rssCrackdown on Offshore Havens Faces Hurdles
Thursday, March 05, 2009 at 12:38 pm
- 19 Comments
President Obama’s plans to crack down on offshore tax havens collided with Swiss bank secrecy at a Capitol Hill hearing Wednesday, illuminating the daunting political, legal, and economic obstacles facing an administration that is counting on aggressive tax collection to help fund its ambitious domestic agenda.
“The U.S. government is taking unprecedented measure to aggressively pursue individuals and institutions that facilitate unlawful tax avoidance, and there is more to come,“ said Douglas Shulman, commissioner of the Internal Revenue Service, at a Senate subcommittee hearing Wednesday.
Illustration by: Matt Mahurin
But Shulman was followed by Mark Branson, a top official at the United Bank of Switzerland (UBS) who repeatedly declined to say if the bank would share the names of thousands of U.S. citizens who live overseas and hold Swiss bank accounts that have not been reported to the IRS.To do so, he said, might violate Swiss law.
“They’re looking for as many ways as possible to hang on to these ill-begotten gains,” said an exasperated Sen. Carl Levin (D-Mich.) after the hearing.
The appeal of shutting down the tax havens has grown during global economic meltdown, with British Prime Minister Gordon Brown connecting bank secrecy to the global economic meltdown in his address to the U.S. Congress “How much safer would everybody’s savings be if the whole world finally came together to outlaw shadow banking systems and offshore tax havens?”
Demands for reform have been hastened in Washington by revelations from the General Accounting Office (GAO) in January that some of the biggest U.S. corporations — including several that have been bailed out by taxpayers–have set up offshore operations that could help them avoid paying U.S. taxes on their profits. Congress’s Joint Committee on Taxation money estimates that the failure to tax foreign income of U.S. controlled corporations will cost $56.4 billion in potential tax revenues (Pdf. p. 70) between 2008 and 2012. It is not known how much tax revenue is lost because of U.S. citizens holding money overseas.
The report identified 30 countries around the world as tax havens. American International Group was found to have 115 subsidiaries in tax haven countries including 59 in the Cayman Islands. The ailing Citigroup had 427 subsidiaries in such countries, including 90 in the Cayman Islands and 21 on the Isle of Jersey, a spot of land off of Great Britain that is nominally its own country
Obama has signaled he wants to go after those tax havens. His 2010 budget counts on collecting an additional $210 billion (pdf) in international tax revenues through 2019. On Tuesday Secretary of Treasury Tim Geithner said the White House “fully” supports a bill introduced this week by Levin that would make close reporting loopholes for accounts held in countries like Switzerland, Panama and the Cayman islands that have tight banking secrecy laws. As a Senator, Obama co-sponsored a similar bill with Levin in 2007.
But winning approval of such legislation will not be easy. Levin’s bill has attracted three Senate co-sponsors, but none of them is a member of the Senate Finance Committee, which has to approve any such legislation. After the hearing, Levin only said he hoped the committee would approve such a bill “this year.”
In the meantime, UBS is sure to have its say. Between 2000 and 2008 employees and political action committees of the Swiss banking giant gave $783,070 to current members of the finance committee, according to an analysis done for The Washington Independent by the Center for Responsive Politics.
Among the top recipients of UBS contributions in those eight years are Sen. Charles Schumer (D-N.Y.) with $139,250 and Sen. Robert Menendez (D-N.J.) with $81,000. The committee’s chairman Sen. Max Baucus (D-Mont.) got $43,000, including a $2,000 donation from the CEO of UBS’s American subsidiary last May. All told UBS employees and PACS gave more than $3 million to U.S. political candidates in 2007-2008, 57 percent of it to Democrats
And UBS is hardly the only beneficiary of tax havens. The GAO found that 83 of the 100 largest publicly traded U.S. corporations had subsidiaries in tax haven countries, including many with good reputations as corporate citizens.
Microsoft, for example, has eight subsidiaries in tax haven countries, including five in Ireland, according to the GAO. One of those subsidiaries, Microsoft Ireland Research , paid 460,000 euros on 1.2 billion euros in profits, the Irish broadcasting network RTE reported last May. That tax rate of 3.8 percent is far less than the software would have paid if those profits were reported in the United Kingdom, Germany or the United States.
“Its very common,” Richard Murphy , a British accountant and founder of the Tax Justice Network, which does research and consulting on international tax issues., said in a phone interview.
“Companies like Microsoft, Apple, Dell, and NCR all use Ireland as a European center for distribution. Irish law makes it very difficult to know what they’re doing because if they register as an unlimited liability company they don’t have to put their accounts on the public record. Microsoft put lots of intellectual property and some employees into Ireland, so it’s no surprise that they make lots of profit in Ireland.”
That same lack of transparency, Murphy said, has contributed to the global meltdown.
“The meltdown was not created offshore,” he said. “It was facilitated offshore. Those subprime mortgages and dodgy loans were created on shore. But when those loans were sliced and diced for reselling, a lot of that took place in the Cayman Islands and Jersey. And when the banks started wondering what all those instruments were really worth in 2007,” he went on, “they couldn’t see what was behind each other’s balance sheets, in part because a lot of their business was hidden in the tax havens. So they stopped lending to each other.”
“You can’t have efficient markets if people don’t know what is going on,” Murphy concluded. “The whole purpose of tax havens is to hide information. They’re a massive market imperfection.”
But as long as entrenched interests stand to benefit from that imperfection, the prospects for reforming a dysfunctional global financial system will remain confined to a Senate hearing room crowded with lobbyists tapping messages on their Blackberries.
19 Comments
Comment posted March 5, 2009 @ 11:33 am
IS Sen. Menendez loyal to AMERICAN WORKERS..?
Senator Harry Reid! YOUR LOYALTY IS NOT WITH LEGAL AMERICAN WORKERS!
We don't need any half-measures for E-Verify enacted by the lawmakers. At the moment E-Verify is free and voluntary. Legal American Workers want the program as a MANDATORY law. In the future it can even exceed it's 99.6 success evaluation. It would have required parasite companies to verify the immigration status of their workers “after being hired.” The pro-illegal alien radical groups, including the ACLU, US Chamber of Commerce funded by the business community, have tried to downplay its value.
As an amendment to President Obama's Stimulus deal, it was secretly killed by Sen. Harry Reid (D-NV) and Sen. Menendez (D-NJ So where does their loyalties lie? Absolutely not with unemployed AMERICANS? He's shadowed by the usual suspects that includes Pelosi, Gutierrez, Feinstein, Crowley, and the hidden faces cringing in dark corners. They have all likely have been brought by the multi-national corporations. Vote them out next time they come up for election. Crucify them?
If you value your job, within any trade or profession it is not safe. Even the high professional jobs have been stolen by visa over-stayers.
They vote on its reinstatement on March 6 in the Washington. We need a federal mandate! Not 5 years, but perpetuity! Call Washington (202) 224-3121
Pingback posted March 5, 2009 @ 5:28 pm
[...] Crackdown on Offshore Havens Faces Hurdles – The Washington Independent.comPresident Obama’s plans to crack down on offshore tax havens collided with Swiss bank secrecy at a Capitol Hill hearing Wednesday, illuminating the daunting political, legal, and economic obstacles facing an administration that is counting on [...]
Comment posted March 6, 2009 @ 9:58 am
Lets make a very obvious signature section on the tax form that says either as CEO and Corporate Board Members or Private Filer, “By signing this tax return I swear that this return is an accurate and complete statement of ALL revenues, Assets, monies, profits, losses, and all financial information relevant to taxation of ALL companies both domestic and foreign, and all sources of revenue under the control of the Filer or his companies or financial organizations from any source. This signature attests to the above and subjects the signator both in his/her professional and/or personal capacity to MANDATORY penalties of law for violation, evasion, untruth or incorrectness.”
Pingback posted March 6, 2009 @ 11:56 am
[...] The Washington Independent » Crackdown on Offshore Havens Faces Hurdles – “You can’t have efficient markets if people don’t know what is going on,” Murphy concluded. “The whole purpose of tax havens is to hide information. They’re a massive market imperfection.” [...]
Comment posted March 6, 2009 @ 4:47 pm
If the USA really were serious about money and morality, it would repatriate all its illegal aliens. Los Angeles County alone, for example, spends one BILLION dollars per year on the children of illegal aliens by its own report.
Pingback posted March 6, 2009 @ 7:00 pm
[...] The Washington Independent » Crackdown on Offshore Havens Faces Hurdles – “You can’t have efficient markets if people don’t know what is going on,” Murphy concluded. “The whole purpose of tax havens is to hide information. They’re a massive market imperfection.” [...]
Comment posted March 7, 2009 @ 3:18 pm
US Persons are already required to report and pay taxes on worldwide earnings The US government has long granted exemptions and special considerations to companies to “encourage” exports and foreign sales. So, if a US company has a lot of non-US income, it is entirely legal to leave those earnings in a foreign subsidiary and avoid double taxation. I am sure that the bulk of the “tax haven” accounts these politicians are so angry about are in really accounts for this purpose. If so, then shame on the money grubbing alarmists.
US citizens who have accounts outside the US are required to file an annual report listing each account and classify the amount held in it. We also have to report and pay any taxes due on dividends.
“offshore accounts” and “tax havens” makes great press, but it is far less of a real tax issue than the hype would indicate
Pingback posted March 7, 2009 @ 4:55 pm
[...] The Washington Independent » Crackdown on Offshore Havens Faces Hurdles – “You can’t have efficient markets if people don’t know what is going on,” Murphy concluded. “The whole purpose of tax havens is to hide information. They’re a massive market imperfection.” [...]
Pingback posted March 8, 2009 @ 12:20 am
[...] The Washington Independent » Crackdown on Offshore Havens Faces Hurdles – “You can’t have efficient markets if people don’t know what is going on,” Murphy concluded. “The whole purpose of tax havens is to hide information. They’re a massive market imperfection.” [...]
Comment posted March 8, 2009 @ 11:40 am
I agree with theBuckWheat on the media hype surrounding offshore “havens”. Unless you fall into certain low earning brackets while working outside the United States, you end up paying comparable taxes. And everyone has to report their income earned abroad. These tax “havens” are less about avoiding taxes and more about having money outside the United States.
Pingback posted March 9, 2009 @ 5:43 am
[...] The Washington Independent » Crackdown on Offshore Havens Faces Hurdles – “You can’t have efficient markets if people don’t know what is going on,” Murphy concluded. “The whole purpose of tax havens is to hide information. They’re a massive market imperfection.” [...]
Comment posted March 9, 2009 @ 12:00 pm
It is always a thrill and fascinating to watch new administrations, e.g., Obama and his cabal of seething collectivists and progressives as they institute measures to further solidify the fetters on American indentured servants. Only the truly superficial and simple-minded would buy into the proselytizing poseurs now reigning in Washington, D.C. Intellect in Washington is backed by vacuous ill-fated reasoning and fallacious logic brought to bare in attacking “tax havens.” The issues about tax havens are addressed at emotional levels suited for two bald-headed men fighting over a comb. In fact, that also aptly describes the entire American political system! The American political body is a cesspool that’s unmatched in purveying its malodorous stink worldwide. This world is filled with allegedly good people (politicians and bureaurats) who think they “know” how to spend your money better than you do. (They don’t!)
It would be an arduous task to list all of the hell raising, hell-bent socialists that now drool at the institution of force and coercion mixed with non-transparent, fraudulent activities by this same cabal mentioned above. Whether from “bailouts or economic promiscuousness” etc., the American government-controlled school system has indeed succeeded in making people believe that the same government is the slave necessary to sooth and restore! Stultification of the masses now favoring the diminishment of individual freedom and liberty in lieu of wearing the harness of collectivism should bring applauding Americans to their feet—feeling “free and easy” in your harness as the government maintains absolute control of the reins. Bravo!!
Not to forget the mentioned statist-loving socialist in the above article is none other than Mr. Richard Murphy, founder of the Tax Justice Network, whose equally seething whores (OECD) are diligently at work in trying to improve the STINK of collectivism and ultimately fortify its reins. “Tax justice?” Be honest and say, “Theft justice!” This should bring equal rapture to the masses of wheedlers, trough-suckers and gimme-gimmes.
For serious individuals who seek true, real freedom, liberty, private property, privacy, and protection of wealth, the task has been and will always be fighting relentless perturbations of the State—and government’s ever-increasing chance to plunder and equalize. This is a superb reason why tax havens exist to protect from the pernicious governmental thugatarians, either at an individual or corporate level! Forward-thinking individuals must rid themselves of the statist/religious tribal inculcations up to an including relinquishment of citizenship. To all that remain in “voluntary subjugation,” you deserve not what you want but exactly what you are going to get. Stupid is as stupid does… C’est la guerre.
“The emotions of man are stirred more quickly than his intelligence.” ~ Oscar Wilde
Comment posted March 9, 2009 @ 7:00 pm
It is always a thrill and fascinating to watch new administrations, e.g., Obama and his cabal of seething collectivists and progressives as they institute measures to further solidify the fetters on American indentured servants. Only the truly superficial and simple-minded would buy into the proselytizing poseurs now reigning in Washington, D.C. Intellect in Washington is backed by vacuous ill-fated reasoning and fallacious logic brought to bare in attacking “tax havens.” The issues about tax havens are addressed at emotional levels suited for two bald-headed men fighting over a comb. In fact, that also aptly describes the entire American political system! The American political body is a cesspool that’s unmatched in purveying its malodorous stink worldwide. This world is filled with allegedly good people (politicians and bureaurats) who think they “know” how to spend your money better than you do. (They don’t!)
It would be an arduous task to list all of the hell raising, hell-bent socialists that now drool at the institution of force and coercion mixed with non-transparent, fraudulent activities by this same cabal mentioned above. Whether from “bailouts or economic promiscuousness” etc., the American government-controlled school system has indeed succeeded in making people believe that the same government is the slave necessary to sooth and restore! Stultification of the masses now favoring the diminishment of individual freedom and liberty in lieu of wearing the harness of collectivism should bring applauding Americans to their feet—feeling “free and easy” in your harness as the government maintains absolute control of the reins. Bravo!!
Not to forget the mentioned statist-loving socialist in the above article is none other than Mr. Richard Murphy, founder of the Tax Justice Network, whose equally seething whores (OECD) are diligently at work in trying to improve the STINK of collectivism and ultimately fortify its reins. “Tax justice?” Be honest and say, “Theft justice!” This should bring equal rapture to the masses of wheedlers, trough-suckers and gimme-gimmes.
For serious individuals who seek true, real freedom, liberty, private property, privacy, and protection of wealth, the task has been and will always be fighting relentless perturbations of the State—and government’s ever-increasing chance to plunder and equalize. This is a superb reason why tax havens exist to protect from the pernicious governmental thugatarians, either at an individual or corporate level! Forward-thinking individuals must rid themselves of the statist/religious tribal inculcations up to an including relinquishment of citizenship. To all that remain in “voluntary subjugation,” you deserve not what you want but exactly what you are going to get. Stupid is as stupid does… C’est la guerre.
“The emotions of man are stirred more quickly than his intelligence.” ~ Oscar Wilde
Pingback posted June 2, 2009 @ 9:03 am
[...] Excerpt from: The Washington Independent » Crackdown on Offshore Havens Faces … [...]
Comment posted July 31, 2010 @ 6:36 am
Not to forget the mentioned statist-loving socialist in the above article is none other than Mr. Richard Murphy, founder of the Tax Justice Network, whose equally seething whores (OECD) are diligently at work in trying to improve the STINK of collectivism and ultimately fortify its reins. “Tax justice?” Be honest and say, “Theft justice!” This should bring equal rapture to the masses of wheedlers, trough-suckers and gimme-gimmes.
Comment posted July 31, 2010 @ 6:36 am
Not to forget the mentioned statist-loving socialist in the above article is none other than Mr. Richard Murphy, founder of the Tax Justice Network, whose equally seething whores (OECD) are diligently at work in trying to improve the STINK of collectivism and ultimately fortify its reins. “Tax justice?” Be honest and say, “Theft justice!” This should bring equal rapture to the masses of wheedlers, trough-suckers and gimme-gimmes.
Comment posted August 5, 2010 @ 1:35 pm
US citizens who have accounts outside the US are required to file an annual report listing each account and classify the amount held in it. We also have to report and pay any taxes due on dividends.
Comment posted August 5, 2010 @ 1:35 pm
US citizens who have accounts outside the US are required to file an annual report listing each account and classify the amount held in it. We also have to report and pay any taxes due on dividends.
Trackback posted December 15, 2010 @ 2:34 am
{Nice|Great|Awesome|Cool|Useful|Good|Interesting} post as usual….
And what can you say about this Wikileaks story?…
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