Dear A-Letter Reader:
John Grisham's 1991 bestseller "The Firm," (made into a 1993 thriller movie), was a tale about a corrupt law firm fronting for the Mafia. It reinforced the stereotype of the Cayman Islands, and by implication, all tax havens, as offshore financial cesspools, where shady bankers willingly hide billions in illicit cash and help scoundrels dodge taxes.
The flick made for entertaining drama, and the theme bolstered the hands of tax collectors worldwide, especially the U.S. IRS. Because offshore financial centers offer low or no taxes, high tax governments have done all they can to propagate the exaggerated, oversimplified generalization that offshore tax havens are bad, even illegal -- which they are not.
Twenty years ago this anti-offshore campaign first relied on the war against drugs and the then new crime of 'money laundering.' Proponents of the new "anti-money laundering" campaign accused offshore havens of harboring drug money hidden in banking secrecy. The war on terrorism offered another false excuse to attack offshore havens, even though the facts show terror cash mostly flows through London and New York, not through offshore financial centers.
The A-Letter has repeatedly countered the excesses of major nations' campaigns aimed at tax havens, as in the major overkill of the USA PATRIOT Act's provisions on money laundering. We have resisted the anti-free market attempts by the Organization for Economic Cooperation and Development (OECD) and the EU to raise all nations' taxes to the level of the high tax rates of the deficit welfare states of Europe. The facts show that tax competition among nations is good for the global economy. Tax competition keeps all taxes lower and boosts jobs and growth.
Now comes our friends at the Center for Freedom and Prosperity Foundation with a new research paper, entitled Tax Havens, Tax Competition and Economic Performance , which finds that low-tax jurisdictions promote global economic growth. It presents conclusive evidence that tax havens provide a tax-efficient system for cross-border investment, help boost capital formation, and encourage pro-growth tax policies in non-tax haven countries. The paper also underscores a fact that most Americans don't realize -- that the United States is the world's largest tax haven -- but only for foreigners.
In part because of global tax competition, maximum personal income tax rates have fallen by about 23% since 1980, and top tax rates on corporate income have fallen by almost 20% points. This is what has boosted growth and job creation.
Tax haven America is the world's largest beneficiary of tax competition, both because the U.S. is a tax haven for foreigners and because tax havens facilitate the flow of capital to the American economy. Foreigners have more than $11 trillion invested in the U.S. economy, including more than $7 trillion invested in America's financial markets. Nearly $1.3 trillion is placed in the U.S. financial system by Caribbean institutions alone. This money helps finance America's economic growth.
The point is that offshore havens have cleaned up their act. Yet the high tax nations continue their spurious, false campaign against tax havens. Intelligent persons need to recognize this propaganda for what it is -- a calculated lie aimed at curbing your rights to protect your assets, invest freely and enjoy true financial privacy.
Today those freedoms can only be found offshore.
But rest assured that many offshore financial centers are alive and well. The new CFP report demonstrates that tax havens play an important role in boosting the economy of the United States and the world at large.
That's the way that it looks from here,
BOB BAUMAN, Editor
A WORD FROM BOB BAUMAN: At The Sovereign Society we place great importance on privacy. As a matter of policy we do not sell or share your e-mail address with anyone outside our company. But in this electronic age it seems nothing is safe. During a security audit of our A-Letter e-mailing lists we discovered that hackers very recently gained access to an unknown number of A-Letter e-mail addresses. We are confident that we've eliminated the vulnerability, and that it was limited in scope. At no time could any information other than e-mail addresses be viewed. We have received inquiries from A-Letter readers who use one email address for Sovereign Society correspondence and who have received unsolicited email from an unknown sender to their address. We apologize for this inconvenience and have taken steps to prevent a reoccurrence.