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Archive for the ‘Tax Havens’ Category

I’m in Singapore for two days to help fight the Organization for Economic Cooperation and Development, a statist international bureaucracy based in Paris. The OECD has something called a global tax forum, the purpose of which is to harass so-called tax havens in hopes of coercing them into acting as tax collectors for Europe’s decrepit welfare states. Here’s the executive summary from the memo I wrote, which warns low-tax jurisdictions that the OECD may push even harder to undermine fiscal sovereignty because of fears that a GOP takeover of Congress will make it more difficult to push for tax harmonization policies in the future.

The Paris-based Organization for Economic Cooperation and Development has an ongoing project to prop up Europe’s inefficient welfare states by attacking tax competition in hopes of enabling governments to impose heavier tax burdens. This project received a boost when the Obama Administration joined forces with countries such as France and Germany, but the tide is now turning against high-tax nations – particularly as more people understand that such an approach inevitably leads to Greek-style fiscal collapse. Looming political changes in the United States will further complicate the OECD’s ability to impose bad policy. Because of these developments, low-tax jurisdictions should be especially wary of schemes to rush through new anti-tax competition initiatives at the Singapore Global Forum.

The good news is that nothing dramatic took place on the first day of the two-day conference. The OECD continued to bully low-tax jurisdictions to sign information-sharing agreements and the low-tax jurisdictions kept asking for double-taxation agreements so they could get some benefit in exchange for weakening their human rights/financial privacy laws. The OECD and high-tax nations have been ignoring these requests for a two-way street, thus continuing their bad-faith behavior.

For more information on this issue, here’s a link to my video on tax competition, and here are a handful of TV appearances where I discuss the issue. This is a challenging issue to debate, so I’d welcome feedback on which arguments you think are most effective.

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Here’s a Reuters story about the Australian Tax Office harassing Paul Hogan, better known to Americans as Crocodile Dundee, because of a tax dispute. The grinches at the tax office took advantage of Hogan’s return for his mother’s funeral to hold him hostage, refusing to let him leave the country until he coughs up some cash. It appears that the tax police in Australia are just as politicized and above the law as the IRS. Hogan has never been charged with tax evasion and there are plenty of signs that the bureaucrats want to make him a high-profile victim to justify the amount of money that has been squandered in a probe of supposed offshore evasion.

Actor Paul Hogan, star of the “Crocodile Dundee” movies, has vowed to continue fighting the Australian tax office which has barred him from leaving Australia until he pays a massive bill, saying he’s victim of a witch hunt.

Hogan, 70, was served with a departure prohibition order 10 days ago while in Australia to attend his 101-year-old mother’s funeral which has prevented him from leaving to return to Los Angeles where he lives with his wife and son.

The Australian Tax Office refused to comment on reports of seeking tax on A$38 million ($34 million) of allegedly undeclared income from Hogan, saying it cannot give details of individual taxpayers.

But the actor went public in the Australian media this week to put forward his side in his five-year row with the tax office, saying he had done nothing wrong and the tax office was on a witch hunt for a high-profile case.

…”If I was a tax evader, which I’m not, I must be the dumbest one in the world to keep coming back here instead of fleeing to a tax haven … I know they’re absolutely desperate to nail some high-profile character with money to justify the expense to the taxpayer.”

Hogan, who was once a painter on the Sydney Harbour Bridge, is under investigation as part of Australia’s biggest probe into offshore tax evasion, Operation Wickenby.

The operation is budgeted to cost at least $300 million. The tax office has claimed he put tens of millions of dollars in film royalties in offshore tax havens, a claim that he has denied. He has never been charged with tax evasion.

This story is symbolic of a bigger issue, which is the the unfortunate tendency of governments to create ever-more oppressive and misguided laws in response to failures of existing policy. We see this in the failed War on Drugs, which leads to trampling of civil liberties and erosion of privacy. We see it in the failed War on Poverty, which leads to more redistribution that further traps people in dependency. We see it in the failed government-run education system, which wastes more money every year as outcomes remain stagnant and children from poor and minority communities suffer.

In the case of tax policy, politicians impose high tax rates and punitive forms of double taxation. As anybody with a modicum of common sense could predict, this bad tax policy undermines economic performance and drives economic activity to jurisdictions with better tax law. The politicians then have two ways to respond. They can lower tax rates and reform tax systems, an approach that simultaneously would boost growth and improve compliance. Or they can tighten the thumbscrews on taxpayers, trample their rights, and conspire with other high-tax nations to punish the jurisdictions that do have good policy.

Not surprisingly, most politicians choose the latter approach. And the attack on low-tax jurisdictions is a particularly loathsome part of their response. As this video explains, tax competition is a liberalizing force in the world economy and the effort by high-tax nations to penalize so-called tax havens is driven by a statist impulse to prop up decrepit and inefficient welfare states.

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Recently, I chastised Senator Levin for his assault on so-called “tax havens,” pointing out that Levin’s agenda would fail to benefit small businesses, but instead “place U.S. corporations at a competitive disadvantage in the international marketplace.”  Since then, Cayman Finance has taken issue with the Senator, reinforcing many of the points consistently made by CF&P in response to fallacious attacks on low-tax jurisdictions:

[A]s a sovereign tax jurisdiction, we have the right to set our own rate of tax—just as Ireland and other jurisdictions do—that is all in accordance with the rule of law, and neither we nor these other jurisdictions can properly be accused of thereby undertaking anything “abusive.” The only question is whether those U.S. multinationals are making use of our jurisdiction in accordance with U.S. law which under current U.S. law is categorically the case.

Consider these points: …

  • The anti-money laundering legislation of the Cayman Islands has been evaluated by the International Monetary Fund and by the Financial Action Task Force and is found to be superior to that of the United States and most EU jurisdictions.
  • The report also ignores the very substantial benefits that our financial industry confers on the United States economy. The financial services sector in the Cayman Islands is enormously important to the economic growth of the United States…
  • The favoured location for inward investment by Cayman funds is the United States; the preponderant flow of capital is from  the Cayman Islandsinto, not out of, the United States.

…[P]laces like the Cayman Islands have in a fully transparent and accountable manner provided a massive source of inward capital flow and taxable income for the U.S.

Thursday, July 22, 2010, CF&P President Opposes Senator Levin’s Latest Attack on So-Called Tax Havens
http://www.freedomandprosperity.org/press/p07-22-10/p07-22-10.shtml

Tuesday,  July 27, 2010, An Open Letter to Sen. Carl Levin, by Anthony Travers, O.B.E., Chairman, Cayman Finance
http://www.caymanfinances.com/Cayman-Finance-News/an-open-letter-to-sen-carl-levin.html

CF&P Fact Sheet, Tax Havens: Myth vs. Fact
http://www.freedomandprosperity.org/taxhavens-facts/taxhavens-facts.shtml

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The fight for financial freedom and limited government is global. The Center for Freedom and Prosperity recognizes Eduardo Morgan Jr., an individual whose work for his native Panama echoes much of our own efforts to defend fiscal sovereignty from the onslaught of anti-growth taxation and regulation.

As Panama’s Ambassador to Washington from 1996 to 1998, Eduardo Morgan Jr. saw his country attacked by US political and economic leaders. Ever since, he has dedicated himself to exposing the hypocrisy of the OECD and its members for attacking other countries that want to compete for investment and capital.

Since the beginning of the year, Eduardo has also contributed factual analysis to the online discussion with his blog, which I highly recommend to our readers. His work on behalf of Panama should serve as an inspiration to all individuals and nations that seek freedom and prosperity.
http://www.eduardomorgan.com/blog/

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As if the residents of the Gulf Coast haven’t had it hard enough, the IRS is moving in to make sure they get their cut of any payouts from BP.  These government bureaucrats even have the chutzpah to pretend that their actions are benevolent and beneficial on the grounds that they are helping taxpayers understand the regulations they must comply with.  Of course, it’s Congress and the bureaucratic tax collection industry that have conspired to create such a tangled mess of regulations in the first place.

The Internal Revenue Service wants its cut from oil spill victims who receive BP payments for lost wages.

Under current law, BP payments for lost wages are taxable — just like the wages would have been, the IRS said in tax guidance issued Friday. Payments for physical injuries or property loss, however, are generally tax free. Payments for emotional distress? Taxable, though medical expenses related to the emotional distress are deductible.

…The IRS issued the guidance Friday to help spill victims sort through the law’s complexities. The agency has posted tax information for oil spill victims on its website and plans to hold forums in seven Gulf Coast cities on July 17 to help victims with tax troubles or questions.

http://www.foxnews.com/us/2010/06/25/insult-injury-irs-wants-taxes-bp-payments-oil-spill-victims-lost-wages/

If we had a simple flat tax, these residents would be able to spend less time trying to understand and comply with a 70,000+ page tax code, and more time doing important things like figuring out how they’re going to make a living now that their beaches are covered in oil.

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The Freeman has an article by an expert from Bermuda about the importance of giving taxpayers an escape option to curtail the greed of the political elite:

The Declaration of Independence had it exactly right: “He [King George III] has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.”

Today, the United States makes George III look like a piker.

…The U.S. governments—federal, state, and local—find that extracting 35–40 percent of incomes is not sufficient. They need more to continue their march toward the perfect welfare state…

The EU countries are even worse, with governments raking in around 50 percent of national output. Even Louis IV of France would now be viewed as a benevolent uncle compared to that. The U.S. and EU governments intrude on the financial lives of citizens in every conceivable way, from taxes to regulations to absurd laws that shape and control their citizens.

…Thomas Paine, who wrote of “the greedy hand of government, thrusting itself into every corner and crevice of industry,” would be astounded at today’s situation.

…There are a number of countries, disparagingly called tax havens (or offshore financial centers), most of them small and insignificant, such as Bermuda, Monaco, Liechtenstein, and Cayman, that are allegedly sabotaging the grandiose plans of the United States and the European Union to create their utopian welfare states…

The greatest enemy of the modern State is not the terrorist, criminal, hoodlum, or even the foreign aggressor; it is the citizen who simply wants to keep his own income or to protect his own wealth. “Need” is defined as getting your hands on other people’s money, and greed has come to mean the natural desire to protect your own property and assets from sequestration by governments.

…Tax competition compels governments to think more carefully before spending the public’s money and frees entrepreneurs for greater access to investment funds. Contrary to common belief, low-tax jurisdictions do not siphon off capital from high-tax areas, but allow a better and more effective means of making investment decisions.

The Bible established a tax rate of 10 percent, known as the tithe. That should be enough for governments. There is little hope for optimism on that score.

Low-tax countries are an affront to high-tax countries that believe they have a right to tell the rest of the world how to live. So high-tax countries try to force their tax regimes on everyone else. That is financial imperialism.

http://www.thefreemanonline.org/featured/the-new-financial-imperialism/#

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In an amusing coincidence, Secretary of State Hillary Clinton and I were both in Latin America this week offering fiscal policy advice. But it won’t surprise you to know that Mrs. Clinton’s suggestions are radically different than the advice I provided. She spoke in Ecaudor and, according to an AFP report, said it was time for “the wealthy across the Americas to pay their “fair share” of taxes in order to eliminate poverty and promote economic opportunity for all.” She also claimed that “her appeal to overhaul tax systems did not amount to “class warfare” and was instead recognition that the “winner-take-all-approach” was a drag on progress.” The AFP story concludes with Mrs. Clinton asserting, “We can’t mince words about this. Levels of tax evasion are unacceptably high.” 

By contrast, in my remarks to the Fundacion Libertad in Panama and the Chamber of Commerce in El Salvador, I explained that academic research shows that better tax compliance is best achieved by lowering tax rates and eliminating inefficient and corrupt spending programs so that taxpayers have more confidence that their money is not being wasted. But let’s touch on something even more important than economics. I also made a moral argument about the danger of giving national tax authorities too much power and information – especially in a region where governments oftentimes are the source of oppression, expropriation, and tyranny. Simply stated, there are some things that are more important than obeying tax laws. This Center for Freedom and Prosperity video explains that so-called tax havens are an extremely important refuge for people who are subject to persecution and other forms of government malfeasance. 

Let’s consider some Latin American examples. Imagine a political dissident in Venezuela. Huge Chavez has turned that country into a thugocracy and opponents of his sinister regime are vulnerable to having their assets expropriated (and worse). Thankfully, many Venezuelans are able to protect themselves from socialist tyranny by putting their money in Cayman, Panama, or Miami (the U.S. is a tax haven for non-U.S. people). But if Mrs. Clinton got to make the rules, tax havens would no longer exist and Chavez would be empowered. 

Or what about families in Mexico, who rightfully are afraid that if they keep their money in the country and report it on their tax returns, corrupt bureaucrats in the national tax office will sell their names to kidnapping gangs and suddenly their children will be kidnapped and they will have to deal with the horror of getting a ransom note accompanied by a child’s finger. Fortunately, many Mexicans can guard against this horrific possibility by placing their assets in Cayman, Panama, or Miami. But in Mrs. Clinton’s ideal world, those options would not exist and many more people would experience the nightmare of vicious crime. 

And consider the plight of Argentineans. A few years ago, the nation’s venal government stole the private pension assets of the people. This is in addition to radical currency devaluations that have wiped out a big chunk of people’s savings. Prudent Argentineans have avoided these forms of back-door thievery by moving funds to Cayman, Panama, and Miami. In the Orwellian world envisioned by Mrs. Clinton, however, tax havens wouldn’t exist and governments would have carte blanche to engage in bad policy. 

This is not the first indication of Mrs. Clinton’s government-über-alles mindset as Secretary of State. Let’s remember that she urged class-warfare tax policy for Pakistan and more recently said Brazil was a role model for soak-the-rich tax policy (a strange assertion since the top tax rate there is only 27.5 percent). If nothing else, at least we can give her credit for being consistent. 

But if I have to choose between Mrs. Clinton’s consistent statism and protecting the liberty and freedom of oppressed and persecuted people, it’s no contest. Politicians and senior government appointees all over the world act as if folks in the private sector are nothing more than serfs and peasants who have an obligation to pay ever-higher tax burdens, so we should be happy that so-called tax havens offer a refuge – even if we don’t live in failed states such as Venezuela, Mexico, and Argentina. Actually, since Obama is trying to turn us into Greece, maybe this issue will be important for Americans even sooner than we think.
http://www.breitbart.com/article.php?id=CNG.34c2d1e015a4313d8a5326dff93b6f02.901

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