Articles Posted in Tax Haven

IMG_0081-300x193In his book, Moneyland, Oliver Bullough details how wealthy individuals and large companies take advantage of a long list of loopholes to hide profits and leverage their control over the world. With a combination of geography and demography, Bullough takes readers on a journey of the corrupt practices followed by some of the most influential entities in the world.

Tax havens and lenient laws are part of what makes such an extreme level of corruption possible, and seemingly legal. Known tax havens like the Cayman Islands, Bermuda, and Switzerland have been used by corporations and individuals around the world to hide profits and reduce tax fees for decades. With little to no taxes owed on profits in these locations, tax havens are extremely inviting to the greedy. But how does it work?

The idea is quite simple. For example, a company in the United States merely has to open a subsidiary located in a tax haven to reroute profits and enjoy the more lenient practices of that area. This practice is only made safer for the individuals involved due to the fact that most tax havens have little to no legislation preventing or criminalizing such acts.

IMG_0065-300x164According to a report by the Guardian, British American Tobacco is being accused of attempting to evade over $700 million in taxes combined from Bangladesh, Indonesia, Kenya, Guyana, Brazil, Trinidad, and Tobago using a UK-based subsidiary to maneuver their profits.

British American Tobacco (BAT), based in London, is the largest tobacco company in the world. The Tax Justice Network reported that in 2016 alone BAT moved over $940 million in profit generated from overseas companies to BAT Holdings, the company’s UK subsidiary. Why? With BAT’s subsidiary based out of the UK, the company can enjoy a 19% tax fee which is significantly lower than in other countries. While this does not eliminate their taxes, it significantly reduces them.

Due to lenient tax laws, it appears that no illegal activity has occurred. However, in the report by the Tax Justice Network, it was quickly noted that BAT has been utilizing complex profit maneuvering to pull off its reduced tax fees. In total, the company appears to have over 100 offshore subsidiaries located in 19 known tax havens. The company’s finances also reveal a multitude of vague “operating charges”, interest fees, and royalties. In over 60-pages, the report by Tax Justice Network also noted additional mysterious transactions including IT charges, advisory fees, and technical fees.

tax havenA whistleblower by the name of Rudolf Elmer claimed that during his work as a private banker and internal auditor for the Swiss financial institution, Julius Baer Bank & Trust Company Ltd., he discovered actions that he found to be deceitful when relocated to the Cayman Islands. When Elmer acted as a whistleblower in this situation, instead of being supported in his efforts, he was fired, removed from the financial world, given time in prison, and even suffered a mental breakdown.

Whistleblower is a legal term that signifies anyone who chooses to report a person or organization for illicit activity. A large portion of whistleblowers are insiders and have directly interacted with the company in question as an employee.

Whistleblowers have the right to take legal action in the government’s name while the government may choose to step in at any point of the process to handle the allegations they find particularly detrimental or unlawful. The United States has a set of laws in place that are designed to protect whistleblowers known as the Whistleblower Protection Act, which has been around for over 30 years with the last major update being in 2012.

deforestation-300x200The destructed land left from the acts of deforestation is an eerie sight. A distant treeline, fallen logs, and disrupted vegetation seem both natural and unnatural, and perhaps rightly so. In a recent investigation performed by Victor Galaz and members of the Stockholm Resilience Center, many acts of Amazonian deforestation can be directly linked to foreign tax havens. Why? Because there’s lots of money to be made in the destruction of these forests, which are eventually used by massive beef and soy companies to turn a profit. However, the fish industry, worth over $23 billion annually, is yet another market at the root of environmental destruction by use of oversea tax havens.

The Link Between Overfishing and Tax Havens

There is a reason why fishing boats are given a daily fish quota, as well as restrictions on the species of fish that they can keep; The environment. The practice of overfishing is capable of wiping out entire species. However, this can be viewed as limited profits for the companies involved in these restrictions; less fish equals less profits. For companies like this, it’s tempting to find a way around these regulations, and foreign tax havens offer the perfect opportunity.

tax evasionAccording to a list by Oxfam, a charitable organization that works to alleviate global poverty, Bermuda is the worst corporate tax haven in the world. Joining Bermuda on this list are fourteen other tax havens, which include the Cayman Islands and British Virgin Islands. But, what makes Bermuda stand out among the others noted on this list?

Creating The List

Oxfam did not take the creation of this list lightly. In order to determine the tax havens that belonged on the list, Oxfam carefully researched numerous factors, including the presence of exceptionally low or nonexistent corporate tax rates and unfair tax incentives. Oxfam also took into consideration the cooperation, or lack of cooperation, of these tax havens in regards to international regulations designed to combat tax evasion. During its extensive research, Oxfam found that Bermuda and other British territories were among the worst tax havens in the world. This is especially true when considering the United State’s use of these tax havens.

tax havenReports from London have shown that nearly a third of the billionaires located in Britain plan to or have already moved to areas considered tax havens. In addition to this sudden shift, there is also talk of an investigation into political party bankrolling from those that have chosen to relocate, as well as the delay in a vote involving the end of secret company ownership in offshore territories.

According to the Times news, 28 out of the 93 recorded British billionaires have been found through public record to have moved or been in the process of moving to a tax haven within the last decade.

Tax havens are locations in the world in which taxation is extremely light or sometimes even non-existent. Examples of these are the Channel Islands or countries like Switzerland and the United Arab Emirates that pay little to no tax.