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Saturday, March 2, 2024

Transocean tax case fallout continues

All charges were thrown out in Norway’s largest ever tax case last week, but the heated debate continued as the ramifications of the Transocean decision were picked apart. On Monday, former Transocean board member Kristian Siem accused the Norwegian authorities of being too aggressive before anything had been legally proven and said all companies had a responsibility to shareholders to minimize their tax costs, while on Tuesday Socialist Left politician Heikki Eidsvoll Holmås likened Siem’s statements to a “declaration of war” against the Norwegian business community.

Norwegian tax authorities spent nine years pursuing the world’s largest offshore rig company, Transocean, and three of its advisers over allegations of tax fraud. In a crushing defeat for the authorities and economic crime unit Økokrim, the Oslo city court acquitted all parties last week. Norway’s Tax Director Hans Christian Holte told newspaper Dagens Næringsliv (DN) he was unfazed by the defeat, and it had only strengthened his desire to tighten taxation control over large global companies. He said Norway would continue to combat anti-competitive behaviour, and took particular issue with multinationals exploiting tax legislation loopholes in multiple countries.

Top Norwegian tax experts and advisers have countered by calling the tax authorities’ operation a “crusade” against the business community and on Monday, billionaire businessman and investor Kristian Siem came out swinging against Økokrim, the Tax Administration (Skatteetaten) and the Labour Inspection Authority (Arbeidstilsynet). The 65-year-old is a 30-year veteran of Norwegian business and finance, and was a Transocean director for 16 years. His tenure on the board covered the period from 1996 to 2001 when Transocean was accused of gross tax evasion. Siem accused the authorities of having a personal agenda to punish the company, abusing their power, and of damaging Norway’s international reputation by acting aggressively before anything was proven in the case.

“After aggressive raids of several Transocean companies and advisers, they pointed at me as the only Norwegian on the board and asked how this could happen in Norway,” said Siem, of the US-headquartered business. “Their perception of Norway was characterized by president Roosevelt’s “look to Norway” as a pioneer country, and they were very surprised by being treated as tax evaders. In the same years Transocean paid NOK 459 million (USD 74.5 million) in tax to Norway.”

Siem said the principle of “innocent until proven guilty” was just as applicable in tax law, and that last week’s judgment was proof that at least the justice system worked in Norway. “That the board members in a company like Transocean should cooperate on a process that was on the edge of the law is highly unlikely,” he said.

DN question Siem on one of the points raised in the trial, where the rig Polar Pioneer was sold to another Transocean company based in the Cayman Islands a minute before midnight and towed out of Norway for a few hours, before being returned. It saved the company almost NOK 200 million in tax. “The board of every company is concerned with doing things right,” Siem replied. “Transocean has 300 companies in 80 countries, and uses the best advisers in every country to find the best tax solutions for the company, there is nothing odious about that. Our advisers believed this was within the law, and the court fully upheld this last Wednesday.”

Family feud
Siem’s issues with the tax authorities run deeper. He is the principal shareholder in Siem Offshore, which last month was hit with a NOK 10 million fine for failing to file Norwegian tax returns for three years. “The company was at that time registered abroad, and we followed the advice of our advisers,” Siem maintained. “When we were advised that we should pay tax to Norway, the conditions were settled at once. To be accused and fined for deliberate tax evasion, we cannot accept.”

Meanwhile his brother, farmer and investor Ole Martin Siem, was reported by the Labour Inspection Authority for serious violations of labour laws and human trafficking at his Vestfold farm. A police investigation found the majority of the authority’s charges were unfounded.

The Tax Administration’s legal director Jan Magnus denied there was ever anything personal in its approach to cases. “Our goal is correct decisions, and the scope of our mission is to determine the right tax at the right time,” he told DN. “That is our social mission. The administration has no interest in demanding higher tax than necessary. We have no personal interest in the outcome of our cases. The statistics show however that in the few cases that end up in court, we were upheld in the majority of the cases.”

Companies’ responsibility to shareholders and banks
Siem was asked for his opinion on the fact that national companies tended to pay much higher taxes than multinationals, because the latter can “shop” for tax laws in different countries without technically breaking the rules.

“All companies have responsibility to their owners and lenders to pursue a professional tax plan aimed at avoiding double taxation and minimizing the total tax bill,” he argued. “Everyone must deal with the tax legislation in each country. With large international business, I understand that the tax offices have a challenge in keeping up. But that must not lead to aggressive attitudes and methods which do not belong in a civilized society.”

Declaration of war
The Socialist Left party’s (Sosialistisk Ventsreparti, SV) Holmås has been particularly concerned with tax evasion as a member of the parliament’s finance committee and the former minister for development. He lashed out at Siem’s statements on Tuesday, labeling the notion that all companies have a responsibility to their owners to minimize their tax bill as “Siem’s doctrine,” and likening it to a declaration of war against nationally anchored businesses and the community.

“Now rich countries are also seeing that the use of tax havens provides the opportunity to move profits from one country with high tax rates, to countries with low tax rates,” Holmås said. “This poses a threat against both the tax base and nationally anchored companies in each country. The problem with what we’re seeing from companies like Transocean and others, is that they run an aggressive tax plan which has one objective, namely to get out of the most tax possible.”

Siem responded that any company that makes use of tax planning does so to reduce, not increase taxes, and that Holmås was wrong to interpret his statements as a willingness to abuse tax loopholes beyond what was legal.

Parliamentary control
Holmås said parliament was committed to controlling the issue. “There is a pronounced political will from the parliamentary majority to do what we can to limit aggressive tax planning,” he said. “But I think it is almost impossible to make good enough rules that manage to anticipate all the antics companies are willing to take to avoid the tax.”

However, Conservative (Høyre) politician and lawyer Michael Tetzschner said he found nothing provocative in Siem’s statements, and it was a fact that the prosecution lost the Transocean case emphatically on all points. “It is the attitude Parliament itself assumes that taxpayers have when Parliament approves the tax legislation,” he told DN. “Then it cannot be immoral when the companies de facto adapt themselves to the tax and duty regime.” Woodgate



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