Posted by Alli -
Fri, Dec 21, 2012
While lawmakers in Washington DC are debating how to solve the fiscal cliff, a group of Americans found a hidden treasure in the Caribbean that could go a long way toward balancing the budget: the billions of dollars US companies and individuals have stashed away in the Cayman Islands. On Thursday, December 13, over 100 Americans landed on the Cayman Islands and marched to the Ugland House, a building where some 18,000 businesses hide their tax dollars. President Obama has referred to Ugland House as “either the biggest building in the world or the biggest tax scam in the world.”
The protesters held signs saying “Bring our tax dollars home” and “We want our money back.” They sang a parody song to the tune of Harry Belafonte’s “Day-O”, with the refrain “Tax evaders time to bring the money home.” Four of them were dressed as billionaires with corporate logos, waving their money in the air in a theatrical show of corporate greed.
This was the first tax-related protest this sedate island had ever seen. The protesters were traveling on a Caribbean cruise with the weekly magazine The Nation, and the rally was organized by the activist group CODEPINK. The group insisted that closing the overseas tax loopholes would add $150 billion a year to the shrinking US Treasury.
The tiny Cayman Islands have become the fifth-largest banking center in the world, with $1.5 trillion in banking liabilities. It has branches of 40 of the world’s 50 largest banks, including HSBC, Deutsche Bank, UBS and Goldman Sachs. Since the introduction of the mutual funds in 1993, it has become the world’s leading offshore hedge fund jurisdiction, and the list of companies with accounts there range from Coca-Cola and McDonalds to General Motors, Exxon and Intel. In fact, there are more registered corporations in Grand Cayman than there are people: 56,000 residents vs. 80,000 companies, 9,000 mutual funds and 250 banks.
Legend has it that the islands’ tax-free status stems from the heroic acts of its inhabitants during a maritime tragedy in 1794 when nine British merchant vessels and their naval escort ran aground on the reefs off Grand Cayman. Thanks to the rescue efforts by the Caymanians using canoes, the loss of life was minimized. King George III supposedly rewarded the island with a promise never to introduce taxes.
Whatever the origin, the Caymans today offer individuals and global corporations a deal they can’t refuse. There are no taxes on profits, capital gains, income or any withholding taxes charged to foreign investors. There are no estate or death duties payable on real estate or other assets. The islands also offer a large degree of financial secrecy and freedom from regulations. And you don’t even have to visit the sunny Caribbean paradise to reap the benefits. All you need is a PO Box and $50,000 to open an account.
Former 2012 Republican presidential candidate Mitt Romney has about $30 million invested in the Cayman Islands in at least 12 different Bain Capital funds. Bain has had investment funds in the Cayman Islands since at least the 1990s, making it easy for their investors to cheat on their taxes.
According to the Government Accounting Office, at least 83 of the top 100 publicly traded corporations in America shield large chunks of their income from taxes by keeping it overseas. By using tax havens (the Caymans prefer to call themselves a “tax-neutral portal”), they can shield their assets from lawsuits in their home countries and hide the identity of the investor from tax authorities. Unless they choose to disclose their holdings and income, there is no way US or other countries’ tax officials know these holdings exist. And even if they do disclose information, the completeness and accuracy of self-reported information is not easily verified.
That’s why the protesters marched through the island streets chanting “Hiding money is a crime, tax evaders should be doing time.”
When the protesters returned to their ship after revealing the pirated corporate booty, they stumbled upon the key to yet another hidden treasure. The clue came in the form of a tweet: Irony: @codepink <https://twitter.com/codepink> #opCaymans <https://twitter.com/search?q=%23opCaymans&src=hash> visit on Holland-America ship. Owner = Carnival Corp of Panama who pay about 1% US tax. <http://t.co/DTtOC1UL>
Sure enough, it turns out that their Holland America ship is owned by Carnival Cruise, which is indeed one of the most egregious tax-evading scoundrels. According to The New York Times , over the last five years, Carnival Cruise has paid total corporate taxes — federal, state, local and foreign — equal to only 1.1 percent of its cumulative $11.3 billion in profits (the federal corporate tax rate is 35 percent).
Carnival takes advantage of an obscure provision in the U.S. tax code that allows shipping companies to incorporate overseas and fly the flags of foreign countries. That’s why Carnival is incorporated in Panama, even though its executives sit in Miami and its passengers board in Baltimore, Los Angeles, Ft. Lauderdale, New York and Seattle.
While the U.S. Navy and Coast Guard keep the oceans safe for Carnival’s ships and government dollars build the roads and bridges to the ports where their ships dock, the executives prefer to bury their fortune in tropical islands than contribute to the national pot.
So it looks like the Cayman protesters will have to add Carnival Cruise’s Miami headquarters to its list of protest sites. It’s not as exotic as the Cayman Islands, but at least the weather is nice.
Popularity: 4% [?]