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Money Laundering, Tax Evasion, Capital Flight, Tax Havens,

Money Laundering, Tax Evasion, Capital Flight, Tax Havens, the Rule based and the Risk Based Approach: Keep it Simple by Brigitte Unger Paper prepared for the TNI Seminar on Money Laundering, Tax Evasion and Financial Regulation, 12th and 13th June 2007, Amsterdam,

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Money Laundering, Tax Evasion, Capital Flight, Tax Havens,

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  1. Money Laundering, Tax Evasion, Capital Flight, Tax Havens, the Rule based and the Risk BasedApproach: Keep it Simple by Brigitte Unger Paper prepared for the TNI Seminar on Money Laundering, Tax Evasion and Financial Regulation, 12th and 13th June 2007, Amsterdam, organized by Tom Blickman Brigitte Unger TNI 2007

  2. Overview: From the old to the new AML regime in Europe • Assessment of money laundering and tax policy • a. Reporting, blacklisting, endangered groups, compliance to FATF recommendations, crime and proceeds, • b. tax evasion c. tax havens • d. Assessment and the change from the rule based to the risk based approach • 2. Conceptual confusion about money laundering and tax evasion • 3. Differen interpretations of actors to fill the gap • 4. Possible solutions Brigitte Unger TNI 2007

  3. Amazon.com 110$ new 222$ second hand CAIMAN.com Amazon.co.uk 59,9 £ new 137 £ second hand Amazon.de 92 € new 194 € second hand Brigitte Unger TNI 2007

  4. 1. a. Assessment of AML through reporting Brigitte Unger TNI 2007

  5. 1. b. Blacklisting Brigitte Unger TNI 2007

  6. 1.c. Assessment through compliance • Source: Arnone and Paoan (2006) Brigitte Unger TNI 2007

  7. 1.d. Another way of measuring complianceFerwerda and Bosma 2006 Brigitte Unger TNI 2007

  8. 1.e. Index of Attractiveness Brigitte Unger TNI 2007

  9. 1.e.Assessment of tax evasion Brigitte Unger TNI 2007

  10. 1.f.Assessment of tax havens • Number of double tax treaties (greater leverage effect) • NL: 80-100, Belgium has 66, Denmark has 78 and the UK has 110. • withholding tax on dividends, royalties and interest • Tax exemptions • Effective corporate tax and income tax rates • Micro and macro calculations • Problem of effective tax rates: • Netherlands statutory corporate tax from 34% to 31% planned to go down to 25% • Netherlands effective corporate tax rage: • 1,7 % (SOMO) – 7% (Sinn) – 20% (de Mooij) – 30% (Report Dutch Min.F.) Brigitte Unger TNI 2007

  11. Special Purpose Entities gross transactions in billion Euro Brigitte Unger TNI 2007

  12. Assessment problems will increase when switching from a rule based to a risk based approach Brigitte Unger TNI 2007

  13. 2. Conceptual Confusion Brigitte Unger TNI 2007

  14. 2. Conceptual Confusion • Withregard to money laundering and tax evasion • Third EU AML Directive effort to harmonize ML definition. But not for tax evasion • ‘national souvereignty’ Brigitte Unger TNI 2007

  15. 3. Different interpretations to fill the gap • Naylor: don’t question the background of the money. • More difficulties to assess AML due to risk based approach is accompanied by simplification trends in implementation and enforcement. • More freedom, more efficiency but more arbitrariness and less fairness • Increased role of the courts instead of politics • Van Waarden’s lawyocracy • Eventually risk based approach will become again a rule based approach Brigitte Unger TNI 2007

  16. 4. Possible solutions • Should tax evasion be part of money laundering or of corruption? • Keep it simple: A Tobin tax instead • For Europe EU law is stronger than UN Convention • (enforcement by Commission, Council, Court) • UN Convention: problem of finding enough support by member countries • New Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism of 2005 signed by 27 countries, ratified so far only by Romania and Albania. • Soft law as a first step? Brigitte Unger TNI 2007

  17. THANK YOU ! Prof. Dr. Brigitte Unger Utrecht School of Economics Janskerkhof 12 3512BL Utrecht The Netherlands +31-(0)30-253-9809 B.Unger@econ.uu.nl Brigitte Unger TNI 2007

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