Tax havens: It's Obama's turn to bluster
So the business world is stung by President Barack Obama's harsh comments about tax havens and the people who love them. Good for him (unless you're a rich twit), but if you're a tax haven, not to worry.
It's unusual for a U.S. president to be so public in condemning tax havens, but it's probably a futile gesture, other than making for a good show. All the big countries would have to join in a concerted effort to stop corporations and rich people from hiding their money on friendly little isles like the Caymans. And the preliminary results of that ballyhooed effort don't look promising.
Nearly a month ago, Alexander Neubacher pointed out some reasons in Der Spiegel, under the headline "Why the Fight Against Tax Havens is a Sham."
And this fight is a diversion from the more immediate problems of the global recession. It's sexy to point to tax havens and stir up public anger, just as it was sexy for Congress to suddenly bluster about AIG's bonuses when in fact such excessive greed has been standard practice up and down Wall Street.
Not that tax havens aren't a problem for governments. But this move against them comes only after world leaders at the G-20 summit in London vowed to stamp them out because the leaders couldn't agree on much else to say about other issues.
And after much huffing and puffing, the Europeans produced a "blacklist" of tax havens that included zero countries. And officials on the Caymans, which are no doubt a tax shelter, are fighting back, claiming that they fear a "witch hunt."
Der Spiegel's Neubacher traced what happened after the London summit:
The fact that all the world's tax havens seem to have disappeared overnight is primarily the result of skillful diplomacy. Even the most notorious offshore financial centers have managed to quickly purge themselves of all suspicions of aiding and abetting tax evaders.
The task was not exactly made difficult for the erstwhile offenders. All a country had to do in order to be removed from the list and accepted into the circle of the supposedly purified was to provide the OECD with the solemn assurance that it intended to abide by international agreements in the future. Whether this is a step forward remains to be seen.
(Actually, there were four countries on the OECD blacklist — Malaysia, the Philippines, Uruguay, and Costa Rica — but all four pledged to share the information demanded by the OECD. So scratch them from the list — four minus four equals zero. All this maneuvering took place a month ago and was reported at the time.)
Oh, and U.K. PM Gordon Brown was so bold even before the G-20 when he pledged a crackdown on tax havens. Last time I checked, the world's most well-known tax haven, the Cayman Islands, wasn't independent but is still British territory — British territory, however, that has no direct taxation of either its companies or its people.
So it's not as if Obama broke big news when he pointed to a Cayman Islands building where 18,000 U.S. companies are housed and said:
(I would guess that the biggest building in the world is either the Mall of America in Bloomington, Minnesota, or the Pall of America — the U.S. embassy in Baghdad. I would be wrong: The biggest, apparently, is the Boeing plant in Everett, Washington.)
Back to the Caymans (if only), where in a grand total area of about 100 square miles (1.5 times the size of D.C.) there are 68,000 businesses and 48,000 people.
In fact, the Caymans' main industry (55 percent of its GDP) is being a tax haven. And Caymanians damn proud of it.
Don't leave for the Caymans without your credit card, but don't mention the phrase "tax haven" when you get there. You can pore through the Oxford Economics February '09 study "Economic Benefits of the Financial Services Industry in the Cayman Islands" and not even find the word "haven." The polite term is "financial services," thank you.
