The Panama papers are not about tax

This deliberately provocative headline is of course not fully true: tax is clearly a tremendously important aspect of the Panama papers scandal, as it continues to roil governments and élites and their advisers, around the globe. But there are far too many commentators who seem to be putting this into a ‘tax’ pigeonhole. Many have dubbed this “the Panama tax avoidance scandal” (or variants of this) — which reflects a profound misunderstanding of what is going on.

First, as an aside, we should probably banish this word ‘avoidance’ from the tax lexicon, because it’s so widely misused and misunderstood (it helps use words like ‘tax cheating’ or ‘escape’ instead, to keep you out of the thorny thickets of what’s legal or not.) But more importantly for today’s blog, these commentators have erred when they put Panama into the ‘tax’ box. Tax is a subsidiary story.

The Panama papers are, most importantly, about secrecy, and . . . hiding: hiding drugs money, hiding money from spouses, hiding from angry creditors, hiding from Mafia-hunting police, and of course hiding from tax too. It is a more general story about wealthy, law avoiding folk and “tax havens” (which are, again less about tax than about other things, as we’ve noted.). Aditya Chakrabortty, writing in The Guardian, cites a TJN expert:

“Thirty years of runaway incomes for those at the top, and the full armoury of expensive financial sophistication, mean they no longer play by the same rules the rest of us have to follow. Tax havens are simply one reflection of that reality. Discussion of offshore centres can get bogged down in technicalities, but the best definition I’ve found comes from expert Nicholas Shaxson who sums them up as: ‘You take your money elsewhere, to another country, in order to escape the rules and laws of the society in which you operate.’ “

Note that the t-word is absent from that loose definition.

One of the few people in the world who has a well-informed insider’s perspective who is also happy to speak out about it is Brooke Harrington of Copenhagen Business School, who took the remarkable step of actually obtaining a professional qualification in wealth management to pursue her studies. As she told our Taxcast recently:

“Tax avoidance was really only the tip of the iceberg. I didn’t realise how much bigger the problem is. Really what wealth managers do extend much more generally to law avoidance. And that creates problems of legitimacy for whole governments: it’s bad enough that people think they are getting shafted because the rich aren’t paying their fair share of taxes: it’s quite another matter when you say there is one law for the rich and one for everyone else and they are not the same: that is the sort of thing that can potentially topple governments.”

— source

The problems with measuring tax systems

In the past few years there have been several efforts to understand and even measure ‘spillovers’ – that is, how one state’s tax or legal system can transmit damage to other states’ tax or legal systems. Perhaps the best known of these efforts is the Tax Justice Network’s Financial Secrecy Index (FSI), which attributes a secrecy score to every country measured, then combines that score mathematically with a size weighting, to create a ranking of the world’s most important secrecy havens. The index has been extremely effective in drawing attention to the issues, and in uncovering a lot of new data and analysis and understanding of the offshore phenomenon which lies at the heart of financial globalisation.

The FSI deals with secrecy: there is a clear need for something similar in the area of tax. Corporate tax loopholes in one country, for instance, can have similarly damaging effects on the corporate tax systems of other countries, by encouraging multinationals to shift profits to the lower-tax jurisdiction, depriving the higher-tax jurisdiction of revenues. People are, rightly, rather angry about this.

A little work has already been done in this area. The IMF published a paper in 2014 entitled ‘spillovers in international corporate taxation,’ a first stab at measuring the scale of the phenomenon. Coming at it from a different angle, Oxfam recently published a report on ‘the world’s worst corporate tax havens’ whose methodology produced a ranking a bit like Financial Secrecy Index’. The corporate tax havens of Ireland and the Netherlands recently published ‘spillover analyses’ of their own tax systems which, surprisingly or unsurprisingly, depending on how cynical you’re feeling, largely absolved themselves of blame.

This is an area where much more work needs to be done. Now Andrew Baker and Richard Murphy offer a new, broad framework for thinking about how one might go about it.

Their blog Reframing Tax Spillovers, and the associated paper for the APPG, rightly highlights the flaws in these other projects, and offers something more comprehensive and useful.

Crucially, Andrew and Richard recognise that there are different dimensions of spillover: not just from one country or state to another, but also between different taxes in the domestic economy. For instance, the corporate income tax was originally set up in order to defend the ordinary income tax: if you have no corporate tax then rich folk simply convert their ordinary income into corporate income and escape the income tax. As they put it: ‘Taxpayers will try to divert part of the income that should be subject to this tax to another tax or location, or both.’ This happens all the time – and of course there are spillovers that cross both tax boundaries and national borders. This early-stage concept is highly welcome, and I can imagine it flowering into something big and useful.

Yet there is another generic issue that also needs highlighting: the conservative bias in measurement itself.

Much has been said about neoliberalism – the disenchantment of politics by economics, as Will Davies has put it – in a sense, the effort to shoe-horn as many aspects as possible of life, the universe and everything into the price system.

Much has been written about how neoliberalism, neoclassical economics and the economics faculty at Chicago University have injected a conservative bias into economics. But there’s an even deeper problem than this: in the area of tax, the very act of measurement is likely to impart a conservative bias.

This is for a pretty simple reason. Take a corporate tax cut, for instance. Leave aside the question of tax spillovers to other countries, and start by asking: ‘does this tax cut help my own country?’ What does it look like from a purely selfish national perspective?

Many studies have done this. Does the corporate tax cut foster new corporate investment, or bring in Foreign Direct Investment (FDI)? Oceans of work have been done here, and plenty of the political discourse in Britain, and in many other countries, leaves the matter at that. If it attracts FDI then that tax cut is ‘competitive’ – so let’s do it. After all, who could oppose a ‘competitive’ tax system?

But of course the story doesn’t end there. FDI is a means to an end, not an end in itself. If you have to spend a lot of treasure to attract that FDI, the cost may not be worth it. Britain’s corporate tax rate cuts since 2010 are forecast to cost nearly £15 billion a year in lost tax revenues by 2021 – which is well over a third of the education budget. It’s hard to see that this equation makes for a ‘competitive’ tax system – whatever ‘competitive’ might mean in this context. I would argue that pretty much all of that academic work just measuring elasticities is, for this reason, pretty meaningless from a policy perspective.

If one could do a good cost-benefit analysis – as in ‘here are the benefits of a given tax cut, weighed against the costs’ – then one might be able to draw a better conclusion about the merits or disadvantages.

But this is where the conservative bias comes in. It’s relatively much easier to measure the ‘benefits’ side of a tax cut – FDI responses, elasticities and so on – than it is to measure the costs.

That is, it’s relatively easier to measure things like investment responses, elasticities, which in isolation tend to favour tax-cutting, than to measure the other side of the ledger where the damage of tax cuts shows up: such as by reducing the long-term benefits of (tax-financed) infrastructure or education, which might play out over decades; or confidence in the overall tax system and democracy itself, as corporate tax rates fall far below personal income tax rates, or the effects of higher inequality exacerbated by corporate income tax cuts, and so on.

As the US public finance expert Robert G. Lynch put it to me recently: ‘It is much harder to measure the damage from reductions in public investment due to tax cuts than it is to measure the benefits from tax cuts.’

Researchers often stick to what they can measure, and to the extent that they do acknowledge the other, harder to measure side of the equation, it tends to be in more narrative form. So even when there’s a suitably nuanced report, policy-makers can cherry-pick out the numbers and throw away the narrative as so much fluff. This happens all the time. And that’s before we even get to the lobbying and role of private finance sponsoring some academic research.

There’s no obvious way around this: more narrative emphasis on the hard-to-quantify stuff will just get airbrushed out of the way of tax cuts. What is necessary is to de-emphasise of the role of economics and measurement in these debates, and to rekindle the politics. Civil society has been doing a decent job here: but academia and policy-makers have too often been in the thrall of the economists.

What is needed, at the end of the day, is to pursue the disenchantment of economics by politics.

— source by Nicholas Shaxson

Oxfam report on the International Finance Corporation and tax havens

Oxfam has launched a new briefing on the IFC and tax havens.

The key findings of the report include:

  • 68 companies were lent money by the World Bank’s private lending arm (IFC) in 2015, to finance investments in sub-Saharan Africa. 51 of these 68 companies use tax havens with no apparent link to their core business;
  • Together, these companies received 84% of the IFC’s investments in sub-Saharan Africa last year;
  • In 2015, the IFC portfolio for SSA was 68 projects of a total value of US$3422 million of which US$2878 million were associated with tax havens through IFC clients – a significant increase in the use of tax havens since 2010 (see chart);
  • Oxfam calls on the World Bank Group to put in place safeguards to ensure that its clients can prove they are paying their fair share of tax.

Inequality is rising around the world. Fighting inequality must be an integrated priority for everyone in development, to promote and achieve sustainable development.

As the World Bank and IMF prepare for their Spring Meeting in Washington 13–15 April, and in the wake of the Panama Papers scandal which reveals how powerful individuals and companies are using tax havens to hide wealth and dodge taxes, Oxfam is calling on the World Bank Group to put safeguards in place to ensure that its clients can prove they are paying their fair share of tax.

Read Oxfam’s report here.

— source

Meet the EU’s own tropical tax haven: Madeira

This week has seen another revelation about one of the world’s lesser known tax havens. After the big(ger) leaks from Switzerland, Luxembourg, Panama and the Bahamas over the past years, a small island in the Atlantic ocean is in the limelight this time: Portugal’s own offshore paradise Madeira.

German broadcaster Bayrischer Rundfunk (BR) has done the bulk of the work and meticulously crafted a database of the island’s company register – information that had been technically available online but not in any usable format, so far. It has subsequently been shared with Spanish, French and Austrian colleagues for joint reporting.
A haven’s usual business…

Unsurprisingly, what the journalists found looks familiar to the characteristics of other offshore havens previously in the public spotlight. Hundreds of firms registered at the same address without any visible physical presence and hundreds of such letterbox companies run by the same directors, often provided to wealthy clients by law firms enabling the offshore business as a ready-made package together with the letterboxes. Also a sizable portion of the companies itself is owned by other firms that are resident in notorious secrecy havens such as Panama or the British Virgin Islands. The offshore world works like a web where things are linked and layered to provide perfect anonymity.

Interestingly, the Madeira database also exhibits several links to the most recent major offshore revelation Football Leaks. Javier Mascherano from Barcelona or Xabi Alonso from Bayern Munich are only two of the prominent players which channeled income to Madeira in order to benefit from its generous tax regime. The offshore dealings of football players are obviously just one of many examples in a system where the richest parts of society systematically shirk obligations that the vast majority of people comply with.

Our GUE/NGL group has already made a substantiated call for the European Parliament to investigate this sector in its on-going committee of inquiry given the ample evidence now on the table. A hearing on the matter is currently foreseen for September 2017 following a recent decision, in principle, to request a six months extension as a consequence of continuous obstruction of the committee’s work by EU Member States.
…rubber-stamped by the EU

What is striking about the Madeira case – the history and details of which have been neatly summarised by Portuguese MEP Ana Gomes – is that it has neither evolved outside the European Union’s jurisdictions (like one could argue for Panama, even if a large part of the cases exposed in the Panama Papers is somehow connected to territories under EU control) nor that its main features are secretive (like the now infamous Luxembourg rulings, aka sweetheart deals). Pretty much to the contrary, Madeira’s 0% tax regime has been formally approved by the European Commission: first in 1987 after Portugal’s accession to the bloc and subsequently again in 2002, 2007, 2013, 2014 and 2015, with effects until 2027.

The Commission did however explicitly insist in 1987 that Madeira not use the privileged regime – granted as exceptional aid because of Madeira’s location as outermost region – to establish an “offshore financial centre”. A conditionality that rings hollow given this week’s revelations, which did not come as a surprise for long-standing critics of the tax giveaways inside Portugal. Besides a slight increase of the rate from 0% to 5% as late as 2013, there was actually not much change over the years. Tellingly, this increase was already too much to ask for some of the biggest multinationals in the data set. US oil giant Chevron, its Italian competitor Eni or the drink producer Pepsi all closed down letterboxes on the island at that time.
Tax haven blacklist as fig leave

Not just did the European Commission approve Madeira’s regime from the point of view of European state aid rules. The topic of special economic zones (SEZ), notably Madeira, has also been under discussion for years in the secretive Code of Conduct Group on business taxation in the Council of the European Union. This is where Member States meet since 1998 to combat harmful practices of corporate taxation but which has been rendered entirely ineffective by a lack of political will and transparency. The discussion on guidelines for SEZ has been dormant since 2008.

Currently under discussion in the same group is the EU’s much taunted blacklist against tax havens. We have previously discussed the limitations of this project at the occasion of Commissioner Moscovici’s hearing at the PANA committee. The final episode of the preparatory work for this list is set to take place next week at the 21 February ECOFIN summit. After this, screening of more than 90 jurisdictions globally will finally commence. Excluded per definition are, however, all territories within the EU. This covers the bigger tax havens like Malta and Luxembourg, but obviously also places like Madeira. The same principle obviously also applies to the separate blacklist for jurisdictions with insufficient anti-money laundering practices.

Hence, for as long as Member State governments keep protecting offshore paradises en masse within their own borders, talk about cracking down on money laundering, tax evasion and tax avoidance really seems like not much more than that: empty talk. The constant flow of leaks and the analysis of these scandals are necessary to draw public attention and expose the hypocrisy of our elites. Fundamental change will, however, require a longer breath and people standing up to the theft by the rich and powerful they are continuously being made to pay the bill for in the form of austerity budgets and deteriorating public services.

— source

Profit shifting and U.S. corporate tax policy reform

This paper argues that the erosion of the U.S. corporate income tax base is a large policy problem. Profit shifting by U.S. multinational corporations is reducing U.S. government tax revenues by more than $100 billion each year, and other countries are facing similar concerns. Yet given the starting point of the current U.S. corporate tax system, potential reformers face a dilemma. Reforms that would protect the U.S. corporate tax base may not find support in the multinational business community, which is more concerned with perceived competitiveness problems. But reforms that address competitiveness worries—such as the “toothless territorial” system that many in the multinational business community favor—would make the tax base erosion problem far worse.

This paper demonstrates that the perceived competitiveness problems are exaggerated. By all common metrics, U.S. multinational firms are doing quite well. They are not tax-disadvantaged relative to firms based in other peer countries. But the United States, like other non-tax-haven countries, has a large and growing corporate tax base erosion problem that has been fueled by both tax competition pressures and the increased tax avoidance activities of multinational firms, resulting in dramatic increases in income booked in very low-tax countries.

I offer several modest reforms that would improve our system of taxing multinational firms, including incremental steps that would stem tax base erosion, reduce the lockout of overseas U.S. corporate profits, and end the flight of U.S. corporations to overseas tax havens via corporate inversions. I also offer two more fundamental policy options: a worldwide consolidation of corporate returns for tax purposes, and a formulary approach similar to the way in which U.S. corporations determine what share of their national income is taxed across U.S. states. Such reforms would create a more effective and efficient U.S. corporate tax system that better serves the needs of the U.S. economy.

Fast facts

Almost all observers of the U.S. corporate tax system agree that the system is broken and in desperate need of reform. The United States has one of the highest statutory corporate tax rates among peer nations, yet we raise comparatively little corporate tax revenue as a share of our gross domestic product, or GDP. Specifically:

Profit shifting by U.S. multinational corporations is reducing U.S. government tax revenues by more than $100 billion each year.
About 98 percent of this revenue loss results from profit shifting to countries with corporate tax rates that are less that 15 percent, and 82 percent of the revenue loss results from profit shifting to just seven tax-haven countries.
The scale of the revenue loss due to profit shifting has increased five-fold over the previous decade, due to increased profit shifting by multinational firms as well as global tax competition pressures.

Reformers face a policy dilemma between proposals that the multinational business community might favor on competitiveness grounds and corporate tax base protection. Proposals that address competitiveness by further lowering tax burdens on foreign income would make the base erosion problem worse, while proposals that address base erosion may increase the tax burden on foreign income.

Since there is scant evidence that U.S. multinational firms have a competitiveness problem, reform efforts should prioritize addressing corporate tax base erosion. Modest, incremental reforms could be quite effective, among them:

Repealing check-the-box regulations that facilitates income shifting
Tougher earnings stripping laws
Anti-inversion rules such as an exit tax

More systematic reforms, however, are highly desirable. These include:

Worldwide consolidation of corporate returns for tax purposes
Formulary apportionment of international corporate income, using a method similar to that used by U.S. states in taxing national income

The starting point

Almost all observers of the U.S. corporate tax system agree that the system is broken and in desperate need of reform. The United States has one of the highest statutory corporate tax rates among peer nations, yet we raise comparatively little corporate tax revenue as a share of our gross domestic product, or GDP. Our tax base is notoriously narrow. There are special tax breaks—including accelerated depreciation, special deductions for production income, and many smaller loopholes—alongside an incoherent system for taxing business income, resulting in disparate tax treatment based on the organizational form of business.

In the international sphere, the problems are worse. Several features of the U.S. tax system directly encourage profit shifting, resulting in substantial erosion of the U.S. corporate tax base as income is shifted from the United States to tax havens such as Switzerland, Bermuda, or the Cayman Islands. Some of these features are systemic (for example, the ability of multinational firms to defer taxation on foreign income until it is repatriated) and some of them are ad hoc (such as “check-the-box” rules that allow the creation of “stateless” income1). Overall, these features enable corporate tax base erosion. My estimates suggest that such profit shifting probably costs the U.S. government more than $100 billion in revenue per year.

International corporate tax systems in the United States and elsewhere

The United States uses a worldwide system of taxation that taxes the foreign income of U.S. resident firms. Still, for most foreign income, U.S. taxation only occurs when the income is returned to the United States, or repatriated.2 Corporations also receive tax credits for foreign income taxes paid that they can use to offset U.S. tax liabilities, including tax due on royalty income from abroad.

In contrast, under a territorial system of taxation, foreign income is normally exempt from taxation. Under a territorial system, there is a stronger incentive to shift income out of the domestic tax base than under current U.S. law, since income booked abroad is permanently exempt from domestic taxation instead of being tax-deferred until repatriation. For this reason, some territorial countries have also adopted tough base-erosion protections whereby categories of foreign income are taxed currently, even without repatriation. Current taxation may be triggered, for example, if the foreign tax rate is less than some threshold rate.

Revenue concerns are not the only motivator for business tax reform in the United States, however. The multinational corporate community is also displeased by the status quo and is pushing reforms that would further U.S. business “competitiveness.” Multinational business interests fault the U.S. tax system for two flaws in particular: the relatively high corporate statutory rate, and the fact that U.S. rules purport to tax the “worldwide” income of U.S. multinational firms. Yet both of these features have more bark than bite. U.S. multinational firms have used careful tax planning to generate effective tax rates that are far lower than the statutory rate, and often in the single digits.3 Further, the U.S. tax system places a very low (and in some cases negative) tax burden on foreign income.4

Given the reality on the ground, one would expect that U.S. multinational firms would be relatively content with the present system. Yet there is a crucial problem: The U.S. tax system generates a very light burden on foreign income, but if multinational firms repatriate that income in order to issue dividends or repurchase shares, they need to pay U.S. tax.5 This repatriation “lock-out” problem has become increasingly problematic due to three factors:

Multinational firms are victims of their own tax-planning success. Profit shifting in prior years has resulted in large stockpiles ($2 trillion) of foreign profits that are growing more rapidly than either domestic profits or measures of foreign business activity.
Foreign countries have been engaging in tax competition, lowering their corporate tax rates in an attempt to attract global business activity. These lower tax rates generate fewer foreign tax credits to offset taxes that would be due upon repatriation.
As part of the American Jobs Creation Act of 2004, the U.S. government gave U.S. multinational firms a temporary holiday for repatriating income at a low rate of 5.25 percent. This holiday dramatically increased repatriations, but the inflow of funds was largely used for share repurchases and dividend issues, and did not boost employment or investment despite the hopeful title of the legislation.6 More importantly, the holiday gave multinational firms a signal that there was no reason to pay the full tax due at repatriation—instead, one should wait for the next holiday or lobby for a tax system that exempts foreign income entirely.7

Some in the corporate community have even threatened corporate inversions if favorable corporate tax reforms are not forthcoming— including the shareholder activist Carl Icahn, who has invested $150 million in a super PAC aimed at corporate tax policy changes.8

A corporate inversion is a restructuring of a multinational corporation, often combined with a merger or acquisition, that results in the multinational corporate headquarters being shifted abroad to a tax-favored location; the U.S. firm is then an affiliate of a foreign parent. As one observer in The Wall Street Journal put it, “the foreign minnow swallows the domestic whale.”9 Corporate inversions make it easier to access foreign profits without tax due at repatriation, and they also facilitate future profit shifting by reducing the constraint associated with U.S. earnings-stripping rules.10

This thirst for corporate tax reform is motivated by important failures of our current tax system—in particular, the combination of deferral and profit shifting. Still, it is important to recognize that reformers of the corporate tax system will face an essential dilemma. Reforms that further lighten the tax burden on foreign income that are unaccompanied by serious base-erosion measures may please the multinational corporate community, but such reforms would make a bad corporate tax base erosion problem worse. Exempting foreign income from taxation altogether will turbocharge the already-large incentive to earn income in low-tax countries by removing the remaining constraint on profit shifting (the tax due upon repatriation). Yet serious measures to protect the corporate tax base often do not win the approval of multinational business interests because many such measures would have the net effect of increasing their tax burden on foreign income.

These vexing international tax problems are not occurring in a vacuum. There has been heightened attention to the problems of corporate tax base erosion and profit shifting in many countries, driven in part by increased press attention to the large scale of this problem and the tax avoidance strategies of well-known multinational firms such as Starbucks Corp., Microsoft Corp., Google Inc., and others. There have been prominent hearings in the U.K. parliament on corporate tax avoidance, and recent European Commission rulings have disallowed tax breaks in Belgium, Ireland, and Luxembourg.

In response to these types of concerns, the developed and leading developing country members of the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty (G-20) launched a Base Erosion and Profit Shifting initiative to make a concrete action plan of recommendations to help countries address the problems of corporate profit shifting. The initiative identified 15 action items to address their concerns, and after two years of work, the final reports were issued in October 2015, totaling nearly 2,000 pages.

This is a significant effort at international tax cooperation, but it remains to be seen if this process will prove successful at stemming corporate tax base erosion. Many aspects of this process are useful, including the recommendation for country- by-country reporting, but adoption of these guidelines is voluntary, and some of the most contentious areas remain problematic. In the meantime, the scale of the erosion problem afflicting the U.S. corporate income tax base grows swiftly, as I describe in the next section of this paper. Yet several modest reforms and more sweeping solutions to the problem by U.S. policymakers are largely at hand for implementation. These solutions are detailed in the closing sections of this report.

The scale of the profit-shifting problem

There is indisputable evidence that the erosion of the U.S. corporate income tax base is a large and increasing problem. In this section, I will summarize original research that employs the best publicly available data to estimate the cost of profitshifting activity to the U.S. government.11 I also extend these estimates to consider the possible magnitudes of revenue loss for other non-haven governments. These estimates indicate a substantial problem: Revenue loss to the U.S. government likely exceeds $100 billion per year at present, and revenue loss to the group of non-haven countries (including the United States) likely exceeds $300 billion per year at present.12

The analysis makes use of U.S. Bureau of Economic Analysis survey data on U.S. multinational firms. Completion of the surveys is required by law, yet the data are not used for tax or financial reporting purposes, and confidentiality is assured. The OECD describes these data as an example of current “best practices” in data collection that allow measurement of base erosion and profit shifting.13

Even a cursory examination of the data indicates the large extent of the profitshifting problem. Among the top 10 profit locations for the overseas affiliates of U.S.-based multinational corporations,14 in 7 out of 10 cases (Netherlands, Ireland, Luxembourg, Bermuda, Switzerland, Singapore, and the Cayman Islands), these countries are havens with effective tax rates of less than 5 percent. Together, these countries are responsible for 50 percent of all foreign profits of U.S. multinational firms. Yet they account for very little of the real economic activity of U.S. multinationals; as a group, they account for only 5 percent of foreign employment. These are also small countries, with a combined population less than that of either Spain or California.

It is also immediately apparent from the data that real economic activities are much less sensitive to tax rate differences across countries. The top 10 foreign countries where U.S. multinationals employ workers, for example, are all large economies with big markets. (See Figure 1.) What’s more, the effective tax rates are not particularly low for this set of countries, as none of these 10 countries has an effective tax rate below 12 percent.

The pressing question of this research is how the booking of profits would differ absent profit-shifting motivations. U.S. multinational firms report $800 billion in gross profits in countries with tax rates that are lower than 15 percent. How much excess profit is booked in these countries? And if it were not booked in low-tax countries, where would it be?

To answer this question, I first estimate the tax sensitivity of U.S. multinational affiliate profits, controlling for other factors that may influence the profitability of affiliates. I find that reported profits are quite tax-sensitive, with a 2.92 percent change in profits for each 1 percentage point change in tax rates, controlling for other factors that influence profits such as the scale of affiliate operations in particular countries, as well as country and time intercept terms.15 There is some important recent work that suggests profits are probably non-linearly related to tax rates, and if that consideration were included in my analysis, results would indicate an even larger degree of profit shifting.16

This measure of tax sensitivity is then used to calculate what profits would be in the countries of operation of U.S. affiliates absent differences in tax rates between foreign countries and the United States. A fraction (38.7 percent in 2012) of the hypothetically lower foreign profits are then attributed to the U.S. tax base.17 The United States has a statutory tax rate of 35 percent, but in this analysis, I assume that the U.S. effective tax rate would be lower (30 percent) to allow for some degree of base narrowing in practice, and that this lower tax rate would apply to any increased income in the U.S. tax base.18 Finally, this number is scaled up, under the assumption that foreign multinational firms also engage in income shifting outside of the United States.19

Table 1 and Figure 2 show the major locations where income is shifted. In cases of high-tax-rate countries with effective tax rates above my assumed U.S. rate—for example, in 2012, Denmark, Argentina, Chile, Peru, India, Italy, Japan, and others—foreign profits would be higher, but in many other cases, foreign profits would be lower. In 2012, I estimate that profits in the lowest-tax countries (with effective tax rates of less than 15 percent) were too high (due to tax incentives) by $595 billion, and these countries account for 98 percent of the total quantity of profit shifting away from the U.S. tax base.

Table 1

Figure 2

Indeed, the estimates of excess income booked just within the seven important tax havens highlighted in Table 1 account for 82 percent of the total. Of the income booked in Bermuda ($80 billion), the Caymans ($41 billion), Luxembourg ($96 billion), the Netherlands ($172 billion), and Switzerland ($58 billion), this method suggests that profits absent income-shifting incentives would instead be $10 billion in Bermuda, $9 billion in the Caymans, $15 billion in Luxembourg, $33 billion in the Netherlands, and $15 billion in Switzerland. In comparison, profits booked in France and Germany in 2012 were $13 billion and $17 billion, respectively.

These estimates—including the main estimate based on the U.S. Bureau of Economic Analysis income series (net income plus foreign taxes paid), as well as an alternative (lower) estimate using the agency’s direct investment earnings series,20 are summarized in Table 2 below. The table shows the total income earned abroad by foreign affiliates of U.S. firms; the estimated U.S. tax base increase if income-shifting incentives were eliminated; and the reduction in U.S. corporate income tax revenues due to income shifting, assuming that marginal revenues are taxed at 30 percent.21 Actual corporate tax revenues in the corresponding year are presented as a comparison. By 2012, the revenue cost of income-shifting behavior is estimated at $111 billion.

Table 2

There is a substantial lag associated with the release of the Bureau of Economic Analysis survey data, so the latest analysis is already a few years old. But if one scales up the estimates to this year at a 5 percent growth rate then the total revenue lost to profit shifting in 2012 (between $77 billion and $111 billion) would be approximately $94 to $135 billion by 2016.22

Figure 3 illustrates the change in these estimates of revenue loss due to profit shifting over the period from 1983 to 2012. This strong upward trend is not a reflection of increasing tax responsiveness over this time period, since that is assumed to be constant in the analysis. Instead, it is due to two factors. First, and most importantly, the total amount of foreign profits is increasing dramatically over this period. Income of all foreign affiliates was $525 billion in 2004, growing to $1.2 trillion by 2012. Direct investment earnings increased by similar magnitudes, more than doubling in eight years. Second, the average foreign effective tax rate continued to fall over this time period, also contributing to income-shifting incentives.

Figure 3

Of course, there are several assumptions required for this analysis that generate uncertainty surrounding these estimates. In the full research paper, I enumerate the sources of uncertainty and discuss their possible effects on the estimates.23 I have sought to err on the side of making conservative assumptions. Still, many assumptions have no direction of bias, and when an assumption could lead to an overestimate, I provide alternative estimates.

These corporate profit-shifting problems are not unique to the United States. In the full research study, I also provide a speculative extension of the analysis to other nonhaven countries, based on data from the Forbes Global 2000 list of important global corporations.24 I estimate that profit shifting is generating revenue costs to governments of about $340 billion per year at present.25 These estimates cover countries that are headquarters to most Forbes Global 2000 firms, excluding those countries with tax rates of less than 15 percent, and including the United States, which accounts for approximately one-third of the total revenue loss.

Unfortunately, data are insufficient for offering an estimate for less-developed countries using this method. International Monetary Fund economists Ernesto Crivelli, Michael Keen, and Ruud A. de Mooij indicate, however, that the profit-shifting problem is likely to be particularly large and consequential for developing countries.26

These estimates are based on the best publicly available data, careful methodology, and conservative assumptions. Further, they are compatible with the work of other researchers at the Organisation for Economic Co-operation and Development, the International Monetary Fund, the Joint Committee on Taxation, and elsewhere.27

What to do (and what not to do) about profit shifting

This section will consider policy solutions to the profit-shifting problem, recognizing the dilemma posed by today’s political realities as our starting point. Perhaps understandably, the most stalwart (and well-funded) advocates for corporate tax reform are the corporations themselves. They are interested in reforms that would ostensibly make corporate taxpayers more “competitive” by lowering foreign tax burdens. Such reforms are likely to make the corporate tax base erosion problem worse, however, while serious reforms that would address corporate tax base erosion would likely raise the net burden on foreign income earned by multinational firms, reducing corporate support for reform. This leaves policymakers with an essential dilemma.
What not to do

Many in the multinational corporate community use the argument of “competitiveness” to suggest that the United States should align its system with those of other countries by lowering our statutory tax rate and adopting a territorial system of taxation. Yet U.S. multinational firms already face low effective tax rates that are comparable to those of firms headquartered in other countries, and very little tax is presently collected on foreign income.28 Indeed, a well-designed territorial system could easily raise the tax burden on foreign income. So, presumably, those that push for adoption of a territorial system under the guise of competitiveness concerns truly have in mind a “toothless territorial” system that would lower the tax burden on foreign income.

Yet every indicator suggests that U.S. multinational firms don’t have a competitiveness problem, but rather are healthy and thriving. Corporate profits as a share of U.S. gross domestic product during 2012-2014 period were as high as any point since the 1960s.29 The United States is home to a disproportionate share of the Forbes Global 2000 list of the world’s most important corporations.30 And, finally, U.S. multinational firms are world leaders in tax avoidance, and as a result, they often achieve single-digit effective tax rates, making them the envy of the world in terms of tax planning competitiveness.31

Pushing for a toothless territorial system without serious and effective base erosion protection measures would risk worsening the erosion of the already shrinking U.S. corporate income tax base. Exempting foreign income from taxation would relax the remaining constraint on shifting income abroad: the potential tax due upon repatriation. This turbocharges the already large incentive to book income in low-tax havens, likely generating large revenue losses.
Small changes that would help

Rejecting a “toothless” territorial system and the competitiveness arguments that lie behind this proposal does not mean that policymakers do not need to address the “lock-out” effect caused by the combination of deferral and profit-shifting. It is also important to address corporate inversions—the “self-help” version of a toothless territorial system—given the frequent adoption of this corporate tax strategy by U.S. multinationals. There are several small policy changes that would be helpful; more fundamental reforms are addressed the following section.

First, it is conceivable that a “tough” territorial system, like the hybrid systems of many of our trading partners, would allow one to address some of the problems of the current system (including the lock-out effect) without eviscerating the corporate tax base. Such a transition to a hybrid/territorial system would include a transition tax on accumulated foreign profits as well as carefully designed measures to protect the U.S. corporate income tax base. Base-protection measures would currently tax foreign income that did not qualify for exemption, perhaps through a minimum tax approach, as suggested by recent proposals from the Obama administration. Law professors J. Clifton Fleming, Robert J. Peroni, and Stephen E. Shay suggest an updated Subpart F regime, which currently taxes some types of foreign income, alongside disqualifying the exemption for royalty income, and creating a realistic allocation of expenses to foreign-source income.32

Still, Fleming, Peroni, and Shay also warn that many recent proposals to move toward exemption have fundamental weaknesses that would increase the erosion of the U.S. corporate tax base.33 For political economy reasons, one might worry that tough base-protection measures would be challenged or eroded over time. Since the main motivation for adopting a territorial system is coming from multinational business interests that would oppose truly tough features of a territorial regime, the details of any such proposal are crucial.

Second, corporate tax reforms could strengthen our system by lowering the statutory rate in combination with provisions that would close loopholes, thus better aligning the “label” of the tax system that describes the law with the reality on the ground that determines the tax treatment of firms. A prime example of a loophole that could be closed is the “check-the-box” rule that facilitates income shifting. Recent Obama administration proposals include a more comprehensive list of possible loopholes that could be closed,34 and an even longer list of guidelines and recommendations to address profit shifting is included in the reports on Base Erosion and Profit Shifting by the Organisation for Economic Co-operation and Development and the Group of Twenty.35

Third, measures could also be taken to stem corporate inversions, regardless of the direction of larger corporate tax reforms. Recent U.S. Treasury regulations, for example, have made inversions more difficult. More could be done, though, including increasing the legal standard for a foreign affiliate to become a parent and a so-called management-and-control test to determine the location of corporate residence.36 Another area that could be revised in response to inversions is the earnings-stripping rules under Section 163(j) of the Internal Revenue Code.37 Such a change would also help address the profit-shifting problem more generally, including in cases in which multinational firms have not inverted. Finally, an exit tax would be a key anti-inversion policy tool. An exit tax would be levied on repatriating companies based on the U.S. tax due on outstanding stocks of income that have not been repatriated.38
More fundamental solutions

The smaller steps just discussed do not fundamentally change the most vexing issue associated with international taxation: the difficulty of determining the source of income (and expenses) in a modern global economy.

Our present system of international taxation relies on the fiction that global firms can neatly account for their income and expenses in each jurisdiction in which they operate. Yet the entire point of a multinational firm is to achieve greater profits than the component firms would achieve operating at arm’s length, by exploiting firm specific advantages to their most profitable end by undertaking transactions across borders yet within the firm. Assigning this additional profit associated with global integration to a particular source is a fraught exercise, made even more vexing in a modern economy where the source of much value is intangible.

This potent brew of globally integrated businesses, intangible sources of economic value, and a creative and industrious tax-planning industry make our system of international taxation costly to administer, difficult to comply with, and mind-numbingly complex. These factors also help explain the large magnitudes of profit shifting and corporate tax base erosion demonstrated in the prior section. More fundamental reforms could better align the tax system with the modern global economy.

Option 1: Worldwide consolidation

Under worldwide consolidation, a U.S.-headquartered multinational firm would simply consolidate its entire global operations (across the parent and all foreign affiliates) for tax purposes, including losses.39 Income would then be taxed currently, allowing a credit for foreign taxes. This proposal is discussed in more detail by the Joint Committee on Taxation, and favored by U.S. corporate tax experts Edward D. Kleinbard at the University of Southern California and Reuven S. Avi-Yonah at the University of Michigan.40

A worldwide consolidation approach has several benefits relative to the current system. Foremost, there would be less tax-motivated shifting of economic activity to book income to low-tax locations, since such shifting would be less likely to affect a multinational firm’s overall tax burden.41 There would thus be few concerns about inefficient capital allocation or corporate tax base erosion. Also, there would be no “trapped cash” problem since income would be taxed currently.

Depending in part on the corporate tax rate that would accompany this change, however, the proposal may still raise competitiveness concerns for those U.S. multinational firms with rising foreign tax burdens under consolidation. Of course, if the U.S. corporate tax rate were lowered substantially alongside this change, as proponents typically suggest, this would reduce the concerns about decreased competitiveness.

Some also worry that this proposal would put stress on the definition of residence. Although some have argued that residence is increasingly elective,42 others contend that relatively simple legislation would make it difficult to change residence for tax purposes. Governments could require that corporate residence indicate the true location of the “mind and management” of the firm; both Kleinbard and Avi-Yonah deem a similar U.K. definition of residence to be effective.43 It is also feasible to develop anti-inversion measures along the lines of those suggested above.

Finally, while there is little real-world experience with such a system, it still falls within international norms, since double taxation is prevented through foreign tax credits. The proposal could be implemented without disadvantaging major trading partners, and it could be adopted unilaterally, though Avi-Yonah recommends that countries take a multilateral approach.44

This proposal has some advantages over simply ending deferral. While eliminating deferral (presumably alongside a corporate tax rate reduction) would entail some of the same tradeoffs illustrated here (removal of distortion to repatriation decisions, reduced income shifting, more efficient capital allocation, potential competitiveness concerns, and a greater stress on the definition of residence), it would not truly consolidate the affiliated parts of a multinational firm. Under worldwide consolidation, for example, if losses are earned in foreign countries, they can be used to offset domestic income.

Option 2: Formulary apportionment

Under formulary apportionment, worldwide income would be assigned to individual countries based on a formula that reflects their real economic activities. Often, a three-factor formula is suggested (based on sales, assets, and payroll), but others have suggested a single-factor formula based on the destination of sales.45

The essential advantage of the formulary approach is that it provides a concrete way for determining the source of international income that is not sensitive to arbitrary features of corporate behavior such as a firm’s declared state of residence, its organizational structure, or its transfer-pricing decisions. If a multinational firm changes these variables, it would not affect the firm’s tax burden under formulary apportionment.46

Importantly, the factors in the formula are real economic activities, not financial determinations. A vast body of research on taxation suggests a hierarchy of behavioral response: Real economic decisions concerning employment or investment are far less responsive to taxation than are financial or accounting decisions.47 For multinational firms, this same pattern is clearly shown in the data. There is no doubt that disproportionate amounts of income (compared to assets, sales, or employment) are booked in low-tax countries.

In this way, a formulary approach addresses aspects of both the competitiveness and tax base erosion concerns. Firms would have no incentive to shift paper profits or to change their tax residence since their tax liabilities would be based on their real activities. Concerns about efficient capital allocation, however, may remain. Under a three-factor formula, there is still an incentive to locate real economic activity in lowtax countries. This is somewhat less of a concern under a sales-based formula, since firms will still have an incentive to sell to customers in high-tax countries regardless.48 Also, prior experience in the United States, which uses formulary apportionment to determine the corporate tax base of U.S. states, has indicated that formula factors (payroll, assets, and sales) are not particularly tax-sensitive.49

If all countries were to adopt formulary apportionment, then there would be few concerns about competitiveness. Multinational firms would be taxed based on their real economic activities (in terms of production and sales) in each country, so firms would be on an even footing with other firms (based in different countries) that had similar local operations. If only some countries adopt formulary apportionment then there are ambiguous competitive effects, depending on the circumstances of particular firms.50 Ideally, formulary apportionment would be adopted on a multilateral basis. But if only some countries adopt this approach then there are mechanisms that would encourage other countries to follow early adopters.51 In other research, I provide more detail on the advantages and disadvantages of formulary approaches.52

Concluding observations on the corporate tax in a global economy

This paper argues that the erosion of the U.S. corporate income tax base is a large policy problem. Profit shifting is reducing U.S. government tax revenues by an amount that likely exceeds $100 billion each year, and other countries are facing similar concerns. Yet given the starting point of the current U.S. corporate tax system, potential reformers face a dilemma. Reforms that would protect the tax base may not find support in the multinational business community, which is often more concerned with perceived competitiveness issues associated with the U.S. system. This report shows that such competitiveness problems are more perception than reality, but there are still important distortions created by the combination of deferral and profit shifting that need to be fixed.

I offer several modest reforms that would make improvements, as well as two more fundamental options. But regardless of the path that reformers take, it is important to remember that the corporate income tax has a vital role to play in the U.S. tax system beyond these important revenue concerns. Perhaps most important, it is one of our only tools for taxing capital income, since the vast majority of passive income is held in tax-exempt form, going untaxed at the individual level.53 Capital income has become a much larger share of U.S. GDP in recent decades,54 and capital income is far more concentrated among those with higher incomes than labor income, making the corporate income tax an important part of the progressivity of the tax system.55 The corporate income tax also plays a vital role in back-stopping the personal income tax system, since otherwise the corporate form could become a tax shelter.56

Finally, recent economic theory buttresses the case for taxing capital on efficiency grounds.57 Thus, the case for a healthy corporate tax is alive and well. The remaining question is whether the requisite political will can be summoned to stem corporate tax base erosion in a global economy.

— source

Trusts – Weapons of Mass Injustice

It is a fact that the trust laws of some tax havens openly promote illegality. The reality that some tax havens will not enforce foreign laws (e.g. ensuring non-recognition of foreign laws and judgements that favoured legitimate heirs and former spouses) is even publicly advertised by some offshore service providers, not on the deep web like drugs and illegal weapons, but on the internet, accessed by a simple google search on tax or estate planning.

Despite this, there has been some reluctance from governments to take on the issue of trusts, and some difficulties posed for governments that have attempted to deal with some of their more problematic features. Today, a new paper called Trusts – Weapons of Mass Injustice from the Tax Justice Network attempts to reopen the debate on trusts, and argues that there is urgent need for effective measures to curtail their activities.

A controversial issue

Trusts create a lot of controversy. While many of them are taxable at the trust level, they may hold assets or engage in business just like companies, and not everybody fully agrees with the idea of registering all trusts, including some transparency campaigners. That’s either because of their complexity or because they believe in “cheaper” options, such as targeting only tax haven trusts.

We looked at some of these issues in a paper we published in November 2015, which made the case for trust registration. The paper describes trust’s secrecy risks and explains why available technology applied to registers of companies means that registering trusts’ beneficial owners is just as simple. Another crucial point is that incorporation of trusts (requiring them to incorporate or register in order for them to legally exist) is the only way to enforce trust registration. This idea currently applies to companies and other legal entities similar to trusts in their effects, like foundations.

Taking on the trusts

In May 2015 the European Union approved the 4th Anti-Money Laundering Directive, establishing central registries of beneficial owners[1] for companies and legal persons (in Art. 30) but leaving glaring loopholes when dealing with the beneficial owners of trusts (in Art. 31).

In response to this, we published a paper suggesting amendments both to the EU Directive but also to the FATF[2] Recommendations’ definitions of beneficial owners of trusts. In contrast to some countries’ regulations (e.g. the UK and the U.S.) that limit the definition of the beneficial owner of a trust to the trustee and anyone with control, we favour a definition that encompasses all related persons of the trust as beneficial owners (all settlors, protectors, trustees, beneficiaries, classes of beneficiaries, and any other person mentioned in the trust deed with control over the trust). This ought not be controversial: the OECD’s Common Reporting Standard (CRS) for automatic exchange of information already requires financial institutions in more than 100 countries to take this approach when identifying the beneficial owners of their trust clients.

In a set back for transparency, in July of 2016, the French Constitutional Court banned the newly introduced French public registry of trusts on the basis of an individual’s right to privacy. Our arguments, which can be found here, rely on a very basic principle: trusts should not be considered a private matter if they can be used and abused to commit financial crimes (e.g. tax evasion, money laundering) and also to defraud legitimate creditors. In essence, we propose a basic principle of responsibility: if you want your trust provisions to be binding on third persons (e.g. a personal creditor to whom you owe money), then a trust must be registered and its beneficial owners publicly disclosed. You don’t need to register anything else that can have no effect on people not related to the trust arrangement.

But, back to the beginning: the problem with trusts goes way beyond their sophisticated secrecy that allows so many crimes to be committed. This new paper explores trusts as creatures of history. While they had good reasons to exist centuries ago (e.g. to protect the family of knights joining the crusades in the Middle Ages), trusts have been used across time to evade and avoid taxes and restrictions placed on asset ownership or transfer by governments.

More recently, new types of trusts and provisions, such as spendthrift provisions and discretionary trusts (available not only in traditional tax havens but some of them also in the U.S. or the UK), allow trusts to be used as asset protection vehicles. This effectively shields assets from legitimate creditors of settlors and beneficiaries, such as tax authorities, former spouses or victims of damages (e.g. mala praxis). Such schemes are being offered instead of an insurance (after all, why pay an insurance premium as a medical doctor if your personal wealth can be protected by placing it in an asset protection trust?).

The results for society can be devastating: in the case of malpractice by a doctor, the claimant will be unable to reach the doctor’s assets for compensation even after trial, while the doctor can avoid liability and financial responsibility for (gross) negligence. Trusts also allow wealth to be accumulated for centuries (reducing or avoiding inheritance tax in the meantime), and inequality inevitably deepens.

To make matters worse, traditional trust rules that did ensure a certain level of good governance are being eroded, such as the rule against perpetuities (to limit the duration of trusts), limits to the settlor having control over the trust or being “a” or “the only” beneficiary of the trust, the requirement for trusts to have beneficiaries (e.g. purpose trusts) and even the very control and management by the trustee (e.g. the BVI Vista Trust).

Often, trusts’ asset protection (and secrecy) is justified by the need to protect vulnerable persons. Yet nothing in trust law requires trust beneficiaries to be vulnerable or minors. And – as our paper shows – specific exemptions could accommodate such concerns easily without creating uncontrollable risks or loopholes.

Trusts offer even more asset protection than an ordinary company. While both trusts and companies may achieve a similar separation of assets and limit liability, corporate shareholder’s personal creditors have one last resort if the shareholder doesn’t pay back: claim the shareholdings (and eventually reach corporate assets). Trusts, in contrast, have no shareholdings. Therefore, if the trust is structured so that beneficiaries have no vested interest (e.g. in a discretionary trust), personal creditors of the settlor and beneficiary have no access to trust assets.

For decades trust law has evolved without democratic scrutiny, and is frequently abused for nefarious purposes. We frankly doubt whether trust law would look as it does if society were aware of the potential harm that trusts can cause.

Our latest paper thus tries to start a new, more critical debate on trusts. Not only on the secrecy that they enjoy (and the fallacious arguments that prolong it), but a more profound discussion on whether society still needs all the current provisions available for trusts, given their huge potential for abuse.

[1] The natural persons who ultimately own, control or benefit from a company, trust or any type of entity or arrangement.

[2] Intergovernmental body in charge of setting up and reviewing Anti Money Laundering Recommendations

You can read the paper we’re releasing today Trusts – Weapons of Mass Injustice here.

— source

Inside India’s domestic tax havens

Everything about B-8 too is fake, although it serves as the registered address of at least 75 companies. There are no employees, no assets and, in fact, no real business. It’s just a drop box address – one of 6,460 across Delhi that mask as the headquarters for 41,448 shell companies, official figures accessed by HT shows.

Shell companies, the backbone of any shadow economy, are back in focus after Prime Minister Narendra Modi pulled out 86% of the cash in circulation in an ambitious campaign to stamp out corruption and ‘black money’.

But many tax evaders avoided Modi’s dragnet using phantom businesses and converted slush funds into legal money, officials and experts said.

An HT investigation based on an analysis of 10.26-lakh entities with the Registrar of Companies (RoC) found at least 133,256 drop box companies from 16,634 drop box addresses in two cities alone—Kolkata and Delhi. A majority of these companies are registered in Kolkata.

The businesses incorporated are legitimate since they do not violate any law. Yet, shell companies, which are used as conduits to convert illicit money into legal cash, are the central piece of the country’s money laundering chain.

With new, stringent guidelines in place, the government had hoped that more than Rs 9-10 trillion would return to the banking system and the treasury would be able to wipe out Rs 5 trillion of illicit cash.

But that did not happen. Much of Rs 15 trillion taken out of circulation was returned to the formal banking channel.

Government officials and experts believe shell companies such as those listed at B8 Ansal Towers played a role in helping avoid detection of ‘black money’.

In the first case of organised money laundering registered after demonetisation against Axis Bank’s Kashmiri gate branch, the Enforcement Directorate (ED) found that “huge monies were transferred through RTGS transfers (online transfer) to some shell companies including a case where the director of such a firm was a ‘petty labourer’”.

Books of shell companies are well maintained. They have their accounts audited, tax returns filed regularly and a functioning bank account. In most cases, directors and shareholders are unrelated persons and often untraceable. Except their identities, they have no direct stake.

This brings in the element of deniability and anonymity, in case they are caught.

Absence of common data base of bank accounts, tax returns and company details make it easy for shell companies to comply with individual statutory agencies.

For instance, there is no violation of income tax act as long as they pay their tax dues. Unless there is a criminal case, there is no case of money laundering that ED can make out against them.

The utility of shell companies go beyond money laundering. They come in handy for skirting regulations, for big corporations in paying-off by covering their tracks and siphoning off loan.

In law enforcement circles, domestic shell companies have a nick name, “Kolkata companies”. The city still is the epicentre of the shell-company industry.

Adjoining West Bengal’s seat of power, the Writers Building, the narrow bylanes of the Lal Bazar area is a mini tax haven in itself. From here, 180 drop box addresses and 11,120 companies are functioning.

“In every scam, shell companies are used for pay-offs and inevitably it involves Kolkata-based shell companies,” a senior ED official said

— source

so what indians are happy to be in ATM queues.