Silicon Valley Is Suffering From A Lack of Humanity

Deep Down We All Know Silicon Valley Needs The Humanitarian Vision of Steve Jobs

The genius of Steve Jobs lies in his hippie period and with his time at Reed College. With the deep ethical problems facing technology now, we need Jobs vision more than ever.

To his understanding of technology, Jobs brought an immersion in popular culture. In his 20s, he dated Joan Baez; Ella Fitzgerald sang at his 30th birthday party. His worldview was shaped by the ’60s counterculture in the San Francisco Bay Area, where he had grown up, the adopted son of a Silicon Valley machinist. When he graduated from high school in Cupertino in 1972, he said, “the very strong scent of the 1960s was still there. After dropping out of Reed College, a stronghold of liberal thought in Portland, Ore., in 1972, Mr. Jobs led a countercultural lifestyle himself. He told a reporter that taking LSD was one of the two or three most important things he had done in his life. He said there were things about him that people who had not tried psychedelics — even people who knew him well, including his wife — could never understand.

Decades later Jobs flew around the world in his own corporate jet, but he maintained emotional ties to the period in which he grew up. He often felt like an outsider in the corporate world, he said. When discussing Silicon Valley’s lasting contributions to humanity, he mentioned in the same breath the invention of the microchip and “The Whole Earth Catalog,” a 1960s counterculture publication. Jobs’ experience rings with my own experience in the Santa Clara Valley at that time. Jobs and I were both deeply affected by Stewart Brand, the visionary behind The Whole Earth Catalog.  Stanford professor Fred Turner has documented this period in his book “From the Counterculture to Cyberculture, Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism. 

For me this journey also began with the extraordinary vision of Marshall McLuhan, the Canadian professor of communications, who literally predicted the emergence of the World Wide Web and “The Global Village,”  like some kind of modern day Nostradamus.

Stewart Brand is also featured in Tom Wolfe‘s book, “The Electric Kool-Aid Acid Test,” along with Ken Kesey’s Merry Pranksters and The Grateful Dead.  I had the great good fortune to formally meet Brand at a COMDEX Microsoft event in a hangar at McCarren Airport in Las Vegas and was immediately impressed by him, as was Jobs. Not surprisingly, Brand was an invited guest at the Microsoft event, having already seized on the importance of the personal computer and the prospect of a networked World. Recently, in another anecdote on that time, Tim Bajarin shared a wonderful story about Job’s counterculture friend and organic gardener who remains the manager of the landscape at the new Apple campus, retaining the feeling of the original Santa Clara Valley orchard economy, that some of us can still remember.

It is important to think back to that time in the Bay Area and the euphoria of the vision of “digital utopianism.”   It grounds me and helps me to understand where we have gone so terribly wrong.

Digital utopianism is now dead. I have written about its sad demise on this blog. The wonderful vision of digital utopianism and the Web has been perverted by numerous authoritarian governments, now including our own, resulting in a Balkanized Web and a dark Web pandering all kinds of evil. This is the problem we face and the urgent need for greater emphasis on ethics. What about human life, culture, and values?  So many areas of technology are on the verge of deep philosophical questions.  Uber has become the poster child for everything that is wrong with Silicon Valley. I ask myself, “What would Steve Jobs have said about Travis Kalanick and Uber?” I think we know the answer. Ironically, Silicon Valley has a center for research and study in ethics, the Markkula Center for Applied Ethics at Santa Clara University. Mike Markkula was an Intel marketing guy who quit Intel to join with two crazy long-haired guys in Cupertino.

I am a Liberal Arts & Humanities graduate myself, including graduate study at Oxford University. When I returned from England I asked the obvious question: Now how do I make a living?  As it happened, I very improbably landed my first real job at Intel Corporation. When I asked why I was hired, the answer was that I was judged to have the requisite talent and aptitude if not the technical knowledge.  I later developed a reputation for being very “technical” by the process of “osmosis,” by simply living in a highly rarified technical culture and receiving whiteboard tutorials from friendly engineers. I was thrown into a group of Ivy League MBA’s. We wistfully shared a desire to have the others’ educations, but simply working together made us all more effective. Amazingly my career grew almost exponentially and I attribute my success to that cross-fertilization.

While with Intel in Hillsboro Oregon, someone approached me to represent Intel at a talk with Reed students. I was cautioned that few if any Reed students would be interested in working for Intel, but they would be very intellectually engaging.  That proved to be a significant understatement.  In the end, I believe that perhaps two dozen “Reedies,” as they are known, joined Intel, one of whom went on to a stellar career as a Silicon Valley venture capitalist.  A significant part of my later career has been devoted to using my Humanities education background to assess and translate deep technology in human terms for the benefit of both management and potential customers.

Today, nothing of my story would ever happen, but the influence of the Humanities and Arts in business seems more sorely needed than ever.

Read more: Why We Need Liberal Arts in Technology’s Age of Distraction – Time Magazine – Tim Bajarin

Read more: Digital Utopianism of Marshall McLuhan and Stewart Brand is Cracking – mayo615,com

Read more: Liberal Arts In The Data Age – Harvard Business Review

Rich, Young “Fuerdai” Chinese Are Buying Overseas Properties on Their Smartphones – WSJ

The truth is that for all of the tough talk from Li Xinping about stopping the massive outflows of capital from China, some of it probably dark money obtained from dubious enterprises and kickbacks, nothing has changed in China or in the Western cities eager to share in the wealth.

Rich, Young “Fuerdai” Chinese Are Buying Overseas Properties on Their Smartphones

Millennials acquire real estate in other countries as hedge against a weakening currency, homes for their own children when they study abroad

An increasingly larger group of Chinese millennials are looking to buy property abroad. Above, a potential buyer inspects a house for sale in Australia.

Reblogged from The Wall Street Journal, Real Estate

By Dominique Fong

Updated May 9, 2017 10:59 p.m. ET

BEIJING— Zheng Xiaohei, a marketer from Urumqi in western China, made his first overseas property investment without so much as a visit.

Mr. Zheng, 29 years old, in March purchased a studio apartment in Thailand for about 650,000 yuan ($94,255) using his smartphone and an app called Uoolu that connects users to overseas property listings.

“Investing in overseas real estate was mainly due to my good impression of Thailand,” Mr. Zheng said.

Founded two years ago, Beijing-based Uoolu is focused on tapping a specific group of home buyers: Chinese millennials looking for foreign properties.

About 70% of Chinese millennials, those born between 1981 and 1998, own a home, the highest share of respondents from nine countries and regions who were surveyed in a recent HSBC study. Chinese parents often register home purchases under their child’s name to prepare the child for marriage and raising a family, which likely boosts the percentage.

Still, a growing sliver of Chinese millennials are looking to buy property abroad. Kevin Lee, chief operating officer of Beijing-based consulting firm Youthology, put the percentage in the low single digits but said it would continue to increase.

The lure? A millennial’s desire to hedge against yuan depreciation and find affordable homes in cities with cleaner air for their children to live in when they study abroad. In the past year, home prices have soared to more than 30 times household income in major Chinese cities.

Uoolu said about 80% of its monthly active users are between the ages of 20 and 39, and that 20,000 customers have bought or are in the process of purchasing overseas property. A similar real-estate platform, Juwai.com, estimates that roughly 30% to 40% of its buyers are millennials.

Cherubic Ventures, a venture-capital firm with offices in Beijing and San Francisco, invested an undisclosed sum in Uoolu. One selling point, said the firm’s founder, Matt Cheng, was Uoolu’s target of reaching young Chinese buyers who are tech savvy and interested in cross-border investments, “but don’t know where to begin.”

Overseas investing isn’t easy at a time when the Chinese government is clamping down on capital flight amid concerns about a weakening currency. Chinese citizens aren’t allowed to transfer more than $50,000 a year out of the country or use those funds to buy overseas property.

However, this increased government scrutiny is “slowing but not cutting off” the surge of investment in U.S. property, said Arthur Margon, partner at Rosen Consulting Group.

“The more the government limits people, the more they want to invest overseas,” said Wang Hao, Uoolu’s 33-year-old chief operating officer.

People often skirt the foreign-exchange rules by, for example, pooling money among family members and friends and separately sending it into overseas bank accounts. Also, Chinese citizens who have studied or worked abroad for a few years might already have bank accounts in other countries and those overseas funds are beyond the Chinese government’s control.

Alan Wang, a 19-year-old college student in Toronto who comes from Shenzhen, said he opened a bank account in Canada for education expenses. Now it is useful for buying property, too. He and his family are thinking about purchasing a home on a budget of about 1 million Canadian dollars (US$730,600) this summer. To do so, he will have relatives send money to his bank account, he said.

Uoolu helps buyers open bank accounts in other countries and apply for mortgages there. Users pay a deposit to reserve the right to purchase a home. The money is sent directly from a buyer’s bank account to the overseas developer—Uoolu says it doesn’t handle the cross-border transaction within the mobile app.

Chris Daish, a real-estate agent at Triplemint in New York, said one of his Chinese clients, an accountant in her mid-20s who works in New York, earlier this year pooled $110,000 from five family members to help buy her a condo in the city.

“It’s a really arduous task even to get a couple hundred grand out,” said Mr. Daish, who emphasized that he doesn’t help clients with money transfers.

A 28-year-old who works in finance in Beijing in February bought two apartments in Bangkok for a total of 5 million yuan ($725,000), one for a vacation home and the other for rental income. She declined to disclose her name out of fear of government retaliation for violating capital controls.

As for some of her friends, she said, “They wish to buy but dare not.”

Source: Rich, Young Chinese Are Buying Overseas Properties on Their Smartphones – WSJ

Vancouver Real Estate Foreign Money Laundering: Nothing Has Changed

Despite all of the revelations of the sources and methods of the Vancouver housing bubble over the last two years, the situation remains largely unresolved.  Ditto in Toronto.  The foreign buyers’ tax has had only a limited effect and has problems.  Fueled by dark foreign money housed in anonymous offshore shell companies like those disclosed in the Panama Papers,  the money is managed by local financial manipulators at the behest of unidentifiable persons overseas.  The foreign buyers continue to enjoy the weakest enforcement jurisdiction in Canada

‘Corrupt Elite’ Still Laundering Money In Canadian Housing: Transparency International Report

British Columbia’s gleaming gem, Vancouver,  is found to still be the worst case example

Reblogged: The Huffington Post Canada  |  By Daniel Tencer

Posted: 03/31/2017 12:16 pm EDT Updated: 5 hours ago

Loopholes in Canadian law are allowing a “corrupt elite” to use the housing market for money-laundering, says a new report from Transparency International (TI).

The report found 10 problem areas with the laws related to real estate transactions in Canada, Australia, the U.K. and the U.S. — four countries it identifies as being hot-spots for real estate-related money laundering.

“Canada’s legal framework has severe deficiencies under four of the 10 identified areas,” TI stated in the report. “In the other six, there are either significant loopholes that increase risks of money laundering through the real estate sector or severe problems in implementation and enforcement of the law.”

This Grey’s Point “tear down” property shown here, recently sold for over $9 Million, more than $1 Million over the asking price of $7.8 Million. There were 11 offers, all cash, and no offer included any contingencies.

One glaring problem is a lack of rules requiring that the actual owner (or “beneficial owner”) of a property be identified. In Canada “there are no requirements for any person involved in real estate closings to identify the beneficial owner,” the TI report stated.

In a study published last December, TI found that the government does not know who owns 46 of the 100 most expensive homes in Vancouver.

The report found that 29 of the homes were owned by shell companies, either Canadian or offshore.

“Offshore companies pose a serious risk … because they are able to purchase property without needing to disclose any information relating to who ultimately owns and controls them to any government authority,” TI said in the report published Wednesday.

The report noted that money-laundering through real estate is growing increasingly popular.

“Large amounts of money can be legitimized at once, maintaining or increasing its value. Investments in real estate are seen as an alternative for those who fear having offshore accounts frozen.”

This chart from Transparency International shows what is known, and not known, about the ownership of Vancouver’s 100 most expensive homes.

Because of over-reliance on banks to spot money-laundering activities, and because banks aren’t involved in cash purchases of homes, money-laundering is going unnoticed, the report said.

And like in the other countries studied, in Canada “there are no data on prosecutions against real estate agents or other professionals for facilitating money laundering.”

Canada has “the best model” for enforcement of money-laundering laws among the four countries studied, the report said, but Canada’s financial intelligence agency, FINTRAC, investigates relatively few real estate transactions.

The report lays out a series of recommendations for governments, including requiring all professionals involved in a real estate transaction to disclose the actual buyer. This should also be required of companies that are buying real estate, the report said.

It also suggested that professionals involved in real estate transactions, such as lawyers and realtors, be registered with a country’s anti-money laundering authorities before they are allowed to practice.

“Governments must close the loopholes that allow corrupt politicians, civil servants and business executives to be able to hide stolen wealth through the purchase of expensive houses in London, New York, Sydney and Vancouver,” TI chair José Ugaz said in a statement.

“The failure to deliver on their anti-corruption commitments feeds poverty and inequality while the corrupt enjoy lives of luxury.”

Canada’s Open Door to Tax Fraud, Money Laundering

 

The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering

Transparency International warns against country becoming a ‘haven for corrupt capital.’

Source: The Shell Game: Canada’s Lax Disclosure Laws Open Door to Tax Fraud, Money Laundering | The Tyee

Canada can avoid becoming a desirable destination for dubious global lucre if it acts soon.

How many shell companies exist in Canada? How many legal trusts? Who are the beneficial owners protected by such unnecessary veils of secrecy? No one knows because in most cases there is no legal requirement to disclose actual ownership even to regulators. In fact, more information is required to get a library card than to set up a company in most jurisdictions in Canada.

What we do know is that Canada ranks near the bottom among our OECD partners in terms of corporate disclosure requirements to fight money laundering and tax evasion. A recent report from Transparency International detailed the dismal situation and why our country has become a haven for dubious offshore property speculation.

“The Canadian government must take immediate steps to require all companies and trusts in the country to identify their beneficial owners to ensure Canada does not become a haven for corrupt capital,” warns Transparency International Canada executive director Alesia Nahirny.

Canada is one of the few developed countries that does not require the identities of company directors to be verified or any information on shareholders. In most provinces, it is legal to use “nominee” directors or shareholders without disclosing that they are acting on someone else’s behalf.

A nominee is essentially a sock puppet — the proverbial student or homemaker often listed as the title owner of some of Canada’s most expensive homes. Why would someone list a multi-million dollar property in someone else’s name? Some plausible reasons include to avoid taxes or to launder money. This practice remains completely and inexplicably legal in most parts of our painfully polite country.

Lawyers can also act as nominee directors, offering their clients an additional level of secrecy under solicitor-client privilege unavailable in most other countries. A ruling from the Supreme Court of Canada in 2015 exempted lawyers and their firms from important parts of the Proceeds of Crime and Terrorist Financing Act, further widening the yawning loopholes in our laws meant to fight money laundering. According to an international oversight body, the Financial Action Task Force of which Canada is a member, “the legal profession in Canada is especially vulnerable to misuse.”

Toronto lawyer Simon Rosenfeld was secretly taped in 2002 during a meeting in a Miami bar with an undercover RCMP officer, who was posing as a member of a Columbian drug cartel needing money-laundering services. According to the officer’s testimony, after exchanging a token dollar to cement solicitor-client secrecy, Rosenfeld bragged that moving illegal funds through Canada was “20 times” easier than the U.S., where arrest and convictions are much more likely. He described the Canadian enforcement regime as “la la land” and said that five other lawyers in Vancouver laundered $200,000 per month through trust accounts for a seven per cent commission.

The transcript of this conversation did not endear Rosenfeld to the jury during his prosecution and he was sentenced to three years in jail. He appealed the conviction and the higher court judge increased his sentence to five years. This rare successful enforcement provides some fleeting schadenfreude, but Rosenfeld’s seasoned and sad assessment of “la la land” continues to ring true.

Legal black boxes

Millions of legal trusts are estimated to exist in Canada, but there is no way of knowing since there is no requirement for them to be registered or file any record of their existence — again an outlier among other countries. They are supposed to file information on assets and trustees with the Canada Revenue Agency but only a small fraction actually do.

A trust is the consummate legal black box. Considered a mere private contract under Canadian law, trusts do not need to keep records on beneficial owners, let alone file such documents with the federal government. Trustees can conduct transactions without disclosing their role as go-betweens, making it difficult or impossible for financial institutions to comply with money laundering regulations. To our international embarrassment, the Financial Action Task Force found in 2016 that Canada was less than fully compliant in 29 out of 40 anti-money laundering measures and “non-compliant” regarding transparency and beneficial ownership of such legal arrangements.

Vancouver, Let’s Stand Up to Moneyed Interests of Real Estate

READ MORE

Real estate in Vancouver and Toronto is where the rubber really hits the road on these national regulatory failings. Transparency International looked at the title documents for the 100 most expensive homes in the Lower Mainland and unsurprisingly found a sampling of all these methods to conceal the beneficial owners. Twenty-nine properties were held by Canadian or offshore shell companies, 11 were owned by nominees with no obvious source of income, six more were held by trusts. In total, 49 of these luxury estates collectively worth more than $1 billion had opaque ownership.

Canada’s lax legal oversight coupled with a decades-long public policy effort to incentivize wealthy citizenship has turned Vancouver into a global hedge city. Like London, New York, and San Francisco, Vancouver’s luxury properties have become a favored place to stash cash for the world’s wealthiest.

According to professor David Ley at the University of British Columbia, Canada effectively sold Canadian citizenships to rich offshore investors through the now-cancelled Business Immigration Program. Ley described the scheme during a lecture last September, detailing how up to 200,000 of the world’s wealthiest may have arrived in the Lower Mainland as a result of these public policy efforts, inflating property values and contributing to our current housing woes.

According to Ley, Canada’s BIP was heavily oversubscribed because Canada was selling citizenships for far below the international market rate compared to other countries with similar citizenship-for-sale incentive programs. In the U.S., candidates had to invest $1,000,000 and employ up to 10 Americans before being granted citizenship. In Canada, investors only had to loan provincial governments $800,000 to be paid back in full after five years. This come-and-get-it attitude towards passports and global capital seems sadly similar to other national assets such as natural resources, but I digress.

Besides ballooning our housing prices, was there a net economic benefit to this citizenship fire sale? According to Ley, the federal immigration database showed that “of all immigration streams to Canada, the Business Immigration Program led to the lowest declared incomes, lower even than refugees.” This was in part because wealthy offshore investors are so skillful at avoiding taxation coupled with a shocking lack of enforcement from the CRA.

Defending against dubious lucre

What can Canada do to clean up this mess and avoid becoming an even more desirable destination for dubious global lucre? A low-cost first step would be to require all Canadian companies and trusts to declare beneficial owners and publish this information on a public searchable registry. The United Kingdom brought in such a system in 2016 to improve in law enforcement and tax collection, which will more than cover the cost of implementation.

Transparency International has several other practical suggestions that are also supported by the banking sector and law enforcement:

• Beneficial ownership should be listed on all land title documents, ideally retroactively.
• Corporate registries should have the resources and requirement to accurately identify directors and shareholders
• The federal government should require all sectors — including real estate agents — to identify beneficial owners before transactions are conducted.

Besides money launderers, tax evaders and criminals, who could possibly oppose these sensible and long overdue reforms? Is the Trudeau government going to act quickly to plug these gapping holes and bring our country in line with the global fight against illicit capital? The recent cash-for-access events with wealthy offshore investors provide a telling opportunity to see on whose behalf Trudeau is acting. The whole country is watching.

Joseph Stiglitz Resigns As Panamanian Government Advisor on Panama Papers Scandal

Panama Papers: Joseph Stiglitz quits as Panamanian Govt adviser

• From BBC News, August 5, 2016

 

Nobel Prize-winning economist, Joseph Stiglitz is one of two advisers to Panama’s government who have stood down

Stiglitz and Swiss Expert, Mark Peith Both Resign From Panamanian Government Investigation

Nobel Prize-winning economist Joseph Stiglitz has quit an advisory panel to Panama’s government set up after the Panama Papers scandal.

Some 11.5m documents, leaked from Panama law firm Mossack Fonseca, revealed huge offshore tax evasion.

The government appointed a panel to look at Panama’s financial practices.

But Mr Stiglitz and and Swiss anti-corruption expert Mark Pieth, who also quit, said government interference in their work amounted to “censorship”.

The seven-person panel also included Panamanian experts.

“I thought the government was more committed, but obviously they’re not,” Mr Stiglitz told Reuters news agency. “It’s amazing how they tried to undermine us.”

A statement by Panama’s Ministry of Foreign Affairs said “the Panamanian government understands both resignations and internal differences”, adding that it maintains a “real commitment to transparency and international co-operation”.

The ministry said it had already acted on some recommendations made in the panel’s preliminary report and was considering others, without specifying which measures had been taken.

But a statement by Mr Stiglitz and Mr Spieth to Reuters said they were concerned that the panel’s final report would not be published.

“We can only infer that the government is facing pressure from those who are making profits from the current non-transparent financial system in Panama,” Mr Stiglitz said.

The Panama Papers were investigated for months by hundreds of investigative journalists, including staff from the BBC.

The documents, which were first detailed in April, revealed the hidden assets of hundreds of politicians, officials, current and former national leaders, celebrities and sports stars.

They list more than 200,000 shell companies, foundations and trusts set up in tax havens around the world.

Mossack Fonseca said it had been hacked by servers based abroad and filed a complaint with the Panamanian attorney general’s office.

The company said it did not act illegally and that information was being misrepresented.

---

How Canada Got Into Bed With Tax Havens

1980 treaty with tiny Barbados paved way for billions to legally flow offshore

By Zach Dubinsky, CBC News

Canadian companies have flocked to Barbados with their cash for decades in order to legally avoid paying Canadian taxes. (The Associated Press)

On a cold December afternoon in 1980, with MPs’ voices echoing in the mostly empty chamber, the House of Commons debated a piece of legislation that has altered Canada’s economy profoundly.

Bill S-2 aimed to ratify a series of taxation treaties between Canada and countries like Spain, Korea, Austria and Italy. Also on the list: the tiny Caribbean island country of Barbados, population 250,000.

• $40B flowed to tax havens in 2015: Tax group
• Deals to catch tax cheats allow billions in taxes to escape
• Canada-Barbados tax deal loopholes revealed

Before the final vote was called, a fresh-faced Bob Rae, at the time the NDP’s finance critic, rose to speak against it. Necktie askew, he warned that there had been precious little study of the consequences of signing a treaty that, like the one with Barbados, would drastically cut the tax rate for Canadian companies operating abroad.

A fresh-faced Bob Rae, the federal NDP’s finance critic at the time, rose in the House of Commons in December 1980 to warn about tax treaties Canada was signing. (CPAC)

“The government is entering into these tax treaties without being fully aware of the impact they will have on domestic taxation in Canada,” Rae said. “Money that is income and is not being taxed at the corporate level, on which the government receives no revenue, has the unfortunate effect of increasing the load of taxation on the average citizen.”

His protestations didn’t stop the bill. After another hour of tepid debate, with a quick murmur of assent from the Liberal and Conservative MPs, the House passed it and it was signed into law the next week.

Canada’s favorite tax haven

Fast-forward to today: Barbados, a tax haven, is the No. 3 destination for Canadian money going abroad. Corporations and wealthy Canadians have moved nearly $80 billion there — behind only the U.S. and U.K. as an investment destination. There’s more Canadian money parked in Barbados than in France, Germany, Italy, Japan and Russia combined.

The Caribbean island is arguably where Canada first seriously waded into the waters of offshore, legal tax avoidance. Canadian companies you might never expect — Petro Canada, Loblaws, Eldorado Gold — have had affiliates there for years, while Canadian banks have branches on many street corners.

Send us tips

Send tips on this or any other tax haven story tozach.dubinsky@cbc.ca

“Barbados was like the entrance to the offshore network,” said Alain Deneault, a Quebec sociologist and university lecturer who has written several books about tax havens.

“You create a subsidiary in Barbados. You send to that subsidiary some assets, and from there on you may transfer the assets, once more, to another tax haven, to another subsidiary where Canada has no link.”

Part of the draw is Barbados’s corporate tax rate of between one and 2.5 per cent. And once that modest amount is paid, thanks to the 1980 tax treaty any leftover profits earned at a subsidiary based or linked to there can be brought back to Canada tax-free.

So while Apple routes its non-U.S. profits through Ireland and into the British Virgin Islands to avoid tax, and Google stashes its foreign earnings in Bermuda, the legal tax haven of choice for Canadian businesses’ foreign operations for many years was Barbados.

Alarms raised, but nothing done

It’s meant potentially huge revenue losses for the Canadian government — which federal auditors general have taken pains to point out multiple times.

In 1992, Auditor General Denis Desautels dedicated an entire section ofhis annual report to the “schemes” companies use to shrink their tax bills.

He pointed to a company, not named, that shifted $318 million in investments to a subsidiary in Barbados. The investments earned $37 million over just six months, on which a sliver of income tax was paid to Barbados. The rest could be sent back to Canada tax-free, and then paid out as dividends to the company’s shareholders — who themselves would enjoy generous dividend tax credits. Meanwhile, the parent company, having borrowed money to fund its subsidiary, deducted the interest it was paying as an expense and ended up with a loss on its books in Canada — so it paid no tax here.

• How Canada’s banks help flow of tax haven money
• Explained: How the rich hide money offshore

“These tax rules are being used to … move Canadian corporations’ income offshore, and convert income of Canadian corporations into tax-free income,” Desautels wrote. “It is reasonable to conclude that hundreds of millions of dollars in tax revenue have already been lost.”

Parliament held hearings in the wake of those concerns, and small tweaks were made, but nothing to shut down the free flow of money from Canada into the Caribbean.

A decade later, the next auditor general, Sheila Fraser, again flagged the issue, writing that Canadian companies took in “$1.5 billion of virtually tax-free dividend income from their affiliates in Barbados” in 2000. “Tax arrangements for foreign affiliates have eroded Canadian tax revenues of hundreds of millions of dollars over the last 10 years,” she said.

More havens, not fewer

Groups of MPs have tried several times over the years to staunch the tax bleeding. In 2005, Bloc Québécois MP Guy Côté introduced a motion, in vain, to shut down the Barbados schemes. His party has another, similar measure in front of Parliament now.

But instead of curtailing legal, offshore tax avoidance, Canada has effectively broadened it.

Since 2009, Ottawa has signed a rash of deals with two dozen other tax havens. Called tax information exchange agreements, they are designed to compel offshore locales such as the Cayman Islands, Liechtenstein and the Isle of Man to cough up details on Canadians who have money and accounts there.

In exchange, Canada grants each of those countries the same treatment as Barbados — Canadian companies are able to set up subsidiaries there and bring home business profits tax-free.

The outflow of money from Canada into tax havens has only proliferated.

Since Canada put in force a new series of accords with tax havens in 2011, billions of dollars have shifted from here to those countries. This graph shows total amounts parked in those tax havens, by year. (CBC)

Sociologist Deneault says it’s fundamentally unfair.

“These corporations benefit from public infrastructures. They use roads, they have access to water, to electricity. Their employees are trained by the state. They benefit from the social system. But they don’t pay for it,” he said. “They don’t pay their fair share and they know how to manage it so they don’t.”

Rae: 1980 view ‘still stands’

Looking back, Bob Rae feels vindicated. Watching the footage of his younger self during an interview last week, he said the argument he was making 36 years ago in the Commons “still stands.”

“You have a means for people who are rich enough and people who are shrewd or clever enough, they can move their money around from one jurisdiction to another depending on the tax rates and the tax treatments of that money, whether it is individuals or companies,” he said.

“And eventually in order to pay the bills, [governments] have to increase personal taxation.”

The Panama Papers and Thomas Piketty

UPDATE May 5, 2016:  National Public Radio’s Takeaway news analysis program, today interviewed James Henry, senior adviser at the Tax Justice Network and a senior fellow at the Columbia Center for Sustainable Investment. He’s examined World Bank and IMF data over the last 45 years, and has found that kleptocrats have taken $12.1 trillion from developing countries. James’ interview specifically discusses the foreign dark money driving the housing markets in Miami, New York and Vancouver, providing further confirmation of my points.  Audio of the interview begins at 19:45 in the podcast below.

I am sharing this because of its particular relevance to the ongoing revelations about connections between global tax evasion shell companies and real estate markets: London, Miami, New York City, San Francisco and Vancouver.

Reblogged from Foreign Affairs

How the Leak May Transform Politics

By Henry Farrell

The Panama Papers—the massive collection of leaked documents from Mossack Fonseca, a Panamanian law firm that helps set up offshore shell corporations—have already had political consequences. Iceland’s prime minister, Sigmundur David Gunnlaugsson, resigned after the leak revealed that he had partly owned an offshore firm. David Cameron, the British prime minister, is facing criticism over an offshore company that his father set up. In Brazil, many of the people connected to the country’s unfolding corruption scandal appear to have held offshore shell companies set up by Mossack Fonseca. And in Russia, Sergei Roldugin, a cellist who is a close friend of Vladimir Putin, appears to control assets of over $100 million. Roldugin hasclaimed that this fortune is the result of donations from Russian businessmen to help buy expensive musical instruments for poor students. Clearly, classical music has some very generous friends among the Russian business elite.

At first glance, the Panama Papers leak looks a lot like other big leaks, such as the classified documents that U.S. Army soldier Chelsea Manningprovided to WikiLeaks or the former NSA contractor Edward Snowden’s trove of information on international surveillance. Like those leaks, the Panama Papers highlight the hypocrisy of prominent politicians and officials. The leak also recalls a series of less glamorous data leaks on the customers of secretive Swiss and Liechtenstein-based banks, which put pressure on governments to crack down on tax havens and allowed some authorities to pursue cases against tax evaders. Although few may remember, WikiLeaks began with a similar leak from the Swiss bank Julius Baer.

Yet the best comparison—and the best guide to what may happen next—is not to Snowden or Julian Assange but to Thomas Piketty, the famous French economist. Piketty’s book, Capital in the 21^st Century, has been interpreted as an economic history, as a grand economic theory and a gloomy political prognosis. Yet few have paid attention to its closing pages, where Piketty lays out the political bet that underlies his research program: that people simply do not know the full extent of economic inequality, and that politics would be transformed if they ever found out.

Piketty’s research and his political program are motivated by a belief that the true extent of economic inequality is invisible. Everyday statistics simply cannot capture the extent to which the rich are different from ordinary people. They are not designed to. Common techniques of measuring inequality, by comparing the income or wealth of the top ten percent of the population to the rest, do not capture how much richer the top one percent is than the top 10 percent, or how much richer the top 0.1 percent is than the mere one-percenters. As the American political commentator Chris Hayes observed in Twilight of the Elites: America After Meritocracy, inequality is like a fractal in that it gets deeper and stranger the further one investigates it. One reason why Piketty’s research has influenced other economists is that it figures out clever ways, such as using university endowment funds as a proxy for hidden fortunes, to measure the consequences of inequality despite imperfect data.

Piketty’s aspirations may yet be fulfilled, but only if the Panama Papers create a new, self-sustaining politics that demands ever more information on the ways in which wealth is being hidden.

But the problem goes beyond deficient datasets. The truly rich have the means and the incentives to hide their staggering wealth. Piketty’s collaborator, the Berkeley economist Gabriel Zucman, estimates that $7.6 trillion is hidden in offshore arrangements. The London real estate market has been reshaped by oligarchs from Russia and elsewhere who use shell corporations to park their capital in a safe and predictable economic system. Activists run Hollywood-style bus tours of the houses of the new kleptocracy.

YVES HERMAN

An activist shows fake banknotes during a demonstration outside the European Commission headquarters after the Panama Paper revelations, in Brussels, April 2016.

As the economist Branko Milanovic argues in his new book, Global Inequality, these trends are reshaping economic and political development. It used to be that economic elites had an interest in building up the rule of law in their own country, if only to protect their own property. Now they can just transfer the loot to London or New York, where “nobody will ask where the money came from,” Milanovic writes. Financial globalization is building a world similar to the one depicted in William Gibson’s grimly satirical science fiction novel, The Peripheral, in which the truly rich are unaccountable to anyone but themselves.

Piketty wants to map this hidden world and destabilize it. He believes that ordinary people simply don’t understand the extent of wealth because they aren’t able to comprehend it. There is thus an urgent need to generate new information that will help people understand how important wealth is, and who has it. This explains, for example, why Piketty wants a utopian global tax on economic capital. It’s not because such a tax would be a complete solution to inequality but because the tax would generate reporting requirements, and hence information on who holds which assets, allowing democracies to hold a “rational debate about the great challenges facing the world today” and who should pay for them.

Piketty’s perspective provides a different—and more fundamental—way of thinking about the long-term consequences of the Panama Papers. The Panama leaks, measured in gigabytes of information, are far larger than the Snowden and Manning ones. Yet compared with the true size of the offshore sector, they are less a leak than a trickle. Mossack Fonseca is not the only law firm setting up shell corporations to help people avoid taxes and scrutiny. And shell corporations are just one small part of a much larger system designed to hide people’s wealth.  The document release—although significant—is no substitute for the kind of detailed and comprehensive information that a global tax arrangement might provide.

The truly rich have the means and the incentives to hide their staggering wealth.

Still, the leak brings the world one step closer toward better information on global wealth. The United Kingdom, for example, has come under pressure to stop protecting its tax haven dependencies. France and Germany are calling for a blacklist of tax havens, which might be cut off from the SWIFT financial messaging network, a global network that financial institutions use to transmit information securely, if they do not make their ownership structures completely transparent.

STIGTRYGGUR JOHANNSSON / REUTERS

People demonstrate against Iceland’s Prime Minister Sigmundur David Gunnlaugsson in Reykjavik, April 2016.

Perhaps more important, in some countries the revelations are creating a new popular politics around tax avoidance and fraud. The Panama Papers have spurred massive public protests in Iceland and political furor in the United Kingdom. They are connecting technical questions of tax evasion and tax avoidance to everyday politics by identifying well-known politicians, officials, and celebrities who benefit from complex arrangements. Some of Piketty’s hopes for popular debate are being realized.

Even so, the effects have been sporadic. The revelations have had little popular impact in the United States, where no public figures have been identified as taking advantage of Mossack Fonseca. They have also yet to lead to substantial public outcry in countries such as Russia or China, where there are limited channels for public dissent. If this is indeed a first step toward identifying the true extent of global wealth inequality, it is only that.

Piketty’s aspirations may yet be fulfilled, but only if this release of information creates a new, self-sustaining politics that demands ever more information on the ways in which wealth is being hidden. This is a tall order given the complexities of international politics and the incentives for individual states to cheat, but the world is significantly closer to it now than anyone would have predicted three weeks ago.

The Rules of Sewage

This is a metaphorical essay on personal ethics, worthy of a serious read and contemplation. When I saw the title I was intrigued but suspected it had something to do with Andy Grove’s colorful adage, “sewage flows downhill,” which means “if anything bad happens it will eventually flow down to you.”  This is about ethics. The points made here are particularly apt in light of  the huge number and sheer scale of recent business frauds: the Volkswagen fraud, LIBOR, Lehman Brothers, Bernie Madoff’s pyramid scheme, Conrad Black in Canada, Olympus in Japan, Bernie Ebbers and Worldcom, Tyco International, stretching back all the way to Enron, Michael Milken’s junk bonds, and the 1980’s savings & loan debacle.

This is only a small selective list and many will be able to think of many other well-known scandals. The problem is that there are no easy answers in many situations. How much do we risk by taking an ethical stand on an issue, and the fact that the bigger the issue the bigger our personal risk?  It is very existential.  At the same time appear to have learned nothing from all these recent scandals, tightened regulations or changed personal behavior. A recent study of Wall Street brokers suggests that most would still commit fraud, if they benefited substantially, and believed that they would not be prosecuted for it.

Read more: 10 Biggest Corporate Frauds In Recent U.S. History

 

Source: The Rules of Sewage

Reblogged via WordPress

David Hunt, December 8, 2013

December 8, 2013Uncategorizedessay, original

Some years ago I heard an analogy that resonated with me.  It was a description of learning something – some piece of information about a person’s character – that was so negative, so vile, that no matter what else you knew about that person, you instantlyunderstood the core of the person in question.  There is, in fact, a folk-wisdom saying that illustrates this concept, which I first heard on a talk radio show: “That tells me everything I need to know about him.”  Ironically, the talk radio host from whom I first heard this expression was revealed to have done something I consider so vile that, even before he was taken off the air, I realized that deed (plus his “Yeah, so what?” attitude) told me everything I needed to know about him – and I stopped listening… and having stumbled across his new broadcast home while channel-surfing, I still refuse to listen to him.

Before I dig into this, I want to be clear – nobody is perfect.  We all have our flaws, being human beings, and need to be forgiving and tolerant.  We all struggle with weaknesses and sin, and while Jewish I’ve found I like the instructional concept of the Seven Deadly Sins (and the other side of the coin, the Seven Cardinal Virtues), and am convinced that while all these are human weaknesses, each person has their “one sin” with which they wrestle as their dominant weakness.  And in that struggle with and – hopefully – victory over it do we demonstrate that we are more than a collection of chemicals and cells, but sentient creatures striving to improve ourselves.

So… this analogy goes as follows:

Imagine you have two cups.  One contains the purest, clearest, most wonderful water possible.  The other, raw sewage.  When you mix the two, you get sewage.  The same for a cup of sewage and a pitcher of water, or a barrel of water.  Regardless of the size of the pure water container, the sewage contaminates it.

This became the root of what I refer to as “The Rules of Sewage” in regards to a person’s character.  This one is the First Rule of Sewage, The Non-Proportional Rule of Sewage.  It means, as the saying above goes, that you can sometimes learn a thing about a person that taints the entirety of their personality – e.g., a person beats their spouse.  It doesn’t matter what else they are, what acts they do, they are polluted by that one thing.

This simmered in my mind over a couple of years, and I started to formulate other Rules of Sewage.  Each was based on the same base concept – mixing water and sewage.  Thus far I’ve come up with six.

The Second Rule of Sewage is the Non-Compartmentalized Rule of Sewage.  You cannot pour a cup of sewage into a container of water, and have it only remain in the place you poured it.  Bad character leaks into other elements of character.  E.g., a person who cheats on their spouse – thus breaking a sacred oath – cannot be counted on to keep an oath in any other part of their life.

The Third Rule of Sewage is the Immersive Rule of Sewage.  Imagine an edible fish taken from that pure water, placed in sewage, and somehow surviving – no matter the fish’s immune system and other defenses, it will become contaminated.  No matter how pure you are to begin with, if you are surrounded by bad people or bad content, it will start to affect you.  E.g., a good, honest person who goes to work in a place with bad ethics and stays there – for whatever reason – will sooner or later find they are making compromises to their own character and standards, and rationalizing their doing so.  (And this is, of course, the root of the proverb “Birds of a feather, flock together.”)

The Fourth Rule of Sewage is Irreversible Rule of Sewage.  Simply put, it’s a lot easier to mix the sewage in and ruin the water than reversing the process.  While people are certainly capable of change, it takes deliberate effort to do so, and usually also an ongoing awareness and maintenance of that change to avoid slipping back to whatever factor is being avoided.

The Fifth Rule of Sewage is the Odiferous Rule of Sewage.  Sewage, to put it bluntly, stinks like sh*t.  Bad odors like that can be covered up or contained, but not forever.  Sooner or later the malodorous item in a person’s character will out, and be readily apparent.  This actually ties in with…

The Sixth Rule of Sewage, the Reactive Rule of Sewage – when faced with a tank of sewage, normal people react negatively.  And while a person learning something about another (ref: Rule One) won’t physically turn their head away and scrunch up their face in disgust, I believe the plain truth is that upon learning of such a think will cause a decent person to dissociate – to whatever degree possible – from the other.  Failing to do so, or worse expressing approval, could be considered an example application of Rule One about them too.

In putting this concept “out there” it will be interesting to see if other Rules of Sewage develop in the comments.

Getting Rich Off The Recession: “The Big Short” Comes to Hollywood

Liar’s Poker is one of those books one of your friends strongly urges you to read.  A short little book, the recommendation I got from Bill Howe, my Canadian Intel colleague in Europe, was that it was a hilarious read.  And so it was. It reads like Animal House.  It is all, well mostly, a true autobiographical story of Michael Lewis’ time at Solomon Brothers in London in the mid-1980’s, at the very beginning of the mortgage securities trading business… As you may also know, Solomon Brothers went out of business long before 2008. I was running my own computer systems integration business in London at the time, exploiting Maggie Thatcher‘s deregulation of the financial markets (where have we heard that before?), selling into the City of London, and to theBBC, British Telecom, ICI and a host of other corporate customers.  So I had a bit of an insider’s grasp of what was going on in The City. It made reading the book all the more interesting.

Looking back, Liar’s Poker is now seen as something of a harbinger of things to come, a foreshadowing of darker clouds, a “canary in the coal mine.”

Lewis also recently wrote The Big Short, his analysis of the 2008 financial meltdown. Liar’s Poker has been described as a comedy, and The Big Short as a tragedy, which seems very apt to me if you have heard Michael discuss both books.  Many may know Michael best for his recent success with Moneyball.

 

Four KPMG Senior Execs Arrested on Tax Evasion Charges

Reported by The Financial Times (UK), CBC News and the Guardian (UK), November 27, 2015

Four senior executives from the Belfast office of international accountancy firm KPMG have been arrested on tax evasion charges.

Read more: KPMG Calls In Outsider In Northern Ireland Tax Fraud Investigation

Read more: KPMG Offshore Tax Sham Deceived Tax Authorities CRA Alleges

Read more: KPMG Tax Sham Used By At Least 25 Wealthy Canadians Document Says

KPMG acknowledged in a press release that four of its top executives in Northern Ireland were arrested Wednesday.

“Pending further information and enquiry, we can confirm that four partners in our Belfast office are on administrative leave. As the matter is ongoing, KPMG is not in a position to make any further comments at this stage,” the company said in a news release.

The four men who were charged and released are:

• Jon D’Arcy.
• Eamonn Donaghy.
• Arthur O’Brien.
• Paul Holloway.

From left to right: Eamonn Donaghy, Paul Holloway, Tom Alexander (not arrested or implicated), and Jon D’Arcy of KPMG Northern Ireland. Arthur O’Brien is not shown.  

New criminal offences that allow charges against people who help clients with tax evasion came into effect in the U.K. last March.

The Financial Times reports, “The arrests are the latest blow to Northern Ireland’s tightknit business community, which has been hit by a scandal surrounding the £1.2bn sale of a portfolio of property loans to Cerberus, a US private equity company. This year allegations emerged that some Northern Ireland politicians stood to gain from a £7m “fixer’s fee” linked to that deal.

The purchase of the loans is the subject of criminal investigations in the UK and the US.

As well as working together at KPMG, the four men are investors in a property company called JEAP Ltd. The company is registered in County Down and has a trading address at 17 College Square East in Belfast — the same address as KPMG. They are listed as JEAP’s directors and shareholders and its articles of association describe its purpose as “to engage in property development activities.”

It is not clear if the arrests are linked to the activities of that company. Property development was a popular investment among professionals on both sides of the border during Ireland’s property boom, which ended in 2008 when the global financial crisis hit.

An island-wide collapse in property prices triggered Ireland’s financial and banking crisis from 2008 to 2010, which reverberated almost as loudly in Northern Ireland as it did in the Republic. Many investors lost heavily in the crash.

The arrests of four such senior staff is a blow to KPMG’s presence in Northern Ireland. Its operations in Belfast are among the biggest of any professional services firm. It is understood that senior staff from the Dublin office have been sent north to ensure the office is able to carry out its day-to-day functions.” End

 

CRA alleges KPMG ‘tax scam’

Meanwhile in Canada, KPMG is fighting the Canadian Revenue Agency over tax arrangements that allegedly hide money for wealthy clients.

The CRA alleges KPMG has used “deceptive practices” that hide the money of wealthy clients in Canada..

In February 2013, a federal court judge ordered KPMG to turn over a list of multimillionaire clients who placed their fortunes in an Isle of Man tax shelter scheme created by the accountancy firm. KPMG is fighting that court order and has yet to identify the wealthy people involved.

The case is scheduled to return to court in 2016.

Legal action against the firm for violations of tax laws and links to tax shelters have been mounting in recent years.

Files leaked from Luxembourg earlier this year show KPMG among the advisers of some multinationals who have successfully shifted money to the low-tax region.

In 2005, the firm paid fines in the U.S. of $456 million US for creating illegal tax shelters to help rich clients avoid tax.