Tuesday, September 16, 2008

Lawbreaking is part of the case for tax havens

The Center for Freedom and Prosperity has just published one of its little videos making what it says is "the economic case for tax havens." It is a mixture of confused thinking and, worse, it condones and consequently promotes financial crime.

Dan Mitchell, the presenter of the video, remarks that “no wonder the global economy is so much stronger today.” Which is a spectacular piece of poor timing, given the turmoil in world markets right now (he seems to make a habit of it - click here.)

It's worth noting that Mitchell has, as usual, not chosen to tackle our arguments head on - and by contrast we have, on many occasions, and from many different angles, taken a full-frontal approach to these arguments, and disposed of them directly and smartly. Here's just one example: Mitchell claims to make "the case for tax competition" - look at his claims, and then see what we have to say about it. You decide.

We won't dwell on this - except to note that they routinely use another tactic commonly used by those who have lost the argument: the smear. Take a look at this rather comic text, for example, from Mitchell, Grover Norquist and others, attacking TJN for, among other things, putting at risk homsexuals in Saudi Arabia, Jews in France, and so on. Much of the text is concerned with putting into our mouths things we never said or advocated, and then adding it all up to create their nasty smear. We urge them to confront our arguments head on. (As an aside, let's confront their argument about homsexuals in Saudi, here, simply by asking the question: who is more likely to avail themselves of offshore secrecy: the human rights activists and other oppressed citizens, or the corrupt dictators and their cronies who oppress them? You know the answer. . . .)

We do agree with Mitchell on one thing. He agrees with the offshore analyst Marshall Langer:

"The most important tax haven in the world is an island. They are surprised, however, when I tell them the name of the island is Manhattan. Moreover, the second most important tax haven in the world is located on an island. It is a city called London in the UK."

Mitchell goes on to say that the US and UK have "laws that enable foreigners to invest money and then not have to report income to tax police. That is good for the US and UK economies and good, of course, for the foreign taxpayers." First, it may be good for foreign "taxpayers" (read wealthy élites) but it is certainly not good for the average citizen of those foreign countries. Second, and just as importantly, this statement is endorsing tax evasion. Tax evasion is a crime.

And then try this comment, arguing that tax havens near large countries increase their prosperity.

"Citizens from high-tax nations often move their money to a neighbouring tax haven, then then pretend that they’re foreigners, and they use that haven as a platform to invest back in their own countries."

Let's unpick that. They "pretend," do they? What he is talking about here is concealment - outright lying to your tax authorities. This is the foundation of tax evasion. Which, as we have mentioned, is criminal activity. It is not only the foundation of that, either. Tax havens are regularly used by crooks to indulge in market-rigging in their home markets, by using the veil of offshore secrecy to disguise their identities and pretending to be "competing" in a market when in fact the participants are all related, and in cahoots to fix prices. Many other forms of crime are hidden using these round-tripping mechanisms.

The press release accompanying the video claims that the video "looks at the empirical data" to make its case.

No it doesn't. What it does is to look at the narrowest possible sections of the data, then use that to draw false conclusions by scrupulously avoiding the bigger picture. They note that by being a tax haven, offering secrecy and low taxes you can attract a lot of hot money and get rich - and then they use that as "evidence" that tax havens are a good thing. This is a bit like focusing on the yachts, fast cars and large palaces owned by rich dictators and their cronies - and then saying "corruption is a good way to get rich - so clearly corruption is a good thing."

Please. Is that the best the promoters of offshore can do? Their game is up.

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