Banks and big companies take advantage of tax havens to evade their taxes

Francesc Ferrer

If we were in a democratic system, we would all be equal before the law, as provided in section 14 of the Spanish Constitution. In this text, we will see how far from reality things are.

Nine out of ten fortunes in Spain evade their taxes. The trade union Gestha, made up of workers of the Treasury Department, has reported that nearly 86% of Spanish fortunes with assets over 10 million euros do not comply with their monetary duties by not paying their due taxes. According to the Treasury personnel, fraud is committed basically through movable capital and real estate properties.

Currently, there are only 132 tax payers declare a net holding of over 30 milion euros, which implies an income of nearly 42.5 million euros for the Treasury and an average of 322,000 euros per tax payer. Around 2,525 citizens declare a net holding between 6 and 30 million euros, which represents 10% of the overall budget revenue on holding taxes.

According to Gestha, underground economy in the Spanish State accounts for 23% of GDP, which means an extra 208,000 should have been paid in to the Treasury in 2007. The majority of this money has been stolen by the richest people in the country to the whole society in a single year.

A remarkable percentage of these evaded taxes goes to tax haves, that is, countries where taxes barely exist, or do not exist ar all, for foreing capital deposited in their banks, who, in their turn, usually highlight the professional secret as a great advantage for their clients.

According to the magazine “Temas” (in English, litterally “Topics”), published by the oganisation Attac, the data available, although limited, confirms intensive use of financial centres with low taxes or no taxes at all by banks and businesses in Spain. As reported by the Industry Department, in the second half of year 2007 Spanish companies have taken out of the country over 3,000 million euros to tax havens and to countries with very low taxes such as the Netherlands. Banks also use their branches in tax havens. The former head of the Public Prosecutions Office Against Corruption, Carlos Jiménez Villarejo, has denounced this fact provinding examples such as the case of Banco Santander and BBVA, both having over 30 branches in these countries, mainly at the Cayman Islands. Nuria Almirón, author of the book “Juicio al poder” (in English, litterally “Legal Procceeding to Power”), states that between 10 and 15% of corporations belonging to these banks have their headquarters in tax havens. This is a well known fact to the monetary world, but once and again silenced by the mass media. All this information has been taken from the magazine mentioned above.

The case of credit assignments

The presumed crime of certain banks hasn’t been ignored by some people and institutions that have opened criminal cases against them; however, it is another thing to convict them.

A prime example of banks immunity in the judicial system is Banco de Santender’s credit assignments. Between 1988 and 1989, Santender collected almost half a billion pesetas—more than 3 billion euros—in new deposits. To attract such a large quantity of money in such a short period, this financial entity relied on the use of a legal figure—bare ownership credit facilities—that consists in transferring the legal responsibilities of one creditor to another, pretending to free these deposits from their fiscal responsibilities. Based on a petition by the Agencia Tributaria (the government tax agency), records indicate that 9,566 changed-title operations by the bank were submitted to the Ministry of Finance. These transactions accounted for 145 billion pesetas and listed among their supposed title-holder the deceased, the unemployed, and retirees without purchasing power. In the close of the investigation, the Agencia Tributaria claimed that more than 14 billion euros in the capacity of taxes had not been received and, additionally, 1,500 operations had not been identified or whose titles had been found. From the judicial investigation it was found that the bank provided instructions to its clients to hide data from the Ministry of Finance and from the investigation of the Agenica Tributaria.

Over 15 years of the judicial processes, despite being the largest fiscal fraud in the history of the Spanish state, BSCH was able to be acquitted by the Ministry of Justice, representing the Agencia Tribunal, asking that the case be shelved 7 times (in the same way that the Ministry of Finance did, asking that it be shelved up to 15 times.)

Finally, on December 3, 2007, the Supreme Court decided, by a majority, to close the case of the credit facilities in which the president of Santender, Emilio Botín, was implicated; the only charges remaining open were those of private prosecution by ADIC and IC. NOMBRES COMPLETOS. The surprising justification for this closure was that “a case cannot be opened only for instances of private prosecution if those affected by the crime do not form part of the accusation.” On the other hand, in all of the “Law of Criminal Judgment” there is no precept that limits the powers of disposition and accusation of private prosecution and therefore there is no legal justification for not finding private prosecution insufficient for a trial.

As there were not any precedents in the sentence of the Supreme Court, the verdict in the credit facilities case has become know in judicial circles as the Botín Doctrine, a denomination that gives us an idea of that power that a banker can have at the hour of judgement (to the point that the law is reinterpreted to not condemn them). The proof is this afterwards, in December 2007, in at least cases the defense has asked for the application of the Botín Doctrine (the cases of Atutxa and Ácido Bórico) and the tribunals have rejected it. So we can conclude that the only clear thing about this doctrine is its name: that is applies to Emilio Botín, period.

This hasn’t been the only reason why the most powerful banker of the state has been freed from conviction because of the lack of interest in prosecuting him on the part of the attorney general. In November 2006 a private prosecution was filed against Botín and 21 others illustrious financial figures responsible for the purchase of Banesto by Banco de Santender; among them the ex-governor of Banco de España, Luís Angel Rojo, and other members of the Botín family. They were charged, among others, with 262 billion pesetas worth of tax fraud and the misallocation of public funds for another 327 billion pesetas. Judge Garzón again filed the complaint with the attorney general.

When can interpret this how we want, but we have to know that the state—be it the government or the judicial system—will always abdicate its functions when it finds itself in front of Power in capital letters.

[NOTE]: Translation of the text below is under way!
( DESPIECE )

Una lei centenaria prohibe la usura pero a penas se aplica

La “ley de represión de la usura” que fecha del 23 de julio de 1908, sigue vigente después de haber recibido algunas modificaciones por la ley de enjuiciamiento civil 1/2000. El artículo primero de la ley dice “será nulo todo contrato de préstamo en que se estipule un interés notablemente superior al normal del dinero y manifiestamente desproporcionado con las circunstáncias del caso”. Al no determinar la ley qué significa “notablemente superior” ha sido históricamente el Tribunal Supremo el encargado de crear jurisprudencia. Sus sentencias en todos estos años han acostumbrado a calificar de nulos los contratos a partir de 2,5 veces más que el precio del dinero. Como actualmente el precio del dinero está situado en el 4,25%, si se sigue esta doctrina, los prestamos operativos hoy en dia por encima del 10,7 de interés, deberian ser declarados ilegales. Casos como los de muchs tarjetas de crédito de los bancos y muchos préstamos de Bancos y Establecimientos Financieros de Crédito (EFC) que funcionan por teléfono e internet (per ex. Cofidis, Finconsum, Mediatis...) deberian ser anulados en masa, dado que lo superan con creces y algunos de ellos están por encima hasta el 20%.
Aún así al ser tan desconocida hay pocas denuncias en base a esta ley y en cambio se permite que los prestamos de este tipo se anuncien por TV y prensa, sin tomar ningún tipo de medida al respecto.