Paradise Papers - legal or illegitimate tax prevention

Paradise Papers a legal scandal?

Paradise Papers - What you need to know about

About one and a half years after the Panama Papers (German Wiki) has revealed a new data leakage, around 13,4 million data sets, tax tricks of politicians, corporations and super rich all over the world. These Paradise Papers show how rich and companies avoid or make profits through mailbox companies or other tax havens such as Isle of Man, Malta, Bermuda, Cook Islands and other states.

by Earl of Cruise

The Hidden Wealth of Nations, Amazon

 

Paradise Papers, hiding the billions - Source: Süddeutsche.de, © Bene Rohlmann

The Paradise Papers feed from 21 different sources. The Paradise Papers were leaked to the German newspaper Süddeutsche Zeitung. The newspaper shared them with the International Consortium of Investigative Journalists. Some of the details were made public on 5 November 2017. The documents originate from the offshore law firm Appleby, the corporate services providers Estera and Asiaciti Trust, and business registries in 19 tax jurisdictions. They contain the names of more than 120,000 people and companies. Among those whose financial affairs are mentioned are Queen Elizabeth II, the President of Colombia Juan Manuel Santos, and the U.S. Secretary of Commerce Wilbur Ross.

The Paradise Papers also illustrate how EU member states tricky withdraw the money of their neighbouring countries. For the EU's cohesion, this is at least as damaging as nationalism in refugee policy.

Süddeutsche Zeitung shared the records with the International Consortium of Investigative Journalists (ICIJ) in Washington D.C., and as with the Panama Papers, an international team of nearly 400 reporters evaluated the documents. including media such as New York Times, BBC, Guardian and Le Monde.

Appleby office - Source: Reuters

The Paradise Papers tell us

APPLE is looking for a country without taxes. NIKE uses a tax haven in the middle of Europe. Race driver Lewis Hamilton is a tax evader.

The documents include the names of more than 120 political figures from 50 countries. One of the most prominent is U. S. Secretary of Commerce Wilbur Ross. Other prominent US politicians are Foreign Minister Rex Tillerson, ex-minister Penny Pritzker or ex general Wesley Clark.

Other Paradise Papers names are: FACEBOOK, UBER, WHIRPOOL, GLENCORE, DISNEY, WALMART, McDONALD´s, YAHOO!, ALLERGAN (the Botox manufacturer), ODEBRECHT (a Brazilian conglomerate, involved in the corruption affair in Brazil), and further more.

Wilbur Ross

Pasradise Papers, Wilbur Ross - Source: NBCNEWS.go.com

According to the Paradise Papers, NAVIGATOR holds a 31% stake in the shipping company NAVIGATOR via various funds on the Cayman Islands. This, in turn, has the Russian energy group SIBUR as its largest customer. SIBUR, however, is controlled by Putin, including US sanctioned Gennadi Timschenko and his son-in-law Kirill Shamalov. According to Süddeutsche Zeitung, this association had not been known to the US senate when Ross was confirmed for his government office at the beginning of 2017.

Lewis Hamilton

Paradise Papers, Lewis Hamilton - Source: Pinterest

Formula 1 world champion Lewis Hamilton is a tax avoider. The racer has several mailbox companies. Hamilton used a mailbox company on the Isle of Man to save more than four million euros in VAT on the import of its new private jet, according to Paradise Papers. For this it was enough to land briefly on the island once in the morning and deal with the formalities.

APPLE

Paradise Papers show APPLE's new tax trick. The mobile phone company wanted to have its promise in the spring of 2014 that it would not have to pay any taxes at all in the Jersey tax haven. "Is it possible to get an official confirmation of the tax exemption and does it cost anything?", Apple contacted an American law firm to ask Appleby, the offshore service provider, before subsidiaries relocated their offices to the island. APPLE's Irish companies used a gap in Irish tax law. The EU has taken Ireland to court in the case of APPLE and other companies for additional tax claims. These negotiated tax agreements enabled APPLE to pay no taxes in no country of the world. The gap was closed in 2015 under EU and international pressure. According to the documents, Appleby then ran two Irish Apple companies based in Jersey. The tax rate for companies there is zero percent. In this way, the Group further reduced its tax rate for non U.S. gains to only three to seven percent. Apple emphasized that it adhered to all laws. "We are the largest taxpayer in the world," a spokesman said.

Computer gigant APPLE has made an intensive effort to find a place of business in a country where there are no taxes ... And furthermore, APPLE wanted to have this insured in writing for the case, if the government changes there ... TTIP and the private arbitration courts send their greetings.

Not only that APPLE is avoiding taxes, legal but illegitimate, APPLE is producing its high priced products in China under conditions similar to that of slavery. The production price is an average of 10% of the sales price ...

NIKE

NIKE uses loopholes in the Netherlands. The sporting goods manufacturer first founded numerous offshore companies on the Bermuda Islands, which hold the company's licensing rights there - for example for the company logo, the world-famous "Swoosh". NIKE's branches had to pay hundreds of millions of euros to these mailbox companies in order to be allowed to use the trademark rights. The high royalty payments have drastically depressed worldwide profits - and thus the tax burden. According to the Paradise Papers, NIKE shifted this practice to the European tax haven of the Netherlands in 2014, pushing its global tax rate down from 35 percent in 2002 to only around 13 percent. For example, NIKE was able to accumulate profits of more than $12 billion in tax havens, which were barely taxed.

Queen Elizabeth II.

Paradise Papers, HRH Queen Elizabeth II. - Source: Reuters

From the Paradise Papers it also emerges that approximately € 11 million from the private assets of the British Queen Elizabeth II. were invested in funds on the Cayman Islands. According to BBC and Guardian, the money ended up in the controversial trade company BRIGHTHOUSE, which is in public criticism because of excessive interest rates, among other things. A spokesman for the Buckingham Palace said, "The investments have been checked and are legal."

Bono

Paradise Papers, Bono of U2 - Source: picture alliance © Michel Euler

U2 singer Bono invested in a shopping mall in Lithuania and through companies in the tax havens of Malta and Guernsey. Confronted with the publications, Bono expressed his disconcerting comment about the investment. "My counselors assured me that no laws would be violated." 

Here I am confronted with the question of the financial owner's control, and more importantly, how does this fit in with his global social engagement. This raises the question of credibility.

A close confidant and fundraiser for Canadian Prime Minister Justin Trudeau, Stephen Bronfman, financed a dubious trust on the Cayman Islands.
Investors' legend George Soros and EBAY co-founder Pierre Omidjar also appear in the papers.

German listings in the Paradise Papers

In the Paradise Papers you will find references to about 1,000 names from Germany that are involved as investors, owners of letterbox companies or consultants. These include SIXT, DEUTSCHE POST, SIEMENS, BAYER and DEUTSCHE BANK. The daughters of the deceased pharmaceutical company Curt Engelhorn, who have already been convicted of tax fraud, are also said to have maintained other trusts and letterbox companies.

Paul Gauselmann

Paradise Papers - Source: Gauselmann.de, Familienstiftung

The slot-machine-king Paul Gauselmann has founded a subsidiary company on the Isle of Man according to the Paradise Papers, for which APPLEBY lawyers have developed terms of business and license agreements, and which have been approved on the Isle of Man. The Isle of Man sells online gambling games, which are largely prohibited in Germany. The Gauselmann, however, emphasizes: "This is all legal."

Again legal is not legitimate.

Gerhard Schröder

Paradise Papers, ex chancelor Gerhard Schröder and Vladimir Putin - Source: ZDF, still from a documentary MENSCH SCHRÖDER

The name Gerhard Schröder also appears in the Paradise Papers, as a supervisory board member of the Russian-British energy company TNK BP. The now largely controversial former chancellor took advantage of APPLEBY's consulting services. He is currently a member of the ROSNET supervisory board ...

The difference to the Panama Papers

In crucial points, the current disclosure is similar to the research on the so-called Panama Papers published by the ICIJ a year ago. The disclosures at that time were based on documents of the Panamanian law firm Mossak Fonseca, which were also allotted to Süddeutsche Zeitung.

This time, the current dat approach draws on several sources: the law firm Appleby, Bermuda, the trust company Asiaciti Trust, Singapore, and the business registers from 19 tax havens. As with the Panama Papers, journalists keep silent about their sources. This time, not only politicians, super-rich or sportsmen and women have been defeated, but also numerous multinational corporations using the off-shore system.

These Paradise Papers called data also provide detailed insights into the work of highly specialized consultants who create complicated tax avoidance constructs.

As a rule, the tricks used are even legal. But are they legitimate? They exploit rules that were originally intended to be of a completely different nature and thus offend the citizens' sense of justice. And in the energy result, the tricks are tantamount to tax evasion. They are withdrawing large sums of money from the general public, the states, i. e. their citizens. However, these would have to be paid in accordance with the spirit of the law. It is a matter of tax fairness and, in general, justice.

Taxation tricks masterminds

It is usually tax and commercial law experts from international law firms who seek loopholes in the tax laws of individual states. The strategies then turn them into money by offering them to their rich clients. The business is based on the utmost discretion. If the name of the law firm appears in such a context in public, then becomes very close for the lawyers. The publication of the Panama Papers shows how fast this can be done. The law firm Mossak Fonseca had to cease operations a few months later because its turnover collapsed.

Regular meetings are held for the tax avoidance lawyers at which not only networking takes place but also information on tax avoidance is exchanged.

APPLEBY, the Bermuda-based law firm with its 470 employees, is located in the heart of the Paradise Paper data leakage. APPLEBY has offices in Hongkong, on the Channel Islands of Guernsey and Jersey, on Mauritius and the Cayman Islands.
APPLEBY is, according to its own statements, the market leader in the market revealed by the Paradise Papers. The services are specially tailored to the needs of large corporations and super-rich companies. In anticipation of the disclosures, the firm stated in a statement at the end of October:" We are convinced that there is no evidence of any misconduct, either on our part or that of our clients."

The reaction of the governments

Pierre Moscovici - Source: Reuters

The Panama Papers have already led to consequences since their publication. The EU Parliament set up a committee of inquiry and the EU Anti-Corruption Office OLAF investigated. In total, more than 100 investigations have been initiated worldwide. Just like international cooperation.

Since September there has been an automatic exchange of information, which gives the financial authorities an insight into the foreign business of their citizens.

Tax evasion and tax avoidance is not a peccable offence, nor is it a sport - it a betrayal against fellow citizens and the general public.

The exchange also includes accounts of trustees, trusts and foundations, which could use the wealthy to conceal their business. Even former tax havens and island states with their letterbox companies, such as the Cayman Islands and Liechtenstein, have joined in. From September 2018, the number of participating states is expected to rise to more than 100. A law passed in accordance with the Panama Paper, which abolishes fiscal banking secrecy, comes into force in Germany in 2018.

Peter Altmeier, provisional Federal Finance Minister, during the press conference about the forecast of the Working Group on Tax Estimates, general government tax revenues will rise from € 734.2 billion in 2017 to € 889.6 billion in 2022. The working group "Tax Estimates" has thus revised its latest forecast of May 2017 upwards - Source: BMF

From the point of view of the experts, however, this is not enough. According to Markus Meinzer, Tax Justice Network (TJN), country-by-country reporting is one of them. Accordingly, each company would have to prepare country-specific balance sheets showing the share of its business that a group of companies makes in a given country. On this basis, the companies are then to be taxed in the respective country, just as there would have to be a duty of disclosure.

"Further efforts will be needed,"s aid a spokesman for the German Finance Department. Necessary, for example, is the minimum taxation rule. The Ministry of Finance called the medias to provide the authorities with the original data.

In view of the revelations in the Paradise Papers, the EU must complete its "blacklist" of tax havens as soon as possible, according to EU Finance Commissioner Pierre Moscovici. "It is absolutely essential that we speed up our program against tax avoidance and aggressive tax planning,"said Pierre Moscovici November 7th, at the meeting of EU finance ministers in Bruxelles.

The EU states have been working for some time now on a common list of third countries against which there are tax considerations or which behave uncooperative when exchanging data.

One of the effects of this arrangement is to force previous tax havens to make legislative changes by the public denounce. France's finance minister Bruno Le Maire said: "Such a list is only a first step. We need sanctions. These would then have to be applied consistently."

Netherlands reviews its ~ 4,000 tax deals, among them that with STARBUCKS, as it is one of the tax havens existing within the EU, besides the British Isle of Man and the Channel Islands - both are ruled direct by the Queen!

The Paradise Papers show us too how EU states are tricky in withdrawing the money of their neighbouring countries - Netherlands, Ireland, Malta, Cyprus and Luxemburg. For the EU's cohesion, this is at least as damaging as nationalism in refugee policy. When Hungary, the Czech Republic and Poland refused to accept their contingent of refugees, they rightly had to accept the criticism that Europe is not a one-way street: anyone who gets billions from the funding pools cannot simply get away with sharing burdens.

And Brexiting Kingdom is surrounded by own tax havens, despite the typical suspects or convicts - British Virgin Islands, Cayman Islands, Bermudas and the other overseas territories ...

National tax laws, which open up frontiers to untaxed capital, are at least as damaging to EU cohesion as nationalism and the lack of solidarity in dealing with refugees.

The establishment of a letterbox company or an offshore company is basically legal

In principle, the tax haven model is legal. Letterbox companies in places with the lowest possible level of tax control, high confidentiality and less transparency can, however, be used for illegal tax evasion or money laundering. According to the SZ, the Paradise Papers provide evidence that among the customers, apart from "normal" rich and large companies are also criminals.

Appleby, the Bermuda-based law firm, stresses that it is acting in accordance with the law. After careful and intensive scrutiny, one came to the conclusion that there was no evidence of misconduct on the part of Appleby ...

Again the question is legal always legitimate?

Economists, however, see a fundamental problem: "Tax havens fuel inequality in the world because the richest billions hide from tax offices," says the French economist Gabriel Zucman. "The damage is borne by the average earners (the middle class, e. g. in the Rust Belt, Ruhr area, etc.). If industrialized countries are deprived of taxes, they must obtain the funds elsewhere. Usually it is employees and workers who have to pay higher taxes." (The Hidden Wealth of Nations, Amazon)

The President of the German Institute for Economic Research, Marcel Fratzscher, said on SWR: "Tax avoidance would ultimately be at the expense of smaller companies, which employ around 80% of the workforce in Germany. The wealthy entrepreneurs benefit to the detriment of the `Kleine Mann´."

Tax defaults for the Federal Republic of Germany

Bundesministerium der Finanzen - © Hendel

Due to the tricks of international conglomerates with profit shifts into tax heavens, the German tax authorities are escaping an estimated € 17 billion annually! With regard to the EU, Gabriel Zucman estimated about € 60 billion!
Gabriel Zucman explains that Germany suffers particularly from tax avoidance practises: "In Germany, corporate income tax revenues could be almost one-third higher if such profit shifts were prevented. It's 25% in France, 20% in the UK." According to the EU's tax havens report, two thirds of the possible tax revenues of Germany will be lost for example to the Netherlands, Ireland or Luxembourg.

Being rich comes with a consequence - responsibility! Wealth is not only for the pure personal pleasure, wealth is borrowed from the following generations.
With these practises of the "rich and beautiful" and multinational conglomerates that have no social conscience, it is named asocial behaviour, nobody should be surprise we have Occupy Now, or Nr 45 in White House, a Marine Le Pen, or the A(pes)fD in Germany in the Reichstag our parliament, or the disastrous Brexit vote result, fueled by the lies of a certain Boris and his companion the Farage person.

We all have to see, that funds are lacking for new or renovated schools, good paid teachers, good and proper roads, and so much more. But instead we see privatization of companies, which cover the basic provisions and necessities of life, water, electricity, etc. for the benefit of wealthy investors, as the state needs money.
It is one of the greatest injustices of our time: asocial richest are allowed to fade away, while the rest of us pay for health care, education and the protection of the most vulnerable in our society. 

Earl of Cruise

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