How It Works
This is how the international tax-evasion system works, both for corporations and for individuals. In both cases, the system is based on the seventy "offshore" centers-tax havens-where secret shell companies and bank accounts are used to carry out transactions that create paper profits and losses, and where the legerdemain is immune from the eyes of tax authorities and law enforcement. There are about three million shell companies. Offshore centers, with 1.2 percent of the world's population, hold 31 percent of the assets and 26 percent of the stocks of American multinationals.
The offshore venues assess little or no taxes on foreign-owned shell companies. Some of these shells have no function other than to hold the assets of corporations or individuals. The offshore banks that handle the shell company money are not underground operations run by unknown shady characters. The banks' managers may indeed be shady, but most of them work for subsidiaries of the multinationals-Citibank, Bank of New York, Credit Suisse, Barclays, Société Générale, Deutsche Bank, and others.
More than half of world trade is within corporations, not between them. And half the world's trade goes through offshore centers, as corporations shift profits to where they can avoid taxes. Companies set up offshore "subsidiaries" that, on their books, perform functions that allow the firms to cut their taxes. The simplest ploy is the "sale" and "rental" back of a company's logo or other intangible assets. Or money stashed in tax havens is "loaned" back to the U.S. company, which then deducts interest payments on its tax returns.
Even more important is transfer pricing: allocating profits for tax and other purposes among parts of a multinational corporate group. Offshore "trading" offices or companies handle imports and exports, buying a U.S. export from a company at a sharply reduced paper cost and selling it abroad for the real-world market value, so the exporting company makes no profit. That stays with the tax haven trading company. In the reverse, a company buys goods at a real price and "sells" to the U.S. firm at a grossly inflated one, so the U.S. firm has a huge cost to deduct when it uses the item in manufacture or resells it at a loss.
Article comments
1 - Nancy
Please take pity, the petro dollar is dying and the Euro is taking over. The free ride for the US is almost over, so do not drive out the remaining wealth/resources of the well-to-do in the country.
They will simply expatriate and take their wealth with them, (as they are already doing because of the high taxes *(going higher) in the country). That scenario leaves us "worker bees" to shoulder the TOTAL burden all by our selves and we have far less to work with when it comes to resources.
Somehow we, as a country of diverse people, have to re-group and re-think our position
The government has got to find ways to 'cut back', instead of demand more and more money from it's citizens, otherwise history will repeat it's self and those with the ability will up and leave the sinking ship. This is traditionally what has always happened throughout history when the government of any country got too greedy and too heavy-handed... those with the assets, liquidated them and got up and left.
There will always be "places to go", there will always be a shelter offered somewhere for wealth, the tax top-heavy nations of the world cannot go around and militarily attack every nation that offers the opportunity to the individual with assets who wants to bring those assets to their country, and that is what it would eventually come down to.
Why? Because "money talks and you-know-what talks"! Nothing ever changes under the face of the sun, read history and understand that higher and higher taxes spell the demise of the country that imposes them. We will die....a painful economic death if we don't try to keep our wealthy individuals to help us.
NEV
2 - J. Gosline
This article was taken from Dissent magazine's Spring 2005 issue without permission. You may continue to post this article on your blog if you provide a link to Dissent's Web site (www.dissentmagazine.org) and credit us with publishing this article. If you choose not to do this, remove this article from your blog immediately. Thank you for your cooperation.
Sincerely,
The Editors
Dissent Magazine
3 - Eric Olsen
Dear J., I have responded by email and made appropriate changes. Thanks, EO
4 - Aaman
That's a great website/mag - thank you for bringing it to our attention
5 - Jeremy
Sorry about that, it was forwarded to me by a friend, fixed.
6 - Tapart News Advocate
The USA government start funding the moving of production outside the USA to places like Mexico in 1956. It was supposed to be a temporary program to help the Mexican economy while bringing cheaper products into the USA.
The program continued on through the years and just prior to the passing of the NAFTA trade agreement in 1994, 2000 US factories had moved to Mexico. NAFTA just confirmed what was going on for a long time. However after NAFTA was passed the number of factories moved to Mexico accelerated and by the time President Bush took office, there were 4000 former US factories in Mexico.
Right after NAFTA was passed President Clinton had to rush billions of dollars to Mexico to shore up the Peso. This should have demonstrated the failure of the programs from 1956 on but power and money run the show. The workers who are the core of the economies are still left out of the rewards. They also have very little voice in their destinies while world banks play a control game. International entities like the WTO control the flow of so called free trade while controlling the flow of wealth.
For more information, see Tapart News and Art that Talks global issues at http://www.tapsearch.com/tapartnews http://pages.zdnet.com/arklineart/tapin
And ask your leaders if the above is true or not. We do not need any conspiracy theories to know that something really went wrong with the workday all around the world and it was power and greed that ruled the process.
7 - L. Burike Files
So much of the discussion seems to be about taxes and privacy. I am aware of many offshore businesses that left the EU and US because of regulation and litigation. The offshore companies are tax neutral but have located in offshore jurisdictions just to survive litigation and the consequences of special interest groups. A perscription fulfilment company left the US for offshore because of lobbyist pressure from the drug companies to shut them down. (Note they fill only 5 and above and thus deal with things like Lipator etc...) I know of dozens of software companies that moved offshore to stem the tide silly litigation, they had won all of the litigation about fees and annual renewals - but paid hundreds of thousands of dolllars of unreimbursed legal fees every year to win those suits. In many offshore centers winner of the suit has the loser pay the legal fees.
So while we rant about offshore as a haven for criminals and tax cheats - the criminals are in the EU and US - and may or may not use offshore.
How many of us are insured indirectly by Bermuda companies, or invest in offshore stocks by and through a Cayman Fund since US mutual funds cannot directly invest in companies not in the US????
How many ways are we touched by offshore companies - every day - and don't realize it.
In short the offshore jurisdiction would only exist - in classic economic terms - if they offered a competitive advantage.
Just some fodder for thought - to maybe - divest our "big county" point of view.
Burke