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1 Examining New Trends in Money Laundering, Tax Evasion and the Development of the Informal Economy March 18th 2013 Lic. Zenón A. BIAGOSCH FIDESnet President

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Page 1: Examining New Trends in Money Laundering, Tax Evasion and ... · 1 Examining New Trends in Money Laundering, Tax Evasion and the Development of the Informal Economy March 18th 2013

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Examining New Trends in Money Laundering, Tax Evasion and the

Development of the Informal EconomyMarch 18th 2013

Lic. Zenón A. BIAGOSCHFIDESnet President

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Agenda

1. Global budget deficit.2. Tax evasion, tax havens & ML.

Some statistical data.3. International response.4. Some analysis and questions.

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1. Global budget deficit

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• U$S 4.480.000.000.000Global budget deficit

‘2010(Source: www.worldbank.org)

• U$S 3.100.000.000.000 Tax Evasion(Source: www.taxjustice.net)

• U$S 21.000.000.000.000 / U$S 32.000.000.000.000

Money in tax havens(Source: www.taxjustice.net)

• U$S 1.400.000.000.000 / U$$ 3.500.000.000.000

Money Laundering(Source: www.fatf-gafi.org)

Some statistical data

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Budget Deficit

Global Indicators U$S trillions

World GDP ´2011 70Budget Deficit ‘2010 4.48Fundraising ‘2010 16Public expenditure ‘2010 20.48Military expenditures ‘ 2011 1.75Expenditure on education ‘2008 3.22

EEUU - fiscal year deficit 2012 (30/09/2012) U$S 1.09 trillions

(Source: www.worldbank.org )

Deficit ‘2011 Euro Zone (17 countries) Euros 390.7 billions

Deficit ‘2011 European Union (27 countries) Euros 560.8 billions

EEUU - estimated fiscal year deficit 2013 U$S 845 billions(Source: www.cbo.gov/)

(Source: http://epp.eurostat.ec.europa.eu)

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2.Tax evasion,

tax havens & ML.Some statistical data

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• U$S 4.480.000.000.000Global budget deficit

‘2010(Source: www.worldbank.org)

• U$S 3.100.000.000.000 Tax Evasion(Source: www.taxjustice.net)

• U$S 21.000.000.000.000 / U$S 32.000.000.000.000

Money in tax havens(Source: www.taxjustice.net)

• U$S 1.400.000.000.000 / U$$ 3.500.000.000.000

Money Laundering(Source: www.fatf-gafi.org)

Some statistical data

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Different Realities – Informal Economy

(Source: “Shadow Economies All over the World”www.worldbank.org)

G7 countriesInformal Economy

Size%

EEUU 8,6

Japan 11,0

UK 12,5

France 15,0

Canada 15,7

Germany 16,0

Italy 27,0

South América and México

Informal EconomySize

%

Chile 19,3Argentina 25,3Mexico 30,0Ecuador 32,4Venezuela 33,8Colombia 37,3Paraguay 38,8Brazil 39,0Uruguay 50,6Peru 58,0Bolivia 66,1

Simple average = 39,14 %Simple average = 15,11 %

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Tax Evasion - Top Ten

(Source: “The Cost of Tax Abuse” www.taxjustice.net)

Country GDPU$S trillions

Informal Economy

Size%

Average taxaliquot

%

Estimatedtax evasionU$S billions

EEUU 15 8,6 26,9 337Brazil 2 39,0 34,4 280Italy 2 27,0 43,1 239Russia 1 43,8 34,1 221Germany 3 16,0 40,6 215France 3 15,0 44,6 171Japan 5 11,0 28,3 171China 6 12,7 18,0 134UnitedKingdom 2 12,5 38,9 109

Spain 1 22,5 33,9 107TOTAL 2 trillions

64 %Total Percentage

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Different Realities – South America

Country GDPU$S billions

Informal Economy

Size%

Average taxaliquot

%

Estimatedtax evationU$S billions

Argentina 369 25,3 26,1 24Colombia 288 37,3 19,3 21Venezuela 388 33,8 13,6 18Peru 154 58,0 16,0 14Chile 203 19,3 18,6 7Bolivia 20 66,1 28,5 4Uruguay 40 50,6 17,9 4Ecuador 59 32,4 16,0 3Paraguay 18 38,8 11,8 0,8

TOTAL 96

Brazil 2 trillions 39 34,4 280 billions

3 %Total Percentage 12 %

(Source: “The Cost of Tax Abuse” www.taxjustice.net)

Simple average 40,18 %

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Different Realities

World GDP U$S 70 trillions

G 7 Estimated Tax EvasionU$S 1322 billions – 43 %

South America EstimatedTax Evasion (without Brazil)

U$S 96 billions – 3%

G 7 Estimated Informal Economy Size15,11 % GDP

South America EstimatedInformal Economy Size

40,18 % GDP

The estimated G-7´s tax evasion quadruples the same indicator in South American countries.

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Different realities – Participation of total global banking assets

(Source: www.pwc.com )

• 60.6 %USA + UK +Germany+ France +Italy + Canada

+ Australia + Japan

• 12.3%BRIC =

China + India + Russia +Brazil

• 0.1 % Argentina

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• U$S 4.480.000.000.000Global budget deficit

‘2010(Source: www.worldbank.org)

• U$S 3.100.000.000.000 Tax Evasion(Source: www.taxjustice.net)

• U$S 21.000.000.000.000 / U$S 32.000.000.000.000

Money in tax havens(Source: www.taxjustice.net)

• U$S 1.400.000.000.000 / U$$ 3.500.000.000.000

Money Laundering(Source: www.fatf-gafi.org)

Some statistical data

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2010’ Ranking - Main contributors

(Source: “The Price of Offshore Revisited”www.taxjustice.net)

Argentina: U$S 399 billions

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2010’ Ranking – Assets managed by 50 major global private banks

TOTAL: U$S 12.100.000.000.000(Source: “The Price of Offshore Revisited”

www.taxjustice.net)

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• U$S 4.480.000.000.000Global budget deficit

‘2010(Source: www.worldbank.org)

• U$S 3.100.000.000.000 Tax Evasion(Source: www.taxjustice.net)

• U$S 21.000.000.000.000 / U$S 32.000.000.000.000

Money in tax havens(Source: www.taxjustice.net)

• U$S 1.400.000.000.000 / U$$ 3.500.000.000.000

Money Laundering(Source: www.fatf-gafi.org)

Some statistical data

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Cost of money laundering raises, at a sum that varies between 1.4 trillion and 3.5 trillion dollars.

Source: www.fatf-gafi.org

Some statistical data

The cost of money laundering is estimated between 2 and 5 % of global GDP.

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Argentina – AML framework

Date Issue

2000 Argentina enacted the first AML law No. 25.246, including taxcrimes as predicate offences.

2011Law No. 26.683 authorized the Financial Intelligence Unit to handle suspicious activity reports of proceeds from serious tax offenses.

2011 / 2012Resolutions of the Financial Intelligence Unit describes the parties obligations to report money laundering cases of proceeds from tax crimes.

Some statistical data

GDP U$S 369 billions

Informal Economy Size 25,3 %

Estimated tax evation U$S 24 billions

Participation of total global banking assets 0,1 %

Money in tax havens U$S 399 billions

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3. International response

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FATF/GAFI New Recommendation 3 – Tax Crimes

“When deciding on the range of offences to be covered as predicate offences under each of the categories listed above, each country may decide, in accordance with its domestic law, how it will define those offences and the

nature of any particular elements of those offences that make them serious offences.”

Participation in an organised criminal

group and racketeering

Terrorism, including terrorist financing

Trafficking in human beings and migrant

smuggling

Sexual exploitation, including sexual exploitation of

children

Illicit trafficking in narcotic drugs and

psychotropic substances

Illicit arms traffickingIllicit trafficking in stolen and other

goodsCorruption and

bribery Fraud Counterfeitingcurrency

Counterfeiting and piracy of products Environmental crime Murder, grievous

bodily injuryKidnapping, illegal

restraint and hostage-taking

Robbery or theft

Smuggling

Tax crimes (related to direct

taxes and indirect taxes)

Extortion ForgeryPiracy

Insider trading and market manipulation

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Organisation for Economic Co-operation and Development (OECD)

• Global Forum on Transparency and Exchange of Information for Tax Purposes.• 109 countries.• “Peer Review” evaluation process.

Tax Transparency

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Foreign Account Tax Compliance Act(FATCA)

• Law approved in the United States in March 2010. • Objectives:

– Force evasors to comply with their tax obligations in compliance with laws. – Identify evasors that hide their profits abroad– Force “Foreing Financial Institutions” (FFIs) to identify “U.S. Person” that keep accounts

abroad for its subsequent IRS report (Internal Revenue Service).

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4. Some analysis and questions.

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Some analysis and questions

As the resources for the implementation of criminal policy tools are not enough, Is it convenient to give the same priority to the control of money laundering coming from

the so-called serious crimes to money laundering coming from tax evasion?Would it be more appropriate for the FATF to apply a risk based approach suitable for

the different realities of the regions of the world?

Do the money laundering figures estimated by the FATF include tax evasion as the origin of laundered funds?

Why do the FATF recommend to apply the same tools used for the control of money laundering coming from organized crime, to the money laundering coming from tax

evasion?

Where do funds that finance those huge budget deficits come from?Could they come, to some extent, from offshore centers?

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Some analysis and questions

How should the private banking business of the major financial institutions of the world be reformulated from this new reality?

Are the consequences to the economic, political and institutional order of organized crime comparable to the consequences of tax crimes?

Isn´t the inclusion of tax crimes and the application of a risk-based approach contradictory?

Is the global money laundering prevention system the best framework to fight tax crime?

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Without underestimating the importance of the evasion control as State policy,

Wouldn't it be more convenient to accept that the most effective way for its reduction is achieved through good administration of public resources with responsibility, transparency and efficiency?

Some analysis and questions

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