7 ms·

The Final Days of a Tax Haven

95 points by chollida1 9y ago

f_allwein 9y ago
If I understood correctly, this says Vanuatu is unhappy that it got gray-listed for dubious tax practices, whereas other tax havens weren't. This will affect the price of "imported food, such as rice, and fuel." > The offshore financial sector kicks in only about 4 percent of the country’s annual output of roughly $800 million, but its existence requires an ultralow tax environment that deprives the government of some revenue. Not sure I get this. I don't see a rational reason why such tax havens should exist in the first place. If efforts are made now to regulate them, surely that's a good thing. Hope they will be able to transform their economy anyway.
- ABCLAW 9y ago
  These are small countries with a number of sophisticated ex-pats who have placed themselves in positions of power to control local regulations. The result of this control is an influx of offshore funds which they manage as financiers, local board members, solicitors or other enabling corporate professionals. These individuals make very respectable incomes doing very little work living in an area with a rock-bottom cost of living and propagate their status in society by imposing regulations that lock in the need for their services, like local directorship quotas for local companies. An individual can sit on 30~ or so local boards for $20,000 a year each with a PO box for an office. That's a cool half-mil per year to sit on the beach, drink out of a coconut, and read a few pages of board materials a day. This isn't the case for all companies, but it sure is the case for some.
  - knocte 9y ago
    Even if what you describe sounds terrible and immoral, thing is, it's not illegal, and it's a consequence of how our capitalistic/bureaucratic system works. Let's fix the root cause instead.
    - f_allwein 9y ago
      indeed - it has been pointed out elsewhere that slavery/ beating your wife/ ... used to be illegal. It is up to us/ our democratic system to fix this.
      - knocte 9y ago
        You can enforce international laws about human rights, but not about economy.
        ABCLAW 9y ago
        Sure you can. We just don't. If you think the EU and the US couldn't get an international tax harmonization treaty that allowed countries to follow revenue into specified haven countries and tax the cash flows where the revenues were generated, you're nuts. Viewed as distinct, large nations have a fuckton more negotiating leverage than Vanuatu's financial industry. The real issue is that Vanuatu and other similarly placed tax havens aren't distinct. They are run by sophisticated professionals for capital holders in developed countries. Those are the same people who are at the bargaining table; those who know about the issue in depth or that have substantial capital involved all benefit from the wealth extraction the current international regime provides.
        knocte 9y ago
        Interesting.
- vadimberman 9y ago
  I suspect that the declared tax revenues of the financial sector are just a small part of the picture. It is likely that much of the enabling infrastructure, like agencies that register companies, nominally belong to the "legal" sector, and perhaps to avoid detection, some others may be misclassified as well. Then, of course, there are lawyers. And since many companies are used as flow-through vehicles solely for money laundering, these can be counted as part of the shadow financial sector as well; while the taxes they pay are not high, they still pay some kind of taxes (say, in single digits?), and the sheer volume makes it worthwhile. If I were to assess the actual share, I would go by elimination: everything sans tourism, minuscule local food production industry, and transportation.
- xmj 9y ago
  >I don't see a rational reason why such tax havens should exist in the first place. From Wikipedia: An oasis (/oʊˈeɪsɪs/; plural: oases /oʊˈeɪsiːz/) is an isolated area in a desert, typically surrounding a spring or similar water source, such as a pond or small lake.
cletus 9y ago
So the elephant in the room here is that the US is increasingly a tax haven. Not for US citizens. For everyone else. The reason? The US might throw it's weight around with FATCA and many things before it to get even moderately sized transactions reported to it and to have assets of US citizens reported but the problem is the information doesn't go the other way. So the result is those dodging taxes in the EU will probably treat the US as a financial shield to hide wealth from their governments.
- ringaroundthetx 9y ago
  The UK is the same way.
- e40 9y ago
  I'd really like to see non-US residents putting money into real estate pay a huge tax, to discourage purchase of condos and single family homes. There's no reason, to purchase these items and leave them empty, as a hedge against whatever is going on in their country. I'm not exactly sure where to draw the line, but if you send a kid to the US for school, and they live in your condo/house, that's fine. But, do we want speculators from outside the country purchasing and leasing back to US residents? Seems like a bad recipe.
  - jaredklewis 9y ago
    Not sure why "speculators from outside the country" are worse than those from inside the country. Personally, I would prefer we encourage efficient land use by everyone, regardless of their nationality. One elegant taxation system to accomplish that is the land value tax: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
    - solotronics 9y ago
      isn't the most efficient land use just letting the free market work without taxation? if land is best used as a store of value for someones money then thats what it is.
Merthurian 9y ago
The tightening of the screws against tax heavens gives me warm fuzzies. The rich will retreat to Bitcoin soon.

95 points by chollida1 9y ago

If I understood correctly, this says Vanuatu is unhappy that it got gray-listed for dubious tax practices, whereas other tax havens weren't. This will affect the price of "imported food, such as rice, and fuel." > The offshore financial sector kicks in only about 4 percent of the country’s annual output of roughly $800 million, but its existence requires an ultralow tax environment that deprives the government of some revenue. Not sure I get this. I don't see a rational reason why such tax havens should exist in the first place. If efforts are made now to regulate them, surely that's a good thing. Hope they will be able to transform their economy anyway.

ABCLAW 9y ago
These are small countries with a number of sophisticated ex-pats who have placed themselves in positions of power to control local regulations. The result of this control is an influx of offshore funds which they manage as financiers, local board members, solicitors or other enabling corporate professionals. These individuals make very respectable incomes doing very little work living in an area with a rock-bottom cost of living and propagate their status in society by imposing regulations that lock in the need for their services, like local directorship quotas for local companies. An individual can sit on 30~ or so local boards for $20,000 a year each with a PO box for an office. That's a cool half-mil per year to sit on the beach, drink out of a coconut, and read a few pages of board materials a day. This isn't the case for all companies, but it sure is the case for some.
- knocte 9y ago
  Even if what you describe sounds terrible and immoral, thing is, it's not illegal, and it's a consequence of how our capitalistic/bureaucratic system works. Let's fix the root cause instead.
  - f_allwein 9y ago
    indeed - it has been pointed out elsewhere that slavery/ beating your wife/ ... used to be illegal. It is up to us/ our democratic system to fix this.
    - knocte 9y ago
      You can enforce international laws about human rights, but not about economy.
      - ABCLAW 9y ago
        Sure you can. We just don't. If you think the EU and the US couldn't get an international tax harmonization treaty that allowed countries to follow revenue into specified haven countries and tax the cash flows where the revenues were generated, you're nuts. Viewed as distinct, large nations have a fuckton more negotiating leverage than Vanuatu's financial industry. The real issue is that Vanuatu and other similarly placed tax havens aren't distinct. They are run by sophisticated professionals for capital holders in developed countries. Those are the same people who are at the bargaining table; those who know about the issue in depth or that have substantial capital involved all benefit from the wealth extraction the current international regime provides.
        knocte 9y ago
        Interesting.
vadimberman 9y ago
I suspect that the declared tax revenues of the financial sector are just a small part of the picture. It is likely that much of the enabling infrastructure, like agencies that register companies, nominally belong to the "legal" sector, and perhaps to avoid detection, some others may be misclassified as well. Then, of course, there are lawyers. And since many companies are used as flow-through vehicles solely for money laundering, these can be counted as part of the shadow financial sector as well; while the taxes they pay are not high, they still pay some kind of taxes (say, in single digits?), and the sheer volume makes it worthwhile. If I were to assess the actual share, I would go by elimination: everything sans tourism, minuscule local food production industry, and transportation.
xmj 9y ago
>I don't see a rational reason why such tax havens should exist in the first place. From Wikipedia: An oasis (/oʊˈeɪsɪs/; plural: oases /oʊˈeɪsiːz/) is an isolated area in a desert, typically surrounding a spring or similar water source, such as a pond or small lake.

cletus 9y ago

So the elephant in the room here is that the US is increasingly a tax haven. Not for US citizens. For everyone else. The reason? The US might throw it's weight around with FATCA and many things before it to get even moderately sized transactions reported to it and to have assets of US citizens reported but the problem is the information doesn't go the other way. So the result is those dodging taxes in the EU will probably treat the US as a financial shield to hide wealth from their governments.

ringaroundthetx 9y ago
The UK is the same way.
e40 9y ago
I'd really like to see non-US residents putting money into real estate pay a huge tax, to discourage purchase of condos and single family homes. There's no reason, to purchase these items and leave them empty, as a hedge against whatever is going on in their country. I'm not exactly sure where to draw the line, but if you send a kid to the US for school, and they live in your condo/house, that's fine. But, do we want speculators from outside the country purchasing and leasing back to US residents? Seems like a bad recipe.
- jaredklewis 9y ago
  Not sure why "speculators from outside the country" are worse than those from inside the country. Personally, I would prefer we encourage efficient land use by everyone, regardless of their nationality. One elegant taxation system to accomplish that is the land value tax: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
  - solotronics 9y ago
    isn't the most efficient land use just letting the free market work without taxation? if land is best used as a store of value for someones money then thats what it is.

Merthurian 9y ago

The tightening of the screws against tax heavens gives me warm fuzzies. The rich will retreat to Bitcoin soon.