Manchester & Stockport District Synod The Methodist Tax Justice - - PowerPoint PPT Presentation

Matthew Jones 23rd April 2016 Manchester & Stockport District Synod

 The Methodist Tax Justice Network was set up

in 2012

 Currently based primarily in the Birmingham

District, but growing

 Membership is not restricted to Methodists –

despite the name!

 To see tax systems set by democratically

elected governments, not corporations

 To see all individuals and companies paying

their taxes

 To see the end of tax havens through

changes to international regulations

 To see the Methodist Church take on tax

justice as a fundamental mission objective

 Produce educational resources  Engage with church groups,

students etc, and run public events and workshops

 Work with partner organisations

(e.g. Christian Aid) to promote their campaigns

 Get out there and campaign

• urselves!

 Take a few minutes to talk to your neighbour

and try and think of as many of the following as you can:

• Companies recently involved in tax avoidance

scandals

• Countries/jurisdictions that have been called tax

havens

 Tax Evasion – Deliberately breaking rules to

deceive the authorities. Failing to file a tax return, hiding taxable assets, not declaring full income etc. Illegal, up to 10 years prison.

 Tax Avoidance – Exploiting loopholes in tax law to

pay low (or zero) tax rates in ways that governments did not intend. Often involves using tax havens and networks of shell companies. Legal but morally dubious.

 “The difference between tax avoidance and tax

evasion is the thickness of a prison wall.” Denis Healy, former UK Chancellor of the Exchequer.

 “Taxes are what we pay for civilized society” – US

Supreme Court Justice, Oliver Wendell Holmes Jr.

 Tax is frequently seen as a cost, something to be

reduced to increase profit. It is not – tax is a responsibility, taken into account after profit/loss, and should accurately reflect real economic activity (turnover, employees and assets) in each country where that company/individual operates.

 Eroding a country’s tax base means it cannot afford

crucial public services and infrastructure. It also widens the inequality gap between the wealthiest and poorest in society.

 UK Budget Deficit 2014/15– £87.7bn

bn

 George Osborne wants to reclaim £5bn

n from tax avoiders...

 The UK’s ‘Tax Gap’ – between £3

£35b 5bn n (HM HMRC RC) ) and £119.4bn bn (Tax Resear arch h UK)

 George Osborne wants to save £12bn

n through welfare cuts...

 Benefit Fraud cost to the UK - £1

£1.2b 2bn n (0. 0.7% 7% of DWP’s budget)

 $160 Billion

• n denied to developing countries

through tax dodging every year (Christian Aid).

 $814 billion

ion denied to Sub-Saharan countries from 1970-2010 (Boyce & Ndikumana 2012)

 “Globally, our estimate is that the amount of money

flowing out of developing countries is 10 times the amount of foreign aid flowing into developing countries.” (Ra Raym ymond

• nd Bak

aker er, , Director ector of Global bal Financ ncia ial l Integr tegrity ity)

 Leak of 11.5 million files

from Panama law firm Mossack Fonseca by unknown

• whistleblower. Contains

details of tax avoidance on an industrial scale.

 Mossack Fonseca created networks of offshore shell

companies and trusts for clients including politicians, criminals and corporations.

 Vast majority of these shell companies and trusts

incorporated in UK Overseas Territories.

 Release of files from

PricewaterhouseCooper in Luxembourg, dating from 2002-2010, by former employee Antoine Deltour.

 Showed that PwC routinely negotiated beneficial tax

rulings between multinational corporations and the Luxembourg tax administration, allowing MNCs to easily shift profits into the low-tax country.

 Deltour due to stand trial in Luxembourg on April

26th 2016.

 Tax Avoidance is a multinational industry.  The world’s wealthiest individuals and

corporations are routinely stashing vast amounts of money offshore, to the detriment

• f developed and developing countries alike.

 Law firms and the ‘Big 4’ accountancy firms

facilitate this, creating vast networks of

• ffshore companies, lobbying governments to

relax tax legislation and giving advice on secrecy and loopholes.

 All Tax Havens share

Two key characteristics:

• Low Tax/Relaxed Legislation
• High financial secrecy

 Finding out who owns tax-haven based

accounts and subsidiaries is nearly impossible without the necessary transparency measures.

 Welcome to THE CAYMAN

ISLANDS – a UK Overseas Territory

 0% Corporati

poration

• n Tax

 0% Income

come tax

 0% VAT  Popular with banks - Barclays have over 120

subsidiaries here.

 Welcome to LUXEMBOURG.

29% corporation tax... BUT only on profits made in Luxembourg.

 ‘Participation Exemption’ = profits derived

from foreign subsidiaries of companies based in Luxembourg are EXEMPT.

 Welcome to THE NETHERLANDS

• Home to 12,000 ‘mailbox companies’

channelling €4bn a year.

• No source taxes on interest or royalties
• Network of double taxation treaties
• Ability to negotiate tax rulings before

payment

 What has struck you so far?  Why would a country want to be a tax haven?  What might happen if all countries tried to

bring in business by lowering tax rates?

 0% tax paid on £1.2bn UK

sales over the last three years.

 Only £8.6m paid over 14

years.

 Paid royalties to Dutch subsidiaries for use of

trademarks, bought coffee beans from Switzerland, and paid interest on loans from

• ther parts of the company.

Coffee Bean producing country Subsidiary in Switzerland Starbucks branches Consumers Key = Money = = Coffee fee

‘Transfer Mispricing’

Low Tax Jurisdictions Dutch ‘mailbox’ company Starbucks branches (Europe and Middle East)

Loss thanks to profits being shifted into Netherlands as IP royalties... Profits moved on again – Dutch double tax treaties mean taxes are liable offshore... ‘Loss’ made in

• perating countries –

no tax paid here... Where they are

• untaxed. The perfect

middleman... Where there is a close to zero tax rate – no tax paid here either!

 “God has blessed us with

such an abundance of natural resources. The paradox is that Zambia gets ranked among the bottom 20 in terms of poverty... We are wealthy, yet we are poor.” Wyl ylbur bur Simuusa, uusa, Zambian bian Minister ster of Mines. s.

 Switzerland-based Glencore (now Glencore Xstrata)

bought Mopani Copper Mines in 2000 at knock- down price. Sold copper to Switzerland at under market value, artificially inflated running costs to make a loss in Zambia and pay no tax.

 2006:

• $3bn worth of copper.
• $50m of tax revenue.
• $150m electricity bill for the mines.

 If Zambia had Switzerland’s copper export tax

revenue, their GDP would double.

 Tax Justice campaigning is not just about targeting

companies – it’s also about changing the rules through advocacy and lobbying.

 The current system is deeply flawed, and doesn’t

recognise the complexities of the modern financial system.

 Subsidiaries of a corporation treated

as individual entities trading fairly with each other – clearly not the case!

 The European Commission recently announced a

package of tax and transparency reforms – they’re not up to scratch. No involvement for developing countries, not publicly available, won’t apply to 85% of corporations.

 These reforms were based on the

recommendations of the OECD – a club of 28 rich countries who currently control global tax and transfer pricing legislation.

 The OECD’s BEPS (Base Erosion & Profit Shifting)

Action Plan which led to these recommendations was a flawed process lasting only two years.

 What has struck you from the last few slides?

What have you learnt?

 Which do you think is the more effective

method for tackling tax dodging – targeting companies or political advocacy? Why?

 Greater financial transparency:

• Compulsory Automatic Information Exchange

worldwide

• Public Registers of Beneficial Ownership

 A complete overhaul, not a patch-up:

• Compulsory Public Country-by-Country Reporting

across all sectors

• Prevention of exploitative tax treaties
• Unitary Taxation – tax paid where real economic

activity takes place.

 A new international body to create tax

legislation, under direct UN control.

 National governments closing loopholes and

eliminating tax breaks with no public benefit.

 National tax infrastructures which are

transparent and accountable.

 “We read the Gospel as if we had no money,

and we spend our money as if we know nothing of the Gospel.” James es Ha Haughey, ghey, Jesui suit t Theolo logian gian

 Ched Myers; economic and social justice are

‘woven into the warp and weft of the Bible’. Three points:

• The world as created by God is abundant, with

enough for all provided that human communities live within limits.

• Disparities in wealth and power are not ‘natural’ but

the result of human sin, and must be mitigated – at least within faith communities– by the regular practice of redistribution.

• The prophetic message calls people to the practice
• f redistribution, characterised as ‘good news to

the poor’.

 Matthew 22: 15-22. ‘... “Give therefore to the

emperor the things that are the emperor’s, and to God the things that are God’s.”’

 Is there more to this passage than just the

question of ‘should we pay our taxes?’

 What is the challenge Jesus is posing to us

and to our governments?

 Myers suggests Jesus’ economics are based

• n the Jubilee/Sabbath system – can you

think of other examples in Jesus’ ministry?

 Do you think this is a fair application of

Biblical teaching?

 Would any other passages be of use in this

context?

 Path

h 1– Engage ge with h co compa mpanies nies directl ctly. y. Contact/boycott a company and let them know that you believe they are acting immorally.

 Path

h 2 – Lobby by for ch changes ges to the law. Write to your MP on why you are concerned about tax avoidance. Ask for better transparency and reporting measures.

 Path

h 3 – Investment/ vestment/Shar Shareh eholde

• lder

r act ctivi ivism

• sm. If you or

your church have investments, make sure you let your treasurer/accountant know that you do not wish to avoid tax or invest in tax avoiders.

 MTJN’s campaign against Cadbury

has been running since 2013, but was emphasised this Easter.

 Paid no corporation tax in 2014/15

despite UK profits of £96.5m thanks to an avoidance scheme through the Channel Islands.

 Draft

t a l letter er to Cadbury, ury, or anothe ther r tax-do dodging ging co compa mpany ny, asking ng them m to pay y tax in line with h their ir real ec economic nomic ac activit ivity y in al all co countri ntries es wher ere e they ey oper erate ate.

 Previously avoided tax through Cayman Islands pre-

• takeover. Has vast network of subsidiaries for tax

avoidance purposes.

 London is due to host the Global

Anti-Corruption Summit in May – a perfect time for David Cameron to implement Public Registers of Beneficial Ownership in the UK’s Overseas Territories.

 Draft

t a l letter er to yo your r MP asking ng them m to put pressure sure on Davi vid d Cameron ron and the government vernment to implemen lement Publ blic ic Registers ters of Benefici ficial al Ow Ownership rship in UK Ov Overse rseas as Territori tories. es.

 Why

y not try y writing ing to yo your r MEP EP as as wel ell, ab about t the e rece centl ntly y announ unced ced tax and transpa sparenc rency y reforms? rms?

 The Methodist Church invests in tax

dodging corporations such as

• Vodafone. Disinvestment is not

feasible, but we can ask questions of these companies.

 The CFB manages all Methodist

investments (unless your church has an annual turnover of £100,000 or more) and pension funds,.

 Draft

t a l letter er/spe /speec ech h to yo your r ch church rch treasurer surer/counc /council l

• utlini

lining ng why y yo you believe eve fair tax should uld be an ethic ical al inve vestm stment nt policy cy, and get them m to co conta tact ct the CFB. Check ck yo your own inve vestm stments nts too!

 Write a letter to your local paper/Methodist

Recorder/an article for your church newsletter.

 Try and inform your congregation about the issue

through worship (see readings above) or small groups – show ‘The UK Gold’ documentary.

 Keep yourself informed – sign up to our mailing list

and the Tax Justice Network podcast.

“We know that God’s arithmetic is somewhat

• dd. When you subtract by giving away, you

get more. When you seek to hoard, somehow you seem to lose out.” Archb hbishop ishop Desmond smond Tutu. u. THA HANK YOU!

For more information contact: Matthew Jones <mtjncoordinator@gmail.com>