Islands of Money

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

David R. Francis reports in The Christian Science
. 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
Komisar writes in CorpWatch
. More recently, the CEO of
American International Group, Maurice Greenberg, resigned in what
Komisar describes on
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.

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Secretly, Tiny nations Hold Much Wealth

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