As the Panama Papers story unfolds and we learn more about the systematic world-scale corruption of offshore tax-havens, the usual suspects have mounted a charm-offensive top defend anonymous offshore bank accounts as critical to democracy and a check against the rise of fascism (no, really).
But it's bullshit. Seriously.
Nicholas Shaxon, author of Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens takes an axe to the pro-tax-haven talking points, starting with the fairy-tale that tax havens helped Jews get their money out of Nazi Germany (the reality is that anonymous Swiss banks helped Nazi war criminals squirrel away far more wealth than Europe's Jews were able to smuggle across the Alps).
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.
Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens [Nicholas Shaxon/St Martin's Griffin]
Five myths about tax havens [Nicholas Shaxson/Washington Post]
(via Naked Capitalism)
(Image: Goldkey Logo Removed, Swiss Banker)