Blog the Debt

The Robin Hood Tax: One Way to Avoid Austerity

Jubilee USA Network — Fri, 24 May 2013 10:00:00 -0400

By: Andrew Hanauer

If you are familiar with British actor Bill Nighy, it is most likely through his role in the popular film Love Actually, in which Nighy plays an aging rock star who grudgingly but shamelessly turns his hit song into a Christmas jingle. In a movie starring Liam Neeson, Colin Firth, Emma Thompson, Keira Knightly and Hugh Grant, Nighy stands out thanks to his quirky mannerisms and comedic timing.

This year, Nighy is using his talents for a less glamorous but far more meaningful role: that of “the Banker” in a YouTube video aimed at advocating for a Financial Transaction Tax (FTT). The FTT is also known as a Robin Hood tax because it would charge banks and other financial institutions a tiny tax for each financial transaction they make and use the money to fund initiatives aimed at helping the poor. In “the Banker,” Nighy plays a banker who is not entirely enthusiastic about this idea:

The Robin Hood tax scored a major victory in late January when eleven EU countries, including France and Germany, voted to approve an FTT for the Eurozone. Countries that are not participating in the FTT, most notably Great Britain, do not have to implement a Robin Hood tax, but transactions made on the London Stock Exchange by institutions based in those eleven countries will still be subjected to the FTT, thus further undermining the spurious claim that an FTT will simply drive financial institutions to move off-short or to non-participatory countries. The fact that Europe is moving ahead with the Robin Hood tax also undercuts that claim as it applies to American banks. If the UK passes an FTT, pressure will increase on Congress and the White House to do the same.

The FTT is a relatively simple concept. Every time a financial institution makes a transaction involving stocks, bonds, derivatives or foreign currency exchange, a tiny tax is attached to it, ranging from .5% of the transaction value all the way down to .005%. It does not apply to ordinary consumers (a person selling or buying a stock) and smaller investors can be exempted legislatively. Many of the transactions being taxed by an FTT are speculative in nature: investors buying and selling derivatives or bonds in seconds in the hopes of making quick money without producing anything of value for the economy as a whole.

But put aside that last critique of the global financial system and the FTT still makes sense. After all, such speculative investments are simply another form of product purchasing, the same way we go to the store and buy any number of things. The average consumer is asked to pay about $9 in sales taxes on $100 worth of goods; a Robin Hood tax would charge financial institutions somewhere between half of one cent and 50 cents on $100 worth of “goods.” Why is buying gas subject to taxation but buying bonds (and then reselling them thirty seconds later) a tax-free activity?

The main arguments against the tax are fairly easy to rebut intellectually, but more importantly they have been easily rebutted by extensive research, both on the economics of the tax and on its impact in countries where it has already been implemented. No, the tax will not simply cause banks to pass on the added costs to the rest of us. No, the tax will not encourage banks to move elsewhere. No, the tax will not cause havoc to global markets.

What the tax will do is free up billions of dollars to be spent on…well…where to begin? Avoid austerity? Fund education? Fund health care? Relieve foreign debt? Prevent children in developing countries from dying of preventable diseases? The fact that governments do not always spend money in such altruistic ways misses the point: it is our job to push for Robin Hood legislation that earmarks the funds raised for specific purposes. Congress, like any other political institution, will only pass legislation as good as the pressure mounted to support it.

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Fans of Bill Nighy might know that he also starred in a little-known film called “The Girl in the Café,” in which he plays a British bureaucrat who takes a date to the G8 conference in Iceland only to watch in horror as she accosts powerful people with the imperative of devoting funds to combating poverty in the developing world. When those powerful people finally decide they’ve had enough and have their security team kindly escort her to the airport, Nighy follows her there and confronts her with the revelation that she has a criminal past.

Nighy demands to know what crime she committed.

“I hurt somebody who hurt a child,” she responds.

“Was it your child?” he asks.

“It was a child,” she responds. “Does it matter whose child?”

There needs to be the creation of a global system of finance that supports the well-being of children everywhere. A Financial Transaction Tax is another step in that direction. There is already legislation introduced in the House and Senate this year. It’s time for Congress to act.

President Obama Works to Stop Vulture Funds

Jubilee USA Network — Wed, 22 May 2013 10:00:00 -0400

We still wait for a Federal Court ruling on Argentina versus the vulture funds, a legal outcome that will significantly impact global poverty in our lifetimes. As we wait, we are grateful for the leadership of President Obama, the US Treasury and the Justice Department for working to protect our economy from these destabilizing forces and for standing up to hedge funds that exploit the poor.

The Obama Administration filed a friend-of-the-court or Amicus brief on behalf of Argentina versus the vulture funds, asserting that the claims of the vulture funds could hurt debt restructurings for developing countries and violate the sovereignty of nations.

The historic 2nd Circuit Court Case, the last stop before the Supreme Court, propelled the international debt crisis and exploitative hedge funds into the spotlight. A few weeks ago, Eric LeCompte, Jubilee's Executive Director, thanked the US government on the floor of the United Nations ECOSOC meetings in New York. Eric's comments joined a chorus of comments from international leaders, countries, investors and Joe Stieglitz in raising concern on vulture funds and the need for new international mechanisms to resolve debt.

The outcome between NML Capital and Argentina will have profound impacts on poor countries, developing nations and any country that is struggling with financial stress. We thank the President for his Administration's efforts in this proceeding to promote an economy that serves all people.

You can join Jubilee USA in thanking President Obama, the US Treasury and the Justice Department for protecting our economy from destabilizing forces and for standing up to hedge funds that exploit the poor by signing our thank-you letter.

Road to Riches: Tracking the Journey of the Global Superwealthy Infographic

Jubilee USA Network — Mon, 20 May 2013 10:00:00 -0400

Learn about the current wealth inequality in this infographic:

Image compliments of Best Value Schools

Real Life Thriller: How the Son of a Dictator Launders Millions

Jubilee USA Network — Thu, 16 May 2013 09:30:00 -0400

By: Amber Przybysz

How does the son of an autocratic president earning less than $7,000 a month[i] afford Michael Jackson memorabilia, a Malibu home, a private jet and a 2011 Ferrari?[ii] The answer: anonymous shell companies. Lax money laundering laws in the U.S. have allowed corrupt dictators and their families to hide assets - assets that do not rightfully belong to them.

Teodorin Obiang, son of the long-ruling president of Equatorial Guinea, has come under heightened scrutiny for his lavish lifestyle sustained by weakly enforced laws in the West.[iii] Teodorin allegedly used anonymous shell companies by the names of “Beautiful Vision, Inc.,” “Unlimited Horizon, Inc.,” “Sweetwater Malibu, LLC” and “Sweet Pink, Inc.” to launder money into the US - money that should have been used for development and to fight poverty in Equatorial Guinea.[iv] Various arms of the U.S. government have been investigating the alleged millions of dollars that Teodorin spent, with the U.S. Department of Justice recently attempting to seize the property.[v] To put this into perspective, the complaint[vi] alleges that Teodorin spent over $300 million between 2004 and 2011, which is over twice the country’s combined annual health and education budgets.[vii]

Equatorial Guinea ranks near the bottom of the UN human development index, with less than half of the population having access to clean water and 20% of children dying before the age of five.[viii] While the country has a fast-growing economy due to the recent discovery of oil, the earnings are allegedly stolen by the ruling elite, marking it as one of the most corrupt nations in the world.[ix] In a country where 77% of the population lives below the poverty line, corrupt leaders must be stopped from plundering state money that is so desperately needed to provide basic needs for its people.[x] Money that is siphoned off to anonymous accounts in foreign countries could otherwise be used to build roads and schools or provide medicine and clean drinking water.

All hope of stopping such activity is not lost, though. As legal measures taken against Teodorin in both the U.S. and France suggest,[xi] there is a push to put a stop to corrupt dictatorships that continue to deprive their people of necessities. Anonymous shell companies that facilitate money laundering are a global problem, but one that can be stopped by closing loopholes in existing laws. The U.S. can take the lead in ending anonymous shell companies here at home and pushing for an international standard that requires companies to disclose the actual owner which would enable law enforcement to pursue criminal activity associated with the company,[xii] putting a stop to criminals using shell companies for personal gains including political elites stealing from their people.

[i] Stefanie Ostfeld, “Dictators’ Riches Are Stolen at Home, But Banked in the West,” Freedom House Blog. September 18, 2012. http://www.freedomhouse.org/blog/dictators%E2%80%99-riches-are-stolen-home-banked-west

[ii] Global Witness, Complaint, June 11, 2012. http://www.globalwitness.org/sites/default/files/library/Second%20Amended%20Complaint%206.11.12.pdf

[iii] Stefanie Ostfeld, “Dicators’ Riches Are Stolen at Home, But Banked in the West,” Freedom House Blog. September 18, 2012. http://www.freedomhouse.org/blog/dictators%E2%80%99-riches-are-stolen-home-banked-west

[iv] Joseph Kraus and Stefanie Ostfeld, “A bill to end secrecy surrounding shell companies,” The Hill, November 1, 2012. http://thehill.com/blogs/congress-blog/economy-a-budget/265401-a-bill-to-end-secrecy-surrounding-shell-companies

[v] Stefanie Ostfeld, “Dictators’ Riches Are Stolen at Home, But Banked in the West,” Freedom House Blog. September 18, 2012. http://www.freedomhouse.org/blog/dictators%E2%80%99-riches-are-stolen-home-banked-west

[vi] Global Witness, Complaint, June 11, 2012. http://www.globalwitness.org/sites/default/files/library/Second%20Amended%20Complaint%206.11.12.pdf

[vii] Stefanie Ostfeld, “Dictators’ Riches Are Stolen at Home, But Banked in the West,” Freedom House Blog. September 18, 2012. http://www.freedomhouse.org/blog/dictators%E2%80%99-riches-are-stolen-home-banked-west

[viii] BBC News, “Equatorial Guinea profile,” June 14, 2012. http://www.bbc.co.uk/news/world-africa-13317174

[ix] BBC News, “Equatorial Guinea profile,” June 14, 2012. http://www.bbc.co.uk/news/world-africa-13317174

[x] Stefanie Ostfeld, “Dictators’ Riches Are Stolen at Home, But Banked in the West,” Freedom House Blog. September 18, 2012. http://www.freedomhouse.org/blog/dictators%E2%80%99-riches-are-stolen-home-banked-west

[xi] Vivienne Walt, “Teodorin Obiang: The Dictator’s Son with a Malibu Mansion and a Warrant for His Arrest,” Time, July 16, 2012. http://world.time.com/2012/07/16/teodorin-obiang-the-dictators-son-with-a-malibu-mansion-and-a-warrant-for-his-arrest/

[xii] Joseph Kraus and Stefanie Ostfeld, “A bill to end secrecy surrounding shell companies,” The Hill, November 1, 2012. http://thehill.com/blogs/congress-blog/economy-a-budget/265401-a-bill-to-end-secrecy-surrounding-shell-companies

Jubilee Meets with Senator Levin

Jubilee USA Network — Tue, 14 May 2013 09:30:00 -0400

By: Rickard Ekstedt

On April 30, Jubilee USA, along with partner organizations of the FACT Coalition, met with US Senator Carl Levin (D-MI). Jubilee has worked and continues to work closely with Senator Levin on legislation to curb tax havens and close corporate tax loopholes.

Ahead of the sequester, Jubilee worked with Senator Levin to introduce the Cut Unjustified Tax Loopholes Act (S. 2075). This legislation would end loopholes that a small percentage of corporations use to avoid paying taxes. In the last Congress, Senator Levin introduced the Stop Tax Haven Abuse Act (S. 1346) to curb the use of tax avoidance in both the developing and developed world. Subsequent amendments of this legislation passed the Senate in 2012.

Recently in March, Jubilee worked with Senator Levin to pass the bipartisan Levin-Hatch Amendment 708 to the Senate Budget Resolution. This Amendment moves forward our work on curbing corporate tax avoidance and stopping corporate offshore tax loopholes. The passage is part of a global movement to ensure that corporations don’t take funds that should aid the vulnerable.

Earlier this year, Senator Levin announced that he is retiring and will not seek reelection in 2014. For the next two years he said that he wants to make ending tax avoidance schemes a priority:

“Are we going to continue to lose revenues to these gimmicks, these tax-avoidance schemes which corporations use basically to avoid paying taxes?” Senator Levin asked. “That’s got to end, and there’s a lot at stake here, and that’s what I'm putting a lot of time in. And frankly ... this is one of the reasons that I have decided that I’m not going to spend the next two years campaigning; I’m going to spend the next two years fighting for things that I believe in, including ending these tax-avoidance schemes which are robbing our Treasury of the funds needed for these very important programs.”[i]

[i] NPR, “Retiring Carl Levin Says He Wants To Leave The Senate Fighting”, March 13, 2013. http://www.npr.org/blogs/itsallpolitics/2013/03/13/174128734/retiring-carl-levin-says-he-wants-to-leave-the-senate-fighting