Offshore Tax Havens: Whose Fight Is It Anyway?

By the end of 2017, offshore tax havens were (again) in the spotlight. This was largely thanks to the International Consortium of Investigative Journalists (ICIJ), which helped release the “Paradise Papers”, a trove of documents primarily concerning the clientele of Appleby, a prestigious law firm with offices in the Cayman Islands and the Bahamas. These documents illustrated how firms like Appleby help wealthy individuals use offshore tax havens to avoid or evade paying taxes in their home jurisdictions; this is possible because tax havens offer significantly lower tax rates compared to the home jurisdiction, and also offer a measure of secrecy surrounding financial transactions. (Tax havens often have little to offer but these discounts; they rarely have good governance, and opportunities outside the finance industry are difficult to find for the locals.)

The movement to crack down on offshore tax havens has gathered much support from anticorruption activists. Pointing to leaks like the Paradise Papers (and the Panama Papers before them), anticorruption activists argue that the secrecy associated with offshore tax havens exacerbates the problems of kleptocracy and corruption. While I agree that offshore tax havens pose serious problems, I’m skeptical whether this issue should be a focal point for anticorruption activists (rather than, say, advocacy groups concerned primarily with tax justice or global wealth inequality). There are two reasons for this: Continue reading

Governor Brown’s Missed Opportunity to Promote Political Transparency and Fight Trumpian Corruption

Last month, Republicans announced their plan for a comprehensive overhaul of the United States federal tax code, the first in decades. In characteristic fashion, President Trump promised, “I don’t benefit. I don’t benefit.” To clarify his point, he added, “I think very, very strongly, there’s very little benefit for people of wealth.” Lest those statements left any doubt, Trump later claimed, “I’m doing the right thing and it’s not good for me, believe me.” Notwithstanding the President’s promises, a New York Times analysis found that Trump could save over a billion dollars if his plan were to be passed into law. Seemingly responding to this reality, Trump later amended his sales pitch by claiming that “everybody benefits” from tax reform.

Tax reform fits squarely into the third category of conflicts tracked by this blog: government regulatory and policy decisions that benefit Trump and his family businesses. Americans deserve to know how the President would personally stand to gain if his proposal became law. Yet the extent of Trump’s conflict of interest remains unknown, and unknowable, because of his widely-criticized refusal to release his tax returns.

Unfortunately, California Governor Jerry Brown squandered an opportunity to force Trump to shed some light on his personal finances when he vetoed the Presidential Tax Transparency and Accountability Act, which had passed both houses of the state legislature with overwhelming support. The Act would have required all aspiring Presidential candidates to provide their tax returns to the California Secretary of State (who would then publish them online) before the candidate’s name could appear on the California primary election ballot. In his veto message, Governor Brown explained that while he “recognize[d] the political attractiveness—even the merits—of getting President Trump’s tax returns,” he worried about the “political perils of individual states seeking to regulate presidential elections in this manner.” Brown identified two specific concerns about the bill: its constitutionality and the potential “slippery slope” it might create.

Brown’s arguments ring hollow. They seem particularly unjustified in a time in which state action is one of the few viable bulwarks against Trump’s corruption. Fortunately, other states, including Massachusetts and New York, are considering similar proposals. Those states can do better than California. Here’s why they should: Continue reading

When, If Ever, Does a Favorable Legal or Regulatory Decision Count as an “Emolument”?

Last week, I posted about the amended complaint that the Citizens for Responsibility and Ethics in Washington (CREW) filed in its lawsuit against President Trump for alleged unconstitutional acceptance of “emoluments” from various sources. My post last week, like much of the immediate commentary on the amended complaint, focused on the new plaintiffs who had joined the suit, and the extent to which their addition mitigated concerns about whether the court would have jurisdiction to hear the case. But the amended complaint was notable for other reasons. In particular, it fleshed out more details about President Trump’s alleged violations of the Foreign Emoluments Clause, and also added a new set of allegations focused on separate violations of the Domestic Emoluments Clause.

What was most striking to me about the allegations detailed in the amended complaint is that in several cases, the alleged “emolument” is not a monetary payment or a market transaction, but rather a legal or regulatory decision by a government (U.S. or foreign) that favors businesses owned by President Trump. Consider the following examples:

  • Donald Trump had long sought—and had long been denied—Chinese trademark protection for his “Trump” brand in China. Shortly after his inauguration, President Trump made statements suggesting that he might reconsider the U.S. commitment not to recognize the government of Taiwan (the so-called “One China” policy). On February 9, President Trump met with Chinese President Xi Jinping. Following the meeting, President Trump reaffirmed the U.S. commitment to the One China policy. Five days later, China granted the Trump Organization its trademarks. According to CREW, the decision to grant the trademarks was an emolument, from the government of China to President Trump.
  • The Trump Organization has several ongoing real estate development projects in Indonesia, which require permits from the government. According to the CREW complaint, if and when the government of Indonesia grants these permits, this will constitute an emolument from the government of Indonesia to President Trump.
  • Prior to the election, a company owned by President Trump signed a lease with the U.S. General Services Administration (GSA) to open what is now the Trump International Hotel at a property owned by the U.S. government. The lease agreement stated that “no … elected official of the Government of the United States … shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom.” Prior to President Trump’s inauguration, a GSA official indicated that the GSA thought that Trump would be in violation of the lease unless he fully divests from the hotel. Shortly after the inauguration, President Trump appointed a new GSA Administrator. On March 23, the GSA issued a letter taking the position that President Trump is not in violation of the lease, principally because President Trump would not receive any earnings from the hotel until he leaves office. Many ethics experts derided the GSA’s letter as unpersuasive. The CREW amended complaint goes further, arguing that the GSA’s letter is itself an “emolument” from the U.S. government to President Trump.
  • Prior to the election, the Trump company that owns the D.C. hotel applied for a “Historical Rehabilitation Tax Credit,” which, if approved, could be worth up to $32 million. The application has cleared the first two phases of the three-stage approval process—the first step before the election, the second step after the election (but before inauguration). The National Park Service must provide the third and final approval. If the Service were to grant that approval, according to the CREW complaint, this would be an unconstitutional domestic emolument to the President.

All of these alleged “emoluments” are regulatory or legal decisions by government agencies. Can such decisions count as emoluments? When or under what conditions?

These turn out to be hard legal questions, and to the best of my knowledge there’s very little existing case law or scholarly commentary. I’ll throw out some preliminary thoughts here, but this issue likely deserves more sustained and careful analysis from genuine experts (which I am not). Continue reading

Guest Post: U.S. Implementation of the EITI–Good Progress, But Needs Improvement

GAB is delighted to welcome back Daniel Dudis, Senior Policy Director for Government Accountability at Transparency International-USA, who contributes the following guest post:

The United States recently published its first narrative report and payment reconciliation report under the Extractive Industries Transparency Initiative (EITI). The EITI was founded in 2003 to help end the “resource curse” by which the revenues generated from natural resource extraction benefit a small group of politically-connected insiders and do nothing to improve the lives of the vast majority of people in many resource-rich countries. The concept that underpins the EITI is simple: by requiring participating resource extraction companies to report the payments they make to all levels of government in a country, while simultaneously requiring participating governments to report the revenues (including royalties, bonuses, rents, penalties, fees, and corporate income taxes) received from those companies, one can compare the reported figures and bring transparency to an often opaque sector. This transparency can in turn be used to hold governments accountable for how they distribute and spend resource wealth. Membership in the EITI is voluntary; there are currently 49 countries participating. The EITI is governed at both the international and national levels by multi-stakeholder groups composed of representatives of government, civil society, and industry.

The recently published U.S. EITI report covers payments made and received in 2013. There is much valuable information in the both report and the accompanying U.S. EITI website. The Department of Interior is to be commended for publishing 100% of payments it received in 2013 from companies producing on federal lands and in federal waters (totaling approximately $12 billion), as well as state-by-state royalties for 18 resource-rich U.S. states. The report also provides detailed information on natural resource extraction governance at the federal, state, and tribal levels, statistics on the size of the extractives sector (in terms of economic output and employment), as well as a valuable assessment of the revenue sustainability in 12 resource-dependent counties.

That said, there are a couple of important respects in which the report falls short: Continue reading