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corporate dominance | government

Five myths about tax havens

When tax havens assist kleptocratic elites in hiding their cash with impunity, they don't guard against corruption and despotism they help perpetuate them. Tax havens provide an escape route from laws that is available only to a rich minority that can afford to use it, thus removing from the equation the constituency with the greatest power to push for reform.
to read Nicholas Shaxson's article published on April 15, 2016, click on

 https://www.washingtonpost.com/opinions/five-myths-about-tax-havens/2016/04/15/76d001d2-0255-11e6-b823-707c79ce3504_story.html

"News broke this month of an unprecedented data leak: Some 11.5 million documents containing detailed, confidential information about more than 200,000 offshore companies involved with Mossack Fonseca, a Panamanian law firm, had fallen into the hands of the International Consortium of Investigative Journalists via an anonymous informant. Collectively known as the Panama Papers , the files revealed just how widespread the abuse of offshore tax havens is among the world's elite politicians and business people. Still, myths persist about the supposed benefits of offshore tax havens, both for the countries that stash wealth there and for the havens themselves...

Reducing corporate taxes to attract wealth back from tax havens sounds plausible "Republicans call [tax inversions] the inevitable consequence of a flawed tax system," Bloomberg View recently observed, "and say the only solution is a full revamp of the tax code, including lowering the corporate rate and limiting taxes on foreign profits." But it doesn't work that way. Tax cuts at home don't persuade corporate bosses to ease up on tax avoidance, and there are always more lucrative shelters abroad.

As U.S. corporate tax rates have plunged over the past 40 years, corporations have shoveled ever-rising quantities of money offshore. In the early 1990s, corporations paid an effective tax rate of nearly 35 percent, and revenue losses to offshore tax havens were hardly a problem. Now effective rates are below 20 percent, and revenue losses are running at an estimated $100 billion annually and rising. The key reason is not high taxes but the proliferation of havens, loopholes and advisers.

Corporate tax cuts also attract the wrong kind of investment activities like profit-shifting that don't result in real benefits to the broader economy. Recent research from Congress's Joint Committee on Taxation shows that tax-cutting by the United States isn't even good at attracting those investments, anyway. There simply is no beating offshore tax havens in their race to the bottom: They will always zip down the slope faster. The solution is not to cut taxes but to crack down."

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