Global tax havens harbor close to 1/3 of the world’s GDP.
Tax Havens of the Wealthy and Powerful
More and more companies are stashing their cash offshore, and they’re doing it at alarming rates. Why? Put simply, it’s about eluding the tax man.
– $21 trillion =
– US, Japanese, and German economies combined.
– EU, Russian, and Indian economies combined.
– Total private wealth held in tax havens worldwide.
– $9.8 trillion =
– Private wealth held in tax havens by a mere 100,000 people.
– The amount of foreign aid the US would provide in 196 years at current rates.
“Double Irish with a Dutch Sandwich”
– Profits routed through Irish and Dutch subsidiaries often end up in Caribbean shell corporations that don’t pay US taxes.
– 83 of the 100 largest companies in the US with subsidiaries in tax havens.
Largest Major Corporate Investors
[corporation-unrepatriated income (in millions)]
– General Electric–$108,000
– Exxon Mobile–$47,000
– Johnson and Johnson–$49,000
[corporation-percentage increase in offshore investment 2009-11]
– Spectra Energy–%1141.8+
– Ford Motor–%546+
– Home Depot–%426.3+
– Starwood Hotels–%203+
– Unum Group–%197.6+
– Genworth Financial – %108.5+
Bailed out and bailing ship
Citigroup, Goldman Sachs, and Morgan Stanley were some of the larger bailouts of the 2008 financial crisis.
[corporation-amount received in bailout money-amount shipped offshore since-percentage increase since financial crisis]
– Citigroup–$2,500 billion–$35.9 billion–%32+
– Goldman Sachs–$10 billion–$20,630 million–%27+
– Morgan Stanley–$107 billion–$6,461 million–%61.5+
– %73 of Americans feel that loopholes should be closed allowing corporations and the wealthy to avoid US taxes by shifting income overseas.
– %83 of Americans feel that tax on US corporation’s overseas profits should be increased to equal what their US income tax would be.
– %90 of Small business owners believe that large corporations use loopholes to avoid taxes that smaller businesses have to pay.
[Tax Burden ]
Estimated Federal Income tax losses from tax havens = $150 billion per year
– US corporate untaxed wealth in tax havens= $90 billion
– US individual untaxed wealth in tax havens= $60 billion
– $150 billion = $1026 in additional taxes from every tax filer in the US.
– $150 billion = %6 percent of total reportable income for the US not filed correctly.
In 2007, tax havens accounted for nearly 9% of the world’s gross assets and liabilities. Meanwhile these nations accounted for only .2 percent of the world’s population and .25 percent of the world’s GDP.
[nation title; total portfolio investment (in millions, 2010 data); population 2010] [0= <1 mil]
– Andorra: 217 ; 83,888
– Anguilla: 627 ; 14,764
– Antigua and Barbuda:132 ; 82,000
– Aruba: 1874 ;101484
– Bahamas:17,101 ; 353,658
– Bahrain:11719 ; 1,234,571
– Barbados 2584 ; 276,300
– Belize: 340 ; 312,971
– Bermuda: 402,093 ; 64,237
– British Virgin Islands: 58,888 ; 106,405
– Cayman Islands: 1575332 ; 54,878
– Cook Islands:7 ; 21,390
– Costa Rica: 397 ; 4,563,539
– Cyprus: 18599 ; 1,102,677
– Djibouti: 3 ; 879,053
– Dominica: 1 ; 65,000
– Gibraltar: 3035 ; 28,956
– Grenada: 60 ; 109,553
– Guernsey: 82547 ; 44547
– Hong Kong: ; 7,024,200
– Ireland: 1090520 ; 4,467,854
– Isle of Man: 10394 ; 12,869
– Jersey: 232812 ; 95,732
– Jordan: 2260 ; 6,113,000
– Lebanon: 2670 ; 3,785,655
– Liberia: 7607 ; 4,101,767
– Liechtenstein: 5529 ; 35,789
– Luxembourg: 2051813 ; 502,066
– Macao: ; 552,300
– Maldives: 3 ; 319,738
– Malta: 3389 ; 414,372
– Marshall Islands:12082; 54816
– Mauritius: 12448 ; 1,283,415
– Micronesia: 0 ; 176,815
– Monaco: 80 ; 36,371
– Montserrat: no data ; 5,000
– Nauru: ; 13,000
– Netherlands: 1883690 ; 16,574,989
– Antilles: ; 197,041
– Niue: 0 ; 1496
– Panama:33587 ; 3,504,483
– Samoa: 4 ; 183,123
– San Marino: 84 ; 13,147
– Seychelles: 170 ; 86,525
– Singapore: 173271 ; 5,076,700
– St. Kitts and Nevis: 286 ; 51,300
– St. Lucia: 112 ; 174,000
– St. Martin: ; 77,741
– St. Vincent and the Grenadines:278 ; 125,000
– Switzerland: 712,622 ; 7,785,806
– Tonga: no data ; 103,365
– Turks and Caicos Islands: 902 ; 50,000
– Vanuatu: no data ; 245,036
– Establishing a corporation offshore:
– Three pieces of paper:
– A nominal director declaration states that the nominal director with a tax haven address will follow the direction of the firm’s real owner.
– An undated resignation letter allows the nominal director to duck liability.
– Power of attorney is granted to the corporation’s real owner.
– The Ugland House, one small building in the Cayman Islands is home to some 18,857 companies.
– The state of Delaware, with a population of 917,092, is home to some 945,000 companies, many of which are shells.
So you have a nominal owner, what happens then?
– Like Bidzina Ivanishvili, the Prime Minister of Georgia, you can buy Picasso’s “Dora Maar au Chat” for $95 Million, a full $35 million more than it is appraised for. Just because you want to.
– Also like Ivanishvili, you can provide 60,000 in your home region with free electricity and gas, build twenty schools, a stadium, and provide monthly bonuses to doctors and teachers.
– At $2 million for a 65′ yacht, the global private wealth in tax havens could fill the entire length of the Mississippi River 34.8 times.
So the US Permanent Subcommittee on Investigations has declared that Ireland is a tax haven and Apple executives giving testimony to the committee have said that the Irish government gave them a special 2% rate. Rate in this context is irrelevant however, as the mechanism ensures that what Apple declares as taxable income is completely up to them. As many reports have suggested, Apple could pay as little as 0.05% on income earned and passed through Ireland, and the revenue appears to be sales tax on Apple products bought in Ireland. In addition they have also said that their Irish companies are not registered for tax anywhere, so that none of the $30 bn global income earned in the last number of years was taxed.The Irish government denies that it has provided special tax treatment to Apple, and that it is not a tax haven. This is the surest sign that it is one, according to Richard Murphy of Tax Research UK.
In my long article in the first issue of Irish Left Review on Ireland’s corporate tax regime I made the point that Ireland in effect sells its abilities to make tax laws to profit hungry MNCs, in much the same way as it sells to the rights to our natural resources to large oil companies. That is, whatever economic benefit there is, and its small, goes to the ‘agents’ who negotiate the deal, with very little, if any, benefit appearing in the economy.
Recently these arrangements, known as the Double Irish with the Dutch Sandwich have been given a lot of attention and are often explained. For example, see this New York Times info graphic. However, while listening to Jim Stewart’s interview on Morning Ireland last Friday in a conversation about Google’s ‘grilling’ before the UK’s Public Accounts Committee on taxation, I found out that the ‘Dutch Sandwich’ is no longer used, and instead Google’s earnings from its EMEA market goes from Google Ireland to Google Ireland Holdings, which is registered in a solicitor’s office at 70 Sir John Rogerson’s Quay and also in Bermuda. So, by passing these to the Bermuda registered company, the earnings go straight to Bermuda. Google Ireland Holdings has no employees and is ‘owned’ by Google Bermuda which also has no employees. Both are unlimited companies, so under Irish law, they do not have to publish accounts.
via Irish Left Review.
via Irish Left Review.
Why Does No One Speak of America’s Oligarchs?
Overdressed Naked Capitalism
One of the striking elements of the demonization of Cyprus was how it was depicted as a willing tool of Russian money launderers and oligarchs. Never mind the fact, as we pointed out, that Cyprus is not a tax haven but a low-tax jurisdiction, and in stark contrast with the Caymans and Malta, has double-taxation treaties signed with 46 nations and has (now more likely had) with six more being ratified. Nor is it much of a tax secrecy jurisdiction, according to the Financial Secrecy Index. Confusingly, in the overall ranking, lower numbers are worse (Switzerland as number 1 is the baaadest) but in the secrecy score used to derive the rankings, higher is worse, with 100 being utterly opaque. The total rank is a function of “badness” (secrecy score) and weight (amount of business done). You’ll notice that all the countries ranked as worse than Cyprus have secrecy scores more unfavorable than it, with the exception of Germany, which is a mere 1 point out of 100 less bad, and the UK, which scores considerably lower (Nicholas Shaxson, author of Treasure Islands, would take issue with that reading, but he takes a more inclusive view of the boundaries of a financial services industry. For the UK, thus he not only includes the “state within a state” of the City of London, but also the UK’s secrecy jurisdictions, such as the Isle of Man, in his dim view of the UK as well as the US on secrecy). And even so, its greater volume of hidden activity gives it a much worse overall ranking. Of countries 21 tp 30, only 3 rank as less bad on secrecy: Canada, India, and South Korea.