Posted on 02/11/2014 5:29:43 AM PST by SeekAndFind
The U.S. and Britain have got themselves in another fine mess over populist measures against tax havens that don't work and smack of hypocrisy.
Obama has set off once more on his crusade against foreign tax havens. His tactic is to extend the jurisdiction of the IRS to cover the whole world. His weapon is the Foreign Account Tax Compliance Act which requires all foreign financial institutions to supply full details of accounts held abroad by American taxpayers.
There are a few problems. The first is that foreign banks have not taken too kindly to being tax gatherers for the US Government at their own expense, which is estimated at 10 times the tax gain. Neither do they appreciate the regulatory costs and penalties that will be imposed on them for any backsliding.
The US has promised reciprocity to countries signing up to the deal, which should have lawyers salivating at the prospects of actions against the Federal Government on constitutional grounds.
A number of countries have signed-up. The snag is that only two of them are ‘tax havens’; the remainder are high tax regimes which are hardly likely to be the destinations of American funny-money, and there are plenty of potholes in the form of privacy laws and data protection. The big tax havens have ignored Obama altogether.
Americans abroad are none too impressed either; there has been a surge in renunciations of US citizenship.
Amazingly, no cost/benefit analysis was undertaken before the Act was passed; it is estimated that the collection costs will outweigh revenue collected, and that capital flight could be substantial, but nobody really knows.
The UK has also ventured down the same bumpy road. A couple of years ago the it negotiated a ‘transparency’ deal with Switzerland.
In return for disclosing the 20 percent or so of undeclared accounts that are identifiably British, the Swiss will not be required to reveal anything more. But most off-shore accounts are blind or discretionary trusts or some other vehicle that does not identify the owner. Off-shore banks specialise in these, and there are entire law firms that do nothing else.
And the levy only applies to accounts still held as at May 2013, so anybody idiotic enough to keep his off-shore account in his own name had 18 months to shift his wedge to another ‘tax haven’. True the Swiss will be required to reveal the number of accounts shifted and the 10 most popular destinations, but not to disclose how much money was moved or by whom.
What’s more, the Swiss and Brits have agreed not to make public any information gathered, so Freedom of Information Act inquiries will get nowhere.
Not that any of this will bother the Swiss or make any difference. The really big amounts of tax-dodging money come from Africa, Eastern Europe, Asia and China.
But the UK Government is in another bind; over the years most public buildings have been financed through PFIs – public/private finance initiatives which are really lease-back arrangements where the money is provided by the private sector and the Government is effectively a tenant.
The £450 million Ministry of Defence offices are owned by a PFI outfit that is incorporated in Jersey and has a Dublin tax residency (Irish corporation tax is much lower). Even more embarrassing, the Home Office is owned by a consortium of financiers through a Luxembourg holding company and a parent registered in Guernsey.
And a former Trade Minister was Chairman of an off-shore bank which has been investigated for laundering money from Pakistan, Qatar and Zimbabwe. Oh, and the Labour Minister in charge of beating up tax havens had £250,000 stashed in an offshore blind trust.
If Obama is looking for a place to start, how about the State of Delaware? Or Nevada, where there is a ‘tax-efficient vehicle’ for every six members of the population? And although the US insists that the IMF investigates transparency into other countries’ offshore banking practices, it will not allow the IMF into its own banks, notwithstanding that America is the world’s largest tax shelter.
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Robin Mitchinson is a Contributing Editor to The Commentator. A former barrister, he is an international public management specialist with almost two decades of experience in institutional development, decentralisation and democratisation processes. He has advised governments and major international institutions across the world
Just don’t mess with Oblamer’s Cayman Islands stash and we’re cool. Capiche?
It appears King Obama will be establishing his throne-ship in the USA upon consolidating his rule over the upcoming New World Order.
I wonder if the capitol will. be at his new palace in Hawaii?
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