Congress recently approved a budget that will drastically affect federal programs as varied as Medicaid, veterans' benefits, and Superfund cleanup sites. While the cuts' backers say they're needed to balance the budget, some critics point out that the United States could fully fund all programs on the books by closing international banking loopholes.
Tax havens, or nations that allow wealthy individuals and multinational corporations to stow their money with little or no tax, have only one percent of the world's population but hold a quarter of United States' stocks and nearly a third of all global assets, David R. Francis reports in The Christian Science Monitor. According to London's Tax Justice Network, nations around the world lose an estimated $255 billion in tax revenue every year because of tax havens. Offshore banking not only affects government programs and budgeting in industrialized countries, but it also influences developing nations where lost tax revenue may exceed foreign aid.
Hollywood portrays tax havens like the Cayman Islands or Bermuda as conduits for criminals to launder 'dirty' money. In reality, they're also favored by some of America's largest corporations to manipulate profit numbers. By using legally registered offshore shell 'subsidiary' companies to shift debt around, Enron, Tyco, and Worldcom were all able to defraud regulatory authorities and shareholders, Lucy Komisar writes in CorpWatch. More recently, the CEO of American International Group, Maurice Greenberg, resigned in what Komisar describes on AlterNet as 'an apparent effort to reduce the negative fallout' from similar allegations.
Because offshore subsidiaries and tax havens are out of tax and law enforcement authorities' reach, it's difficult to enforce laws when they are broken. In December of 2004, a tragic fire in a Buenos Aires discotheque with multiple fire code violations killed 200 people and injured 700. Courts were unable to prosecute anyone because the legal owners of the property and disco were registered as offshore shell companies in Uruguay, a tax haven. That's why, Komisar explains, Buenos Aires recently issued the world's first ban on offshore shell companies.
Go there >> Secretly, Tiny nations Hold Much Wealth
Go there too >>Bringing Business Back Ashore
- The Fall of a Titan
- Tax Justice Network
- Profit Laundering and Tax Evasion: The Dirty Little Secret of Financial Globalization
Related Links from the Utne Archive:
- How the Rich Elude the Tax Man
- Shell Game: Citibank Attacks Money-Laundering Regulations
- Economic Hit Man($$)
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