NYC Mayor's '09 Tax Forms Show More Offshore Money

In 2009 Michael Bloomberg's philanthropic foundation invested over $75 million in offshore tax havens. Although not illegal, off-shoring reduces the amount of money the government has to function. Mayor Bloomberg says all his money is held in blind trusts, meaning he has no idea where his money is invested. This practice is designed to eliminate any conflicts of interest as he serves as Mayor.

The Associated Press reports:

The Bloomberg Family Foundation's 2009 tax forms were filed to the state Monday after two extensions.

Bloomberg's foundation, which gives away hundreds of millions of dollars, has maintained offshore investments for years — typically more than $100 million annually — but that only came to light earlier this year.

Bloomberg spokesman Stu Loeser declined to comment on the latest foreign investments.

When first confronted with questions about the investments last spring, Bloomberg defended the tactic but said he has no control over the money. His investments are maintained in a blind trust that prevents him from knowing his specific holdings to guard against conflicts of interest.

"As far as I know," he said last spring, "the investments that my money managers make are perfectly legal, they're fully disclosed and they're appropriate to maximize the assets which I'm giving away to charities."

The mayor signs his own tax forms, which clearly list the offshore investments.

Read more here

U.S. Could Lose $37 Billion a Year to Tax Havens: Levin

From ABCNews.com:

The U.S. government loses $37 billion per year in tax revenues because multinational corporations stash money in overseas tax havens, Democratic Senator Carl Levin and a group of small businesses said in a report on Tuesday.

Levin, who for years has pushed for a tough law to fight tax evasion among corporations, has enlisted some small businesses to back his so-far unsuccessful proposal to close loopholes letting companies legally avoid taxes by keeping income abroad.

"There are too many small businesses now paying more than their fair share," Levin told reporters on a conference call. "It creates a very unfair competitive situation."

Levin wants to attach some of his proposals to help fund a bill that sets up a $30 billion fund for small business. Levin has tried to attach his initiative to other bills in the past without success.

The coalition of small companies favors banning the use of overseas tax havens, which are generally unavailable to smaller firms.

OECD Crackdown on Tax Havens Seen Lacking Teeth

According to Reuters.com, the number of countries included on the Organization for Economic Cooperation and Development "gray list" of tax havens – who have neglected to implement international tax standards – decreased from 40 to 17 over the past 12 months. Although the OECD has hailed this report as progress in their attempt to stamp out untaxed and illicit cash flows across the world, many critics are claiming the compliance bar was set too low to make a significant impact.

The stakes are certainly high, as the signing of bilateral Tax Information Exchange Agreements (TIEA) is the centerpiece of OECD and G20 efforts to crack down on tax havens.

The amount of money in tax havens has been estimated at $11.5 trillion by the Tax Justice Network, a respected and independent advocacy group that monitors such trends.

Spurred by public outrage over bonus-earning bankers and frauds by wealthy financiers, G20 leaders launched a campaign in April 2009 to name and shame tax havens and penalize those who failed to tighten standards and transparency.

But some say the havens are getting off lightly, and that it is more or less business as usual.

Continue reading at Reuters.com…

USA Tops International Tax Haven List, Thanks To Delaware

Although the Federal government is going to great lengths to take action against taxpayers using Swiss bank accounts to avoid paying taxes, according to the U.K. based Tax Justice Network, Delaware is the biggest tax haven on the planet. Their report claims the state is "the most secretive financial jurisdiction in the world," based off an analysis “60 financial jurisdictions according to level of secrecy and cooperation with foreign tax authorities.”

Delaware even beat out Luxembourg, Switzerland, and the Cayman Islands who came in 2^nd, 3^rd, and 4^th place respectively. Check out the following facts about Delaware from the Tax Justice Network’s press release, thanks to Huffington Post.

• According to the Delaware Secretary of State's office, their operating budget was $12 million in 2007 and they made $24 million in the fees for expedited incorporation filings alone.
• There are currently some 695,000 active entities registered in Delaware, including 50 percent of the corporations publically traded on the U.S. stock exchange.
• New business formations in Delaware are currently running at about 130,000 per annum.
• The growth of private individual deposits by non-residents was most robust in the United States outranking other popular financial jurisdictions such as the Cayman Islands, United Kingdom, and Luxembourg with total non-resident deposits equalling $2.6 trillion in 2007.

The Myth of a Corporate Tax Exodus

From Reuters.com:

When the Obama administration unveiled its plan to crack down on corporations using tax havens to avoid paying their full share of tax, there was a corporate outcry, especially loud in the business media. Many trumpeted the view of Americans for Tax Reform, which predicted that making companies pay their taxes would cause U.S. companies to move abroad, taking their capital and jobs with them.

That's a scary proposition, even when we're not in a recession. It's also utter nonsense. The American economic right wing often seems like a parody of the vulgar Marxist view; instead of asserting that all human behavior is based on economic decisions, the right wing asserts that all decisions are based on taxes. In reality, there are dozens of reasons why companies locate where they do: sure, taxes are one, but so are quality of infrastructure (especially communications); access to a productive and stable workforce; and the desire of employees to relocate.

And thus, not surprisingly, as multinational corporations adjust to the likelihood that their fictional headquarters in places like the Cayman Islands may have to end, the movement that we're seeing is not an exodus from the United States. Rather, as today's Wall Street Journal reports, the movement is from truly law-evading locales like the Caymans to better regulated low-tax jurisdictions like Ireland and Switzerland. Accenture (ACN) has become the latest company to approve such a move, joining Tyco (TYC), Ingersoll Rand (IR) and a host of other companies who have the option to declare their headquarters in just about any country but want to remain legitimate.

But look, if you're really still worried that Intel (INTC) or Microsoft (MSFT) are going to close up shop and move to India, there's a very simple solution. It's what the Senate version of a tax haven crackdown proposed the last time it was introduced: the government simply declares that any company doing $50 million or more inside the United States will be taxed as a U.S. corporation. That way, U.S. companies will be welcome to move abroad if they have good reasons, but avoiding taxation will not be one of them.

Tax Havens Onshore

From the New York Times.com:

Few here in Switzerland have been other than disgusted by the behavior of UBS and many of us have moved money away from that bank in protest. However, your editorial “The Swiss and their secrets” (May 16) supports demands that are of dubious legality.

Were the Americans to practice what they preach, the I.R.S. would investigate its own tax havens of Delaware, Wyoming and Nevada, the latter having allowed some 80,000 dummy companies to be anonymously registered in 2008 alone, presumably for U.S. tax evasion reasons.

Moreover, a long overdue overhaul of tortuous U.S. tax laws might prove more productive than attacks on a foreign bank; many of the 52,000 U.S. customers of UBS whose names your editorial asks for might then be happy to head home.

Tax Haven Questions Could Trip Up Panama Trade Pact

From the Wall Street Journal:

Questions about Panama's status as a tax haven have raised a new hurdle for U.S. approval of a free trade deal between the U.S. and the Central American nation.

The U.S.-Panama trade pact was signed in June 2007, but the deal has been stalled along with separate bilateral trade pacts with Colombia and South Korea.

The latter two trade deals are ensnared in controversial human rights and market access disputes. But the White House said earlier this year in a "trade policy agenda" document that it hoped to send the Panama deal to Congress for consideration "relatively quickly."

Democratic lawmakers and Obama administration officials now say Panama must take steps to increase transparency and information exchange with U.S. authorities on tax issues, before the free trade agreement can advance.

"I would say with respect to Panama that there are also some important issues that need to be worked through having to do with cooperation in resisting tax evasion," White House National Economic Council Director Larry Summers said at an April 18 press conference at the Summit of the Americas.

The Treasury Dept. launched talks with Panama towards a tax information exchange agreement in 2002, but the talks have made little progress.

U.S. business lobbyists who back the U.S.-Panama trade deal have been pushing for a vote prior to Congress' August recess. But the demands from the Obama administration on tax transparency seem to make that timetable unlikely.

Panama holds presidential and parliamentary elections May 3, and it is doubtful whether the Treasury Dept. would be able to conclude a tax information exchange agreement with the lame-duck administration of outgoing President Martin Torrijos.

The Organization for Economic Cooperation and Development on April 2 listed Panama as one of 30 tax haven jurisdictions that have committed to international standards on bank secrecy, but have "not yet substantially implemented" those standards. Panama is also mentioned in legislation introduced by Sen. Carl Levin, D-Mich., with sanctions for tax haven jurisdictions.

Panamanian officials did not immediately respond to inquiries for this article. In a March letter to the OECD, Panama said that while it is not a tax haven, it is taking steps to strengthen its "legal and regulatory framework, thus helping our international financial center to not by unduly utilized by citizens of other States to evade or defraud their respective tax authorities."

Tax Havens Not Safe Havens

Earlier in the week the Reason.com blog posted an article on the recent tax haven controversy, and expressed how they feel tax havens are never “safe havens.” You can find a snippet of the post below, but the full story can be read here.

Things are bad all over. Writers for The Wall Street Journal have retreated to their international gold- and lead-lined bunkers, from which they are writing articles in defense of tax havens. The usual suspects Sens. Carl Levin (D-Mich.), Bryon Dorgan (D-N.D.), and Max Baucus (D-Mont.), plus Treasury officials, are trying to snag tax money from some American companies that are incorporated and operate outside the United States. As things currently stand, these companies can defer U.S. taxes on money earned overseas until it is brought into the United States.

This is the government equivalent of scrounging in the couch cushions for change...at someone else's house. But hey, they need the money, right? That part at least sort of makes sense, although it will discourage certain useful kinds of reinvestment in firms that function abroad and have other negative consequences for people who really need financial privacy in the face of corrupt and kleptocratic governments. But then there's this:

In addition to charges of tax evasion, some members of Congress—echoing European politicians including France's President Nicolas Sarkozy and British Prime Minister Gordon Brown—have even tried to scapegoat the low-tax jurisdictions as somehow being responsible for the global recession. They are demanding that the G-20 countries come up with action proposals against them at their meeting next month.

Geithner Pledges ‘Ambitious’ Crackdown on Tax Havens

From Bloomberg.com:

Treasury Secretary Timothy Geithner said the U.S. government will mount an “ambitious” program to crack down on companies that use offshore locales to avoid paying taxes.

Closing loopholes and hunting tax evaders are especially important at a time when the economy is deteriorating and the government is running a record budget deficit, Geithner told the Senate Finance Committee today in Washington.

“We’re going to have a much more ambitious effort to deal with offshore tax havens,” Geithner said in response to questions from the panel. Allowing companies and individuals to escape paying their share “isn’t fair, particularly given the scale of the fiscal challenges we inherited,” he said.

A congressional report released in January found that in 2007 83 of the 100 largest publicly traded U.S. companies had units in low-tax or no-tax jurisdictions like the Cayman Islands or the Isle of Man. They included American International Group Inc., Citigroup Inc., Bank of America Corp. and Morgan Stanley, all of which were given taxpayer money through the $700 billion financial rescue.

Some of Geithner’s counterparts in Europe have vowed to take similar action, and the issue may be discussed when finance ministers for the Group of 20 industrial and developing nations meet next week in the U.K.

Yesterday, German Finance Minister Peer Steinbrueck said Switzerland should change laws that shield foreign tax dodgers from investigation in their home countries.

IRS Eyes Wider Net To Catch US Tax Cheats

The IRS is considering getting involved with other governments in order to catch US tax evaders. You can find a snippet of a Reuters article discussing the topic below, or the full text can be read here.

The U.S. Internal Revenue Service may team up with other governments to crack down on tax cheats as it faces pressure to toughen rules on Americans who try to conceal income at offshore tax havens, a senior IRS lawyer told Reuters on Tuesday.

"We are concerned about U.S. people hiding their assets and not reporting their correct worldwide income," Steven Musher, IRS associate chief counsel for international issues said in an interview on the sidelines of a banking conference.

At the same time, Musher said the IRS does not want changes to be burdensome for banks and financial institutions. "We are trying to achieve the balance between increasing the reliability and quality of documentation to serve these various competing purposes," he said.

Musher declined to discuss the agency's lawsuit seeking to obtain the names of thousands of American clients with accounts at Swiss bank UBS AG (UBSN.VX)(UBS.N).

The IRS is preparing a proposal to change rules for its so-called Qualified Intermediary Program, which helps the government keep track of U.S. funds invested in foreign banks.

International Tax: The New Hunt For Tax Havens

From Web CPA:

Congressional leaders are looking to clamp down on offshore tax havens after a Government Accountability Office report found that 83 of the 100 largest publicly traded U.S. corporations have subsidiaries in jurisdictions listed as tax havens or financial privacy jurisdictions, while 63 of the 100 largest publicly traded federal contractors reported having subsidiaries in such jurisdictions.

"This report shows that some of our country's largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And some of those companies have even received emergency economic funds from the government," said Sen. Byron Dorgan, D-N.D. "I think we should take action to shut down these tax dodgers and we will be introducing legislation to do just that."

Sen. Carl Levin, D-Mich., echoed Dorgan: "We must get to the bottom of activities such as the following: Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Hundreds more tax haven subsidiaries operate under strict secrecy laws in places like Switzerland, Hong Kong, Panama and Maurituius."

Levin, who chairs the U.S. Permanent Subcommittee on Investigations, has made offshore tax abuse a major subject of its investigations.

Robert Gallagher, managing editor of WG&L Journal of International Taxation at Thomson Reuters, observed that the GAO study "correctly notes that there is no agreed-on definition or list of 'tax havens.' Instead, they cobbled together their list from three old ones."

The GAO said that while there is no agreement on a definition, various governmental, international and academic sources used similar characteristics to define and identify tax havens: "Some of the characteristics included no or nominal taxes; a lack of effective exchange of information with foreign tax authorities; and a lack of transparency in legislative, legal or administrative provisions."