+1 862 207 3288 Punishing Tax Havens
Punishing Tax Havens. The United States is punishing the tax havens effectively. This is because the government of the United States believes tax havens are causing the credit crisis through increasing criminal activities. A tax haven is used to ensure little or no tax liability in an economically and politically static environment. Therefore, the increasing criminal activities, budget deficits and tax-fraud scandals in tax havens are because the United States government fails to share information or data as mandated by the Common Reporting Standards with their respective governments. For instance, the Treasury for the United States cannot force US banks to share information to third parties. In addition, the US has failed to comply with the Common Reporting Standards. The US is punishing tax havens more by shutting down foreign tax havens as well as stealing their business which undermines America’s standing in diverse sectors from climate change to trade. Besides, instead of the US using its power to create an equitable structure of worldwide governance, the US demands standards from the rest of the world which it never applies to itself. The US government has also encouraged data privacy and secrecy which is against the tax haven agreement, therefore, punishing tax haven, preventing adequate information sharing (Alstadsæter, Johannesen & Zucman, 2018).
Punishing Tax Havens Effectively
The governments supporting tax haven initiatives should establish an equitable system of global governance and transparency in order to ensure effective tax haven operations. All governments should share information and adopt Common Reporting Standards under the global agreement to ensure that countries provide automatic data as required by FATCA. Besides, governments should impose tax, migration and trade measures on individuals and companies from those countries which engage in practices that discriminate or imply economic interest damage. In addition, governments should improve their fights against tax evasion, financial crimes, corruption and money laundering in tax haven zones. Regulations should be enacted to lift the veil on the secrecy type that organizations should establish by developing a public registry for companies to allow free access. Moreover, the government should establish sweeping anti-monetary initiative or directive that will empower law enforcement, media and public through special request (Alstadsæter, Johannesen & Zucman, 2018).
Punishing Tax Havens. Top Tax Havens
According to Zucman (2018), the top four tax havens are Ireland, the Caribbean, Singapore, and Switzerland. Ireland is the refereed to the best tax haven because of its economic and taxation policies. Legislation highly favors the creation and operation of corporations and economic environment is very hospitable for all corporations such as for research, development, and innovation. Ireland offers tax incentives, low CIT and proof of large-scale profit shifting due to policies that a fully obedient to all global best practices in the information sharing and tax transparency areas. The Caribbean is also among the top tax havens because they offer 0% CIT, evidence of large-scale profit shifting, 0% withholding taxes, exchange and transparency initiatives and lack of participation in multinational anti-abuse. Singapore provides tax incentives, shows evidence of substantial profit shifting and lack of withholding taxes. Switzerland is among the top tax havens because it provides 0% withholding taxes, transparency initiatives, tax incentives, and shows verification of large-scale profit shifting and lack of participation in multilateral anti-abuse (Bucovetsky, 2014).
Punishing Tax Havens. Incidents of Leaks of Tax Haven Data
There are various incidents of leaks of tax haven data that have resulted to scrutiny and massive investigation in recent activities. There was a substantial leak of confidential information from Mossack Fonseca. Mossack Fonseca allowed wealthy clients to set up mysterious firms in tax havens. The leaked documents cover over 40 years of the operation of the law company as well as allegedly touching on the financial operations of the head of states and over sixty more persons connected to world leaders (Bucovetsky, 2014). The leaked information had links between offshore accounts set up by the firm and tax evasion, bribery and money laundering. In addition, others include the Panama Papers and the Bahamas data leaks. These two provide information about offshore dealings of executives, criminals and politicians as well as lawyers and bankers who assist in money movements. The new leaked information allowed investigation and indicates corporate middlemen and registered agents who serve as intermediaries between customers and Bahamian authorities. The Panama papers indicate how Mossack Fonseca assisted customers to use Bahamian privacy to keep their identity out of public filings as well as undermining the global push for tax transparency. Besides, leaks reveal details of the offshore activities by prominent world leaders and a failed disclosure of their connections to offshore entities (Alstadsæter, Johannesen & Zucman, 2018).
Punishing Tax Havens. Elements of an Effective FCPA Program
The purpose of effective compliance programs is to detect and prevent criminal conduct because companies violate the US Foreign Corrupt Practices Act. The FCPA program should have a written program with procedures and standards for detecting and preventing criminal activities and an oversight board to ensure operations comply, ethics or cultural programs to exercise reasonable oversight of its effectiveness and implementation. FCPA should include responsible persons for a compliance and ethics program as well as operating and reporting periodically to high-level personnel using appropriate resources and authority. There should be the management of the record of compliance, communicating and training to ensure that FCPA adheres to current measures and standards. An effective FCPA should have consistent enforcement of incentives and discipline and the right to the response after a criminal activity has been detected. The organization must take a periodic assessment of the risk of criminal activities and take suitable measures to develop, execute, and adjust its compliance programs in order to mitigate the risk of criminal conduct. Besides, FCPA should also have a culture of compliance, standards of clear communication, a universal program, a program tailored to each business, compliance internal controls, clear lines of responsibilities and consistent follow-up (Hanlon, Maydew & Thornock, 2015).
Punishing Tax Havens.Protecting Actions of Rogue Employees
Actions of rogue employees can put a company or an organization in serious jeopardy. Companies should protect their assets such as breaches of information, sabotage, ransom ware attacks, and hacking attempts through various security measures. Despite being difficult to prevent every act of employee data theft, companies should establish programs to significantly mitigate its vulnerability to such actions. Companies should establish a well-defined policy which is combined with identity and access management in order to cut down on data leaks from rogue employees. A comprehensive identity and access management program should have essential capabilities to provide full life cycle management for all users in order to improve data security. The programs should have automated de-provisioning, automated roles and attribute-based entitlements, delegated administration and audit trail. This will allow the administration to grant or revoke access and tracking those who access the information. Generally, organizations should establish checks and balances, processes and procedures to ensure that everything is run accordingly (Hanlon, Maydew & Thornock, 2015).
Punishing Tax Havens. The Retention of Outside Counsel in Matters of Bribery
The most common reasons to retain outside counsel in matters of bribery include audit committee investigations, corporate risk analysis, and shareholder derivative. This is because outside counsel brings in specialized knowledge to these subjects, especially on matters of independent position in relation to the corporation. The impression of management partiality in making key audit opinions may be the strongest arguments for retaining the outside counsel services. The perceived lack of investigative independence leads to a conflict of interests which may endanger the credibility of the investigations’ findings. Outside counsel ensures a high degree of investigative independence. Outside counsel ensures that regulators and the general public are thorough and unbiased. A corporation should retain outside counsel when they want independent nature as well as neutral and objective opinions on bribery matters in order to protect a third-party liability (Saez & Zucman, 2016). Besides, companies should retain outside counsel in matters of protecting the company from litigation or costly bribery matters.
Punishing Tax Havens. The Establishment of an Effective FCPA Compliance Program for Multinational Companies in China
The establishment of effective FCPA compliance programs for international corporations in China should be tailored to meet market conditions of the country. An effective FCPA program in China should ensure a culture of compliance. A culture of a compliance program will create and promote an organizational culture that will encourage a commitment and ethical conduct to cultural expectations from all management levels. In addition, the program should be tailored to each business and to the risks associated with the specific business. Thus, the program should be well-designed and applied in good faith in order to comply with the business environment of China. Besides, the forms of payments and benefits should be consistently enforced through incentives and discipline. The program should promote and enforce consistently compliance and ethics measures throughout the operation using suitable incentives to execute according to ethics and compliance programs and disciplinary actions for engaging in criminal activities. Thus, all these elements should be contained in a written program with procedures and standards to prevent and detect criminal behavior (Saez & Zucman, 2016).
Revising of FCPA
It is important to revise FCPA in a sort of compliance subject. This includes revision of corporate enforcement policy such as firms considering voluntary disclosures if FCPA violations. There should be guidelines and exceptions to companies that comply with self-reporting of misconduct and other violations such as bribery. The anti-corruption amendment should be revised because it puts the United States companies at a competitive disadvantage, and it is important to obtain the multilateral support of payments for officials of foreign countries. The Foreign Corrupt Practices Act should be amended to include financial incentives for self-disclosures such as deferred prosecution agreements, non-prosecution agreement, reduced fine amounts and sentencing guide. Besides, the amendment must include other practical considerations such as resulting disclosure to other governments, obligations under pre-existing agreements with the government, details of misconduct, broader government inquiries and exposure to related litigation. The FCPA has been doing amendments such as the accounting and reporting an amendment, introducing reporting requirements in 2015, jurisdictional considerations in 2010, influence on charging decisions in 2014, and the availability of adequate procedures for defense (Jorgensen, 2017).
Punishing Tax Havens. FCPA Violations
Enforcement of the FCPA continues to be a major priority sector to enhance its enforcement and prohibit companies from issuing stock to the United States by bribing foreign officials for business and government contracts. In July 2018, the Credit Suisse Group AG approved to pay more than 30 million USD to the SEC and a 47 million USD as criminal penalties to resolve charges that the company acquired business for investment banking in the Pacific-Asia area by an influence of corruption to foreign officials in violation of the FCPA. In January 2018, Orthofix International, which is based in Texas and deals with medical devices decided to pay more than 6 million USD to resolve charges that its Brazil subsidiary used improper payments and lofty discounts to persuade government doctors to use products from Orthofix International. In February 2016, SAP SE which is a software manufacturer accepted a fine of 3.7 million USD in profits from sales to resolve SEC charges in violation of FCPA.SAP SE used deficit in internal controls to enable an executive to pay bribes for procuring business in Panama (Jorgensen, 2017).
Punishing Tax Havens. Territorial Jurisdiction and Technological Advances by the FCPA
Under statutory bases of FCPA jurisdiction, this is what the initial Act implied regard to territorial jurisdiction. This is because the US and foreign-based issuers and the US nationals, citizens and residents as well as US-based entities are subject to FCPA jurisdiction in furtherance of bribery offenses. In addition, territorial jurisdiction ensures that an act of corruption must have a nexus to the US territories. Besides, foreign entities and individuals are subject to territorial jurisdiction for payments under corruption while in the US territories. The certainty of modern regulatory environments requires that firms use procedures and policies to mitigate the risk of violating the FCPA (Leibold, 2014). Using technologies to FCPA compliance processes is a strategic way to make sure that companies smartly comply with these measures. Enforcement Automation of the FCPA policies will decrease missed data and data inconsistencies due to errors of people. In addition, companies should review their policies to identify gaps in their compliance procedures and apply technological interventions in order to ensure companies stay ahead of investigations by governments. Technological advances will address issues in real-time information, the creation of red-flag analysis, enhanced communication and automated monitoring of programs for training employees to ensure completion, the execution of automated triggers to identify high-risk transactions, and worker acknowledgment of FCPA guidelines. FCPA focus should create an increased awareness among companies for a re-evaluation of their compliance programs for advancing technology.
Punishing Tax Havens. BAE Ethics’ Helpline
I agree with BAE Ethics Helpline that increased training leads to reduced calls. This is because if employees are well trained, they understand the reasons for keeping effective compliance with ethics’ requirements and FCPA violation. Training helps to bridge the gap in no-compliance and Helpline is valuable to the workforce. Companies should increase awareness of the benefits of complying with the FCPA ethics Helpline (Saez & Zucman, 2016). FCPA should provide support for ethics and compliance offices for the Helpline community and for designating a liaison within the information technology functions. Leadership should provide effective support through training and communication of ethics and compliance staff as well as increasing awareness for the Helpline. FCPA should support employees to avoid the fear of retaliation by taking necessary incentives to promote reporting.
Punishing Tax Havens. References
Alstadsæter, A., Johannesen, N., & Zucman, G. (2018). Who owns the wealth in tax havens? Macro evidence and implications for global inequality. Journal of Public Economics.
Bucovetsky, S. (2014). Honor among tax havens. Journal of Public Economics, 110, 74-81.
Hanlon, M., Maydew, E. L., & Thornock, J. R. (2015). Taking the long way home: US tax evasion and offshore investments in US equity and debt markets. The Journal of Finance, 70(1), 257-287.
Jorgensen, J. T. (2017). The Foreign Corrupt Practices Act Turns 40. Tex. A&M L. Rev., 5, 237.
Leibold, A. (2014). Extraterritorial Application of the FCPA Under International Law. Willamette L. Rev., 51, 225.
Saez, E., & Zucman, G. (2016). Wealth inequality in the United States since 1913: Evidence from capitalized income tax data. The Quarterly Journal of Economics, 131(2), 519-578.
