While the United States works to get tax dollars from corporations hiding assets elsewhere, they offer the same opportunity in U.S. states to businesses from other countries.
To some, “tax haven’’ is a dirty word, describing as it does a place where wealthy people and large corporations can hide assets to avoid paying taxes on economic gains.
Of course, for those wealthy people and large corporations, “tax haven’’ carries a different connotation.
American politicians, including President Barack Obama, decry the existence of tax havens, and declare their intent to get what is due the American economy in the form of taxes due. But no American politician seems to be upset that the United States itself serves as a tax haven for wealthy individuals and large corporations from other countries.
According to a study by the Tax Justice Network (an independent international organization), the United States ranks third behind Switzerland and Hong Kong in the financial secrecy index, with the U.S. states of Delaware, Nevada and Wyoming most noteworthy for the efforts they make to make available shell companies catering to overseas individuals and companies trying to hide assets form their own tax laws. The U.S. actually climbed up to No. 3 from No. 6 in the 2013 rankings by TJN.
The U.S. has made inroads with some countries recently in trying to find out just how much American corporations and individuals have hidden in off-shore accounts. But the U.S. reportedly does not reciprocate when other countries come seeking their own tax dollars.
“Though the U.S. has been a pioneer in defending itself from foreign secrecy jurisdictions it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction,’’ the TJN report stated. “The U.S. has not seriously addressed its own role in attracting illicit financial flows and supporting tax evasion.”
Although Britain is not among the top three countries cited in the TJN report, that is because it does not include all of the outlying British-supported territories such as Jersey, the British Virgin Islands, and the Cayman Islands in its counting. Otherwise, Brittan would be No. 1 on the list, as both Jersey and the Cayman Islands are well-known and heavily used tax havens.
It is estimated that 358 out of the Fortune 500 companies operate subsidiaries in tax haven countries outside of their base location in order to avoid paying taxes at home. Those companies have $2.1 trillion in assets located in those tax haven countries, translating to approximately $100 billion to $240 billion annually in taxes that do not get paid due to the subsidiary location and the tax laws surrounding those tax havens.
The TJN’s financial secrecy index measures a range of criteria with the resulting number than weighed against the size of the financial services offered to non-residents. The index has been used by asset-tracing specialists and for parliamentary inquires.
Meanwhile, the European Network on Debt and Development, a network of non-government organizations in Europe, report that Spain, Luxembourg and Germany “offer a diverse menu of options for concealing ownership and laundering money.”
There are two treaties that operate between countries related to tax avoidance, divergence and payment. The United Nations operates the a system that seems to favor a balance between large and small countries aligned with the U.N., while an independent Organisation for Economic Co-Operation and Development, a European alignment, tends to favor rich countries which the Tax Justice Network says is “more favorable to rich countries.”
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.