Reprinted with permission from DCReport.
Which country do rich people willing to break the law to escape taxes favor most as the place to hide their money? Chances are you’re in it right now.
Public records reveal there are two major tax havens of almost equal size. Few journalists ever look at such records, much less analyze them, but scrutinizing them is our specialty at DCReport.
In first place is the spiderweb of British protectorates including Bermuda, the Cayman Islands and the Isle of Man. Virtually equal in size, and growing fast, is the United States.
America has 22.3% of the global illicit money-hiding business while the British spiderweb is at 22.6%.
Next, and far behind, is tiny Luxembourg at 12.6%, followed by Singapore at 4.6% and Switzerland at 4.5%.
These top destination havens play several crucial roles,” writes James S. Henry, DCReport’s editor for investigative economics.
“First, they are the penultimate safe harbors for wealthy individual investors, offering low tax rates, anonymity, stability, liquidity and legal security. Second, they are also very attractive corporate havens for multinational corporations and banks. Finally, they are also residential havens, where wealthy offshore investors can spend long periods of time, virtually tax-free.”
These rich tax evaders enjoy their money without sharing in the burdens of government. Instead, they silently shove their burdens onto the rest of us, who as a result suffer from a combination of more taxes, less government services and more government debt than if the tax laws were enforced. We could, of course, fix this if we had a president who was not himself a confessed tax cheat who lost two income-tax-fraud civil trials, as I detailed in my book The Making of Donald Trump.
Henry’s new report includes a revealing chart showing the explosion of suspicious activity reports, a measure of likely money laundering, since 1996:
Among those who facilitated egregious money laundering was Donald Trump with his Taj Mahal casino, which was fined $10 million in March 2015 for “willful and repeated violations of the Bank Secrecy Act” in the form of “significant and long-standing money-laundering violations.”
Henry writes that “by now we (should) all know that global trade wars, as well as imperial wars, can be costly. But the high costs of global tax competition, deregulation wars, and financial secrecy wars have received much less attention. Unfortunately… the United States, which has long prided itself on being one of the world’s leading proponents of progressive taxation, multilateral cooperation, and stiff sanctions for white-collar financial crime, is now actually leading this race to the bottom.”
“Indeed,” Henry adds, “the United States is on the verge of fulfilling one of the most hyperbolic fantasies of ultra-economic libertarians—as Rep. Devin Nunes (R-CA) put it way back in 2013, this is ‘to make the United States the largest tax haven in history’.”
Under Trump policies that seems certain. Cuts in the Internal Revenue Service budget, attacks on federal law enforcement, the appointment of numerous high officials whose histories show they worked for the tax evaders, money-laundering banks and otherwise helped tax cheats have been documented by DCReport. You can review some of our stories on how Trump and the Republican leadership in Congress gave aid and comfort to tax cheats here and here.
Henry knows of what he writes about illicit money flows. While still in his 20s Henry was chief economist at McKinsey, the big global business consultancy, and then he became a General Electric executive reporting directly to CEO Jack Welch. Henry gave all that up decades ago to pursue investigating corrupt banking practices, money laundering, tax avoidance and other financial crimes. Henry was also a consultant on the Panama Papers expose by the International Consortium of Investigative Journalists.
In March 2017 Henry wrote DCReport’s intensely documented exposé of the ties between Wilbur Ross, who was named Commerce secretary by Trump, and the corrupt Bank of Cyprus, a leading money launderer for Russians. Ross served as vice chairman alongside an appointee of Vladimir Putin.
We summarized Henry’s story here and ran it in full here.
In his new report, Henry notes the crucial role played by weak state laws that let people hide who actually owns American corporations set up as shells to move and conceal wealth. You can learn more about how state laws help international tax dodgers (and can help terrorists, too) by reading an excellent 2011 Reuters exposé by reporters Brian Grow and Kelly Carr.
Driving home this point about how the weak corporate disclosure laws of Delaware, Nevada and Wyoming help tax dodgers, Henry’s new exposé quotes a question at a 2008 money-laundering conference and the answer from a senior partner of a Panamanian law firm:
Q: “So where else do you advise clients to set up their offshore companies and trusts?”
A: “We think Delaware is pretty good. They have over a million companies and trusts there, and no beneficial ownership registration. No one can find you.”