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Tax Haven Racket
by Ralph Nader
Komisar of the Tax Justice Network—USA (taxjustice-usa.org) spoke at the Conference on Taming the
Giant Corporation last week about “Closing Down the Tax Haven Racket.” Her words
were so compelling that the rest of this column is devoted to excerpts from her
tax haven racket is the biggest scam in the world. It’s run by the international
banks with the cooperation of the world’s financial powers for the benefit of
corporations and the mega-rich…. [M]ost Americans, including progressive
activist Americans, don’t know what I’m going to tell you. And that’s part of
havens, also known as offshore financial centers, are places that operate secret
bank accounts and shell companies that hide the names of real owners from tax
authorities and law enforcement. They use nominees, front men. Sometimes
offshore incorporation companies set up the shells.
the banks do it. Often someone will use a shell company in one jurisdiction that
owns a shell in another jurisdiction that owns a bank account in a third. That’s
called layering. No one can follow the paper trial.
is where most of the world’s drug money is laundered, estimated at up to $500
billion a year, more than the total income of the world’s poorest 20 percent.
Perhaps another $500 billion comes from fraud and corruption.
figures fit with [International Monetary Fund] numbers that as much as $1.5
trillion of illicit money is laundered annually, equal to two to five percent of
global economic output.
Street wants this money. The markets would hurt, even shrivel without that cash.
That’s why Robert Rubin as Treasury Secretary had a policy, as Joseph Stiglitz
told me, not to do anything that would stop the free flow of money into the US.
He was not interested in stopping money laundering because the laundered funds
ended up in Wall [Street], maybe in Goldman Sachs where he had worked, or
Citibank, where he would work.
to find laundered funds are usually dismal failures. According to Interpol, $3
billion in dirty money has been seized in 20 years of struggle against money
laundering — about the amount laundered in three days.
other major purpose of offshore is for tax evasion, estimated to reach another
$500 billion a year.
how corporations and the rich have opted out of the tax
have sophisticated mechanisms. There’s transfer pricing. A company sets up a
trading company offshore, sells its widgets there for under market price, the
trading company sells it for market price, the profits are offshore, not where
they really were generated.
American professors, using customs data, examined the impact of over-invoiced
imports and under-invoiced exports for 2001. Would you buy plastic buckets from
the Czech Republic for $973 each, tissues from China at $1874 a pound, a cotton
dishtowel from Pakistan for $154, and tweezers from Japan at $4,896
companies, at least on paper, were getting very little for their exported
products. If you were in business, would you sell bus and truck tires to Britain
for $11.74 each, color video monitors to Pakistan for $21.90, and prefabricated
buildings to Trinidad for $1.20 a unit.
all claimed export and import prices to real world prices, the professors
figured the 2001 U.S. tax loss at $53.1 billion.
company sets up subsidiaries in tax havens – to “own” logos or intellectual
property. Like Microsoft does in Ireland, transferring software that was made in
America, that benefited by work done by Americans, to Ireland so Microsoft can
pay taxes there (at 11%) instead of here (at 35%). Why is Ireland getting the
benefit of American-created software? It’s legal. We need to change the
logos are offshore, the company pays royalties to use the logo and deducts the
amount as expenses. But the payments are not taxed or are taxed minimally
offshore where they are moved…. When Cheney ran Halliburton, it increased its
offshore subsidiaries from 9 to at least 44.
of world trade is between various parts of the same corporations. Experts
believe that as much as half the world’s capital flows through offshore centers.
The totals held offshore include 31 percent of the net profits of U.S.
whole collection of tax scams is why between 1989 and 1995, of US and
multi-national corporations operating in the United States, with assets of at
least $250 million or sales of at least $50 million, nearly two-thirds paid no
U.S. income tax.
1996-2000, Goodyear’s profits were $442 million, but it paid no taxes and got a
$23-million rebate. Colgate-Palmolive made $1.6 billion and got back $21
million. Other companies that got rebates in 1998 included Texaco, Chevron,
PepsiCo, Pfizer, J.P. Morgan, MCI Worldcom, General Motors, Phillips Petroleum
and Northrop Grumman.
reported $12.3 billion U.S income in 1999 and paid zero federal taxes. (In two
recent years, Microsoft paid only 1.8 percent on $21.9 billion pretax U.S.
the 1950s, U.S. corporations accounted for 28 percent of federal revenues. Now,
corporations represent just 11 percent.
unpaid taxes can buy a lot of politicians and power. When Nixon needed money to
pay the Watergate burglars, he got it from some corporate offshore bank
system has given the big banks and corporations and the super-rich mountains of
hidden cash they use to control our political systems.
offshore system must be dismantled.
why isn’t the progressive movement doing something about this? This is a case
where some people in Congress are ahead of the activists. There are a handful of
Democrats like Senators Levin (MI), Dorgan (ND) and Conrad (ND), like Rep.
Doggett (TX), who are speaking out and introducing legislation. But there is no
movement behind them. And while Obama has signed onto the Levin Stop Tax Haven
Abuse Act, Clinton, Biden and Dodd have not.”
Komisar spreads out the proposed strategies at taxjustice-usa.org. One or
more are structured so that you can play a part in furthering them toward
concluded: “Let’s get the country to tell the corporations that the taxes they
are dodging is our money.”
Ralph Nader, attorney, author, was a green
party candidate for U.S. President in both the 2000 and 2004 campaigns. He
has been a prominent environmentalist and consumer advocate for several decades,
who founded along the way, several non profit organizations that are still
active; his accomplishments, like forcing U.S. auto companies to install seat
belts, are legendary. His most recent book is The Seventeen Traditions.
This essay is herein reprinted with the author's
Posted September 02,
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