Analysis: How rich oil firms are using a secretive court to fight capital gains tax in developing world

By George Turner from Finance Uncovered.

At a little known but powerful international court of arbitration, so secretive that senior officials decline to disclose even the dates of hearings, a new case has been filed that will pitch a mighty US oil major from Houston, Texas, against one of the world’s last Communist-run countries.

On the face of it, this battle between ConocoPhillips and the Socialist Republic of Vietnam is as dry as it gets. Hardly anyone has yet heard of it.

But the result could mark a significant shift in the way huge multinationals fight off the threat of taxes from desperate revenue authorities in developing countries.

For ConocoPhillips is using the not-so-glamourous Bilateral Investment Treaty Mechanism of the UN to launch a pre-emptive legal strike against Vietnam’s intention to levy an estimated $179m capital gains tax charge on oil fields sold by one of its UK subsidiaries.

Capital gains: A new frontier

Think of any of the major tax avoidance scandals that have dominated headlines in the last ten years: Google, Facebook, Apple, Nike, all have focused on profit shifting, the art of moving money out of profitable markets and into tax havens as a means of avoiding corporate income tax.

Most commonly, profit shifting happens when companies move revenues abroad, for example by billing their customers from an offshore company, or by invoicing a local business for fees and costs from an offshore company.

However, there is another important form of tax avoidance which multinationals frequently abuse but which has received little attention from the media: avoiding tax on capital gains.

Over the next few years, as more countries claim their resources have been bought and sold by foreigners tax free, this issue is likely to become a new frontier in the anti-tax avoidance campaign.

A capital gain is where a company or an individual sells an asset and makes a profit on that sale due to an increase in value of the asset being sold. Think of selling a house. The money you make by the virtue of your house increasing in value is your capital gain.

When it comes to major multinational mergers and acquisitions the capital gains can be enormous, and tax can easily be avoided if deals are structured offshore.

Capital gains tax: Made in Vietnam?

In 2012, a UK subsidiary of ConocoPhillips sold two other UK companies it owned, ConocoPhillips Gama Limited, and ConocoPhillips Cuu Long. It sold them to a UK company owned by Perenco, the Anglo-French oil firm. Perenco is also a party to the arbitration.

The only assets held by ConocoPhillips Gama and Cuu Long were Conoco’s oil interests in Vietnam.

ConocoPhillipsAccording to accounts filed at UK Companies House, ConocoPhillips sold the companies for $1.3bn making a profit of $896m. Buried in the detail of those accounts, a small note states that the company paid no taxes on that capital gain.

Why? Because Britain operates a loophole known as a “substantial shareholder exemption”. This means that profits on the sale of shares in subsidiary companies are not subject to capital gains tax in the UK.

But although the UK may choose not to levy any capital gains tax, that has not prevented Vietnam’s policymakers from trying to do so.

Under the terms of the UK-Vietnam tax treaty, Vietnam has the right to tax any capital gains made by UK companies that originate in Vietnam. If the profits on the deal were subject to the standard corporation tax rate in Vietnam, then ConocoPhillips could have to cough up an estimated $179m to the Vietnamese government.

So the question therefore becomes, what and where is the source of the profits?

If you are ConocoPhillips, the value is all in the shares, and the profit should be located in the UK. When we asked the company about the deal a spokesman said: “The sale was between two UK incorporated and resident entities with no taxable presence in Vietnam. The target companies are also UK companies. As a result, no taxes were owed on the sale in Vietnam.”

The Vietnamese government takes a different view, claiming the profits really arise out of the transfer of the oil assets. As these were located in Vietnam, it says that’s where they should be taxed.

Indeed, Vietnam has signalled its intention to tax the transaction – and that has alarmed not only the US oil giant, but also in all likelihood other similarly powerful corporations.

The potential precedent for multinationals

If Vietnam is successful, there could be profound implications for other developing countries, which have often seen Western companies make huge profits on their investments, only to walk away with them tax-free.

It is an issue that has concerned policymakers at the highest levels of the United Nations and the Organisation for Economic Cooperation and Development. In essence, the argument is: if multinationals make fortunes from a poorer country’s resources, then surely the host should have the right to levy the appropriate tax on the gains.

But ConocoPhillips is holding firm, telling Finance Uncovered that it would “pursue all available legal remedies to challenge any attempt by Vietnam to tax the transaction”.

And that is exactly what the company is doing with this new legal move: it wants to stop the threat in its tracks.

ConocoPhillips and Perenco have quietly filed a petition in the secretive investment tribunal, requesting it orders Vietnam not to levy the tax.

Unusually, the case is being brought under the UK-Vietnam Bilateral Investment Treaty, which is subject to an arbitration process run by a little known corner of the United Nations System, The United Nations Commission on International Trade Law.

The use of the Bilateral Investment Treaty Mechanism is itself controversial. Such disputes are expensive, opaque and are not usually used to settle tax disputes.

Cavinder BullNeither ConocoPhillips nor Cavinder Bull (pictured, left), a senior Singaporean barrister and chairman of the arbitration panel looking into the case, would disclose the location, or the dates, of the hearings.

And this case is thought to be the first to look at the issue of capital gains tax. If it goes ahead, that itself could act as a deterrent to developing countries trying to levy taxes because such battles cost fortunes in legal fees – about $5m a case, on average.

Michael Lennard is the Chief of the UN International Tax Cooperation Section who is currently on sabbatical as a visitor at the Oxford University Centre for Business Taxation. He has negotiated many tax and investment agreements, and speaking in a personal capacity he told Finance Uncovered: “The proceedings are held in secret, with expensive Western law firms often having to be hired to deal with arcane procedures.

“Most of the potential arbitrators in tax-related cases are not tax experts or else are tax advisers to corporations, with insufficient experienced and non-partisan arbitrators from the developing world (such as academics), not enough women and not enough younger experts.

“As a result it is extremely difficult for developing country governments to secure the expertise they need to defend these cases.”

For many, this reeks of injustice: big multinationals using the sledgehammer of a secretive and prohibitively expensive court to deprive developing countries of the revenue they feel is theirs.

Jayati Ghosh, a renowned professor of economics at Jawaharlal Nehru University in New Delhi, said: “Developing countries’ experience with the outcomes of such cases does not inspire optimism, as it is well known that the panels tend to be more investor friendly and generally support the claims of firms over the rights of governments or even the human rights of their citizens.”

Perenco declined to comment.

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A Brief History Of The Rothschild Banking Family

1

You may not know it, but the Rothschilds, a Jewish banking family, has been hidden behind the curtains of civilization pulling the strings on almost every ill inflicted on western society for over 200 years.


2

1763: The founding of the House of Rothschild and the New World Order by Meyer Amschel Bauer who was taught by his father, a banker. Amschel Moses Bauer taught his son, Meyer, everything about moneylending and finance. Meyer then went to work for the Oppenhiemer’s bank.


3

He found much success in this endeavor and later returned home, purchased his father’s business and renamed it Rothschild aka “Red Shield” in German.


4

Working with the Oppenhiemers, Meyer Rothschild learned that lending money to governments was more profitable than lending to individuals – AT INTEREST!


5

Towards the end of Meyer’s life, he sends his 5 sons Nathan, Salomon, Anselm, Carl and James to different countries across Europe to establish family banks.


6

Salomon was sent to Austria, Carl traveled to Italy, James to France, Nathan to London and Anslem stayed in Frankfurt, Germany. This was accurately depicted in the 1934 Hollywood movie ‘The House of Rothschild’.


7

To this day, the Rothschild family remains the dominant and commanding force behind Globalism, Zionism, phony environmentalism (the “Global Warming” scam) and Liberalism.


8

1774: The British Currency Act is introduced which forbids the American colonies from issuing their own debt-free currency.


9

A combination of the Tea Act of 1773, the Currency Act and the Boston Massacre sparked a revolutionary spirit throughout the colonies.


10

The Rothschilds finance the British resistance while Jewish money-lender Haym Salomon funds the American Revolution.

This conflict greatly weakened both sides, leaving both vulnerable for future takeovers and heavily in debt.


11

In 1776, the Jew Adam Weishaupt establishes ‘The Illuminati’ which was a secret society for wealthy socialites.

They disbanded in 1784. Weishaupt was an acquaintance of the Rothschild family and was funded by them. In secret, they plotted to further their New World Order agenda.


12

1789: The French Revolution overthrows the Monarchy of France. King Louis XVI, Marie Antoinette & 40,000 others are killed by Jacobans.

British historian Nesta Webster, indicates a “foreign” source funding the Jacobans with hopes of starting “worldwide revolution.”


13

Throughout the years of 1798 – 1815 Rothschild banks are established all across Europe. The brothers had succeeded in their mission.


14

1790: Thomas Jefferson & Alexander Hamilton clash over the 1st Bank. Hamilton wins and the First Central Bank of America is founded.

Alexander Hamilton was a New York banker, educated in a Jewish school and founder of the 1st Bank of America – a clear Rothschild agent.


15

1799: The Rothschilds encounter their first major obstacle for world financial conquest – the French revolutionary leader Napoleon Bonaparte.


16

When Nathan Rothschild heard of Napoleon’s return from exile, he instructed his workers to start selling bonds on the Stock market.

This caused everyone to believe Napoleon had won and so proceeded to sell everything they had off in the Stock market too. 1934 film below.


17

However, when Nathan heard of the victory at Waterloo through carrier pigeon, he bought up everything at the Stock market at rock bottom prices.

This is something that is VITAL to understand. This is how the Rothschilds bought up Britain.


18

1811: The Bank of America’s 20 year charter is about to expire. President James Madison refuses to renew the charter as he disliked the central banking system. Britain soon threatens war.


19

1814: The Rothschild financed war brought British forces to Washington D.C to protest the expiration of the bank. They burn the White House.


20

Eventually, a storm extinguishes the fire and both countries makes peace through negotiations. In 1816, the 2nd Central Bank is established. America now once again belongs to the Rothschilds. Within just 3 years, the Bank creates its first panic known as the Panic of 1819.


21

The Panic of 1825 is engineered by the Bank of England. Throughout 1832-35, President Andrew Jackson battles with Bank boss Nicholas Biddle.

Andrew Jackson runs his entire campaign on “killing the bank” and kill the Bank he later did.


22

1835: Jackson pays off the National debt and closes the Central Bank. The Rothschilds now begin assassinations attempts on Jackson. All attempts on Jackson’s life ultimately fail.


23

In 1836, the 2nd Central Bank of America is finally killed, and America will remain free of Rothschild clutches until 1913 when the bill for the Federal Reserve was passed.


24

Little known fact: Karl Marx, a German Jew and author of ‘The Communist Manifesto’, was related to the Rothschild family through marriage.


25

1840-1880: 7 assassination attempts are carried out against Queen Victoria. This sends a message of intimidation to the Royal Family.

To this day, the Rothschild’s banking dynasty is run from the financial district ‘The City of London.’ The Queen does not dare confront them.


26

The Rothschilds financed BOTH sides during the American Civil War. The aim was to weaken both sides, afterwards taking control of America and consolidate power in Britain.


27

1865: President Abraham Lincoln is assassinated by John Wilkes Booth. He defied the Rothschilds by printing debt-free money called ‘Greenbacks.’


28

1881: American President James Garfield is shot and later dies from the infected wound. Garfield despised the bankers. Another assassination?


29

1881: Communist Reds finally assassinate Russia’s Czar Alexander II after SEVERAL failed attempts. The Rothschilds are now after Russia, as their money supply remains free of their control. Multiple attempts were also made on Kaiser Wilhelm’s life.


30

1894: The Communist Reds kill the popular French President Marie Francois Sadi Carnot. He was close friends with Czar Alexander III.


31

1897: Communist Reds kill Spanish Prime Minister Antonio Canovas. 1898: Communist Reds kill Elisabeth of Austria. Both were popular, nationalistic leaders that were not interested in co-operating with the money-lenders.


32

The blood-lust of the violent Communist Reds inspired to act on propaganda can be seen today with the Antifa movement who can be described as modern day Reds. “Foot soldiers of the Rothschilds” if you will.


33

So we approach the 20th Century! This has been but a mini-compilation of events of the Rothschilds from inception to 1900. If you want a more comprehensive read then please read the book duology ‘Planet Rothschild’ which is an epic chronology of events.


34

For the Rothschilds, the 20th Century was a pivotal time that saw their most success but also their mightiest of obstacles. The most monumental was the German leader Adolf Hitler.


35

Let’s get a silly myth of the way – that Hitler was a Rothschild agent. This bizarre conspiracy theory is ludicrous and holds no weight. Hitler ARRESTED a Rothschild for his banking practices.


36

Adolf Hitler and the rise of Fascism in Europe w/ Benito Mussolini of Italy, Oswald Mosley of Britain and Corneliu Zelea Condreanu of Romania, was a major threat to the Rothschild’s New World Order. National Socialism/Fascism was sweeping across all of Europe.


 

Hungary Becomes First European Country To Ban Rothschild Banks

Hungary have become the first European country to officially ban all Rothschild banks from operating in the country. 

In 2013, Hungary began the process of kicking out the International Monetary Fund (IMF), and agreed to repay the IMF bailout in full in order to rid the country of the New World Order banking cartel.

Neonnettle.com reports:

A kindly worded letter from Gyorgy Matolcsy, the head of Hungary’s CentralBank , asked Managing Director, Christine Lagarde of the International Misery Fund, as some have fondly nicknamed it, to close the office as it was not necessary to maintain it any longer.

The Prime Minister, Viktor Orban, seemed keen to ease off austerity measures and prove that the country could go it alone. It in fact issued its first bond in 2011, borrowing off the global markets.

Hungary borrowed €20 billion loan to avoid becoming insolvent during the economic crisis in 2008. But the debtee debtor relationship has not been smooth sailing.

Many criticised the Prime Minister as making an ill-advised decision in order to win an election, which was due in 2014. He also wanted to refrain from having too many foreign eyes on their economic policies, as many reforms were criticised as being undemocratic.

Paying the loan back early has meant Hungary have saved €11.7 million worth of interest expenses, but Gordan Bajnai, leader of the electoral alliance E14-PM, claimed that they had actually lost €44.86 million by March 2014 because of the early repayment as all they did was replace the loan from the International Mafia Federation (another nickname, we’re still talking about the IMF here) with a more expensive one, labelling the stunt as Propaganda .

And what made further nonsense; another loan at high interest rates was signed to finance a nuclear upgrade, which will mean not only higher repayments but also high electricity costs. But they do have economic sovereignty now.

Many have claimed that the IMF AKA ‘Imposing Misery and Famine’, are owned by the Rothschild group, the biggest banking group in the world, having their fingers in almost every central bank in the world. This means that not only do they make money off usurious interest rates at the misfortune of crumbling economies, they also literally own Governments and people of power – I mean they have considerable influence.

Escaping the banking clutches is therefore, iconic. Iceland joined Hungary in 2014 when it paid back its $400 million loan ahead of schedule after the collapse of the banking sector in 2008 and Russia, of course bowing down to no Western puppeteer, freed itself in 2005, one wonders what other strings are attached though — and how long it will be before the international bankers wheedle their way back in.

The return of these three countries to financial independence has been said to be the first time a European country has stood up to the international fund, since Germany did so in the 1930s. Greece is anxiously trying to make payments but missing them as we all stand on the sidelines routing for them to stick two fingers up to the ‘International M***** F******’.