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Posted on 04/14/2009 8:52:50 PM PDT by nickcarraway
The recent G20 summit -- a much expanded platform from the traditional and exclusive G7 and G8 -- brought together a disparate, and somewhat desperate, group of world leaders from across the political divide.
They gathered after realising that they could no longer afford to operate within the constraints of ideological straitjackets, economic orthodoxy and in a business-as-usual mode in the face of the global financial meltdown, which has left a bloodbath of banking failure, business collapse and job losses.
The meltdown had to be addressed urgently or else it would result in a world economic depression.
So they had to find quick and sustainable remedies -- among them a US$1 trillion stimulus package and setting new rules of operation binding them all as financial markets have become so intertwined in a globalised world that collapse of one has a contagion effect on the rest.
This was a tacit admission that unregulated free markets simply do not work.
One issue that found unanimity among the G20 leaders -- with Brazil, China, India and South Africa sitting at the top table alongside traditional economic powerhouses like the United States, Japan and Germany -- is that of reining in or completely abolishing tax havens.
The issue has come to a head owing to the colossal amount of tax evaded through these havens, most of which are conveniently situated on isolated islands (i.e. offshore so-called overseas territories such as the British Virgin Islands), principalities (small territories ruled by princes, e.g. Monaco) or special administrative regions under sovereign states, as is the case with Hong Kong and China.
Thus, the strict rules governing banking in London don't apply on the Virgin Islands as is the case Beijing vis-a-vis Hong Kong, making these places havens in every sense of the word.
At a time governments need every tax dollar legally due to them to fight recession, tax evasion through tax havens can no longer be tolerated.
Geoffrey Power, a former economic adviser to the tax haven of Jersey, a British Crown dependency in the English Channel, says: "What . . . defines an area as a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax evasion."
Characteristics that make tax havens attractive are:
no taxation, or if any, it is nominal;
lack of effective exchange of tax information with foreign tax authorities;
lack of transparency in the operations of legislative, legal or administrative provisions;
no requirement for a substantive local presence; and
self-promotion as an offshore financial centre.
Thus, discretion, which actually amounts to secrecy, is a tax haven's main attraction through protection of personal information.
The mushrooming of tax havens has been attributed to the considerable growth of offshore banking and globalisation of world business.
Thus, tax havens straddle the world from the British Virgin Islands in the Caribbean, Guernsey, Luxembourg, Monaco, Switzerland (all in Europe) to Hong Kong and Macau under Chinese jurisdiction.
An estimated US$7 trillion of assets are being held offshore with an estimated US$500 billion of personal wealth in Jersey alone.
According to pressure group Tax Justice Network, developed countries lose US$180 billion a year in evaded taxes.
In 2007, the then US Senator Barack Obama filed a Stop Tax Haven Act with Senate counterpart Carl Levin who said at the time: "Offshore tax havens have declared war on honest US taxpayers by helping tax cheats."
On the campaign trail, Obama cited one building called Ugland House on a tax haven, the Cayman Islands, which are a British overseas territory in the Caribbean.
The building is registered as accommodating 18 000 companies but just 241 people work in the building.
"That's either the biggest building or the biggest tax scam on record," said Obama in disgust.
Tax havens are an example of what prompted former British prime minister Edward Heath's memorable description of the late British tycoon Roland "Tiny" Rowland as the "unacceptable face of capitalism" because of the latter's rapacious business methods in the 1970s.
Africa has not been spared either with the likes of the late former Zairean dictator Mobutu Sese Seko and Nigerian strongman General Sani Abacha stealing from the state and stashing the millions in numbered Swiss bank accounts.
Tax havens also aid organised crime and terrorist networks in money-laundering.
They operate on a see-no-evil/hear-no-evil basis.
However, countries which have fallen victim to this criminality and greed are now fighting back to protect their tax bases by taking retaliatory economic measures. A "blacklist" of offending countries was given to the G20 summit to name and shame them.
To situate the issue in our context, Zimbabwe has not been immune to this method of tax evasion.
Several firms -- some very large --have been exposed for under-invoicing exports and banking the difference offshore at a considerable loss to the economy.
This malpractice must not be countenanced any longer because the inclusive Government needs every tax dollar to pay the civil service, revive the economy, and rebuild infrastructure.
The amounts that have been externalised this way could also go a long way in offsetting the country's foreign debts and could have greatly mitigated the effects of sanctions and recurrent droughts that have hit the country over the past years.
Relevant Links Economy, Business and Finance Legal and Judicial Affairs As such, the Government of Zimbabwe should join hands with those states that have said enough is enough of tax havens and are striking back by targeting areas where errant countries' economies are open to retaliation.
The measures include threat of rescinding existing treaties and withholding interest payments to non-cooperative jurisdictions.
It cannot be business as usual anymore. Let's do away with such obscene criminality; let's not conceal it under a veil of respectability.
So now they’re going to tell countries how to set up their tax system?
What nonsense. They were not free markets. They were distorted by massive fraud at Fannie & Freddie. Leveraged investment banks and hedge funds bailed out by political crony pals.
The title was we canbnot allow tax havens. God forbid any freedom from thuggish govt and extortionate taxation.
America. A great idea, too bad it didh’t last.
>So now they’re going to tell countries how to set up their tax system?
Blatantly contra-Constitutional. Any adoption of a foreign taxation ought to result in the complicit branches of government being shot by the armed forces... for by doing so they are acting so wholly outside Constitutional perveue that they themselves ARE an enemy of the Constitution, which is what they are sworn to uphold.
Any wealth you have, anywhere in the world, must be forfeit to the Obamassiah for redistribution according to his will!
I like the idea of “tax havens”.
I believe it’s a good thing to have options as to where one can keep their money.
Isn’t one of the planks of the communist manifesto about confiscating the property and money of people who leave the country? One of the BIG rules of the old USSR was that no currency could leave the country, at all.
Obama is a foreign Communist usurper.
>God forbid any freedom from thuggish govt and extortionate taxation.
I think the politicians forgot to read America’s warning label. —
WARNING: Excessive and onerous taxation may cause tax-debts to be paid in Lead, Copper, Tungsten, and/or Steel.
True, but this policy went into effect about a year ago, as I recall.
Circular definition.
Thou shalt not covet.
The "government" of Zimbabwe publishes this?
You know, the guys who know have to pay for a drink with a ten trillion Zim note? Soon to be replaced with a 20 trillion note?
So now they blame their insanity on Evil Tax Havens.
Got it, Mr. Mugabe. Right. BTW, wife on one of those big shopping trips to Paris? Or is it Singapore this week?
How laughable.
Anybody who says that the US economy was unregulated is a LIAR.
“So now they’re going to tell countries how to set up their tax system?”
It doesn’t take “telling countries how to set up their tax systems.”
It could be done in the US by changing the IRS regulations and tax laws, such that the company wouldn’t benefit as they presently can.
It could have the effect of making it attractive for US companies to take their Hq. offshore, as Haliburton did (United Arab Emirates).
http://en.wikipedia.org/wiki/Halliburton
Current US tax law permits a company to defer (nearly permanently) payment to the US until funds are remitted to the US parent as dividend income.
Change that law, has no requirement for the tax haven to change their tax laws.
Bottom line: The main issue is the consolidated US corporate income tax rate.
Tax Havens -
:-)
>>So now they’re going to tell countries how to set up their tax system?<<
Yeah but its gonna be us (and the G19) telling others not to help U.S. citizens violate U.S. laws so its familiar territory.
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