MSNBC has reported on findings to be discussed before a Senate Committee in the USA today.
Key amongst the claims are that:
Offshore tax havens hold trillions of dollars in assets and allow wealthy Americans to avoid paying $40 billion to $70 billion in taxes each year
and that
To address the problem, tax, securities and money laundering laws should be changed to presume that a U.S. citizen should be taxed on money in a trust or corporation in a country known to the Treasury Department to be a tax haven, said Sen. Carl Levin of Michigan, the top Democrat on the investigative subcommittee. That would put the burden on the taxpayer to prove the money should not be taxed.
Carl Levin is right. This is the right test. But there's another solution. As the report notes:
The arrangement typically starts with a promoter, someone who sells wealthy people on the advantages of moving money offshore and who recommends a country or service provider to those clients.
This is what I call 'the supply side problem'. If you knocked out the major banks (see yesterday's feature on the Bank of America), no more than ten firms of accountants and the same number of lawyers the credibility of offshore would be seriously damaged. Many people would not trust it. And whilst these people (and you know who they are) continue to operate in the offshore world they undermine the whole of the world's tax system, and with it the credibility of democracy and the lifestyle that goes with it.
So my solution goes one step beyond Senator Levin's. I would withdraw banking, audit, investment business and other licences from the onshore activities of these organisations until they closed (not sold) the offshore parts of their activity. Of course I know there are regulatory problems with this. And I know that this will not close offshore. But it will harm it enormously. Which is a start.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Would the currancy issuing banks like the US Federal Reserve, Bank of England, Bank of Japan and European Central Bank not put a stop to removing the offshore activities of banks. Especially, as they already hold the world to ransom?
I find your breathless conclusions fascinating.
But a few points:
First, I see the “costs” to various Inland Revenues as stated by you and your colleagues fluctuating between $70 and 300 billion.
However, 70% of US bank liabilities to Foreigners are processed through International Financial Centres (IFC). 80% of that money is invested in US securities; giving lie to your cost/benefit analysis.
US debt and deficits are financed through so-called ‘offshore centres’. The amount actually invested by these means is nearly $6 trillion.
If you have given you mind to the strategic balances – considering the basic rule that something replaces whatever is removed – what therefore is the political/economic forfiet of ruining the financial centres ?
Second, your description of ‘offshore banking” betokens an ignorance of banking itself.
Transactions are initiated from “onshore”. However, the onshore laws protect institutions from phishing. So, instead – it seems – you and your colleagues are content to force smaller nations to do, what law prevents you doing to larger institutions onshore.
A lesser madness is devoutly to be wished.
M.
For more comment please see
http://www.taxresearch.org.uk/Blog/2006/12/11/how-the-poorest-keep-the-us-and-uk-going/
For those that are hard of understanding, I will spell it out for you all, nice and easy so that you all understand it.
IF THE INDIVIDUAL AND CORPORATE TAX PAYERS IN THE WORLD DECIDE NOT PAY THEIR PERSONAL AND CORPORATE TAX LIABILITIES, THE CONSEQUENCES FALL ON THE LOWER SOCIO-ECONOMIC CLASSES TO PICK UP LOST TAX REVENUES.
Not rocket science, just fact. The next time you all say that governments are wasting public revenues and you would all like to go private. Ask yourself this question, what will I do when my house is on fire?
All the leading governments of the civilised world are held to ransom by the “national” banks that are in private hands, for private profit, not public benefit.
OFCs will come under more and more scrutiny over the coming years. But, just imagine the total tax take if every person and company paid their codified tax liabilities. Overall taxes would fall.
As to your question on Attac’s and the Tax Justice Network’s estimates on tax avoidance, evasion, corruption, capital flight, money laundering etc, I can say that we are under-estimating the problem, as in my own experience, Jersey does not know how many “trusts” are present, not even the IMF could find out.