You are hereThe Nation: Tax Havens: Bigger Than You Think, Closer to Home Than You Imagine

The Nation: Tax Havens: Bigger Than You Think, Closer to Home Than You Imagine


April 1, 2011- Author Nicholas Shaxson (Treasure Islands) does not disguise how he feels about the corporate tax haven system. “It is a hugely regressive force,” he says, adding that it takes money and income away from “ordinary people and [gives] it to the wealthiest members of society.”

By some estimates, the United States loses $100 billion every year to foreign tax havens, though Shaxson emphasizes that most people still don’t really grasp the enormity of the problem. When they hear the term “tax havens,” many people envision a handful of billionaires sunning themselves on a remote beach somewhere, martinis in hands. The real problem is actually much larger and closer to home.

There now exists an entire parallel network of business conducted by huge corporations that actually mirrors the behavior of international crime organizations. Over half the world trade is now routed through tax havens. “You have this zone where you have big corporations and criminals rubbing shoulders with each other,” says Shaxson. This system has a double effect, he explains. First, it creates incentives to break the law at a corporate level, but it is also “going to provide huge political cover for the criminals themselves when you get the corporations protecting the tax havens and protecting secrecy.”

And this isn’t just happening on sandy beaches, he explains. “The biggest tax havens are big, rich countries, particularly the United States, the United Kingdom, Switzerland—of course, the Cayman Islands is very big too—but also countries like Ireland and Luxembourg, Luxembourg is absolutely huge. Very few people talk about it when they’re thinking about tax havenry.”

General Electric, which paid no federal income taxes in 2010, even though it raked in $14.2 billion in profits (and another $3.2 billion in tax benefits), is a huge fan of aggressively moving profits offshore to Luxembourg, and also Bermuda and Singapore.

Many people might not realize that the United States itself is a tax haven. Tax havens are basically playgrounds in which the rich and well connected can do whatever they want, and those playgrounds can exist anywhere. “There are all sorts of things that the United States offers; particularly, there are tax exemptions, tax loopholes, that attract a lot of money to the United States,” says Shaxson. “Someone from Latin America can put their money in the US and earn income there tax-free.” The amount of dirty money attracted into the United States has been estimated at $3 trillion.

Several US territories are now engaged in a race to the bottom to see who can provide the most tax loopholes and lowest tax rates to rich people and corporations in order to drum up business and revenue for badly indebted states. Most promise a cloak of secrecy, which is really what big corporations love. They want to know they have the right to operate however they please without meddlesome regulators breathing down their necks. Wyoming, Nevada and Delaware are the leaders in this area, according to Shaxson.

FULL STORY HERE:

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