by Linda Beale
The July 24 New York Times Magazine carries an article by Adam D entitled My Big Fat Belizean, Singaporean Bank Account.
The author shows how easy it was for him to establish a secret offshore bank account that would allow him to evade US (and other nation’s) taxes with ease. It only cost around a thousand dollars, and the firms that do this for a living can set you up with a fake corporation in one tax haven and a real bank account in another, both of them sworn to secrecy about your identity as a US citizen and complicit in aiding wealthy taxpayers in avoiding required reporting to the IRS.
And that means a lot of moolah gets stashed abroad, and a lot of taxes remain unpaid.
The Tax Justice Network, a global research firm that advocates against such havens, suggests that the amount hidden offshore is between $21 trillion and $32 trillion. If properly taxed, that could yield more than $200 billion in revenue around the world. Furthermore, because a 2010 McKinsey & Company report estimated the world’s financial assets at about $200 trillion, somewhere around 10 percent or more of the world’s wealth is effectively invisible. And it’s also almost certainly in the hands of the people and institutions that most actively influence major investment decisions. Id.
So far, so good. But where the author goes wrong is in his ruminations about the reasons such shenanigans go on. He thinks it is because regulations and tax laws are so complex.
One often-overlooked lesson of the financial crisis is that shenanigans don’t happen in the absence of regulation; they happen when regulations are exceedingly complex and involve confusing, overlapping regulatory authorities.
Pshaw. This is, quite simply, garbage regulatory mythology. Shenanigans happen in brute force capitalism–the kind we’ve had in place for the last few decades–until there is one dominant beast who controls everything. Regulations ain’t the cause.
Every simple rule becomes an opportunity for “inventive” tax lawyers and those with wealth desirous of hiding it or evading taxes on it to come up with “creative” solutions that skip around, over, or under the law. When tax administrators find out what is going on, they can sometimes take immediate steps. Often it requires legislation and regulation, and in the time it takes to create the lock on the door that the evaders broke through, lots of taxes have been evaded. And as soon as the lock goes on, the inventive tax lawyers and wealthy tax evaders get busy at their manipulative game again. So there is a spiral of complexity to deal with the problem caused by sophisticated taxpayers seeking sophisticated help to avoid or evade taxes.
This “regulations and complexity are the cause of offshoring and tax cheating” nonsense sounds about like the 2001 arguments made by many on the corporatist right for reducing tax rates. First, the proponents of lower taxes noted that there was a considerable amount of cheating via tax shelters by the wealthy and big corporations. Then, the illogical next step was taken: if only the wealthy just had to pay a little less in taxes, they’d be good citizens and quit using tax shelters, the Republican head of the Joint Economic Committee opined. HA. If you lower the rate today, the greedy ones just demand a lower rate than that the next day. We’ve seen that play out as the corporate lobbyists got a twenty-year-long wish list fulfilled in the 2003 Bush tax cuts, then came back for more the next year and the next (and are still demanding even more today).
cross posted with ataxingmatter
Source: Angry Bear