Today's comment is by Bob Bauman, former U.S. Congressman and Senior Writer and Legal Counsel for The Sovereign Society.
Dear A-Letter Reader,
You may not have noticed the few recent items about tax havens. But that's one of the many reasons the Sovereign Society exists - to keep you abreast of offshore developments and to explain how events may affect you, your wealth and your freedoms.
One interesting item was from Gibraltar's chief minister, Peter Caruana. Mr. Caruana predicted that tax havens will cease to exist within 10 years because of what he calls "international scrutiny and pressures." Of course, the Rock is both a semi-independent British overseas territory and a certified tax haven.
The busybody, left-leaning Organization for Economic Cooperation and Development (OECD) once listed Gibraltar as a harmful tax haven. But since then, Gibraltar has reformed its laws to become more "transparent" - a favorite word the anti-tax haven crowd uses to refer to tax information exchange about individuals among governments. Or in other words, "transparency" means the end of financial privacy.
Of course, Mr. Caruana sang praise for his own jurisdiction. But he might just as well have praised almost the entire offshore financial community, including all tax havens.
Tax Havens Already Cleaned Out Their Dirty Money
In the last decade, almost every offshore jurisdiction has adopted stringent new anti-money laundering and "know your customer" laws.
These offshore regions have also imposed obligations to report suspicious financial activity. These laws are aimed specifically at drug and terrorism money. In fact, most of them are far tougher and are better enforced than those in the major centers of dirty money - including the United States and the United Kingdom.
The real source behind all the pressure and manufactured media hullabaloo against tax havens has been the tax collectors of major welfare state nations. These collectors are a miserly group that is convinced everyone and anyone who does business offshore is automatically a tax evader.
The IRS and British Inland Revenue hate the fact that tax havens offer tax-free profits and statutory guarantees of bank and financial secrecy. They refuse to accept the fact that tax competition among nations helps the world economy because it keeps taxes lower, increases profits and creates jobs.
Proof that tax havens have improved comes from none other than the notorious OECD group, the Financial Action Task Force (FATF). The OECD sidekicks in the FATF are the self-appointed blacklisters of all tax havens, from Switzerland to the Cayman Islands. Earlier this month, the FATF announced that the Marshall Islands has been removed from the OECD's list of so-called "harmful tax havens." The announcement came after this tiny Pacific island jurisdiction committed to improving transparency and establishing exchange of tax information.
Interestingly, the only "uncooperative" tax havens still on the FATF hit list are Andorra, Liechtenstein and Monaco - all nations with strict financial secrecy laws that they refuse to waive in the face of FATF bullying. And God bless them!
Hypocrites Should Check Their Stories
What must be understood is that the decade old anti-tax haven campaign is really all about tax collectors using phony reasons (anti-drug, anti-money laundering, anti-terrorism) as public relations covers for curbing the right of individuals to bank, invest and do business anywhere in the world they wish.
These phony political attacks run counter to all modern economic trends of globalization, expanded world trade, international investment and free exchange of funds among nations.
For some of the major protagonists, such as the U.S. and the U.K., it is sheer hypocrisy, because these two haven bashers are also major tax havens for foreigners who invest there. For example, wealthy "non-domiciled" residents of London pay virtually no taxes on income earned elsewhere, and even those who are paid in the U.K. have a special tax break that greatly reduces their taxes compared to U.K. citizens.
But bashing tax havens has become an international sport among leftist politicians who have always preached "soak the rich" themes in trying to appeal to the poor, hard working masses. It's called demagoguery.
Not to be outdone, the Democrats who now control the U.S. Congress are already passing new restrictions and levying new taxes on offshore financial activity, and I'll have more to say about that stupidity shortly. (President Bush, get out your courage and your veto pen!)
Who Eggs Benedict?
It's reported that Pope Benedict XVI is working on an encyclical that strongly condemns wealthy individuals from using tax havens and offshore bank accounts. The Times of London reports that the Pope will argue that tax avoidance and evasion is morally unjust because it supposedly prevents governments from collecting revenues to help society's least fortunate people. ("Render unto Caesar the things that are Caesar's...")
This is one Catholic who wishes the Pope had better economic advisors so that he might understand the beneficial role tax havens play in the world economy. (According to the Council of Vienne [1311], a person who charged interest on a loan was to be punished as a heretic committing a mortal sin).
Notwithstanding the continuing leftist onslaught against tax havens, I predict they will survive and prosper, just as they have been doing since this battle began 10 years or more ago.
BOB BAUMAN, Legal Counsel
P.S. Want to know how tax havens can help you morally to expand your wealth and religiously to protect your assets, see the latest edition of my now classic book, Where To Stash Your Cash: Tax Havens of the World.