Pfizer’s goals.

“Allergan was easier to get done as a friendly deal in terms of getting a structure done and management roles done,” said Jeffrey Holford, an analyst with Jefferies.

To some involved in the deal, the tax savings are all that matters. “If the tax stuff went away entirely, the deal would be off,” a person briefed on Mr. Read’s thinking said.

(English) US overtakes Caymans and Singapore as haven for assets of super-rich

Simon Bowers

The Guardian

November 2nd, 2015

But financial secrecy index report notes if UK and affiliated tax havens such as Jersey were treated as one, it would top the list

US president Barack Obama

Obama’s US has been praised for prising asset information from offshore banks, but TJN says it gives little in return and is a ‘harmful and irresponsible secrecy jurisdiction’. Photograph: Yuri Gripas/AFP/Getty Images

The US has overtaken Singapore, Luxembourg and the Cayman Islands as an attractive haven for super-rich individuals and businesses looking to shelter assets behind a veil of secrecy, according to a study by the Tax Justice Network (TJN).
The US is ranked third, behind Switzerland and Hong Kong, in the financial secrecy index, produced every two years by TJN.
But the study noted that if Britain and its affiliated tax havens such as Jersey were treated as one unit it would top the list.
The performance of the US will come as a surprise to Barack Obama’s administration, which has been widely credited with doing more than any other government to compel offshore banks to hand over information on hidden assets.
In recent years the US has also won unprecedented disclosure battles with Swiss banks notorious for protecting client information behind Switzerland’s secrecy laws.
“Though the US has been a pioneer in defending itself from foreign secrecy jurisdictions it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction,” the TJN report said.
Inequality is the great concern of our age. So why do we tolerate rapacious, unjust tax havens?
The scale of hidden offshore wealth around the world is difficult to assess. The economist Gabriel Zucman has put it at $7.6tn (£4.9tn), while the TJN’s James Henry, a former chief economist at consultancy McKinsey, estimated three years ago it could be more than $21tn.
The US states of Delaware, Wyoming and Nevada have for decades been operating as onshore secrecy havens, specialising in setting up shell companies catering to overseas individuals and companies seeking to hide assets.
“The US has not seriously addressed its own role in attracting illicit financial flows and supporting tax evasion,” the TJN report found.
Shockwaves were sent through the offshore industry two years ago when US laws came into force compelling banks and other financial companies to hand over details of overseas assets belonging to American citizens. If they refused, under the Foreign Account Tax Compliance Act (Fatca), firms faced punishing US taxes.
The aggressive unilateral approach – loathed by tax havens – was quickly seen as setting a new gold standard for cross-border information sharing in the battle against tax evasion and money laundering. The Organisation for Economic Cooperation and Development quickly drew up copycat measures, but their effectiveness still depends on agreement from major financial centres.
So far the US appears not to be cooperating with the creation of a common standard for information sharing between countries, as drawn up by the OECD. Without its support, TJN argues, several other countries have felt they too can afford to offer only partial support for the project.
“Washington’s independent-minded approach risks tearing a giant hole in international efforts to crack down on tax evasion, money laundering and financial crime,” the TJN report said.
As long ago as 2009, Obama set out his determination to take on the offshore industry, making it a campaigning issue in his first presidential race. He highlighted the case of Ugland House, the Cayman Islands head office of the law firm Maples & Calder, where he said 12,000 US-based corporations were housed.
“That’s either the biggest building in the world or the biggest tax scam in the world,” he said. But critics quickly pointed to similar examples in the US, such as 1209 North Orange Street, Delaware, used as an address by more than 6,500 companies.
Like the US, Britain too remains a central player in the vast financial secrecy industry despite championing corporate transparency on the international stage, the TJN report found. It came 15th in the 2015 index.
New laws to create a public register of ownership for every UK company, and free online searches for company accounts, have helped Britain’s standing. But the TJN study is highly critical of the UK’s failure to force its global network of affiliated offshore tax havens – including Jersey, the British Virgin Islands, Bermuda and the Cayman Islands – to produce similar ownership registers.
Britain has also played an important role in preventing transparency initiatives from extending to offshore trusts, TJN said.
“Though the UK isn’t in our top 10, it supports a network of secrecy jurisdictions around the world … whose trusts and shell companies hold many trillions of dollars’ worth of assets,” the report said. “Had we treated the UK and its dependent territories as a single unit it would easily top the 2015 index, above Switzerland.”
The TJN’s financial secrecy index measures a range of secrecy criteria with the result for each jurisdiction then weighted according to the size of financial services offered to non-residents. The index has been used by asset tracing specialists and parliamentary inquiries, and has appeared in peer-reviewed academic journals.
TJN’s 2015 financial secrecy index rankings (2013 placing):
1. Switzerland (1)
2. Hong Kong (3)
3. US (6)
4. Singapore (5)
5. Cayman Islands (4)
6. Luxembourg (2)
7. Lebanon (7)
8. Germany (8)
9. Bahrain (13)
10. UAE (16)
11. Macao (22)
12. Japan (10)
13. Panama (11)
14. Marshall Islands (23)
15. UK (21)