The Architects of Tax Avoidance
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7/2017 The Architects of Tax Avoidance Overview of tax planning service providers active in Finland This study was produced as part of Finnwatch’s Sustainable Finance Research Programme and was fi nanced with crowdfunding. Finnwatch would like to thank all those who supported this research project. Finnwatch is a non-profi t organisation that studies the global impacts of Finnish business. Ten development, environment and consumer organizations and trade unions support Finnwatch’s work: the International Solidarity Foundation (ISF), Pro Ethical Trade Finland, the Trade Union Solidarity Centre of Finland SASK, Attac, Finn Church Aid, Kepa, Kehys – The Finnish NGDO Platform to the EU, the Dalit Solidarity Network in Finland, Friends of the Earth Finland and the Consumers’ Union of Finland. Layout: Petri Clusius / Amfi bi ky Publication date: December 2017 Cover photo: Finnwatch. Tax memos ordered by the State Pension Fund of Finland, which include analyses on the investments’ tax effi ciency. 2nd updated version of the report. Information on Access Partners companies has been updated and moved to Chapter 2.5 Unoffi cial English translation. Original report in Finnish is available at www.fi nnwatch.org. Contents INTRODUCTION .................................................................................................................................. 4 1. TAX SERVICES FOR COMPANIES ................................................................................................ 6 2. TAX SERVICE COMPANIES THAT OPERATE IN FINLAND AND THEIR TAX LIABILITY ......... 8 2.1 Big 4 – Large international audit and consultancy professional services networks .................8 2.1.1 PwC .................................................................................................................................... 9 2.1.2 KPMG ................................................................................................................................ 13 2.1.3 EY ..................................................................................................................................... 17 2.1.4 Deloitte ............................................................................................................................. 17 2.2 Other auditing and consultation networks and accounting fi rms .......................................... 18 2.3 Law fi rms and attorneys’ offi ces specialised in business law ................................................ 21 2.4 Other expert companies and actors with a focus on taxation ............................................... 23 2.5 Financial sector service providers ........................................................................................... 33 3. CONCLUSIONS .............................................................................................................................. 40 4. RECOMMENDATIONS.................................................................................................................. 42 ANNEX 1 ............................................................................................................................................ 46 3 Introduction International information leakages from a formal opinion by the OECD Forum on Tax companies that provide tax services have and Crime set the limitation of operations by provided a signifi cant amount of additional parties that provide harmful tax planning and information on the operations of tax havens tax evasion services, e.g. by increasing crimi- and the companies and private persons that nal liability, as its fi rst objective4. For example, utilise these. in its present form, Finnish legislation does not lay down any sanctions for assistance in The largest data leakages, the Panama tax evasion. Papers and Paradise Papers revealed exten- sive dummy company factories that have The role of companies that provide tax ser- been linked to tax evasion and fi nancial vices in the avoidance of taxes is multi- crime maintained by law fi rms and their faceted. The leaked information has revealed foreign partners. The Lux Leaks, which pre- that some banks and tax consultancy fi rms ceded these, brought to public attention have helped their clients in illegal tax evasion Luxembourg’s secret tax deals that compa- and even tax fraud with measures such as nies utilised with the help of audit and con- establishing dummy companies in secrecy sultation companies to avoid taxes in the jurisdictions for their clients. Companies countries where they actually operate1. that provide tax services also help their client companies in aggressive tax planning, The OECD and EU have started to draw atten- meaning in how to exploit loopholes in tax tion to the role of banks, law fi rms and con- laws to minimise their tax liability without sultancy companies as well as other com- breaking the law. panies that provide tax services as interme- diaries of tax avoidance. In its report pub- Business that supports the tax haven lished in June 2017, the PANA Committee, economy is also carried out from Finland: the which was established after the Panama leaks have revealed that there are Finnish Papers leak, states that a tax haven economy companies and private persons who have would not exist were there not service pro- wanted to avoid taxes and intermediary com- viders that maintained tax avoidance2. The panies that acted as service providers for OECD has already prior to this recognised them. The tax consultancy market in Finland the need for increasing the transparency of is experiencing growth5. Some consultancy is tax planning services3. In November 2017, also linked to activities that actively seek to minimise tax liability. 1 The European Union is currently investigating Luxembourg’s suspected of granting illegal state aid in Companies’ aggressive tax planning, fuelled the form of taxes. See e.g. European Commission 2015, by tax services providers, is a socially sig- Commission decides selective tax advantages for Fiat nifi cant phenomenon. According to an esti- in Luxembourg and Starbucks in the Netherlands are illegal under EU state aid rules, http://europa.eu/rapid/ mate compiled by Finnwatch, Finland loses press-release_IP-15-5880_fi .htm (viewed on 28 Novem- 430 to 1,400 million euros annually in corpo- ber 2017) and 2016, State aid: Commission opens in- 6 depth investigation into Luxembourg’s tax treatment of rate taxes as a result . According to a careful GDF Suez (now Engie), http://europa.eu/rapid/pressre- lease_IP-16-3085_en.htm (viewed on 22 June 2017) 2 European Parliament, 2017/2013 (INI), availab- on, 21 June 2017, Press release, http://europa.eu/rapid/ le at: http://www.europarl.europa.eu/cmsda- press-release_IP-17-1663_fi .htm ta/122787/2017-06-30%20Draft%20report.pdf 4 Fifth OECD Forum on Tax and Crime, Closing State- 3 Action 12 of the OECD BEPS project concerns manda- ment, available at: http://www.oecd.org/tax/crime/ clo- tory disclosure, and on the basis of this the Europe- sing-statement-oecd-forum-on-tax-and-crime-novem- an Commission has proposed new transparency pro- ber-2017.pdf visions for fi rms operating in the tax planning sector. 5 Kauppalehti, 25 February 2016, Big Four -yhtiöt usko- OECD/G20, Base Erosion and Profi t Shifting Project, vat verokonsultoinnin kasvuun, https://www.kauppaleh- Mandatory Disclosure Rules, Action 12: 2015 Final Re- ti.fi /uutiset/big-four--yhtiot-uskovat-verokonsultoinnin- port, http://www.oecd.org/tax/mandatory-disclosure- kasvuun/2HStvtV4 (viewed on 1 December 2017) rules-action-12-2015-fi nal-report-9789264241442-en. 6 Finnwatch, 2016, Jäävuorta mittaamassa. Arvioita mo- htm (viewed on 22 June 2017); European Commissi- nikansallisten yritysten aggressiivisen verosuunnittelun 4 estimate by the OECD, the worldwide corpo- The report’s structure is as follows: the fi rst rate tax losses resulting from aggressive tax chapter runs through the different types of planning total 75 to 180 billion euros each tax services provided to corporations. The year7. These fi gures do not include tax losses second chapter introduces the key com- resulting from illegal tax evasion or fi nancial panies that provide tax planning services crime. Tax avoidance has the greatest nega- to Finns and presents one example of tax tive impact on developing countries, which arrangements that tax consultants have have been estimated to lose up to more than planned for a pension institute’s fund. The 100 billion dollars as a result of aggressive third chapter of this study gives a rundown tax planning by corporations8. of the study’s conclusions and the fourth chapter lists recommendations for the pre- This report aims to clarify which compa- vention of aggressive tax planning services nies based in Finland provide assistance and and making them transparent. advise companies and other fi rms on tax planning, which in its extreme forms can be This report has been produced with crowd- considered aggressive tax planning and tax funding as part of Finnwatch’s Sustainable evasion. Tax planning by private persons is Finance Research Programme. touched on primarily in the section on tax services provided by the fi nancial sector. Tax arrangements related to aggressive tax planning are not normally made public and they are in the scope of business secrecy. In Finland, the situation is particularly diffi cult, as rulings by our administrative courts on tax matters are only partially published9. This further hampers discussion on the respon- sibility of the operations of companies that provide tax services. For this report,