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Published online by Cambridge University Press: 23 November 2023
During the 1970s, governments increasingly expressed concerns about the loss of revenue through the use of tax havens by both individuals and corporations. This article explores a covert international working group (the Group of Four) set up between France, Germany, the United Kingdom, and the United States in 1969 in response to such concerns. At regular meetings, officials exchanged information gathered by their respective tax authorities in auditing multinational companies. In the 1980s, under increasing pressure from governments in a now much more hostile climate to tax authorities, the Group’s work shifted away from multinationals and toward more general, technical questions. The history of the Group of Four illustrates the importance of the 1960s and 1970s as a period for regulating economic actors and the impact of broader circumstances on the success or failure of anti-tax avoidance measures.
I wish to thank the anonymous reviewers and editors of the BHR for their helpful feedback and guidance.
1 Daniel Bunn and Sean Bray, “The Latest on the Global Tax Agreement,” Tax Foundation, 13 June 2023, accessed 17 July 2023, https://taxfoundation.org/global-tax-agreement/.
2 Kimberley Clausig, Emmanuel Saez, and Gabriel Zucman, “Ending Corporate Tax Avoidance and Tax Competition: A Plan to Collect the Tax Deficit of Multinationals,” Working Paper, January 2021, accessed 17 July 2023, https://gabriel-zucman.eu/files/CSZ2021.pdf.
3 The results of the 2022 midterm elections do not appear to have changed the situation conclusively. On the importance of US participation and the implications of an American refusal to ratify the agreement, see Quentin Parrinello, Mona Barake, and Elvin Pouhaër, “The Long Road to Pillar One Implementation: Impact of Global Minimum Thresholds for Key Countries on the Effective Implementation of the Reform,” Note, EUTax Observatory, July 2023, accessed 17 July 2023, https://www.taxobservatory.eu/publication/the-long-road-to-pillar-one-implementation-impact-of-global-minimum-thresholds-for-key-countries-on-the-effective-implementation-of-the-reform/.
4 Christophe Farquet and Matthieu Leimgruber, “Explaining the Failure of International Tax Regulations Throughout the 20th Century,” Working Papers of the Paul Bairoch Institute of Economic History, June 2016; Sol Picciotto, International Business Taxation: A Study in the Internationalization of Business Regulation (London, 1988); Madeleine Woker, “Edwin Seligman, Initiator of Global Progressive Public Finance,” Journal of Global History 13, no. 3 (2018): 352–373.
5 The only paragraph-long reference to the existence of the Group I have been able to find anywhere is Picciotto, International Business Taxation, 254, who appears to have known about the Group based on conversations with officials at the time of his research, not based on archives. Picciotto gives 1972 as the year in which the Group of Four was set up but it was in fact explored in 1969 and met for the first time in 1970. British and German archives contain some duplicate materials on the Group’s activities but overall the British materials are more detailed.
6 Catherine C. Schenk, “The Regulation of International Financial Markets from the 1950s to the 1990s,” in State and Financial Systems in Europe and the USA: Historical Perspectives on Regulation and Supervision in the Nineteenth and Twentieth Centuries, ed. Jaime Reis and Stefano Battilossi (Ashgate, UK, 2010): 149–166.
7 Ronen Palan, Richard Murphy, and Christian Chavagneux, Tax Havens: How Globalization Really Works (Ithaca, 2010), 202.
8 Sebastien Guex, “The Emergence of the Swiss Tax Haven, 1814–1916,” Business History Review 96, no. 2 (Summer 2022): 353–372.
9 On the history and periodization of tax havens, see Vanessa Ogle, “Archipelago Capitalism: Tax Havens, Offshore Money, and the State, 1950s–1970s,” American Historical Review 122, no. 5 (2017): 1431–1458; Ogle, “‘Funk Money’: The End of Empires, the Expansion of Tax havens, and Decolonisation as an Economic and Financial Event,” Past & Present 249, no. 1 (2020): 213–249.
10 Tax treaties can be considered part of global capitalist infrastructure. On other such examples, see Vanessa Ogle, “Global Capitalist Infrastructure and U.S. Power,” Cambridge History of America and the World, ed. Mark Bradley, vol. 4, The Twentieth Century, eds. David Engerman, Max Paul Friedman, and Melani McAlister, 31–54.
11 Farquet and Leimgruber, “Failure,” 2.
12 Telegram to the British Delegation to the Fiscal Committee, Foreign Office, 6 Oct. 1936, IR 40/5070, The National Archives (hereafter TNA), Kew, United Kingdom.
13 Report to the Council on the Fifth Session of the Committee Held at Geneva from June 12th to 17th, 1935, p. 3, Part 4, League of Nations, Fiscal Committee, IR40/3419, TNA.
14 Farquet and Leimgruber, “Failure,” 5.
15 Alex Cobham, “A Historic Day for Unitary Taxation,” Tax Justice Network, 21 Nov. 2019, accessed 17 July 2023, https://taxjustice.net/2019/11/21/a-historic-day-for-unitary-taxation/.
16 Farquet and Leimgruber, “Failure,” 6–7.
17 Vanessa Ogle, “State Rights against Foreign Capital: The ‘New International Economic Order’ and the Struggle over Aid, Trade, and Foreign Investment,” Humanity 5, no. 2 (Summer 2014): 211–234, 218. See also Sabine Pitteloud, “Unwanted Attention: Swiss Multinationals and the Creation of International Corporate Guidelines in the 1970s,” Business and Politics 22, no. 4 (Dec. 2020): 587–611.
18 Letter, Miss A. H. McNicol to H. T. A. Overton, British Embassy Bonn, 1 Oct. 1970, IR 40/17565, TNA.
19 Memo Group of Four, Report of the Working Group to the Policy Group at its meeting of 20 Sept. through 1 Oct. 1982, Dijon, France, IR 40/17773, TNA.
20 Miss A. H. McNicol, O. P. Davies, Memo, International co-operation for the prevention and detection of tax avoidance and evasion across frontiers, Paper for the Working Group by the United Kingdom, Somerset House, London, 25 Sept. 1970, IR 40/17565, TNA.
21 Note to Mr. Howard, Inland Revenue, 6 Dec. 1972, IR 40/17568, TNA.
22 Memo, US Views on the Cooperation in Tax Matters Among “the Group of Four,” 29 Sept. 1970, IR 40/17565, TNA.
23 Miss A. H. McNicol, O. P. Davies, Memo, IR 40/17565, TNA.
24 Washington Meeting: Note by the United Kingdom Delegation. The Pharmaceutical Industry, London, Dec. 1970, IR 40/17566, TNA.
25 Group of Four: London Meeting, Note by the French Delegation. Pharmaceutical manufacturing companies, IR 40/17567, TNA.
26 Miss A. H. McNicol, O. P. Davies, Memo, IR 40/17565, TNA.
27 “The Low Profile, High Profits of Hoffmann-LaRoche,” Financial Times, 6 April 1973, 20.
28 “The Low Profile,” Financial Times.
29 Group of Four: London Meeting. Note by the French Delegation. Pharmaceutical manufacturing companies (international operations), IR 40/17567, TNA.
30 Memo, meeting of the working group, Washington, 15–17 July 1975, IR 40/17569, TNA.
31 “The Low Profile,” Financial Times, 20.
32 “The Low Profile,” Financial Times.
33 “The Low Profile,” Financial Times.
34 Picciotto, International Business Taxation, 189.
35 “Roche Told to Halve Price of Two Drugs, Repay Profits,” Financial Times, 13 April 1973, 1.
36 “Details of Roche Appeal Soon,” Financial Times, 24 April 1973, 44.
37 “An International Inquisition,” Financial Times, 7 Feb. 1975; Group of Four, report of the working group to the policy group for the meeting held at Cambridge, Massachusetts, on 20 and 21 Sept.1979, IR 40/17571, IR 40/17568, TNA.
38 Group of Four, Draft Report from the Working Group to the Policy Group for the Meeting to be Held in Washington on 8–9 April 1976, IR 40/17569, TNA.
39 Use of tax havens by companies: Meeting memo, Group of Four, Meeting of Working Group in London, 30 March–1 April 1971, IR40/17567, TNA.
40 Washington Meeting: Draft of Note by the UK Delegation, London, Dec. 1970, IR 40/17566, TNA.
41 United States paper regarding existence of base or sham companies and authority and power to exchange information on such companies for discussion at meeting of working group to improve intergovernmental exchange of information, 14–16 Dec. 1970, Washington, DC, IR 40/17566, TNA.
42 Hearings Before the Committee on Ways and Means, House of Representatives, Vol. 4, Eighty-Seventh Congress, First Session, 1961, 3534 to 3551, IR 40/17568, TNA.
43 Pfizer is not named in the US documents, but the information provided matches that of French and other documents that do name Pfizer, indicating the same years and patterns.
44 It seems that by the early 1970s, Pfizer had reorganized its corporate structure. At this point, another document described Pfizer’s Panama company as having its own sales branches in 14 countries, including several with processing facilities. Since materials were sold to intragroup entities, verifying profits between entities was difficult, leading US officials to suspect artificially inflated profits. The Panamanian company had acquired the company’s world patent rights beyond the United States. Hearings Before the Committee on Ways and Means, Vol. 4, House of Representatives, Eighty-Seventh Congress, First Session, 1961, 3534 to 3551, IR 40/17567, TNA.
45 On the spread of export processing zones, see Patrick Neveling, “Export Processing Zones, Special Economic Zones and the Long March of Capitalist Development Policies During the Cold War,” in Decolonization and the Cold War: Negotiating Independence, ed. Leslie James and Elisabeth Leake (London, 2015), 63–84.
46 Airgram from American Consulate, Colón, Panama, to Dept. of State, 20 July 1951, 419.0023/7-2051, Dept. of State Subject-Numeric Files, RG 59, United States National Archives and Record Administration, College Park, MD. Group of Four, Note of meeting of representatives of the working group and field agents in Washington, DC, on 11–13 July 1972 and London, 20 July 1972, Pfizer, IR 40/17568, TNA.
47 Memo II-A-2 Improvement of international cooperation. Tax routes and abuses under tax treaties. Routing interest through corporations in favorable tax treaty countries, IR 40/17567, TNA.
48 Tijn Van Beurden and Joost Jonker, “A Perfect Symbiosis: Curacao, the Netherlands and Financial Offshore Services, 1951–2013,” Financial History Review 28, no. 1 (2021): 67–95, 71.
49 Van Beurden and Jonker, “Perfect Symbiosis,” 73.
50 Van Beurden and Jonker, “Perfect Symbiosis,” 74.
51 Van Beurden and Jonker, “Perfect Symbiosis,” 75.
52 Van Beurden and Jonker, “Perfect Symbiosis.” See also Washington Meeting: Note by the UK Delegation, The United Kingdom/Netherlands Antilles double taxation agreement, IR 40/17565, TNA.
53 French memo, “A case of international fraud,” IR 40/17773, TNA.
54 Note, Appendix 2, Specific cases, Scientology, IR 40/17565, TNA.
55 Group of Four, report of the working group to the policy group for the meeting to be held in London on 14 Oct. 1976, IR 40/17569, TNA.
56 French memo Overview of activities conducted within the Group of Four since the meeting held at Washington), 17–18 Dec. 1970, Ministry of Economics and Finances, General Tax Administration, 4 May 1972, 126/71392, German Federal Archives (hereafter BArch), Koblenz, Germany.
57 Note to Mr. Howard, Inland Revenue, 6 Dec. 1972, IR 40/17568, TNA.
58 Note Confidential, Meeting of the Policy Group, London, 14 Oct. 1976, IR 40/17569, TNA.
59 Note Confidential, 14 Oct. 1976.
60 Group of Four, Meeting of working group in London, 12–13 Oct. 1976, IR 40/17569, TNA.
61 Statement Interfisc., n.d., IR 40/17569, TNA.
62 Group of Four, Report of the working group to the policy group for the meeting in Bordeaux, 26–27 Oct. 1978, IR 40/17569, TNA.
63 Group of Four, Meeting of the Working Group in Washington, DC, 22–23 May 1973, 126/71392, BArch.
64 Exchange of Information, Paper by the United Kingdom, n.d. German Delegation, Memo, Problems in the provision of administrative assistance, 25 Aug. 1986, IR 40/17778, TNA.
65 German notes on ISAB computer system, IR 40/17771, TNA.
66 Group of Four, Dijon Sept.–Oct. 1982, United Kingdom Paper No 4, Data Protection, IR 40/17773, TNA.
67 Group of Four, Report of the working group to the policy group for the meeting to be held at Cambridge Massachusetts, 20–21 Sept. 1979, IR 40/17571, TNA.
68 J. A. Stephenson, Note of Group of four meetings at Cambridge, Massachusetts, on 18–21 Sept. 1979, Oct. 1979, IR 40/17571, TNA.
69 Stephenson, Note of Group of four meetings at Cambridge, Massachusetts, on 18–21 Sept. 1979.
70 Working Group of Four 1988, Taxpayer’s Charter, July 1986, Board of Inland Revenue, HM Customs and Excise, IR 40/17779, TNA; J. D. Taylor Thompson, Note on telephone conversation, 15 May 1986, IR 40/17778, TNA; Group of Four, Heads of Delegation Meeting, San Antonio, Texas, 21–24 Sept. 1987, IR 40/17779, TNA.
71 Exchange of Information, Paper by the United Kingdom, n.d., IR 40/17778, TNA.
72 H. M. Collins, Note of Meeting, Bonn, 27–30 April 1982; see also I. N. Hunter, J. A. Stephenson, Group of Four, Background briefing, n.d., IR 40/17773, TNA.
73 Note, I. N. Hunter to Mr. Battishill, Inland Revenue, 22 Nov. 1985, IR 40/17778, TNA.
74 Memo Policy and Working Group Meeting, Charleston, SC, 16–18 Nov. 1983, B 126/324173, BArch.
75 Susan Borkowski,“The History of PATA and its Effect on Advance Pricing Arrangements and Mutual Agreement Procedures,” Journal of International Accounting, Auditing and Taxation 17 (2008): 31–50.
76 Memo, US Simultaneous Examination Program, n.d., IR 40/17773, TNA.
77 Exchange of Information, Paper by the United Kingdom, n.d., IR 40/17778, TNA.
78 Materials in 126/324180, BArch.
79 On multilateral campaigns and US-led efforts after 9/11, see Jason Sharman, Havens in a Storm: The Struggle for Global Tax Regulation (Ithaca, 2016); Thomas Rixen, The Political Economy of International Tax Governance (Basingstoke, UK, 2008).
80 Javier-Garcia Bernardo, Petr Jansky, and Gabriel Zucman, “Did the Tax Cuts and Jobs Act Reduce Profit Shifting by US Multinational Companies?,” Working paper, 20 May 2022, accessed 15 July 2023, https://gabriel-zucman.eu/files/GBJZ2022.pdf.
81 Note that this was different earlier in the twentieth century, when a raise in rates could lead to increased capital flight. But this occurred under the specific circumstances of the 1920s, when newly progressive income taxes at raised rates were first widely applied after World War I. Such differences simply highlight that taxation needs to be treated as a historical subject that can be understood only in its relative context. See Christophe Farquet, “Capital Flight and Tax Competition after the First World War: The Political Economy of French Tax Cuts, 1922–1928,” Central European History 27 (2018), 537–561.
