|Economists have always advised that it is important to save money for the future. Saving money can be done in a number of ways. One way is to put $100 away every month for 40 years and you’ll end up a millionaire. But a lot of people think this is taking too much time. They want their money grow faster. And of course, given the naturally occurring inflation, any stack of money would have lost a lot of purchase power over 40 years. |
And that’s precisely the reason why a lot of people all over the world thought of saving money in a different way….by evading to pay taxes. Depending on the tax rate and further growth of the principal capital this saving could easily amount to 50-60% YEARLY!
Makes sense, doesn’t it?
There is only one little problem with it. Evading taxes is frowned upon in most countries and will, if discovered, have pretty serious consequences for the person or company involved.
Let’s look at America, though any other country would do as well.
America is ruled by the super-rich 1-2% of the population. As elsewhere, in America the super-rich are falling distinctively short of paying their fair share of income tax. And now we have another confirmation why that is so. Number one reason why Uncle Sam doesn’t get the taxes: The money has already left the United States. It has gone behind several curtains and entered a so-called tax-haven or call it tax paradise. Per definition a tax-haven is either offering very low tax rates or no taxes at all.
By now you must have heard about the PANAMA PAPERS, huh? Yup, Panama along with other shady places like …Cayman Islands, Bermuda, Jersey, Isle of Man, Virgin Islands, have attracted Billion-Dollar money infusions of very rich people from all over the world. In fact, we have a very “diversified” company right here in our home Province which has been very successful in managing to channel most of their profits, made right here at home, through a vast number of companies into Bermuda bank accounts. And they are real masters at that as the entire operation is 100% legal. Ever wondered how the Koch-Roach brothers made theirs? Tax havens are great for the rich and mighty. Apparently, German Süddeutsche Zeitung has been the whistle blower or at least one of their journalists. I am always so amazed what a journalist can find out if he puts his mind to it. And I must say in this case it was due to sloppy routines and handling at an off-shore law firm.
And I was just reading the New York Times. And wouldn’t you know it, even the tiny Nation of Iceland has to deal with the Panama Papers.
After denying it for one day he finally gave in and resigned
Mr. Most Honorable Prime Minister Sigmundur David Gunnlaugsson has thrown in the towel and taken temporary leave from his prestigious job. His name came up on the list of persons who did not want to pay taxes in his home country. So being on this rather small island, he decided there wouldn’t be anything wrong if he put his money into off-shore-holdings, thus effectively evading his income from taxation at home. Mr. Gunnlaugsson had insisted on staying in office after the leaked documents revealed that he and his wealthy partner, now his wife, (what?)had set up a company in 2007 in the British Virgin Islands (another tax haven) through Mossack Fonseca. The documents also suggested that he sold his half of the company to her for $1 on the last day of 2009, just before a new law went into effect that would have required him as a member of Parliament to declare his ownership as a conflict of interest.
The economy of the British Virgin Islands is largely based on such secrecy, with just over half of all government revenues coming from incorporation fees. More than 950,000 offshore companies have been incorporated there. If everyone of them would occupy an office of say 400sqft only, it would amount to a total office square footage of 380Mill sqft. With that much office space one should think that the island’s Capital, Road Town, would resemble Manhatten.
Road Town, British Virgin Islands not Manhattan but Caribbean Paradise
But that is far from being the case, a striking proof of the majority of the companies not occupying a 400sqft office but the inside of a simple P.O.Box only. While the number of registered companies is large it seems almost monstrous if one compares it with the actual small population of 28,000 living in the British Virgin Islands.
It’s also a great place to keep the yacht one has bought with all that extra money
I can almost feel the quake now as celebrities, politicians, brokers and bankers all over the world are starting to get jitters about their fortunes in tax havens. However, the real guilty people here are not just the owners of the money, but more so the accomplices they had in form of banks and law firms which actually made it possible to filter the transactions through any number of shell companies without first making sure that tax authorities had been notified.
What I do wonder about though is that nobody named any names in the United States yet. The U.S. territory of the U.S.-Virgin islands are direct neighbours and it could surprise if nobody there is capable of figuring out what U.S. companies are doing right under their nose. But that might be a big secret? Or is it just a strategy ….. (I’ll leave this one to you)
One way or the other….we will hear it in time.