On November 19, 2009, the Tax Justice Network posted "Cry havoc -- why mercenaries love tax havens" on
http://taxjustice.blogspot.com/2009/11/cry-havoc-why-mercenaries-love-tax.html
Apparently this is a site dedicated to discrediting "tax havens" among other tax injustices.
I hadn't really thought about tax havens until I thought about what the fellow wrote and decided the whole idea of calling what are in fact Safe Havens "Tax Havens" was a way to discourage people from taking control of their own affairs. By using the name "tax haven" to describe a place to keep money that is not in one's own country, pro-tax people and government have colored all discussion by the simple label. Very good marketing but very bad logic.
At the end of the post, the Tax Justice Network wrote:
"The tax havens are steeped in blood"
This is good drama but incomplete truth. It sounds like Dubai, named in the post, is more steeped in blood than, say, the U.S. It's not. The U.S., used properly and legally, let alone illegally, is the greatest tax haven in the world.
The reason "tax havens" exist is not just to "hide" money or to avoid taxation -- either legally or illegally -- depending on who is going the inquiring or whose standards one uses -- but rather for safe-keeping your assets against any number of forces or events that can steal wealth in an instant.
So-called "tax haven's” are good or bad depending on how they are used, not just evil because they exist. Just as guns are not intrinsically good or evil, it is how they are used that determines the morality of the user not the instrument. A cricket bat or baseball bat can be quite deadly if used for a bad purpose.
The current darling controversy is "transparency" versus "opacity" with transparency being "good" and opacity being "bad".
As I understand the argument, in broad terms, transparency is good because it stops "funny business" and opacity is bad because it allows bad people to hide their nefarious activities. Sounds ok on the surface, but it can't take real scrutiny.
Frankly, the reason for Constitutional rights is because we "used" to live in a system where all was permitted that was not prohibited. Sadly that is not really the case any longer. We have been legislated unto death. As a person or company I used to have the right to absolute privacy except when ordered to disgorge information by a court of proper jurisdiction. I'm afraid that now very many "government" agencies can just peek at all matters private whenever they want to. I think you'd have to agree that most of our affairs are quite "transparent" to such inquiries. Hell, we don't even know when it happens -- which is probably not a good thing.
Unfortunately, such "peek-a-boo" government data-mining that used to be unconstitutional is no longer so. Information, public or private, so-called transparent information, is often used for deeper inquiry without true probable cause. In a word, it is abused. Often.
But take "transparency" into not so nice parts of the world. Remember, either you want transparency to be for everyone or you don't. Now you are suddenly living in, say, China. Want transparency? Russia? Want transparency? Cuba? Want transparency? North Korea? What transparency? Nigeria? Want transparency? South Africa? Argentina? Want transparency? You want “basic” transparency or “deep, drill-down” transparency like everyone’s lobbying for these days?
Say that you run an honest business in a country full of corruption and extortion. Transparency in your business means forfeiture of your life or your property. Still want transparency? No you wouldn't. You'd surely want a place like the Caymans or Dubai or Switzerland or Uruguay to more your capital to where it will be safe from plundering by forces larger than you be they government or private.
Here's a link to the "Corruption Perception Index". I can't vouch for it, but it's interesting:
http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table?utm_source=Gizmag+Subscribers&utm_campaign=1a3791aeff-UA-2235360-4&utm_medium=email
"Safe Havens" (which is what we are REALLY talking about) are as necessary as air. "Tax Havens" is a government-inspired pejorative phrase to re-name what many believe are "Safe Havens" for capital storage to be something bad and nefarious that only bad people use to "cheat."
So-called "tax havens" are sometimes just countries looking for an edge. Basic economic theory suggests that the healthiest countries are those that attract foreign capital and the unhealthiest are ones that "lose" foreign exchange to someone else.
A "tax haven" such as Switzerland is a nice place to live. It actually does make a few very fine products but not too many. Offering private financial services is a "big" industry and quietly earns it foreign exchange. China takes in other countries' foreign exchange by the basket full and countries like the U.S. with net trade deficits "lose" foreign exchange to a host of other countries -- largely countries like China or to a lesser extent countries like Saudi Arabia . . . for petroleum products. Of course, both countries used to use the foreign exchange to buy U.S. Treasury Notes/Bonds but those days seem to be ending.
Why are so many Caribbean island nations tax havens? Have you ever been to these places? Except for tourism, they rarely have anything to sell anyone. You try to get a banana from the Commonwealth of Dominica to Los Angeles while it still has life in it. Coconuts? Dying of yellowing leaf disease. They have to import everything they need, often including electricity, cement, fuel, rice, basic food stuffs. These places NEED an edge.
One man's opinion, but I think the reasons companies or persons use "tax havens" is that the large, "transparent," juggernaut countries have a tendency to seize assets without a great deal of due process. Frankly, this is not all that uncommon in "tax havens" as well but there it's usually by unscrupulous bankers or lawyers.
Another reason for using small, personal "tax havens" is an unwritten rule that smart people never keep their money where they live or where they do business. It solves 95% of "problems". I'm not suggesting this is good or bad, but only that in my opinion it's one of the "reasons."
While not saying they are equivocal, black markets and "tax havens" exist because the market perceives they are needed.
Since most of the world does not "live" in Switzerland and it doesn't steal the money except in very ingenious fashions, it meets the "test" of a safe place to store wealth. As do a number of other "tax havens" around the world.
Nonetheless, from now on I'm going to think about so-called "tax havens" as true "safe havens" -- if chosen properly.
Jack Compitelli, J.D., is the author of the Internet Law Compliance System (www.internetlawcompliance.com) -- a complete e-delivered system for quickly helping your website comply with most of the laws that regulate it -- complete with licensed forms.
