Photo Ansa   Among the causes of marginalization and impoverishment of certain States, the privileged fiscal regimes are situated, at times, easy and convenient refuge of the capital of organized crime. For some time now, and even more today, with the economic crisis at a global level, the fiscally advanced States have put the fight against these elusive practices on their agenda, e.g. the transfer of capital to Countries with privileged fiscal regimes – for no valid economic reasons, but only to obtain benefits of a fiscal nature. It is Attilio Befera, Director of the Revenues Agency, who with extreme clarity and brevity analyzes in this contribution the phenomenon in all its complexity, also in light of recent Community interventions of contrast.

The globalization of the markets and the lowering of the barriers has profoundly affected the economic systems of the single Countries, favouring the proliferation of regimes or territories that adopt advantageous fiscal policies to attract capital.
Consequently, in the last ten years, this growing liberalization has sharpened – both in Community and international ambits – the differences between regimes of imposed taxes and rates of taxes adopted by the different Countries, territories and jurisdictions.
In fact, it is well known that all businesses, also the so-called virtuous ones are in continual search of always more convenient locations to increase their competitiveness, also through international fiscal planning, directed to minimize the imposed tax burden through the utilization of structures and organizations resident in Countries of fiscal privileges.
However, in concrete terms, draining resources from developing Countries, territories with privileged fiscality represent one of the main causes of marginalization and impoverishment of many States, dispossessed of the economic means to advance, as well as, sometimes, being an easy and comfortable refuge – perhaps involuntary – for the protection of the interests of organized crime.
The number of offshore Countries is estimated between forty and eighty, according to evaluation criteria followed in the classification by the single States and by the international Bodies and can even involve Member Countries of the EU, with an approximate turnover of 1.800 billion dollars a year.
The offshore phenomenon can be more or less extensive – according to what are considered authentic fiscal Paradises – characterized by a very low or even non-existent taxation regime, and normally made up of States without their own resources, and/or the Countries with privileged fiscality, which often operate within industrialized States with ordinary fiscality, to exploit the competitive advantages deriving from the inflow of capital and the localization of foreign businesses and utilized for the purpose of carrying out “triangulations” and “conduit” operations.
There are, in fact, Countries which, even though they are not fiscal Paradises, from political choice, stipulate conventions for the elimination of the double taxation impositions, to finance or favour the development of others, or they choose to introduce favourable fiscal regulations: certain examples are, Luxembourg, Ireland, Holland and the USA.
We must not, however, confuse the fiscal Paradises with these structures of fiscal planning, diffused in the Countries of the Anglo-Saxon culture, which operate in respect of the interests of the State (the revenue is ensured) and of those of the economic taxpayers-operators, with the objective of obtaining the highest possible savings to finance the development of the businesses.
By reason of such premises it appears evident, therefore, that in the final analysis, the fight against the substantial illusive practices – in the transfer of taxable set-ups to Countries with privileged fiscality through ad hoc operations, often without valid economic reasons and finalized, exclusively, to the achievement of fiscal benefits – constitutes a priority for the fiscally advanced States.



The fight of the International Bodies
against fiscal Paradises

Already at the end of the 90’s, the various international Bodies (1) were demonstrating their first reactions in the fight against the harmful fiscal competition and money laundering.
Nevertheless, the results were modest and they were not able to avoid the further development of the “Paradises” as offshore financial centres.
In the second half of the last decade there arose, at both a European level(rectius: European Commission) and at OCSE level, particular attention to the concept of “harmful fiscal competition”, although with different purposes and applicative ambits.
Particularly, at the OCSE level, the commitment against the harmful fiscal competition was demonstrated by the publication of proper reports which summarized the conclusions reached by the Organization following the continual debates between the Member States, some of which have the same legislations as those of the favourable fiscal regimes.


The “harmful fiscal practices”:
the harmful fiscally privileged regimes

With the OCSE Report of 1998, better known by the name of "Harmful Tax Competition", the principal factors that characterize the potentially “harmful” fiscal regimes were individuated. In this connection, the Report subdivides the so-called “harmful fiscal practices” into two categories: harmful preferential tax regimes, and tax havens.
Defined as “harmful preferential tax regimes” are those mechanisms which, even though coexisting with ordinary, and also important taxation systems, allow clients to obtain reduced rates or, indeed, pay nothing. Furthermore, the Report states that such circumstances must be accompanied by, at least, one of the other elements indicated by the OCSE, such as the so-called “ring fencing ”, or the isolation of the privileged regime from the ordinary taxation system (2) the lack of transparency of the fiscal regime, as well as the refusal of local financial administrations to the exchange of information.


The “harmful fiscal practices”: the fiscal Paradisesi

As mentioned in the introduction, many sovereign territories and many Countries use the fiscal lever and other measures of economic policy to attract capital and investments into services and the financial sectors.
These States offer foreign investors environments of non-taxation or purely nominal taxation, usually combined with particularly bland administrative-legal regulations (3) .
Generally, the activities carried out are not the object of information exchange with other Countries and they present a particularly strict banking secret.
Such jurisdictions are, rightly, designated as “fiscal Paradises”: they lean on the international financial system, facilitating the capital flows and, taking advantage of the forces of globalization and the growing liberalization in the financial movement. They finish by depriving other Countries of resources – harming them, obviously, from the viewpoint of taxation revenues.
Due to their capacity to minimize the fiscal imposition and to allow anonymity, such States attract both the societies and the single individual.
In general, they are utilized for three principal purposes:
as “money boxes” or as locations to hold capital used for “passive” investments, typically financial, which generally produce interest, royalties and dividends;
as locations to ascribe, from an accounting point of view, profits realized elsewhere (paper profits);
to hide from the fiscal Authorities of the Country of residence, all or part of the capital.
Such characteristics damage the fiscal system of other Countries, in particular, with reference to the revenue of the income taxes of the single individual and the societies, as well as favouring international tax evasion by tax payers.
The Report, therefore, defines the tax havens as jurisdictions in which:
there is no taxation or it is purely face value, but not effective;
there is a lack of transparency in the legislative and administrative regulations;
there are no requirements that the activities conducted in the host Country should be of a substantial character in order to benefit from the fiscal concessions;
there is no effective exchange of information with other Countries:
Following the Harmful Tax Competition Report, the OCSE drew up a black list which included 41 jurisdictions definable as “fiscal Paradises”.
Moreover, the Guidelines of ’98 against harmful fiscal practices provided for the obligation to remove the benefits obtainable in the fiscal Paradises within and not later than 31st December, 2005, under penalty of criminal sanctions.
Up to the 28th February, 2002 (4) , the Countries considered to be tax havens could, however, with the purpose of overcoming the harmful fiscal practices, send “advanced commitment letters”, considered official commitments, and which allowed, in short, the substantial shrinking of the black list. In particular, between 1999 and 2002, a good 34 of the 41 Countries on the black list sent the advanced commitment letters (5) and obtained cancellation from the list.
However, there still remained non-cooperative jurisdictions such as Andorra, Marshall Island, Liberia, Liechtenstein, Nauru, the Principality of Monaco and Vanuatu. Successively, by 2005, only Andorra, Liechtenstein and the Principality of Monaco remained on the black list.
In concrete terms, apart from the manifested “letters of intent”, many Countries on the original black list, and others not then included, have continued to operate as tax privilege regimes, in various capacities and under different aspects.
Re-examination of the situation took place at the OCSE, upon request, above all, by Countries of the EU, such as France and Germany, on occasion of the G20 held in London in April of this year.


The common fight of the EU Countries
against the fiscal Paradises

Since the beginning of the world economic crisis – still existing – the fight against the fiscal Paradises has been considered among the principal objectives of the new economic policies of the more developed Countries – European and extra-European.
The recent summit of the leaders of the more industrialized Countries of the world (G20), held in London on April 2nd, 2009, was an important occasion of international meeting to effectively discuss actions to be taken to stem the losses of fiscal revenue deriving from the existence of such territories of highly privileged fiscality. In fact, with the economic crisis we are going through, and the growing hostility of public opinion, the European Governments – presently forced to withdraw hundreds of millions of Euro from the nation’s coffers to re-launch their economies – can no longer tolerate the presence of “fiscal black holes”, which aid the escape of capital, thereby allowing great fortunes, banks and multi-nationals to pay less tax. If, for the United States, the lost revenue amounted to circa 100 billion dollars, the tax evasion would cost Germany 30 billion Euro, and 20 billion a head for France and the United Kingdom.
At the European level, the summit was preceded by a meeting in Berlin on the 22nd February, 2009, between the leaders of the European nations belonging to the G20 (6) , with the aim of bringing a common position to the summit.
And, on this same occasion, the necessity for effective sanctions against the fiscal Paradises was urged and, in general, against the nations that would try to impede the European steps directed towards the economic recovery.
Under the circumstances, the OCSE has compiled a new list of non-cooperative Countries – a list which had become considerably shorter following formal commitments by many of those Countries which originally appeared on said list – for an exchange of information on the basis of the international standards fixed by the OCSE.
Notwithstanding, the situation in the European environment is rather discordant. In fact, beside the nations, such as Germany and France, which have strongly declared their support in the fight against the fiscal Paradises, there are others which, up to now, are still on the list of Countries that cannot yet be defined as completely cooperative (7) .


The counter-measures adopted in certain Countries:
the case of Germany and France

In the above outlined context of the common fight against the use of Countries of fiscal privileges, and request for modifications of the present regulations, also at a EU level, through the revision of the Guideline concerning the preservation and extension of the Guideline 77/799/CEE on the exchange of information between States of the EU, it is necessary to draw attention to what has been done autonomously by the single nations.
One refers, in particular, to Germany and France. In Germany, always in the front line in the “squeeze” against the fiscal Paradises, a regulations proposal to hit the tax-payers– individuals or companies – has recently been made, in cases of proven absence of transparency in economic and financial activities realized at international level.
Germany – always strongly critical of Switzerland in its banking secret and fiscal system – approved, last April, a bill that provides for more ways and means to fight tax evasion through the fiscal Paradises.
For example, the measures will allow the German financial Administration to exact – from the individual or company taxpayers which invest in Countries or territories which do not respect the regulations of the Organization for the cooperation and economic development, or of the EU, in matters of fiscal and banking secret – greater information with respect to the nature and purposes of the international economic operations carried out.
The individuals or societies that invest in non-cooperative Countries, among which, Switzerland, Belgium, Austria or Luxembourg, would lose, furthermore, certain fiscal advantages by undergoing:
a limitation in the deductible expenses;
the application of deduction of tax at source in the case of payments to foreign recipients resident in non-cooperative States;
the refusal of tax breaks on the incomes of societies for dividends and surplus value from participations in societies which are based or have top management in non-cooperative Countries.
Also the transalpine Governments are trying to handle the problem of the presence of capital abroad through purposely studied measures to take ‘lymph’ away from the fiscal Paradises and to recuperate monies for the Inland Revenue and, above all, for the French economy.
In particular, the French approach in this area is very practical, which provided for a favourable treatment towards ‘repentant’ taxpayers who disclose to the Inland Revenue undeclared goods and properties abroad.
A treatment then, case by case, and not a general tax amnesty.
The underlying motive for this choice is the conviction that the French taxpayers can be encouraged to voluntarily declare their foreign capital for fear of the emergence of new banking ethics and the possible stipulation by France of new agreements of fiscal assistance which will lay down in black and white, the commitment of the stipulated Countries to respond to the requirements of information requested by the French Fiscal Administration.


Conclusioni

The abolition of the banking secret and the cooperation from the viewpoint of strengthening the exchange of information can be, without a doubt, individuated as fundamental elements for an effective deterrent to the distorted use of the so-called fiscal Paradises.
It is not pure coincidence that the Countries present at the last summit of the G20, which are committed to the fight against tax evasion, continue to concentrate their attention on this subject.
The official announcement of closure of the summit, in fact, shares the appeals of the Organization for Economic Development and confirms the awareness that the constitution of an anti-evasive system of trans-national value cannot be elaborated by a single State, but necessitates the contribution of a harmonizing will which, through the exchange of information and a less rigid banking system, can overcome the encumbrances placed by the regulatory measures of the single systems.
To be indicated is the revision of the “lists” made by the OCSE, identifying:
Cooperative Countries entered in the white list;
Countries which have committed themselves to accept the international standards on the exchange of information – even
though such standards have not yet been introduced into the national legislation – are entered in the grey list;
non-cooperative Countries are entered in the black list.
This revision represents an important event in the commitment of the OCSE, over the last ten years, in the fight against the fiscal Paradises. In fact, this year, in addition to the white list (8) , it starts a grey list, comprising those Countries which are working to modify their fiscal systems to adapt them to the international one, which is founded on clear regulations and adequate instruments of control.
Such commitment should result in the progressive cancellation of the black list, through measures of decriminalization in favour of the return of capital and, in the meantime, of increasing the sanctions against banks or companies which maintain relations with the States (9) still present on the list.
In fact, in 2009, the “inflexible” Countries are only Costa Rica, the Philippines, Malaysia and Uruguay.The success achieved, even though constituting only an intermediate lap to the winning post, marks an important turning point that requires a dedicated activity in the study of strategies to favour the re-entry of the hidden capital, and the continuation of vigilance, until the systems of financial internationalization become processes of legitimate fiscal planning, in order to impede the hiding, or rather, the artificial shrinkage of the income charged to the consolidated balance of a company through technical-legal constructions without concrete economic motivation.