The veteran journalist made his name covering the 1991 Gulf War from Baghdad for Greek television. He is now the nation’s best-known investigative journalist, targeting the country’s oligarchs in the magazine he launched last April with $6,700 of his own money.
“We have a small business elite promoting their interests and a political system accommodating them,” he says, picking up the most recent issue.
“Godfathers of the law, promoters of corruption” is the cover headline. The story outlines 20 laws that benefit Greece’s super-rich, such as the one passed in 2011 that gives homeowners with houses larger than 21,000 square feet a 60-per-cent property tax cut. The same year, about $10.2 billion in collectible taxes of all kinds were in arrears — nearly half the country’s budget deficit, according to the International Monetary Fund.
What angers Vaxevanis is the European caricature of Greeks as a lazy people unwilling to pay taxes.
“It is not how it is,” he says. “It is a corrupt political system with corrupt politicians and a climate of fear where journalists cannot report the truth.”
Vaxevanis, who once hosted an investigative television show called Pandora’s Box, rose to global fame in October when he published the so-called Lagarde List, which named 2,059 Greeks, including businessmen and politicians, who have HSBC bank accounts in Switzerland. Vaxevanis estimates the accounts were used to transfer out of Greece at least $3.3 billion between 2004 and 2006, potentially avoiding taxes.
Publishing the special edition “was a nightmare because the owner of the distribution company for my magazine was on the list,” Vaxevanis says.
It was a major scandal, not least because the finance minister at the time, George Papaconstantinou — the architect of the hugely unpopular austerity program — was accused of removing the names of three relatives to prevent them from being audited. Parliament has launched an investigation. He denies the allegations.
The list is named for Christine Lagarde, the IMF chief who received the HSBC account numbers while serving as French finance minister. France and Spain launched investigations to recover unpaid taxes and Lagarde gave the Greek names to Papaconstantinou in 2010. But nothing happened.
Until, that is, Vaxevanis got the list on a USB memory stick from an anonymous source with a note that read, “The truth has to be told and you have to say it.” The day his special edition hit newsstands, authorities swung into action — arresting Vaxevanis for violating privacy rules.
Vaxevanis’s story is unfolding against the backdrop of a larger debate across Europe. State coffers are dwindling as the financial crisis deepens, but a growing chorus of people — including economists and businessmen — say the root of the crisis is that the world’s wealthiest citizens and corporations refuse to pay their share of taxes by moving enormous sums to tax havens where there is little or no income tax.
The rules of the free market are broken, says John Christensen, an economist and director with the Tax Justice Network, a London-based activist group.
“Tax is the foundation of good government and a key to the wealth and poverty of nations, yet it is under attack,” he says from his home in London, England. “The issue (of tax avoidance) is one of the great political struggles of the century.”
In January, the World Economic Forum, the Swiss foundation best known for gathering the rich and famous at its annual summit in Davos, said severe wealth gaps followed by unsustainable government debt were the top risks cited in its annual survey of 1,000 experts and industry leaders.
The few billion that some rich Greeks may have moved overseas is peanuts compared with the mind-boggling sums experts are talking about. Approximately $12 trillion of unreported, private financial wealth from the developed world — including Europe, Canada and the United States — is held in about 80 tax havens, according to James Henry, former chief economist at consultancy firm McKinsey.
If the $12 trillion earned a modest 3 per cent annual return and was taxed at 30 per cent it would generate $150 billion to $200 billion a year — more than enough to pay for Europe’s budget deficits, calculates Henry.
“That is lost, taxable income in the developed world,” he says. But the $12 trillion is a fraction of the real wealth — held by only 10 million people — because it only counts financial assets such as bonuses, profits and salaries. “It does not include tangible wealth such as racehorses, mansions or yachts.”
Henry estimates that by factoring in the rest of the world — including the Middle East, Latin America and Africa — the true total wealth held by the super-rich in offshore havens is up to $32 trillion.
The social fabric of some European countries is fraying as companies go bust and governments struggle to balance the books.
In France, Greece, Spain and Ireland, governments are pushing tax increases and spending cuts totalling $77.5 billion to shore up shaky economies. The reaction from the public as health and education programs are axed has been violent. Tear gas, Molotov cocktails and protesters clashing with police on cobbled squares have become a common sight.
So many Irish are leaving the Emerald Isle to seek work the phenomenon is called “generation emigration.” In Greece, hospitals are being shut, schools can no longer pay for books and people are bartering because they have no money.
Evading taxes in the southern Mediterranean is a national sport played by everyone from tycoons to shopkeepers, one reason Greece fell into the economic abyss in the first place. The Italian government is considering sending soldiers to protect tax collectors as they try to recoup $153 billion lost to tax evasion.
Even in the more fiscally sober north there is anxiety. In Britain, the tax gap — the difference between tax collected and what would be collected if every resident and corporation paid what they should — was $50 billion in 2010-2011, according to figures from the House of Commons. Big businesses owed 25 per cent of that sum.
In debt-laden France, President François Hollande has defended a controversial plan to impose a 75-per-cent tax rate on those earning 1 million euros or more as “fiscal justice.”
For Pascal Saint-Amans, Europe’s budget crisis is a “once-in-a-century opportunity.”
Saint-Amans works for the Organization for Economic Cooperation and Development, which sets tax guidelines for its 34 member states.
The OECD is a fierce defender of free-market capitalism. But Saint-Amans says politicians are realizing that rules set up in the 1920s need reform because allowing corporations and the very rich to hang on to huge amounts of wealth is bad for the economy.
“When you have a political crisis, I am sad to say it, you have political support and political heat,” he says in an interview from OECD headquarters in Paris. “European countries are turning to corporations and saying, ‘You don’t want us to become bankrupt. Please, pay your taxes and let’s make the changes together, otherwise we collapse. And if we collapse so will you.’”
Last year, several G20 finance ministers asked him for a report on how big companies move vast profits around the globe to avoid being taxed. Saint-Amans will release the report on Feb. 12.
“I didn’t anticipate it would happen so fast,” he says. “The fiscal crisis has turned into a budget crisis. . . . The ministers from G20 cannot explain to their people that they should pay more tax but big, profitable companies will not pay more.”
Tax havens are a secretive world offering anonymity and little regulation. They are associated with sunny islands such as the Bahamas, where yachts moor in crystal-blue harbours. But it’s not an accurate term because they are also in Liberia, Luxembourg and the U.S. state of Delaware, which is why some prefer to call them “secrecy jurisdictions.”
“Delaware has 900,000 companies on its register, but there is very little information about any of them,” says Henry. One of the juicy incentives is what bean counters call the “Delaware loophole.” Firms with businesses in other U.S. states can reduce their tax bill by sending royalties and revenues to a holding company in Delaware, where it is not taxed.
The key issue for Saint-Amans is taxing profits where the economic activity takes place. He wants to draft rules that make it difficult to move profits to offshore havens from the country where corporations actually do business.
“We can’t close tax havens down because they are sovereign jurisdictions, like Bermuda,” he says. “How do you shut down Bermuda?”
The OECD has been grappling with offshore havens for 20 years. It tried to come up with a so-called blacklist, which meant the threat of sanctions against jurisdictions refusing to offer more transparency and information on the businesses that set up there. It failed, partly because many of the tax havens were in powerful member countries such as America and Switzerland.
Saint-Amans is confident the political climate has changed dramatically.
It has in England. In 2010, as the public mood began darkening because of austerity measures, Prime Minister David Cameron hired retail tycoon Philip Green as the “inefficiency czar,” in charge of reviewing government finances. The move backfired spectacularly.
In 2005, Green, who owns trendy clothing chain Topshop through his company Arcadia, received what the British press called the “biggest paycheque in corporate history” when he paid himself $1.9 billion. The payment was actually made to his wife Tina, who is listed as Arcadia’s owner and lives in Monaco, where she pays no income tax. The tiny state on the French Riviera is a tax haven.
UK Uncut, a grassroots group campaigning against budget cuts, accused Green of dodging a $476-million tax bill, money it said could have been used to pay 20,000 nurses.
Green did not do anything illegal. There is a difference between tax evasion, which is illegal, and tax avoidance, which is not. But he became a villain.
In a sign that public pressure may be working, Cameron promised at the Davos summit in January that he would go after major tax dodgers when the UK took up the G8 presidency later this year.
And the British House of Commons’ public accounts committee shed some light on how tax havens work. Last year it detailed how Google and Starbucks used arcane accounting to legally reduce their tax bill.
In 2011, Google reported $629 million revenues in the UK but paid only $9.5 million in tax. The company admitted that tax havens influenced where it formally located its companies, and it minimizes tax to “within the letter of the law,” according to the report.
Google billed its British sales in Ireland, which offers a 12.5-per-cent tax rate, nearly half of Britain’s corporate tax rate. Revenues were then sent to a subsidiary in the Netherlands and to an entity in Bermuda, where it pays no tax.
Starbucks has nearly 800 coffee houses across Britain, but claimed a loss for 14 out of the 15 years since opening its first café, the House of Commons report stated. The public outrage prompted the company to pledge $32 million to the British taxman.
Christensen says the world’s biggest coffee chain was using tax structures to minimize its tax bill in a way that small- and medium-sized business could not, creating an anti-competitive “market distortion.”
“That market distortion mitigates against innovation, flexibility and more jobs,” he says. “For me, this is not a moral issue, although I don’t dismiss that. It runs to the heart of the market economy — we must have rules that give a level playing field.”
In Greece, that playing field is non-existent. Commercial shipping is its most successful industry, worth billions of dollars. But owners pay zero tax on revenues earned abroad — a privilege enshrined in the constitution. Leon Patitsas, scion of one of Greece’s fabled shipping dynasties, defended the exemption as a necessity. “Shipping ensures 400,000 jobs in Greek shipyards that could go elsewhere at any time,” he told the German magazine Der Spiegel.
Henry says the whole industry is virtually untaxed.
“The Greek shipping industry is basically off the books. It is owned by a few families, but the money is held in havens like Panama and Liberia.”
Even some capitalists in the U.S. are speaking out against shifting money to skirt taxes.
American venture capitalist Nick Hanauer, who sold his online advertising company to Microsoft for $6 billion, said last year that the claim that the rich deserved tax breaks because they created jobs was “disingenuous.” Middle-class demand for goods spurred spending and hiring.
“When the biggest tax exemptions and the lowest tax rates benefit the richest all in the name of job creation, all that happens is that the rich get richer,” he said in a TED talk lecture last year to much derision from other millionaires.
Henry says tax havens are only part of the problem. The kind of accounting used to legally shift, say, $30 million without anyone noticing requires sophisticated international bankers. A network of about 50 major financial institutions play the game on behalf of wealthy clients, he says.
Christensen says the UK government should introduce new transparency laws allowing courts to examine major financial transactions to determine if the transfer was done for economic reasons or tax avoidance.
“I don’t expect David Cameron to get on a white charger and slay a dragon,” he says. “What he can do is slice the dragon’s tail, salami slice the whole thing away and reduce the role of tax havens.”
In Athens, Vaxevanis is more pessimistic.
He was acquitted of breaching privacy on Nov. 1, but his legal headaches are not over. He was informed by his lawyers that he was facing a second trial on unspecified charges at an unspecified date. He says Greece’s rich and politically connected are using the justice system to make an example of him.
“The intent is not the delivery of justice, but handing down of the desired, damning court decision.”
Hamida Ghafour last wrote for World Weekly about Greece’s Golden Dawn party.
Biggest tax havens
Places that provide legal and financial secrecy to others, elsewhere.
Maldives
Nauru
Antigua
and Barbuda
Netherlands
Antilles
Bermuda
Brunei Darussalam
Bahamas
Belize
Grenada
Guatemala
St. Kitts and Nevis
Lebanon
St. Lucia
Liechtenstein
Liberia
Marshall Islands
Macau
Montserrat
Seychelles
Turks & Caicos Islands
Vanuatu
Samoa
British Virgin Islands
Source: Tax Justice Network
Original Article
Source: thestar.com
Author: Hamida Ghafour
No comments:
Post a Comment