"AN ESTIMATED $5 billion is moved out of Australia each year to tax havens around the world, according to Deputy Commissioner of Taxation Paul Duffus. Claiming that the Commonwealth was being defrauded of about $300 million in revenue each year, the Tax Office, along with the Australian Crime Commission and the Australian Federal Police, have commenced a major investigation of the use of offshore tax havens for money laundering and tax evasion."http://www.smh.com.au/news/business/tax-havens-reap-5b-a-year/2005/12/04/1133631145956.html
"The Tax Office abandoned its serious claim of "tax evasion" against Gerard Industries and ultimately levied no penalties, despite its investigators finding that the company's elaborate tax haven insurance dealings were a "sham" designed to evade tax.
Revealing details of his family company's confidential tax settlement for the first time, the [recently and now resigned
] Reserve Bank board member Robert Gerard said through his barrister yesterday that he had paid "just over" $75 million to settle unpaid taxes and interest - but none of the onerous penalties that apply for tax fraud or evasion.
The Tax Office's report from a 12-year audit found that Mr Gerard had, as a director of Gerard Industries, jointly established a company called FAI Insurances NV in the Netherlands Antilles and claimed deductions for millions of dollars of premiums paid to that company. It also found Mr Gerard and his co-director, Bill Henderson, made false statements and misled investigators by denying their links to the "artificial" company.
The settlement, agreed in late 2002 but not finalised until a year later, closely followed a letter from Mr Gerard to the then federal attorney-general, Daryl Williams, urging him to "urgently intervene" because he was getting a "hard time" from the Tax Office. The letter, dated October 18, 2002, was promptly passed to the Tax Commissioner, Michael Carmody.
Tax professionals yesterday expressed surprise at the gap between the Tax Office's harsh findings in this case and the lack of any punishment. This was contrasted with the case of a 36-year-old mother of three who last year was sentenced to three years' jail for submitting false business activity statements and avoiding $85,000 in tax."http://www.smh.com.au/news/business/gerards-75m-to-settle-tax-sham/2005/12/01/1133422048097.html
[In olden times, companies tended to be taxed where they had their biggest presence, which was usually where they had their production facilities or most of their workers. Today, though, they exist in some electronic file on a computer on a tiny rock somewhere surrounded by water -- and secrecy. Now, let me get one thing straight. Guam is most definitely not a tax haven; it's tax code is a copy of the US tax code. So there is nothing untoward in that respect from my planned relocation back there. There have been efforts to create some financial activities there but it just is not in the "offshore" league of islands. These so-called havens are mere legal artifices concocted by huge money interests, legitimate and illegitimate, to hide earnings, avoid tax payments and stay under the radar screens of the business press and regulatory agencies. These havens have no natural resources to sustain them and live off the greed of the great and mighty who are not inclined to share their profits with the countries which host their profit-making enterprises.]
"The Cayman Islands is the fifth largest financial center in the world. It is where deals are made and large amounts of capital are banked overnight. It is fully in the international financial system.
Caymans 97 [is] a holding company for BP - the world's second largest oil producer. Now, this company holds controlling ownership in Cayman of many of BP's worldwide operations. It serves a variety of useful purposes for BP, the most useful being the pooling together in one place of a massive portion of the income and assets of the entire BP group. The goal is to fill the holding company pool to the brim with revenue and then keep that money in play and wash it back through the company - untaxed - only landing it onshore in the U.S. or UK when tax rates have been engineered through the company's offshore network to be the most advantageous.
Secrecy is at the heart of the process I've just described - it's central to the way corporations move their money around to avoid and evade the scrutiny of regulators and governments. BP - and any multinational you care to mention - all operate in the same way. Most will be public companies and so theoretically transparent - but behind the scenes will be these networks of offshore subsidiaries that no one knows about - and if you do discover them like Caymans 97 - offshore secrecy structures prevent governments and the public from seeing what they really do, which is essentially engineering their income so as to pay as little tax as possible.
Enron had 692 subsidiaries incorporated in Cayman before it went bankrupt. It had about 200 other offshore companies in other tax havens around the world. Its offshore network was set up with the prime intention of avoiding tax in any country where it operated - the company even had a special unit working out the best offshore transactions for tax purposes. It was that kind of set up which made profits for Enron of nearly $2 billion between 1996 and 2000 - while the company only paid $17 million in tax. And it was that kind of aggressive offshore setup that allowed Enron to grow and expand in the 1990s and become the global multinational it so aspired to be.
But of course there was another offshore side to Enron which says a lot about how corporations use offshore setups these days. This is "corporate financialization" - and what that means is the way that multinationals now engage in very complex trading on the world's markets using derivatives and other financial instruments to hedge loans, do deals and swaps, convert currencies, buy contracts and so on. No longer do companies just make their product and sell it - they have become banks and finance companies as well - and offshore subsidiaries and entities are absolutely critical to that, because they specifically allow companies to get around various laws in the countries where they operate to get the offshore advantage with a particular type of deal or contract they have in mind. Tax figures too in this advantage, but so do issues of secrecy, where, for example, a company might not want some loan to show up in its public accounts. And as we see at the moment - just think AIG and its reinsurance subsidiaries in Bermuda - this covering up of liabilities offshore is all too common.
The offshore world of tax havens and financial centers knows no national boundaries and differences when it comes to corporations and money. To the offshore tax haven, corporations and capital are all the same, wherever they come from, and new tricks can be pulled out of the offshore box to give them that extra advantage. The main thing is the legal and financial expertise that resides in any given tax haven. At the top end you will have the best offshore lawyers and accountants in the world as well as a few dregs, and at the bottom you will have just the dregs.
Look at Cayman: side by side, you have U.S. hedge funds - it's where Bayou Management, the most recent casualty in that industry
, was incorporated; Japanese credit card companies setting up structured finance deals offshore that they couldn't do at home; Britain's BP with its offshore income pools; and of course it's where all the offshore cards in Parmalat's hand where based.
It's offshore where the real world of international finance and business exists - and it's all hidden away under a cloak of secrecy, transfer pricing and tax dodging. The global economy that knows no boundaries or borders - the kind of economy constantly talked up by neoliberals and free-marketeers - does exist, just not where they say it does. Instead, it's offshore, where capital and corporations that know no national borders are owned and controlled by the world's wealthy ultimately for their benefit.
There was a lawyer named Bill Walker who came to Cayman in 1963 from Guyana. At the time, there were cows wondering through George Town, and only one bank and only one paved road, and no telephones.
He had experience in the Bahamas, which had been the hottest offshore tax haven in the Caribbean up until Cayman came along. And Cayman was ripe for turning into a tax haven. It had the same legal foundations - English law, and specifically English company law, a very primitive and straightforward company law which held that corporations did not pay taxes. Companies just didn't pay tax in the 185Os when this law was set up.
There were other factors as well that were very instrumental in turning Cayman into a fully fledged tax haven. They needed a technological infrastructure. It gained an international phone system in the mid-1960s. They built an airport as well.
It is a dependent territory. There is a governor who is appointed essentially by the United Kingdom. He is a representative of the British Crown in the Cayman Islands. Their political system is developing all the time. They are now beginning to have political parties.
To a certain extent, our modern world is offshore. Things arenot fixed or attached to the nation-state. Increasingly, people and companies are not fixed to the ground as they would have been perhaps just 50 years ago, or even more recently.
That's not saying that the nation-state has disappeared. But its function has probably moved on and has less of a hold over more of the day-to-day aspects of people's lives.
In economic terms, there are two key factors at play here. First, offshore tax havens have contributed to the global growth of corporations - corporations that have subsidiaries and holding companies across the world. And second, offshore centers have had an enormous impact on the global financial system.
If you look back at the 1970s, tax rates in the UK were in the 90 percent range. Capital was controlled by the nation state. These offshore tax havens put an enormous amount of pressure on domestic banking systems to deregulate and liberalize. The onshore nation- state world had to become offshore. It had to loosen up, deregulate and liberalize. They had to get rid of that basic connection between people and their nations.
And that's what has largely happened. We now live in an offshore world - an economically free market world that has paradoxically been opened up through these secretive offshore entities.
This is the dark side to that mobility, to that movement, to that fast exchange across the world. And that dark side can be one where crime, fraud and money laundering can be largely protected in secret by the very instruments that were the cause of opening up the economy in the first place.
This is the big, historical picture of what happened: In short, the neoliberal revolution that swept through Britain and the U.S. in the 1980s was the moment that international financial capital - which had until then been kept in offshore tax havens - came onshore to remake the state in its own image. Over the course of the next two decades, offshore capital - and the corporations that depended on it to expand - asserted their dominance over sovereign national economies. Old style nation-state capitalism was replaced by a new phenomenon: I call it offshore capitalism.
Getting into more detail, my belief is that both factors that make up economic globalization today - the global financial market and the global corporation - owe their origin directly to offshore tax havens. Let's start with the huge expansion of American corporations across the world from the 1950s. These corporations - Procter & Gamble, DuPont, IBM would not have become the massive, integrated organizations they are today without the direct involvement of tax havens. Tax havens allowed these huge companies to retain their profits and so allowed them to expand exponentially across Europe and elsewhere. Without tax havens, and without a little help from the federal government in the form of tax credits and rebates, U.S. corporations would have found it too expensive and time-consuming to internationalize.
But the multinationals would not have been able to gain such dominance without the freeing up of capital in the world's economies. For this to happen there needed to be a single, global financial market that integrated national economies across the world. Certainly, opening up national economies to international capital was what neoliberal politicians did - but they were only responding to the pressure that offshore tax havens were already putting on states to internationalize their economies. Onshore banks and monetary authorities tried desperately in the 1970s to control and regulate the new international capital markets that were based offshore. But it was an unequal struggle, and onshore nation-states eventually repealed their own regulations and let offshore capital come onshore. The rest is history, as they say.
The point about the offshore world is that it is extremely useful for corporations. And therefore it is not something that western industrial nations are in the end going to crack down on.
rporations need these offshore financial centers to function. That is the situation today.
Of course, now and again there are huge scandals. And after the scandal erupts, politicians say we can't have this happening anymore. But I suppose for every scandal with a corporation, there are thousands of corporations that use these offshore tax havens and nothing negative happens.
Any kind of hard regulation on an offshore jurisdiction is very unlikely to succeed. These jurisdictions are set up to evade these kinds of regulations. And there is no international body that can impose those kind of regulations on offshore jurisdictions. There can be multilateral agreements where the industrialized nations say that if offshore centers don't reform, then they will be ostracized from the international economy."All that and more at http://www.offshorenet.com/blog/archives/000559.php
"Sen. John F. Kerry (Mass.), the front-runner for the Democratic presidential nomination, frequently calls companies and chief executives "Benedict Arnolds" if they move jobs and operations overseas to avoid paying U.S. taxes. Executives and employees at such companies have contributed more than $140,000 to Kerry's presidential campaign, a review of his donor records shows. Additionally, two of Kerry's biggest fundraisers, who together have raised more than $400,000 for the candidate, are top executives at investment firms that helped set up companies in the world's best-known offshore tax havens, federal records show.
Kerry has taken aim at "Benedict Arnold" companies as part of a much broader political and policy debate over stemming the flow of well-paying U.S. jobs overseas, a chief cause of unemployment, especially in the hardest-hit manufacturing sector. Kerry's solution, detailed in a speech yesterday in Toledo, is to enforce trade agreements, track and slow the outsourcing of U.S. jobs, and stop government contracts and tax incentives from going to companies that move operations or jobs offshore.Bush has taken exponentially more from these companies than Kerry, though the president has not made a major campaign issue out of clamping down on them."http://www.washingtonpost.com/wp-dyn/articles/A6884-2004Feb25.html
"The Eastleigh Conservatives are being funded by the controversial offshore financier Lord Ashcroft, according to figures published this week by the Electoral Commission. Lord Ashcroft has given £161,840 to the Conservatives according to the latest figures. The contributions have been funnelled through Lord Ashcroft's company, Bearwood Corporate Services. This is a subsidiary of Bearwood Holdings, which the Belize-based Baron controls through a network of Belize and Virgin Islands trusts."http://www.eastleighlibdems.org.uk/news/160.html