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I'd argue any article about "tax havens," that does not include a section on SPVs for insurance and other securities is un-serious agitprop. The "trillions" of

I'd argue any article about "tax havens," that does not include a section on SPVs for insurance and other securities is un-serious agitprop. The "trillions" of dollars of assets registered in these countries is mainly collateral that secures agreements and contracts that yield income that gets taxed in the country where it is ultimately realized. Writing about these countries without addressing how mainstream financial instruments work should be treated as very revealing.

justincormack 7y ago
There is no reason SPVs shouldn’t be supported onshore.
- motohagiography 7y ago
  I'd say they cannot work onshore because it just substitutes a transparency problem with a much more complex harmonization problem for rules across borders, which creates new arbitrages and political leverage points. The offshore situation we've had for a couple hundred years now is a case of better the devil you know. The rules in haven countries are established, clear, and provide a foundation for all the value in international trade. The only problem is it limits the total dominion of one group via surveillance, which I think is a feature, not a bug. For Special Purpose Vehicles to work onshore, you need something like income trusts, which barely exist anymore because of people who write articles like the one above. It is a custodian with limited liability that does not pay tax, so that you can hold assets in it and invest them to preserve the availability of the principle after a trigger event. Governments hated them because they diverted money out of income tax flows, and it is more politically expedient to solve revenue problems instead of spending ones. I think this aspect of the system works, and this sort of lazy propaganda needs to be recognized for what it is. I respect there are other views on this, but they should be held to a standard of financial literacy this article did not meet.
  - pudo 7y ago
    To say that the current system works (its current form is a few decades old at best) is to ignore the massive impact that secrecy jurisdictions have on virtually all developing countries. Offshores are used there to facilitate the extraction of trillions in wealth that often is directly stolen from public resource (such as direct tax revenue, procurement contracts, and, natural resource concessions). Of course you can argue that any financial problem the public sector has is always a spending problem and never one with the tax base, but that strikes me as a fringe political opinion, and particularly as not a decision that the people of Ghana, Russia, or Ukraine got to make for themselves. Perhaps they're not small government ideologues and would actually prefer to have health care and schools. Justifying all this by saying that very wealthy and powerful people and corporations need privacy to protect them is pretty cynical. (Disclaimer: I'm an enthusiastic contributor to "lazy propaganda" like this)
    - motohagiography 7y ago
      The problem these and other less democratic countries have is that the government can stay in power using resource extraction wealth to pay their police and armies and they do not rely on direct taxation for their revenues. The reason the people do not have a say in how money gets spent is because there is no political reason to ask them. See De Mesquita and Smith on that dynamic. The problem for developing countries is not foreign bank "secrecy," (a presumptuous term itself) it's their domestic resource curse and other governments propping these leaders up. For these third party countries to decline to sign surveillance agreements and tax treaties that disadvantage them is not "secrecy," its sovereignty. Attacking the sovereignty of financial centres is a sordid attempt to bar the exits and prevent capital flight when large state governments impose ever more wealth destroying policies to buy votes. If by "fringe," you mean that solving the spending problem before the revenue problem is beneath discourse - the policy makers of every Tory, Republican, and Conservative party in the western world would probably like to have a word. As would a number of Liberal parties as well. Contributing to lazy propaganda that advocates for soaking "the rich," seems rather more a fringe activity, and further, if it does not include an understanding of the mechanisms of finance, one that is intellectually dishonest at that.
      - 7y ago
majos 7y ago
Do you have a recommended source for learning more about SPVs, whatever those are? A book would be OK.
- T-A 7y ago
  A really short explanation: https://corporatefinanceinstitute.com/resources/knowledge/strategy/special-purpose-vehicle-spv/ https://corporatefinanceinstitute.com/resources/knowledge/st... An infamous use-case: https://en.wikipedia.org/wiki/Enron_scandal#Special_purpose_entities https://en.wikipedia.org/wiki/Enron_scandal#Special_purpose_...

justincormack 7y ago

There is no reason SPVs shouldn’t be supported onshore.

motohagiography 7y ago
I'd say they cannot work onshore because it just substitutes a transparency problem with a much more complex harmonization problem for rules across borders, which creates new arbitrages and political leverage points. The offshore situation we've had for a couple hundred years now is a case of better the devil you know. The rules in haven countries are established, clear, and provide a foundation for all the value in international trade. The only problem is it limits the total dominion of one group via surveillance, which I think is a feature, not a bug. For Special Purpose Vehicles to work onshore, you need something like income trusts, which barely exist anymore because of people who write articles like the one above. It is a custodian with limited liability that does not pay tax, so that you can hold assets in it and invest them to preserve the availability of the principle after a trigger event. Governments hated them because they diverted money out of income tax flows, and it is more politically expedient to solve revenue problems instead of spending ones. I think this aspect of the system works, and this sort of lazy propaganda needs to be recognized for what it is. I respect there are other views on this, but they should be held to a standard of financial literacy this article did not meet.
- pudo 7y ago
  To say that the current system works (its current form is a few decades old at best) is to ignore the massive impact that secrecy jurisdictions have on virtually all developing countries. Offshores are used there to facilitate the extraction of trillions in wealth that often is directly stolen from public resource (such as direct tax revenue, procurement contracts, and, natural resource concessions). Of course you can argue that any financial problem the public sector has is always a spending problem and never one with the tax base, but that strikes me as a fringe political opinion, and particularly as not a decision that the people of Ghana, Russia, or Ukraine got to make for themselves. Perhaps they're not small government ideologues and would actually prefer to have health care and schools. Justifying all this by saying that very wealthy and powerful people and corporations need privacy to protect them is pretty cynical. (Disclaimer: I'm an enthusiastic contributor to "lazy propaganda" like this)
  - motohagiography 7y ago
    The problem these and other less democratic countries have is that the government can stay in power using resource extraction wealth to pay their police and armies and they do not rely on direct taxation for their revenues. The reason the people do not have a say in how money gets spent is because there is no political reason to ask them. See De Mesquita and Smith on that dynamic. The problem for developing countries is not foreign bank "secrecy," (a presumptuous term itself) it's their domestic resource curse and other governments propping these leaders up. For these third party countries to decline to sign surveillance agreements and tax treaties that disadvantage them is not "secrecy," its sovereignty. Attacking the sovereignty of financial centres is a sordid attempt to bar the exits and prevent capital flight when large state governments impose ever more wealth destroying policies to buy votes. If by "fringe," you mean that solving the spending problem before the revenue problem is beneath discourse - the policy makers of every Tory, Republican, and Conservative party in the western world would probably like to have a word. As would a number of Liberal parties as well. Contributing to lazy propaganda that advocates for soaking "the rich," seems rather more a fringe activity, and further, if it does not include an understanding of the mechanisms of finance, one that is intellectually dishonest at that.
    - 7y ago

majos 7y ago

Do you have a recommended source for learning more about SPVs, whatever those are? A book would be OK.

T-A 7y ago
A really short explanation: https://corporatefinanceinstitute.com/resources/knowledge/strategy/special-purpose-vehicle-spv/ https://corporatefinanceinstitute.com/resources/knowledge/st... An infamous use-case: https://en.wikipedia.org/wiki/Enron_scandal#Special_purpose_entities https://en.wikipedia.org/wiki/Enron_scandal#Special_purpose_...