Abstract
It is estimated that the offshore banking industry shelters over $7.5 trillion, which costs governments lost revenues of at least $200 billion a year. Another estimate puts the amount of money in offshore tax haven accounts in 2010 at $21 trillion (such a figure is comparable to the size of the economies of the United States and Japan combined). A recently announced “big data” leak containing over 2.5 million tax haven documents revealed dealings of over 70,000 taxpayers and also of over 120,000 offshore corporations and trusts. The “big data” (which was followed by an even bigger data leak in 2016) was uncovered by over eighty-six journalists in forty-two countries. Commenting on the leak as part of his ground-breaking research on big data and tax haven secrecy, Professor Arthur Cockfield observed, “For the first time, the secret world of tax havens was revealed in great detail.” He notes that offshore service providers — such as trust and finance companies — take advantage of tax haven secrecy to help individuals engage in global financial crime through various tactics including assisting clients to launder or “normalize” illegal income so that funds can be repatriated to their home.
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Notes
- 1.
See Gerard Ryle et al, “Banking Giant HSBC Sheltered Murky Cash Linked to Dictators and Arms Dealers” (8 February 2015), online: International Consortium of Investigative Journalists www.icij.org/project/swiss-leaks/banking-giant-hsbc-sheltered-murky-cash-linked-dictators-and-arms-dealers.
- 2.
See Janet McFarland & Bill Curry, “Document Leak Reveals Widespread Use of Tax Havens” Globe and Mail (5 April 2013), online: www.theglobeandmail.com/report-on-business/economy/document-leak-reveals-widespread-use-of-tax-havens/article10797329/. The estimate is from a report by James S Henry, a former chief economist with the global consulting firm McKinsey & Company. According to the article in the Globe, ibid, the top five tax haven destinations for Canadian dollars in 2011 were Barbados ($53.3 billion), Cayman Islands ($25.8 billion), Ireland ($23.5 billion), Luxembourg ($13.8 billion), and Bermuda ($13.2 billion). Not all of these amounts are attributable to tax evasion. These figures do not specifically break down which amounts may be attributable to funds held offshore by multinational enterprises, or directly or indirectly (e.g., through nominee entities) to undeclared accounts of individuals. In 2005, one estimate of individual tax evasion was $50 billion, based on an estimate of holdings by high net worth individuals invested outside the United States at $1.5 trillion (using a rate of return of 10 percent and a tax rate of approximately one-third to arrive at the estimate of $50 billion): see Joseph Guttenberg & Reuven Avi-Yonah, “Closing the International Tax Gap” in Max B Sawicky, ed, Bridging the Tax Gap: Addressing the Crisis in Federal Tax Administration (Washington, DC: Economic Policy Institute, 2005), cited in Jane G Gravelle, Tax Havens: International Tax Avoidance and Evasion (Washington, DC: Congressional Research Service, 2013) at 23. Another estimate by the Tax Justice Network puts the worldwide revenue loss from individual tax evasion for all countries at $255 billion (using a 7.5 percent return and a 30 percent tax rate): see Richard Murphy, John Christensen, & Jenny Kimmis, Tax Us If You Can (September 2005), online: Tax Justice Network www.taxjustice.net/cms/upload/pdf/tuiyc_-_eng_-_web_file.pdf, cited in Gravelle, ibid. The Tax Justice Network estimated offshore wealth at $21 trillion to $32 trillion: see James S Henry, The Price of Offshore Revisited (July 2012), online: Tax Justice Network www.taxjustice.net/cms/upload/pdf/Price_of_Offshore_Revisited_120722.pdf, cited in Gravelle, ibid. Ms Gravelle, ibid at 24, observes that the US cost on these estimates could approach $100 billion. Estimates of unpaid tax since 2006 uncovered by CRA audits are over $4.5 billion: see David Simms, “Offshore Tax Dodgers Coming under Greater Pressure” CBC News (21 February 2013, updated 9 March 2013), online: www.cbc.ca/news/business/taxes/offshore-tax-dodgers-coming-under-greater-pressure-1.1353349. Estimates of Canadian funds in tax havens in 2013 were $170 billion: see Janet McFarland, “Canadians’ Offshore Tax-Haven Holdings Rise 10 Per Cent, to $170-Billion” Globe and Mail (2 May 2014), online: www.theglobeandmail.com/report-on-business/international-business/canadians-tax-haven-holdings-rise-10-per-cent-to-170-billion/article18400026/.
- 3.
In 2013, the International Consortium for Investigative Journalists announced a leak containing over 2.5 million tax haven documents: see Arthur J Cockfield, “Big Data and Tax Haven Secrecy” (2016) 18 Florida Tax Review 1 at 2. Professor Cockfield, ibid at 47, offers a taxonomy of offshore tax evasion behaviour around tax haven service providers and their clients. He calls for a more integrated policy response among the separate government agencies and across separate but related legal regimes (tax, criminal, banking, antiterrorism) to more effectively fight global financial crime.
- 4.
See ibid. In 2016, an additional leak of more than 11.5 million financial and legal records revealing more than 214,000 offshore entities was announced by the International Consortium for Investigative Journalists: see the Panama Papers, online: https://panamapapers.icij.org/20160403-panama-papers-global-overview.html. The files that compose the Panama Papers are from the database of the offshore law firm Mossack Fonseca and were originally obtained from an anonymous source by the German newspaper Süddeutsche Zeitung: see Luke Harding, “What Are the Panama Papers? A Guide to History’s Biggest Data Leak” Guardian (5 April 2016), online: http://gu.com/p/4tvyz/stw. The Panama Papers have prompted investigations into and crackdowns on tax evasion by tax authorities and governments around the world as well as new global collaboration on reducing tax evasion and aggressive tax avoidance: see Holly Watt, “Panama Papers: Global Tax Officials to Launch Unprecedented Inquiry” Guardian (12 April 2016), online: http://gu.com/p/4ta47/stw. The Panama Papers solidify the conclusions of this book that the OECD has been papering over the challenges posed by exchange of information and call upon individual countries more than ever to pursue aggressive and innovative homegrown strategies.
- 5.
Cockfield, above note 3 at 47.
- 6.
Ibid.
- 7.
See Diane Francis, “Lip Service to Money Laundering: Failure to Apply Controls a Serious Threat to Global Economy” Financial Post (26 September 2015) FP2, online: http://business.financialpost.com/diane-francis/lip-service-to-money-laundering-failure-to-apply-controls-a-serious-threat-to-global-economy, noting that the Toronto and Vancouver condominium markets are driven by hot money flows that have increased housing prices to excessive levels and that in Canada, banks operating in Hong Kong, London, and tax havens facilitate flows out of China and elsewhere. Ms Francis, ibid, also observes that Canadian governments, like those in Europe and the United States, compound the problem by resembling giant secrecy havens in that they do not require disclosure of beneficial ownership.
- 8.
For a discussion of Automatic Exchange, see Chapter 8.
- 9.
For a discussion of the policy objectives behind TIEAs, see Chapter 6.
- 10.
See OECD, Global Forum on Transparency and Exchange of Information for Tax Purposes, Information Brief (Paris: OECD, 2013) at 4. See also OECD, Global Forum on Transparency and Exchange of Information for Tax Purposes, Progress Report to the G20 Leaders: Global Forum Update on Effectiveness and On-going Monitoring (Paris: OECD, 2013) at Executive Summary, online: www.oecd.org/tax/transparency/progress_report__G20.pdf.
- 11.
For a discussion of the Foreign Account Tax Compliance Act, Subtitle A of Title V of the Hiring Incentives to Restore Employment Act of 2010, Pub L No 111–147 enacted on 18 March 2010 [FATCA], see Chapter 9.
- 12.
United States, Congress, Joint Committee on Taxation, Explanation of Proposed Protocol to the Income Tax Treaty between the United States and Switzerland (Washington, DC: Joint Committee on Taxation, 2011) at 5, online: www.jct.gov/publications.html?func=startdown&id=3791. This is in addition to other policy reasons discussed below.
- 13.
- 14.
Pub L 91-508, Tit II, 84 Stat 1118, 10/26/1970, codified as amended at 12 USC 1829b, 12 USC 1951–1959 and 31 USC 5311–5314; 5316–5332 [BSA]. Regulations implementing Title II of the BSA (codified at 31 USC 5311 et seq) appear at 31 CFR part 103, and effective 1 March 2011, at 31 CFR Chapter X. For a discussion of the BSA and related policy issues, see Chapter 10.
- 15.
See Internal Revenue Code, USC 26 (1986) of 1986, as amended, and the Treasury Regulations issued thereunder under §§ 901 and 911 [Code] dealing with the foreign earned income exclusion and the foreign tax credit respectively.
- 16.
See United States, Internal Revenue Service, Criminal Investigation, Fiscal Year 2014 National Operations: Annual Business Report (Washington, DC: IRS, 2014) at 2, online: www.irs.gov/pub/foia/ig/ci/REPORT-FY2014-IRS-CI-Annual-Report.pdf. Audit rates will continue to decline as Congress has not increased funding for enforcement: see Richard Rubin, “Thanks for Calling the IRS” Wall Street Journal (16–17 January 2016) B7.
- 17.
See, for example, Devlin Barrett, “U.S. Intensifies Bid to Defund Hezbollah” Wall Street Journal (17 December 2015) A14, online: www.wsj.com/articles/u-s-intensifies-bid-to-defund-hezbollah-1450312498, describing the intensification by the United States of efforts against Hezbollah’s financial network, based, in part, on leads developed in the Lebanese Canadian Bank case in 2011.
- 18.
David Leigh et al, “HSBC Files Show How Swiss Bank Helped Clients Dodge Taxes and Hide Millions” Guardian (8 February 2015), online: www.theguardian.com/business/2015/feb/08/hsbc-files-expose-swiss-bank-clients-dodge-taxes-hide-millions. See also Serge Michel, Fabrice Lhomme, & Gérard Davet, “‘SwissLeaks’: The Backstory of a Worldwide Investigation” Le Monde (2 August 2015, updated 2 September 2015), online: www.lemonde.fr/economie/article/2015/02/08/swissleaks-the-backstory-of-a-worldwide-investigation_4572334_3234.html.
- 19.
See Ryle et al, above note 1.
- 20.
Quoted in Andrew Hill, “When Is a Company Too Big to Manage?” Financial Times (27 February 2015) 9, online: www.ft.com/intl/cms/s/0/87395500-bdd2-11e4-8cf3-00144feab7de.html#axzz3vdYLgWNn.
- 21.
Ibid.
- 22.
Ibid.
- 23.
See Economist, “America the Not So Brave” Economist (23 May 2015), online: www.economist.com/news/finance-and-economics/21651887-america-has-led-global-assault-tax-dodgers-and-their-enablers.
- 24.
See ibid.
- 25.
As explained in Chapter 10, the cost for older Canadians to comply with the older and even the current US voluntary disclosure programs can be staggering, and may force these retirees to dip into their RRSPs to fill out a myriad of US forms, including meaningless foreign trust reporting forms for certain savings accounts and their grandchildren’s education funds, money they can never hope to make back. These individuals often have no ties to the United States and honestly comply with Canadian tax and reporting laws but must face onerous reporting rules, including those under the BSA if they have their spouse’s power of attorney or joint accounts.
- 26.
See Federal Taxes Weekly Alert Newsletter, “National Taxpayer Advocate Suggests Changes to Offshore Voluntary Disclosure Initiative” (2012) 58 Federal Taxes Weekly Alert Newsletter at 3 (Checkpoint).
- 27.
See United States, Internal Revenue Service, Criminal Investigation, Fiscal Year 2015 National Operations Annual Business Report (Washington, DC: IRS, 2015) at 34–35, online: www.irs.gov/pub/foia/ig/ci/FY2015_IRS-CI_Annual_Report.pdf [IRS CI, 2015 Annual Report]. For a discussion of the BSA, see Chapter 10.
- 28.
See IRS CI, 2015 Annual Report, above note 27.
- 29.
Ibid.
- 30.
Ibid.
- 31.
Ibid.
- 32.
See ibid at 1. See also Max Colchester, “Under Scrutiny Standard Chartered Beefs Up Compliance” Wall Street Journal (10 August 2015) C3, online: www.wsj.com/articles/under-scrutiny-standard-chartered-beefs-up-compliance-1439213360, reporting that London-based bank Standard Chartered PLC hired a number of top compliance executives as it expects to deal with increased scrutiny of its global sanctions controls by US officials. In 2014, deficiencies in the bank’s anti–money laundering systems at its New York branch resulted in a $300 million fine. In 2012, the bank settled allegations of sanctions violations with both the New York Department of Financial Services and the Department of Justice (ibid).
- 33.
See Andrew Tannenbaum, “To Prevent Cyberattacks, Share the Threat Data” Wall Street Journal (9 July 2015) A13, online: www.wsj.com/articles/to-prevent-cyberattacks-share-the-threat-data-1436482349.
- 34.
Ibid.
- 35.
Ibid.
- 36.
See IRS CI, 2015 Annual Report, above note 27 at 36.
- 37.
See ibid. Ulbricht created Silk Road in January 2011 and owned and maintained the website until law enforcement authorities closed it in October 2013. During its operation, Silk Road was used by thousands of drug dealers to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to more than 100,000 buyers and to launder hundreds of millions of dollars derived from these unlawful transactions. Ulbricht sought to anonymize transactions on Silk Road by operating on a special network of computers on the Internet (distributed around the world and designed to conceal the true IP addresses of the computers on the network) and through the use of a bitcoin-based payment system to conceal the identities and locations of the users transmitting and receiving funds through the site (ibid).
- 38.
See United States, Department of Justice, News Release 14-194, “BNP Paribas Agrees to Plead Guilty to Conspiring to Process Transactions through the U.S. Financial System for Sudanese, Iranian, and Cuban Entities Subject to U.S. Economic Sanctions” (30 June 2014), online: www.justice.gov/usao-sdny/pr/bnp-paribas-agrees-plead-guilty-conspiring-process-transactions-through-us-financial.
- 39.
Ibid.
- 40.
Ibid. Under the settlement, $100 million will go to the Federal Reserve, more than $715 million will go to the New York Department of Financial Services, and $1.8 billion will go to the Department of Justice (ibid).
- 41.
Ibid.
- 42.
See United States, Department of Justice, News Release 14-1453, “Bank Leumi Admits to Assisting U.S. Taxpayers in Hiding Assets in Offshore Bank Accounts” (22 December 2014), online: www.justice.gov/opa/pr/bank-leumi-admits-assisting-us-taxpayers-hiding-assets-offshore-bank-accounts.
- 43.
See Robert W Wood, “Israel’s Bank Leumi Settles U.S. Tax Charges for $400M, Gives Depositor Names” Forbes (22 December 2014), online: www.forbes.com/sites/robertwood/2014/12/22/israels-bank-leumi-settles-u-s-tax-charges-for-400m-gives-depositor-names/.
- 44.
See Economist, above note 23.
- 45.
For a description of the Swiss Bank Program, see Chapter 5, Section D(4).
- 46.
See ibid.
- 47.
See Laura Saunders, “U.S. Expects $1.36 Billion from Swiss Firms” Wall Street Journal (28 January 2016) C3.
- 48.
See ibid.
- 49.
See Lynnley Browning, “US Indicts Wegelin Bank for Helping Americans Avoid Tax” Reuters (3 February 2012), online: www.reuters.com/article/us-usa-tax-swiss-indictment-idUSTRE81203M20120203.
- 50.
See ibid.
- 51.
See ibid.
- 52.
See United States, Department of Justice, News Release 12-041, “Manhattan U.S. Attorney Announces Indictment of Overseas Bank on U.S. Tax Charges” (2 February 2012), online: www.justice.gov/archive/usao/nys/pressreleases/February12/wegelinindictment.html. See also Kara Scannell & Haig Simonian, “Wegelin Charged with Aiding Tax Evasion” Financial Times (3 February 2012), online: www.ft.com/intl/cms/s/0/70aac594-4df5-11e1-b96c-00144feabdc0.html#axzz3vv83ZaBd.
- 53.
See David Voreacos & Karin Matussek, “Wegelin Banker Facing U.S. Tax Charge Said to Be Arrested” BloombergBusiness (5 February 2015), online: www.bloomberg.com/news/articles/2015-02-06/wegelin-banker-facing-u-s-tax-charge-said-to-be-arrested.
- 54.
See Reed Albergotti, “Wegelin’s Fall to Tax-Haven Poster Child” Wall Street Journal (3 March 2013), online: www.wsj.com/articles/SB10001424127887323293704578334310421785672.
- 55.
See Nate Raymond, “Update 2-Swiss Bank Wegelin to Pay $58 MLN in US Tax Evasion Case” Reuters (4 March 2013), online: http://mobile.reuters.com/article/idUSL1N0BWKIK20130305.
- 56.
See David Voreacos & Carlyn Kolker, “U.S. Sues UBS Seeking Swiss Account Customer Names” (Update 3) Bloomberg (20 January 2009, updated 19 February 2009), online: www.bloomberg.com/news/articles/2009-01-20/billionaire-olenicoff-adds-racketeering-kurer-to-ubs-complaint.
- 57.
See Lynnley Browning, “I.R.S. to Drop Suit against UBS over Tax Havens” New York Times (26 August 2010) B6, online: www.nytimes.com/2010/08/27/business/global/27suisse.html?_r=0; Editorial, “Still Waiting for Those Names” New York Times (16 June 2010), online: www.nytimes.com/2010/06/17/opinion/17thu3.html.
- 58.
See Andrew Grossman, John Letzing, & Devlin Barrett, “Credit Suisse Pleads Guilty in Criminal Tax Case” Wall Street Journal (19 May 2014), online: http://online.wsj.com/news/articles/SB10001424052702304422704579571732769356894.
- 59.
See Cindy E Harnett, “Crackdown on Tax Evaders Urged; Victoria Family Allegedly Paid Little Tax after Receiving Millions from Off Shore Firm” Times Colonist (Victoria) (10 September 2015) A3, online: www.timescolonist.com/news/local/victoria-family-cited-in-cra-crackdown-on-tax-evasion-1.2055917.
- 60.
See ibid.
- 61.
See Peter Mansbridge, “An Exclusive Report on the Off Shore Tax Plan the Canadian Revenue Agency Calls a Sham” (Byline Frederic Zalac, Marshall Cooper, André Lareau, & Dennis Howlett) National (10 September 2015, 10:00 pm EST); Harvey Cashore, Dave Seglins, & Frederic Zalac, “KPMG Off Shore ‘Sham’ Deceived Tax Authorities, CRA Alleges” (9 September 2015, updated 10 September 2015), online: www.cbc.ca/news/business/kpmg-offshore-sham-deceived-tax-authorities-cra-alleges-1.3209838; Dave Seglins, Harvey Cashore, & Frederic Zalac, “Federal Probe of KPMG Tax ‘Sham’ Stalled in Court” (10 September 2015, updated 18 September 2015), online: www.cbc.ca/news/business/federal-probe-of-kpmg-tax-sham-stalled-in-court-1.3210113.
- 62.
See the Tax Court of Canada pleadings in Peter Marshall Cooper v R, 2015-1070(IT)(G), Notice of Appeal filed 9 March 2015, Amended Reply filed 10 July 2015, online: http://cas-cdc-www02.cas-satj.gc.ca/tcc_docket/search_e.php?ap_id=163359; Marshall Cooper v R, 2015-1069(IT)G, Notice of Appeal filed 9 March 2015, Amended Reply filed 10 July 2015, online: http://cas-cdc-www02.cas-satj.gc.ca/tcc_docket/search_e.php?ap_id=163358; and Richard Cooper v R, 2015-1068(IT)G, Notice of Appeal filed 9 March 2015, Amended Reply filed 10 July 2015, online: http://cas-cdc-www02.cas-satj.gc.ca/tcc_docket/search_e.php?ap_id=163357.
- 63.
See Harnett, above note 59.
- 64.
See IRS CI, 2015 Annual Report, above note 27 at 2.
- 65.
United States, Department of Justice, “U.S. Attorneys’ Manual” (Washington, DC: Department of Justice, 2015) at § 6-4.010, online: www.justice.gov/usam/united-states-attorneys-manual.
- 66.
See IRS CI, 2015 Annual Report, above note 27 at 1.
- 67.
Code, above note 15, § 7201.
- 68.
Code, above note 15, § 7202.
- 69.
Code, above note 15, § 7203.
- 70.
Code, above note 15, § 7205(a).
- 71.
Code, above note 15, § 7206(1).
- 72.
Code, above note 15, § 7206(2).
- 73.
Code, above note 15, § 7206(4).
- 74.
Code, above note 15, § 7206(5).
- 75.
Code, above note 15, § 7207.
- 76.
Code, above note 15, § 7212(a).
- 77.
Code, above note 15, § 7215.
- 78.
18 USC § 2.
- 79.
18 USC §§ 286 & 287.
- 80.
18 USC § 371.
- 81.
18 USC § 1001.
- 82.
18 USC § 1956(a)(1)(A)(ii).
- 83.
Code, above note 15, § 7201.
- 84.
See United States, Department of Justice, Tax Division, Criminal Tax Manual (Washington, DC: Department of Justice, 2012) at § 8.02, online: www.justice.gov/tax/file/705911/download [Criminal Tax Manual].
- 85.
See United States v Mal, 942 F 2d 682 at 686–88 (9th Cir 1991); United States v Dunkel, 900 F 2d 105 at 107 (7th Cir 1990). To establish a violation of § 7201, the government must prove each of the following elements beyond a reasonable doubt: an affirmative act constituting an attempt to evade or defeat a tax or the payment thereof (Sansone v United States, 380 US 343 at 351 (1965)), an additional tax due and owing (Boulware v United States, 552 US 421 at 424 (2008)), and wilfulness (Cheek v United States, 498 US 192 at 193 (1991)).
- 86.
See Criminal Tax Manual, above note 84 at § 8.02. Discussion of the above-noted crimes is beyond the scope of this book. For a detailed explanation of US federal tax crimes, see Michael Saltzman & Leslie Book, IRS Practice and Procedure (Valhalla, NY: Thomson Reuters, 2012) (Checkpoint) (loose-leaf).
- 87.
IRS CI, 2015 Annual Report, above note 27 at 2.
- 88.
See ibid at 33.
- 89.
See ibid.
- 90.
See ibid at 34.
- 91.
See ibid.
- 92.
Ibid at 40.
- 93.
See ibid at 41.
- 94.
See Michael A Livingston, “Reinventing Tax Scholarship: Lawyers, Economists, and the Role of the Legal Academy” (1998) 83 Cornell Law Review 365 at 406.
- 95.
Ibid at 368. Livingston, ibid at 399, observes further
that normative scholarship corresponds to the argumentative, “law”-centered aspect of legal practice — the lawyer as advocate for a position based on a fixed set of facts. Empirical or descriptive scholarship emphasizes the “fact”-centered aspect — the lawyer’s skill as information gatherer and weigher of competing evidence. By using both of these skills, academic lawyers will be better able to carve out a distinct territory for their scholarship and resist the encroachment of economists and other outsiders.
- 96.
Ibid at 400.
- 97.
Ibid at 409.
- 98.
Diane M Ring, “The Promise of International Tax Scholarship and Its Implications for Research Design, Theory and Methodology” (2010) 55 Saint Louis University Law Journal 307 at 328–29. In commenting on Livingston’s conception of “empirical” work, Ring, ibid at 312, notes that Livingston favours the goal of gathering and analyzing relevant information in useful ways for those designing policy and that he believes a rigid adherence to highly sophisticated methodologies from the social sciences is not essential.
- 99.
Ibid at 328.
- 100.
Ibid at 329.
- 101.
Allison Christians, “Case Study Research and International Tax Theory” (2010) 55 Saint Louis University Law Journal 331 at 332, exploring case study research in international tax law scholarship and arguing that legal scholars could significantly advance international tax theory by approaching case studies more explicitly and more methodically. Professor Christians, ibid at 338, notes that international tax law scholars using case studies should ask, what can be learned both about and from the event or phenomenon identified as the case?
- 102.
Dennis Pearce, Enid Campbell, & Don Harding, Australian Law Schools: A Discipline Assessment for the Commonwealth Tertiary Education Commission (Canberra: Australian Government Publishing Service, 1987) [Pearce Report], cited in Terry Hutchinson & Nigel Duncan, “Defining and Describing What We Do: Doctrinal Legal Research” (2012) 17 Deakin Law Review 84 at 101.
- 103.
Social Sciences and Humanities Research Council of Canada, Law and Learning: Report to the Social Sciences and Humanities Research Council of Canada (Ottawa: Ministry of Supply and Services, 1983) [Arthurs Report], cited in Hutchinson & Duncan, above note 102 at 102.
- 104.
Doctrinal research is described as “[r]esearch which provides a systematic exposition of the rules governing a particular legal category, analyzes the relationship between the rules, explains areas of difficulty and, perhaps, predicts future developments”: see Pearce Report, above note 102, cited in Hutchinson & Duncan, above note 102 at 101.
- 105.
Reform-oriented research is described as “[r]esearch which intensively evaluates the adequacy of existing rules and which recommends changes to any rules found wanting”: see Pearce Report, above note 102, cited in Hutchinson & Duncan, above note 102 at 101.
- 106.
Theoretical research is described as “[r]esearch which fosters a more complete understanding of the conceptual bases of legal principles and of the combined effects of a range of rules and procedures that touch on a particular area of activity”: see Pearce Report, above note 102, cited in Hutchinson & Duncan, above note 102 at 101.
- 107.
Fundamental research is described as “[r]esearch designed to secure a deeper understanding of law as a social phenomenon, including research on the historical, philosophical, linguistic, economic, social or political implications of law”: see Arthurs Report, above note 103, cited in Hutchinson & Duncan, above note 102 at 102.
- 108.
Susan Bartie, “The Lingering Core of Legal Scholarship” (2010) 30:3 Legal Studies 345 at 350, cited in Hutchinson & Duncan, above note 102 at 105.
- 109.
Bartie, above note 108 at 350, cited in Hutchinson & Duncan, above note 102 at 105.
- 110.
For an example of a Coasean transaction cost approach to international taxation, see Arthur Cockfield, “The Limits of the International Tax Regime as a Commitment Projector” (2013) 33 Virginia Tax Review 59. Professor Cockfield’s article, ibid at 61, conceptualizes the international tax regime as a political and legal system striving to address transaction cost challenges, as described by Ronald Coase, and claims that it has an uneven record in reducing transaction costs for taxpayers and others.
- 111.
See United States, Internal Revenue Service, News Release, IR-2012-4 (6 January 2012), online: www.irs.gov/uac/IRS-Releases-New-Tax-Gap-Estimates;-Compliance-Rates-Remain-Statistically-Unchanged-From-Previous-Study.
- 112.
Gravelle, above note 2 at 16.
- 113.
Ibid at 21.
- 114.
Ibid.
- 115.
See Arthur Cockfield, “Summary of Oral Submissions [Presented to the Standing Committee on Finance, House of Commons]: Tax Evasion and Offshore Bank Accounts” (17 February 2011) [unpublished, archived online at http://arthurcockfield.com/wp-content/uploads/2011/04/Summary-of-Oral-Submissions-Cockfield-Finance-Feb172011.doc], acknowledging that empirical studies attempting to assess the amount of assets Canadian individuals have placed in offshore accounts for tax evasion purposes would be inhibited by a lack of available data due to the illegal and secret nature of the activities, and, in any event, are extremely scarce.
- 116.
See, for example, the following articles, which focus on the OECD’s efforts against tax havens from approximately 1998 through 2007 but not implementation of the new OECD standards and the peer review process or the efficacy of TIEAs and the effort to combat tax evasion surrounding them: Lorraine Eden & Robert T Kudrle, “Tax Havens: Renegade States in the International Tax Regime?” (2005) 27:1 Law and Policy 100 at 122, examining the OECD’s harmful tax competition project; Robert T Kudrle, “The OECD’s Harmful Tax Competition Initiative and the Tax Havens: From Bombshell to Damp Squib” (2008) 8 Global Economy Journal 1, reviewing the OECD’s harmful tax competition project against tax havens in the early years, with economic analysis of the Cayman Islands; Reuven S Avi-Yonah, “The OECD Harmful Tax Competition Report: A Retrospective after a Decade” (2009) 34 Brooklyn Journal of International Law 783, arguing that the OECD effort was successful on the basis of data showing no decline in individual or corporate tax revenues in OECD member countries. See also Allison Christians, “Hard Law, Soft Law, and International Taxation” (2007) 25 Wisconsin International Law Journal 325, arguing that whether an international tax practice or norm is described as “hard” law, “customary” law, “soft” law, or no law at all does matter as those terms point to the need for further analysis regarding the legitimacy of institutional authority and expectations, and the transformative impact of globalization on the making of national tax law; Steven A Dean, “Philosopher Kings and International Tax: A New Approach to Tax Havens, Tax Flight, and International Tax Cooperation” (2007) 58 Hastings Law Journal 911, arguing that the OECD’s cooperation commitments have done little to reduce tax flight; Arthur J Cockfield, “The Rise of the OECD as Informal ‘World Tax Organization’ through National Responses to E-commerce Tax Challenges” (2006) 8 Yale Journal of Law & Technology 136, which is a case study assessing national and international responses to tax challenges posed by cross-border e-commerce in which the OECD is identified as an informal world tax organization; Allison Christians, “Taxation in a Time of Crisis: Policy Leadership from the OECD to the G20” (2010) 5 Northwestern Journal of Law & Social Policy 19 [Christians, “Taxation in a Time of Crisis”], observing that despite the financial crisis of 2008–2009 and the need for developing countries to play a greater role in global tax policy, such a goal remains elusive in a world where tax policy is set and dominated by the wealthiest countries in the OECD. This book has also been informed at points throughout the research by other scholars and their insights relating to certain aspects of TIEAs and EOI: see, for example, Arthur J Cockfield, “Protecting Taxpayer Privacy Rights under Enhanced Cross-border Tax Information Exchange: Toward a Multilateral Taxpayer Bill of Rights” (2010) 42 University of British Columbia Law Review 420, recommending that governments consider adopting a multilateral agreement on taxpayer rights to ensure that tax information is transferred across borders with minimum standards of legal protection; Adrian Sawyer, “Peer Review of Tax Information Exchange Agreements: Is It More Than Just about the Numbers?” (2011) 26 Australian Tax Forum 397, observing that the information exchange mechanism under TIEAs is fundamentally flawed.
- 117.
See Chapter 3, Section F.
- 118.
See Christians, “Taxation in a Time of Crisis,” above note 116 at 27. Professor Christians, ibid, observes that although for more than a decade the United States together with other European countries framed the issue of tax evasion as an important global problem for reasons relating to economic efficiency and fairness, in the early 1990s and again in response to the economic crisis in 2008–2009, the OECD’s stated policy goals were directed at shutting down tax havens to protect national revenue bases and address major fiscal problems that wealthy countries were experiencing as a result of the crisis.
- 119.
Ibid at 19–20 and 40. Professor Christians, ibid, argues that despite the emergence of the G20 as an economic leader, the OECD remains the market leader in developing tax standards and guidelines while the G20, rather than providing developing countries with a meaningful voice in the dialogue, provides an opportunity to syndicate OECD-made policy, and further that despite the need for developing countries to play a greater role in global tax policy, such a goal will remain elusive while the OECD dominates this role.
- 120.
See, for example, Allison Christians, “Sovereignty, Taxation and Social Contract” (2009) 18 Minnesota Journal of International Law 99, where Professor Christians examines the OECD’s work on harmful tax competition from a political philosophy perspective to identify the existence of a global social contract for taxation and to assess its content and implications.
- 121.
For a discussion of tax harmonization versus deharmonization see Chapter 6, Section D.
- 122.
OECD, Model Tax Convention on Income and on Capital (OECD: Paris, 2010), online: www.oecd.org/tax/treaties/47213736.pdf [Model Tax Treaty].
- 123.
See, for example, Tom Fairless, “EU Demands Back Taxes from Global Companies” Wall Street Journal (12 January 2016) B3, who notes that thirty-five multinationals will be required by the European Union to pay approximately $765 million in additional taxes in Belgium after a ruling that they benefited from an illicit tax break.
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Kerzner, D.S., Chodikoff, D.W. (2016). Introduction and the Problem of Offshore Tax Evasion. In: International Tax Evasion in the Global Information Age. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-40421-9_1
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