How Tax Havens Helped Create The Financial Crisis

Financial Times:

Banks employ large teams of highly paid people to devise transactions mainly for the purpose of avoiding tax. These activities seem to be far more profitable than the humdrum business of managing payments and channelling savings towards investment. Why?

Read the whole story: Financial Times

Comments

[davidwayneosedach]

You can bet that's where Bernie has a few billions hidden.

[AnnfromCA]

Interesting article here in plain English. We "knew," but it's nice to see it spelled out what needs to change.

[armacas]

One aspect of banking activities in tax heavens has not been mentioned at all: The fact that an international elite (among which the Bin Laden, Saudi Royal and Bush families, and their cohorts, to name but a few) AND GOVERNMENTS are moving, laundering and disappropriating huge amounts of money, such as was the case with BCCI (Bank of Credit and Commerce International, or 'Bank of Crooks and Criminals International, as ex-CIA Director and present Secretary of Defence Robert Gates called it).

To quote Lucy Komisar, author of a chapter on off-shore banking in the 2006 book 'Game As Old As Empire' (Berrett-Koehler Publishers, San Francisco, www.bkconnection.com), 'How the US used an off-shore bank to run guns, finance Islamic Jihadists and launder money. How its Saudi sheikh owners and American insiders defrauded depositors of over $ 10 billion. And how they all hot away with it.'

[armacas]

To make it short: Not only multinational companies profit from the intransparency of the global banking system - powerful political forces cannot do without it, either. The despised Taliban were set up and financed using BCCI (arms for drugs trade; google Hezb-i-Islami and its founder Gulbuddin Hekmatyar; great investment that was!), the drug trade with Panamanian Dictator Manuel Noriega was facilitated and, of course, Iraqui Dictator Saddam Hussein was given $ 4 billion to buy US weaponry systems (another great investment!). Did I mention that the BCCI correspondence bank BNL (Atlanta branch of the Italian government-owned Banca Nazionale del Lavoro) had 'Kissinger Associates' as its client and Henry Kissinger and Brent Scowcroft (Bush Sr. National Security Adviser) on its international Advisory Board?

Consider this: Today there are 70+ financial centers around the world where the owners of bank accounts and companies are kept secret from law enforcers - each boasting dozens, often hundereds of banks willing to 'play the game' (BCCI was closed in the early 90's - the game has since seen it's 2.0 and 3.0 generation version...­)

Considering all the above, chances that anything will change - even with Obama in the White House - are slim at best. Some of the players will be made scapegoats - the rest will retire to another 'backroom'­... and become even more 'exclusive'.

[outnow]

If you could rig the game in your favor by contributing to the campaigns of politicians and by hiring lobbyists, wouldn't you do exactly what the financial industry does? The best democracy that money can buy. A Dream Team of executives in the White House and Congress doing your bidding. Well? That's exactly what we have in Washington and everybody knows it. The price of our "freedom" is feeding parasites who use propaganda 24/7.

The only way out is to reform the monetary system and audit the Fed. Less power for the Fed, not more power. Fractional reserve banking is the heart of the issue. There can be no real change until and unless we address this problem. Neither the Democrats nor the Republicans will touch this sacred cow, or should I say "cash cow." Richard Cook writes good articles about this fraud we call banking and where it came from.

[LeLoup]

Tax havens would be very easy to destroy if only the definitions of business residence was under the rules of common sense:

ANy regulation about business residence should pass muster with a simple question:
"Where is the bulk of your business done?"
UK? Then you pay UK taxes.
USA? Then you pay US taxes.

The argument "But if we do that, they will go to the Cayman islands or wherever" is specious. Let them I say.
And by the way, why aren't they there already? Could it be that it is much more convenient, safe and effective to conduct real business in the UK or the US? So, shouldn't these corporations pay for these advantages? I know I do not want to shoulder the cost of these advantages if corporations don't do it too, while profiting from it. Would anyone pay the condos fees for someone who live there but is not paying said fees because the manager pretend they don't really live there?

Come on now! Give me a freaking break!

[yorkriver1]

I have been saying this for a while. At the end of the off shoring Ponzi scheme (jobs and tax dollars from profits) could be the collapse of our country as we know it. Then where will the clever financiers go? Maybe they already have their plans in place. Multiple houses in various countries, private jets, private yachts. Secret bank accounts. Leave on a moment's notice. The cynicism is breathtaking.

[PlayTOE]

The American corporate tax rate is 30%, one of the lowest rates in the world. Obama wants to move this to 35% which is a more reasonable number.

But how to deal with tax shelters?
The simple way is to insist on all profits of all companies doing business in the USA to be taxed with a deduction for moneys paid in foreign taxes. That is, if you don't pay taxes in a "shelter nation" then you still pay them in the USA.

This makes Tax havens a lot less attractive.

[dutch163]

well, of course tax havens aided the financial mess..duh!

the amazing thing is we have put up with it for so long

I hear people blame welfare recipients for economic problems..­this takes WAY more money away from us all

[sheilaofmiami]

money has been so well hidden that it will never be found, except by those who think they are better than us. Well they certainly have more marbles than we do, but they are not marbles in the head.

We are so screwed and tax law is against the common citizen, banks don't care about their customers anymore, and pollution is killing the planet.

I am sorry for my children. I may be erred giving them life.

[outnow]

Is tax evasion "terrorism?" If so, we can declare tax-evaders "terrorists", use the waterboard to locate assets, use the drug forfeiture laws and smoke out the hidden bucks, or fly the Predator if they run.

Somehow it is treason to allow this hiding of money in secret offshore accounts. I would treat it as such during these hard times. FDR had to collect all the gold, for example. Stop coddling tax cheats and offshore banks.

[PhilipTaylor]

Time=line Bush-Wall Street Corruption creating Housing Crisis

2001=Tax Relief for Richest Americans+­Shelters+C­orporate Relief
2002=Video: Younger Bush Pushing "EASY Loans" on Minorities
2002=Bush Video: http://www.youtube.com/watch?v=kNqQx7sjoS8&feature=related
2002=Bush Proclaims Enlisted Investment Banks to issue "EASY SURE FAIL" Mortgages
2002=Bush Proclaims Enlisted Fannie/Freddie to buy Garbage Mortgages
2002 FED+Bush Admin=high priority="financial innovation"+Bush"s "ownership society"
2002 FED=Used housing boom to prop up stock market after 2000 collapse
2002 Gramlich=FED governor=warned fast-grow lenders breeding risky unaffordable mortgages
2002 Gramlich=urged examiners investigate mortgage lenders affiliated with WSBanks
2003-2004=FED analyst notice deteriorating lending standards+higher defaults+f­oreclosure­s
2003-2004=FED encourage development of alternative mortgages=sub-prime loans+adjustable
2004=Comptroller Curr (OCC) used 1863 law=prevent state enforcement predatory lending laws
2004=OCC New rules=prevent states enforcing consumer protection laws against WSBanks
2004=Link: http://www.nakedcapitalism.com/2008/02/spitzer-bush-administration-blocked.html
2007=FED+F­DIC+OCC=is­sue refi guide=No new loans=poor after 'teaser' rates expire 2-3 years
2007=FED regulatory decisions=waited until too late before taming excesses
2007=Bubble fed by "Easy SURE FAIL" Mortgages BURST creating CRISIS
2007-2009=20-30% with subprime mortgages couldn't meet new Refi thresholds
2007-2009=But 70-80% could without new guidelines=2Mill subprime loans expired w/o refi
2008=Green­span=defen­ds actions=FED ill-equipped to investigate deceptive lending
2009=Greenspan consulting gig+senior bondholder­@PIMCO+ass­et manager for GSE mortgages
2002-2008=Graph Housing Bubble=straight up line 2003-2007
Graph= http://www.mortgagecalculator.org/images/us-subprime-mortgage-market-growth.png

Special Thanks=CarolAB=did majority of Research

[outnow]

"W" wanted a bubble to replace the dot.com and "jobless recovery" so that he could go to war for oil in Iraq while they were shopping on money taken from our home equity. Then many found out that they owe more than our homes are worth. Now they don't have a job or health insurance. Their 401(k)'s were hammered but the banks are being "re-capitalized""so that they can "lend more."

You two need to add Obama's deeds to the list. Summers is manipulating Obama. The bailouts are making it worse.

[tippydog11]

finding a buyer China and other foreign nations now are buying up American assets..no­w who caused this and made it easy for them to do so? hmmm

[tippydog11]

Those who run to any country even China yes, where big corporations have been running to..they are not running because of lost profits in America or just for cheap labor--but to pay ""no no taxes at all""..I have been saying for so so so long---Who are the greatest contributor and creators of socialism?---Big corporations?--not the average businesses­..they pay taxes, but huge corporatio­ns..Busine­ss pay their taxes and more then the their shares because of corporations not paying no taxes at all..

Like Rachal Maddows said. well--the man who makes $50,000 thousand a year pays more in taxes, then a huge corporatio­n--because corporations pay no taxes at all..secre­t mail boxes tax havens are not secret any more--and why did it need to be secret in the first place...hm­mmm

[ibsteve2u]

From the story: "Reform should include a shift towards unitary taxation, which most international tax specialists recognise is long overdue. This would be preferable to the Obama administration’s new proposals to tinker with US rules on tax deferral."

lollll...b­oy, now there is a can of worms.

The multinationals want "free trade" not just because of the ability it gives them to play one nation and its workforce off another nation, but because free trade gives them the ability to shield enormous sums of money from taxation.

I can hear the slow swell of "grass roots support" against "one world government" and "the loss of national identity" being pumped up now...

The fact is we will have to use the same laws globally, or the corporations - and high finance - will keep us bent over the log, squealing like pigs, forever.

[ibsteve2u]

If I could go back in time, I would have more correctly written the one paragraph as:

"The multinationals wanted "free trade" - but inequitable labor, environmental, and tax laws, nation to nation - not just because of the ability it gave them to play one nation and its workforce off another nation, but because free trade gave them the ability to shield enormous sums of money from taxation."

I got too excited, thinking of the battles to come...

[yorkriver1]

Suddenly, when thinking about how the shape shifting of businesses overseas can keep the shell game going to avoid taxation I recalled a day in LA traffic court. The judge was shaking his head over the small time punks who were trying to avoid responsibility for illegal activities tied to vehicles originally registered in their name. Oh, no, I sold that car....the actual person in possession of the vehicle would keep the title signed but unfiled, to avoid tracking their activities. A game of who's on first as to the responsible party. Ghost owners, not trackable.
I find it amusing, as did the judge, while finding ways to hold them responsible for their vehicle violations. Are the corporations any less devious?

[thecanadian]

Change the law on Tax Havens Mr. President and state to the world that anyone who runs to tax havens - either from the U.S. or Canada - are crooks. Doesn't matter whether they are Democrats or Repugs, Liberals or Conservatives - if they are fighting this - they are guilty and not for their country or their people. Stand firm Mr. President! All Canadians are behind you on this (except the crooks).

[sexyrexy]

another duh... this is the upshot of tax cuts to the rich-- trickle down effect?? not on your nelly..

offshore accounts & tax evasion-- here I come.. as they bought their islands in the caribbean.­.

[givesflack]

Hey Dugan, Rancho and and Corp. I watched Morning Joe and Erin (defend off shore tax havens) where they discussed that in China we would be taking any job we could get because they don't have Unemployment Benefits. We're taking unemployment because we're essentially lazy. They compared this "opinion" to welfare reform in the 90's and how many progressives embraced it (like Summers?). Combined, your all still pushing this laissez faire criminal free market philosophy of protecting much needed tax revenue in offshore bank accounts while banks received humungous handouts and would never! take a wage cut in their life? Telling us to work any job we can get but mind our business about tax havens? So THEY say it's fair to deprive us unemployment benefits or prevent jobless poor people from buying groceries but their privileged and questionable phony-ass news casting proclaim it's patriotic to withhold taxes from the American Government? This is as close to promoting crime for non-national priorities(?) than you can get. Following welfare reform came the deregulation of the Financial Sector which cost me and many people work and a living for almost the last year. JUST SAYING... as nasty Erin would put it. So your priority is to threaten not only our country of it's due revenue but also that competition in the world market means stripping us of at few worker benefits ? This is- class warfare!

[yorkriver1]

Valid points!