28 November 2013

Transport & Environment: Particle emissions from petrol cars

Vehicle tests show that without the use of gasoline particulate filters (GPF) the number of particles emitted from gasoline direct injection (GDI) engines is likely to exceed future European emissions limits, known as Euro 6 standards. Nowadays, particle emissions from these new petrol engines are higher than equivalent diesel vehicles. The cost of a filter to eliminate particle emissions is low (around €40), with no fuel economy penalty. Despite this, carmakers are delaying fitting filters on GDI cars and instead rely on manipulating tests. Their reluctance is worsening urban air pollution and reducing the health benefits of the new limits.

Air pollution in the EU is estimated to contribute to 406,000 deaths annually and cause over 100 million lost days of work, costing the EU economy €330-940 billion per year. Small particles in the air pose the greatest risk to health, penetrating deep into the lungs and being absorbed into the blood, causing a range of illnesses and even death. T&E calls upon carmakers to ensure GDI cars minimize their particle emissions by fitting filters.


22 November 2013

Fitch Publishes Special Report on Protected Cell Insurance Captives

Fitch Ratings believes the legal separation of the protected cells, the credit profile of the protected cell sponsor and the credit profile of the protected cell company are important considerations when analyzing a captive insurer organized as a protected cell. Accessibility, if any, to the assets in the general account is a potential credit positive. A protected cell company is an insurer that consists of a general account, or core, and one or more protected cells. A protected cell company and its protected cells are a single legal entity, though the individual protected cells are designed to be segregated from each other in the event of a protected cell's insolvency.

Cell company legislation has been enacted in several jurisdictions throughout the world, including 10 U.S. states. Clearly the legislative intent is that the assets of each cell are segregated and not available to satisfy the creditors of another cell in the event of that second cell's insolvency. However, in most jurisdictions the cells are not organized as separate legal entities. Further, there is not a substantial history of these structures being successfully defended, or even challenged, in court. This introduces uncertainty into the rating process for protected cells.

"It may be helpful to borrow insight from structured finance," said Don Thorpe, senior director of the Insurance group at Fitch, "In structured finance, it is common to obtain legal opinions regarding the enforceability of contracts and the nonconsolidation of the transaction parties in the event of one transaction party's insolvency. This is often referred to as bankruptcy remoteness."

Fitch also believes the financial strength of both the captive sponsor and the entity that sponsors the protected cell company could affect the credit profile of the individual protected cell. This will depend on the degree of linkage between the entities and structural mitigants, if any. Once again, Fitch believes there are analogies that can be drawn between protected cell companies and structured finance.

Some protected cell credit profiles may benefit from access to the assets of the protected cell company's general account. However, this will require a thorough analysis of the applicable regulations, and agreements between the protected cells and the protected cell companies, if any. Thus, this determination would rely heavily on the individual circumstances.

04 November 2013

Deloitte advised big business on how to avoid tax in some of the poorest countries in Africa, ActionAid report reveals

One of the world’s Big Four accountancy firms, Deloitte, offered advice to large companies on how to avoid potentially hundreds of millions of dollars of tax in some of the poorest countries in the world, according to an ActionAid investigation released today.

ActionAid has uncovered a Deloitte document called ‘Investing in Africa through Mauritius' (pdf) which details how tax can be avoided in African countries by structuring business through Mauritius.

The strategy, which is entirely legal, could potentially be used to deprive African countries of vitally needed tax revenue.

As part of the presentation, the document gives the specific example of how tax can be avoided in Mozambique. It shows how withholding tax can potentially be reduced by 60 per cent and capital gains tax by 100 per cent.

Mozambique is one of the poorest countries on the planet, where one third of the population is chronically food insecure and average life expectancy is only 49.

The document was part of a presentation given by Deloitte in China in June this year at a conference attended by more than 80 major western and Chinese companies with interests in Africa.

The document also reveals how Mauritius is being promoted as a favoured tax haven for use by big businesses operating in Africa.

Amade Suca, Country Director of ActionAid Mozambique said:

"When big companies avoid tax in Mozambique they are taking money out of the hands of the poor.

"Mozambique desperately needs increased tax revenues to lift people out of poverty, build schools for our children and hospitals for the sick, and reduce the need for foreign aid.

"But as long as wealthy companies continue to avoid tax in our country – none of this will happen.

"The people and government of Mozambique have a right to expect big companies making big profits in our country to pay their fair share of tax.

"We must also close the tax loopholes that allow big companies to behave in this way.

Last year Deloitte generated more than $32 billion in revenue – more than any other Big Four company.

The document was presented at the conference two weeks before the G8 summit when David Cameron condemned tax avoidance both in the UK and in developing countries.

ActionAid Tax Policy Adviser Toby Quantrill said:

This document helps lift the lid on the tax avoidance techniques that are being used to deprive poor countries of hundreds of millions of dollars in tax.

These techniques may be legal, but that does not mean they are moral. Tax revenues are desperately needed to meet peoples most basic needs and to move countries away from aid dependency.

Big businesses have an important role to play in economic development in poor countries. But they also have to act in a socially responsible way. Deloitte is failing Africa for as long as it continues to advise on tax avoidance strategies in the way they have been doing.

According to the Organisation of Economic Co-operation and Development, developing countries lose more than three times more money to tax havens than they receive in aid.

A Deloitte spokesperson said:

"It is wrong to describe applying double tax treaties, such as the treaty between Mauritius and Mozambique, as tax avoidance. Such treaties are freely negotiated between the Governments of the countries involved.

"Double tax treaties exist to enable the countries concerned to strike a balance between the need to encourage investment, including cross-border investment, to raise tax revenue, and to work together with other countries who have the same legitimate concerns to raise revenue and promote business.

"The absence of such treaties could result in a reduction of investment, and less profit subject to normal business taxes in the countries concerned.

"Any discussion of tax treaties by tax professionals would typically be around the technical and administrative aspects of the treaties and not an expression of favour of any particular country at the expense of any other country."

ActionAid: Deloitte’s tax avoidance advice could cost poor African countries hundreds of millions of dollars

From Starbucks to SAB Miller, and from Associated British Foods to Google, there’s been a constant stream of tax avoidance controversies over the last couple of years.

But who dreams up the tax plans that make this kind of avoidance possible?

The answer is that some of the chief architects include accountancy firms.

These firms not only audit the books of other companies, but also sell them advice on how to minimise their tax bills.

Until now it has been quite difficult to see how this might work in practice – but today we hope to partly answer this by revealing evidence of how Deloitte is advising big business on how to avoid tax in some of the world’s poorest countries by using the Indian Ocean tax haven of Mauritius.

Deloitte earned made more than $32 billion in revenue last year alone – the most money out of any of the Big Four firms.

The kind of avoidance it is advising, which is entirely legal, could be costing African countries hundreds of millions of dollars a year.

It could mean teachers or doctors don’t get hired or roads and sewers don’t get built, keeping whole countries dependent on international aid.

The document we found is called Investing in Africa through Mauritius (pdf) and was part of a presentation which Deloitte made at conference in June this year attended by many large companies.

Using the country of Mozambique as an example, Deloitte showed how withholding tax and capital gains tax could be avoided by structuring a business through Mauritius.

Mozambique is one of the poorest countries in the world, where the average age at death is 49 and 40% of people are malnourished.

However the document is also important for another reason – because it lifts the lid on how big businesses with operations in Africa use the tax haven of Mauritius to avoid tax.

According to one estimate, three times as much money is being lost to tax avoidance globally as developing countries receive in aid each year.

Want to know more about Deloitte and tax?

02 November 2013

Offshore Investment (November 2013): The OECD / G20 tax agenda

The recent St Petersburg G20 declaration endorsed (obviously without much thought by jetlagged and overburdened heads of government with too little time to think about things), a Tax Annex prepared by the Organisation for Economic Co-operation and Development (OECD) in conjunction with various tax agencies and foreign ministries across the world.  Perhaps because the G20 government leaders could not agree about things like Syria (and their involvement in promoting and financing the civil war that is costing thousands of lives and has made 2 million or more people homeless), they were more willing to agree on motherhood statements about tax, thinking that they were subscribing to nothing more than the nostrum that “we ought to do something about tax dodgers”.

Offshore Investment (November 2013): Special Purpose Vehicles - Clarity in Type

The world of private wealth planning has become more complicated and this has been in response to both client demand and legislative change. There has been a gradual shift away from classic trust and company structures to more exciting and innovative structures which more closely match the requirements of the clients. This has to be a good thing but it has also meant that advisers have had to up their game and start understanding how these new exotic vehicles actually work.

01 November 2013

IFC Review: Caribbean Financial Centres – Where Does the Future Lie?

Timothy Ridley comments on the future for the offshore financial industry, amid exaggerated reports of its demise in the aftermath of the 2008 financial crisis.

IFC Review: Due Diligence - Chinese Corruption

Burke Files assesses the various levels of corruption in China and considers where this problem might lead in the future.

IFC Review - The Bahamas: The Right Choice for Latin America

Ryan Pinder examines how The Bahamas has sought to align its financial services strategies with the needs of the emerging economies within Latin America, continually evaluating new products for Latin American clients.

IFC Review - Money Does Not Buy Happiness: Can Bermuda Help?

Randall Krebs discusses the issues facing wealthy private clients in Bermuda - one of the oldest private client jurisdictions in the world.

IFC Review: Q&A with… Julien Martel and Brian Balleine, Butterfield Trust

IFC Caribbean speaks to the MDs of Butterfield Trust in The Bahamas and Cayman to assess how the international finance industry is developing in the region.

IFC Review: BVI - Regulation ‘Right’

Marianne Rajic discusses the BVI's success in both implementing AIFMD and preparing for FATCA, further evidence of why the jurisdiction is considered one of the most flexible and user friendly in the region.