This may be the biggest heist in the history of mankind, if the Panama Tax Heaven papers are to be held on to. Let us take a look at the staggering numbers in question. Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280bn in lost income tax revenues to various governments across the world.
It is not just the rich miserly people who are saving up money by parking money in these tax heavens. Some of the world’s largest companies, donning the apron of corporate transparency are also beneficiaries of these relaxed tax norms in some the countries across the world.
Let us take a look. Pfizer, the world’s largest drug maker, paid no US income taxes between 2010 and 2012 despite earning $43 billion worldwide. In fact, the corporation received more than $2 billion in federal tax refunds. In 2013, Pfizer operated 128 subsidiaries in tax haven countries and had $69 billion offshore and out of the reach of the Internal Revenue Service (IRS).
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Microsoft, the world’s largest software maker, maintains five tax haven subsidiaries and stashed $76.4 billion overseas in 2013. If Microsoft had not booked these profits offshore, they would have owed an additional $24.4 billion in taxes.
Citigroup, bailed out by taxpayers in the wake of the financial crisis of 2008, maintained 21 subsidiaries in tax haven countries in 2013, and kept $43.8 billion in offshore jurisdictions. If that money had not been booked offshore, Citigroup would have owed an additional $11.7 billion in taxes.
The United States loses approximately $184 billion in federal and state revenue each year due to corporations and individuals using tax havens to dodge taxes a year. On average, every truth full tax filer would need to pay an additional $1,259 in taxes to make up for the revenue lost.
The amount involved could have saved the entire world’s population out of hunger, provided them sanitation, health care, immunization and shelter. In addition, the entire children of the world could have been educated. Some back of the envelope calculation point out that about a few trillions are enough to eradicate most of the ills we live with. We could have avoided a few troubles spots on the earth, if the rich wanted to be true.
I am sure Mossack Fonseca papers are just the tip of the iceberg. If a real enquiry is undertaken, many more skeletons will stumble off the shelf. And, there is also a need to ensure that the leaks are not selective and all names and money involved is brought before the public eye.
Albeit all the intentions behind the leaks and the expose, one gets a bit uneasy when it comes to the way these reports were given out or published. Isn’t there a shade of similarity in the news organizations that told us what we always had a hunch about? Or were we forced to leapfrog a retreat to believe that “in a hunky dory world, a sudden blast has taken place?” I would prefer to go by the former than the later, just to go by a journalistic instinct. Come on, I did too deal with some of the biggest leaks some of the world’s largest companies based in India have done, for some reason or the other. And these jump from simple official memos to the ever so sacrosanct Cabinet Notes. I would call it selective leaks to pin someone. You can always differ with me.
Fund managers in the US have been clear in the recent years. You can help your clients move their fortunes to the United States, free of taxes and hidden from their governments. Is it emerging as the new Switzerland.
After years of lambasting other countries for helping rich Americans hide their money offshore, the US is emerging as a leading tax and secrecy haven for rich foreigners. The world’s largest economy has been quiet keen on resisting the new global disclosure standards. Is it a conscious effort to create a new black money parking lot. If one were to believe the money mangers companies and rich have been pushed to park money outside the then tax havens. To newer shores.
All the money mangers are getting busy helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota. In addition, many of the world’s traditional money holders are trying to open shops in the US now, a move these bunch of high headed money mangers would never have considered. After all money does move the clock.
According to reports, Trident Trust Co., one of the world’s biggest providers of offshore trusts (Black money hideouts), moved dozens of accounts out of Switzerland, Grand Cayman, and other locales and into Sioux Falls, S.D., in December, ahead of a Jan. 1 disclosure deadline.
No one expects offshore havens to disappear anytime soon. Swiss banks still hold about $1.9 trillion in assets not reported by account holders in their home countries. Nor is it clear how many of the almost 100 countries and other jurisdictions that have signed on will actually enforce the new disclosure standards, issued by the Organisation for Economic Co-operation and Development, a government-funded international policy group.
For decades, Switzerland has been the global capital of secret bank accounts. That may be changing. In 2007, UBS Group AG banker Bradley Birkenfeld blew the whistle on his firm helping US clients evade taxes with undeclared accounts offshore. Swiss banks eventually paid a price. More than 80 Swiss banks, including UBS and Credit Suisse Group AG, have agreed to pay about $5 billion to the U.S. in penalties and fines.
It seems apparent that the US’s reluctance to sign onto the OECD information-sharing standard is paving the way to the mushrooming of new tax havens.
Let us take a look at the realities at home in India. Undisclosed assets or black-money stashed abroad will give each of India’s 1.3 billion people as much as Rs 21 lakh – more than 25 times the average national income. Well, we are governed by a government, headed by a Prime Minister who promised to bring back black money stored abroad to India within 100 days. Now almost over 700 days are over..
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