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BEHIND THE HEADLINES: Oxfam’s ‘outrageous’ tax list


BEHIND THE HEADLINES: Oxfam’s ‘outrageous’ tax list

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HYPOCRISY, DOUBLE STANDARDS and a case of overstepping a comfort zone.

That was the appropriate mix of negative responses heard in and out of Washington and the Caribbean to the publication of Oxfam’s flawed list of the “world’s worst corporate tax havens”.

On it were 15 countries that ranged from Bermuda, the Cayman Islands, the Netherlands, Switzerland, Singapore, Ireland, Luxembourg, Curacao, Hong Kong and Cyprus, to The Bahamas, Jersey, Barbados, Mauritius and the British Virgin Islands, in that order.

It was a listing that stirred the wrath of Dr Dan Mitchell, a senior Fellow of the Cato Institute in Washington DC; angered Minister of International Business Donville Inniss; earned the scorn of editorial writers of THE NATION newspaper; and left Bruce Zagaris, a leading international tax law expert somewhat perplexed.

“It’s another part of moving the goalposts,” complained Mitchell, an economist and a commentator on tax reform whose views are often published by major United States newspapers and magazines, including the Wall Street Journal. “Now, they [Oxfam] are saying they want to know what everyone owes in taxes because they want them to pay more taxes.”

But Dr Mitchell didn’t stop there. The list, he added, was “part of the usual left-wing attack” on corporations and on countries with low tax systems. Little wonder then that he didn’t believe the Oxfam list would be taken seriously by the new movers and shakers in Washington.

Clearly, he went on, Oxfam “is saying that it really doesn’t matter if corporations and governments didn’t break any laws but fully obey even the most oppressive laws. Now, it is also saying you have to walk around naked in the public square” to be considered as acting in society’s best interest.

Oxfam is a well-known international body that links arms with domestic partners in a host of United Nations member states to fight poverty and improve life standards. It sought to justify its unfathomable ranking by stating that its report revealed “how top tax havens are starving poor and rich countries out of billions needed to tackle poverty and inequality”.

Claiming that the US and developing countries “each lose an estimated $100 billion per year because of corporate tax dodging” by global brands that use more than 1 600 subsidiaries located in tax havens to avoid billions of dollars in tax every year, Oxfam wants the network of offshore centres to be reined in.

There are several flaws in Oxfam’s process that determined its ranging of the “worst tax havens”. The first is, who determines the level of tax corporate and individuals must pay. If you are rich like US President-elect Donald Trump, expert accountants and attorneys exploit the complex provisions of the tax code to determine how much their clients must pay. It’s not the small states like Barbados and The Bahamas that reduce the tax bill.

That’s why Oxfam’s use of the estimated US$100 billion figure in unpaid corporate taxes which it claims Barbados and the 14 other “worst” havens are costing each developing country is an overreach. It’s an unsubstantiated amount that can’t stand up to intense statistical scrutiny.

Then, there is the issue of which countries have been left off the list. Oxfam didn’t put the US on it despite international acceptance that the economic colossus is the world’s number one “tax haven”.

Zagaris, an authority on international tax law who has been advising Barbados for decades, questioned Oxfam’s decision to leave the US off the list, while putting Barbados and its neighbours on.

“That Oxfam didn’t put the US, more specifically Nevada, Delaware, South Dakota or Wyoming on the list raises questions about its accuracy,” Zagaris complained. “They are states that are obtaining a lot of business right now because of confidentiality and because they are trading on the failure of the US to sign the common (international) reporting standard and the ability of people to keep their funds secret.

There are all kinds of trust companies that are moving to the United States, expanding their operations because of that. The fact that Oxfam does not mention the biggest tax haven in the world makes its criteria suspect.”

The problem with the omission doesn’t end there.

“On December 1, 2016,  the Financial Action Task Force issued its report on the mutual evaluation of the United States and again it found, just like it did ten years before, that the US was non-compliant in transparency and non-compliant in the gatekeeper standards,” which are designed to regulate and monitor the international flow of money, said Zagaris.

The obvious question is: how come Oxfam and like-minded organisations which inveigh against small Caribbean nations that have low-tax systems can compile a list that doesn’t include the US?

The answer: the law of the jungle is being applied. If you are large, wealthy and powerful, you can do anything. Not so if you are small and struggling.

“One wonders why ten years after the US was found non-compliant with the same standards it has been unable or unwilling to take action,” added Zagaris. “It shows the lack of a level playing field.”

Mitchell agreed.

“The failure of Oxfam to include the US is a case of hypocrisy and of a double standard,” he argued. “The US should be on it. After all, we have states in the country which are doing the same thing as those that are on the list. Oxfam must explain why it left off the US, especially places like Vermont, Delaware, California and South Dakota.”

Inniss used different words to raise essentially the same question about Oxfam’s motivation for pinpointing Barbados but omitting the US.

“You have these organisations that criticise us and will not say ‘boo’ about America where there are some states there which practise [such activity],” was the way he put it.

Interestingly, though, Oxfam made an intriguing move by putting  Switzerland, Luxembourg, the Netherlands, Ireland and Hong Kong on its odious list. Other international organisations which compile tax haven lists routinely give those countries a pass.

The problem for Barbados is that its place on the list can encourage other critics and US states to point a finger to justify the creation of their own offshore tax regime to compete against Barbados.

Oxfam’s venture into a poisonous well of denigration of developing countries which are using offshore financial systems to raise living standards is regrettable.