The Senate Permanent sub-Committee on Investigations issued a press release yesterday saying (no link yet):
At a Thursday hearing entitled, Tax Haven Banks and U.S. Tax Compliance, the latest in a series of hearings with insider information about the workings of the offshore industry, the Senate Permanent Subcommittee on Investigations will examine how tax haven banks facilitate tax evasion by U.S. clients, hide client and bank misconduct behind the cloak of bank secrecy laws, and add to the offshore abuses that cost U.S. taxpayers an estimated $100 billion dollars each year.
A six month-long bipartisan Subcommittee investigation examined LGT Bank in Liechtenstein and UBS in Switzerland to expose how tax haven banks are assisting U.S. taxpayers to evade taxes, in particular by urging U.S. clients to open accounts in their offshore jurisdictions, assisting them in structuring those accounts to avoid disclosure to U.S. authorities, and providing financial services in ways that do not alert U.S. authorities to the existence of the foreign accounts. Subcommittee Chairman Sen. Carl Levin (D-Mich.) and Ranking Minority Member Norm Coleman (R-Minn.) will release a 115-page joint staff report detailing the findings of the investigation in conjunction with the hearing.
"Tax havens are engaged in economic warfare against the United States, and the honest, hardworking American taxpayer is losing," said Levin. "The iron ring of secrecy around tax haven banks and their deceptive banking practices enable and encourage tax cheats to hide assets from the United States. Congress needs to enact strong penalties on tax haven banks that help U.S. taxpayers avoid paying taxes to Uncle Sam."
Senator Coleman said, "It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars from taxation, forcing working families to shoulder the tax burden. By exploiting gaping loopholes, these foreign banks are enabling felony tax evasion. Simply put, foreign banks should not be Al Capone safe-houses for evading taxes. Closing these loopholes means we must strengthen reporting requirements, broaden the scope of the audit program, and extend the amount of time the IRS has to investigate cases involving an offshore tax haven."
I have not a shadow of a doubt that the Senate has got this story right and really understands this issue.
Now contrast this with evidence submitted to the UK Treasury Select Committee by the massed ranks of tax havens and offshore finance centre operators (the UK included). Take this from the Financial Services Authority:
These reviews have tended to conclude that OFCs per se do not pose a threat to global financial stability, and that standards of regulation are generally comparable to those that apply in other jurisdictions.
How can they be that complacent when the US is not?
Then there is this from the Isle of Man:
The Isle of Man is committed to delivering effective regulation. It complies fully with international standards. Under the auspices of the Organisation for Economic Co-operation and Development ("OECD"), it is at the forefront of the development by small jurisdictions of a network of Tax Information Exchange Agreements ("TIEAs"), based on mutual economic benefit. It has a transparent tax code, and does not have banking secrecy laws. It has consistently shown itself to be a co-operative jurisdiction in terms of the international fight against criminal activity.
The Isle of Man may have the regulation, but it clearly does not work. Read the 400 plus page report of the Senate Subcommittee in August 2006. That recounts endless abuse within the Isle of Man: the regulation does not just not work,it is persistently ignored. Senator Carl Levin made it clear in his 2006 report that he thought this deliberate. This the recurring theme of the Tax Justice Network submission to the Treasury Select Committee.
The list could go on, and on. But the tone of them all can be summarised by Deloittes who say in their submission:
The UK should respond to these issues [raised by offshore financial centres] by supporting such international efforts [to regulate them], by improving its own competitiveness, and by continuing to take proportionate measures to protect its tax base.
The implication is clear, they think there is little wrong offshore: indeed they made that claim when giving oral evidence. The problem is, they say, with the UK where for 'improved competitiveness' read 'reduced tax rates'. I mentioned yesterday a trend that I think is happening in the UK where the financial system is being captured by an elite for its own purposes. The combined submissions of that elite within the tax havens and financial services companies to the Treasury Select Committee, which in combination seek to whitewash the abuse that the US Senate clearly sees to be happening, is another example of this capture of the collective common good for the advance of the personal greed of these groups.
It is essential that the Treasury Select Committee see through the charade of their combined front and realise that this is the action of a group undertaking collective deception. If they don't we continue our sleep walk into the nightmare scenario where the common good no longer exists, and democracy goes with it (for tax havens and offshore financial services operators share a combined contempt for the democratic process).
It's extraordinarily worrying.