Tax Havens – Financial Impact

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posted on May, 15 2005 @ 06:24 AM
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We will never be able to reduce global poverty whilst the rich and disreputable run the worlds financial systems for themselves at the expense of worlds poor and impoverished. The impact is not only felt in deprived and developing countries where corrupt officials siphon off millions, (often illegally) but also in more prosperous countries.

The impact of large amounts of money being syphoned of to tax havens coupled with lost tax revenue can have a significant impact on even wealthy countries like the US. In a report issued in April of this year the amount of assets salted away in tax havens was estimated to be $11.5 TRILLION. The same article estimated that the US probably loses somewhere in the vicinity of $60 billion in lost tax revenue per year.

There are about 3 million shell companies (set up largely to dodge taxes) in offshore tax havens. These tiny tax havens such as Cayman Islands, Bermuda, and Jersey hold 31 percent of total world assets and 26 percent of the stock of US multinationals.

Whilst the report when published in April created lively debate in Europe there were only slight rumblings in the US, which is interesting given their estimated loss. I was intrigued to learn that in the late 1990s, industrial-nations reached an agreement to force tax-haven countries to stop aiding money laundering, drug dealing, and tax evasion. This agreement was championed by the Clinton administration. I guess you won’t be surprised to learn that it was squashed by the then new Bush administration.

Senator Norm Coleman along with Sen. Carl Levin championed of the Tax Shelter and Tax Haven Reform Act back in 2004. During the course of a yearlong subcommittee investigation, Levin and Coleman found that respected accounting firms, banks, investment advisors, and lawyers had become high-powered engines behind the design and sale of tax shelters. The investigation and subsequent hearings uncovered evidence that these tax advisors cook up one complex scheme after another, package them as generic “tax products” and then devise elaborate marketing efforts to peddle these products to thousands of people across the country.

The Tax Shelter and Tax Haven Reform Act, S. 2210, proposes the following measures, among others, to clamp down on tax abusers:

• INCREASE PENALTIES on persons who promote abusive tax shelters, knowingly aid or abet taxpayers who understate their tax liability, or fail to disclose abusive tax shelters or offshore bank accounts.

• PREVENT ABUSIVE TAX SHELTERS by strengthening enforcement mechanisms for ethical rules on tax practitioners; by requiring standards for tax shelter opinion letters; and by authorizing the IRS to work with other federal agencies to strengthen civil law enforcement.

• REQUIRE ECONOMIC SUBSTANCE FOR TRANSACTIONS TO BE ELIGIBLE FOR TAX BENEFITS by clarifying and codifying the economic substance doctrine; by strengthening the penalties for tax transactions lacking economic substance; and by eliminating tax deductions for interest on unpaid taxes attributable to transactions determined to be without economic substance.

• DETER UNCOOPERATIVE TAX HAVENS by authorizing Treasury to publish an annual list of uncooperative tax havens; and by ending tax benefits and requiring greater disclosure for taxpayers transferring funds to such uncooperative tax havens.

With $11.5 Trillion dollars squirreled away in tax havens, there is still a way to go and the impact on the global economy and the poor is devastating.

Essentially there are two different worlds to live in. If you're rich enough, it is no particular problem to place the majority of your wealth outside the system most of the rest of us are stuck in.




posted on May, 15 2005 @ 11:43 PM
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What bothers me the most about it is the sheer perversity of it.

Working people pay virtually all taxes in US.
But Corporations get the benefits of government contracts, sweetheart regulations, and pay no taxes by 'offshoring' their profits in a shell corporation in the Cayman Islands or Bahamas.

Now if you, an individual citizen tried this kind of chicanery the IRS would be all over your backside and have you in prison.

America is Broken.
.





 
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