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Today there is a great outcry from
these and other countries about the
tax saving benefits afforded to
citizens of certain countries by
going offshore. These countries
claim that their constituents are
cheating them out of billions of
dollars of taxes by going offshore.
The offshore jurisdictions that are
considered the tax havens say that
is a nice allegation but we are not
your collection agency and do not
ask us to change our bank and
corporate privacy laws because your
constituents do not want to pay
taxes, this is your problem not
ours. The actual amount of taxes
that are avoided unlawfully is a
figure that one can only take a
guess at. Many people set up
offshore structures to do business
outside of their home country and
are not in violation of any laws the
way they conduct their business
affairs. Many people live in other
countries and need to own offshore
bank accounts, offshore
corporations, offshore real estate,
etc. Many people use offshore
privacy to protect themselves from
identity theft, kidnapping,
blackmail, and possible extortion.
Let me use an analogy to make a
point. In Latin America there is an
organization of five states called
Mercosur. Mercosur consists of
Argentina, Brazil, Paraguay,
Venezuela, and Uruguay. Mercosur
also has associate members which are
as follows: Chile, Bolivia, Peru,
Columbia and Ecuador. The Mercosur
countries engage in free trade and
easy border controls with no
passports, just national identity
cards for border crossings. Mercosur
recently issued a statement that
they would in the future strive to
resist any further attempts to get
them to spend more resources on
narcotics enforcement that stems
from the UN. The UN says its member
countries must enact certain kinds
of laws to control narcotics and
states these laws and insists on
enforcement policies. The Mercosur
spokesperson stated that this was an
irrational policy since it has not
worked for over a quarter of a
century and it was severely draining
the resources of their countries.
Essentially they said they were sick
and tired of the United States which
is the nation driving these policies
through the UN, making their
problems, the problems of other
countries and they were going to
collectively attempt to legalize
narcotics in their own nations to
free themselves from this heavy
burden of narcotics enforcement.
This has already begun to happen in
Bolivia, Paraguay, Argentina and
Venezuela with the abundant legal
availability of cocoa leaf. The
cocoa leaf has cocaine alkaloids
(real cocaine) and is commonly used
as a chew like chewing tobacco leaf
or made into tea leaves. Street
cocaine is perhaps 30 times as
potent and is diluted with harmful
substances like turpentine, ether,
etc. Cocoa leaf is a natural plant
product used for centuries as a
stimulant by people living in the
high altitudes of Bolivia, farm
workers etc. One can now see coca
tea being sold freely on the
internet but I would strongly advice
you not to order any because you may
get charged with narcotics
importation, seriously because it
can be lab tested to contain
cocaine. So my point is a lot of
countries have said ok enough is
enough when it comes to narcotics.
It is not working leave us alone,
take care of your own problem. So
Mercosur countries are now worrying
about their own problems more and
less about the narcotics issues in
the USA and other nations. I think
you will see more of the same type
of thinking when it comes to
offshore banking, offshore
corporations, offshore foundations,
offshore stock brokerage accounts
etc.
Offshore jurisdictions have to go
through all sorts of compliance that
is not needed in say the USA or the
UK. One offshore formation agent
went to the USA and was able to open
eight USA bank accounts in one day.
In Panama a bank account can take
five days after you collect and
submit the reference letters and
documents. In the USA and UK no bank
reference letters are required to
open a bank account, neither are any
professional references required. In
the USA and UK they do enforce money
laundering protective measures
strictly. One can buy USA
corporations or UK corporations
without any of the due diligence
requirements that are required from
offshore jurisdictions. So the
playing field is not exactly level
yet these countries are screaming
for more controls not on themselves
but on other countries. It seems
that the offshore jurisdictions will
scream enough is enough if any
further controls are imposed on them
and resist them. Of course one
wonders what further controls they
could come up with that they haven’t
already imposed. Let’s look at
history a little to see how things
deteriorated in the past regarding
offshore privacy and offshore
banking. Most of the older offshore
tax havens are also tourist
destinations such as Cayman Islands,
Nassau, Bermuda, Grenada, Belize
etc. These countries usually have
little if any natural resources and
need to bring in everything they
consume. While some of them avoid
income taxes instead they impose
taxes on goods imported. These
countries got heavily involved in
tourism as a way to keep their
economies moving. A cruise ship
docking at these ports usually
carries 2500 people. Each person
probably spends an average of $100 a
day when in this ports buying
t-shirts, duty free liquor, tobacco,
jewelry etc. many spend a good deal
more. That is $250,000 per cruise
ship. These jurisdictions get from 3
ships per week, to 40 ships per week
docking there. The money from the
cruise ships exceeds what would be
earned from their previous offshore
banking and incorporation
activities. Remember a bank that
controls hundreds of millions of
dollars of deposits can only have 50
or so employees. A thriving cruise
ship port can have thousands of
employees working in the shops,
restaurants, as tour guides, taxi
drivers etc. So more jobs are at
stake in the tourism business. We
also have to take into account the
resorts these countries have which
create even more jobs and generate
revenue in the form of a hotel room
tax built into the rates. These
countries also charge a head tax on
every person coming into their
country. Bottom line is there is
much more money in the tourism
business than there is the offshore
business for the government of these
jurisdictions. The governments of
these countries don’t make much off
of a bank account for instance,
actually nothing. They have no
income or capital gains tax. The
offshore corporations would pay a
few hundred dollars a year in taxes
but that was it. The banks would pay
a few thousand dollars a year for
their licenses. So these countries
sold out on offshore privacy to
protect their tourism. If they did
not do so the countries allowing tax
free importation from these
countries of tourist bought items
might go away. Tourists returning
from these countries by ship or air
might find themselves stuck in long
lines while they are searched and
interrogated by authorities of
various affected countries which
would quickly and seriously
discourage tourism to these
countries. Other countries like
Switzerland, Lichtenstein, and
Luxembourg sold out due to pressure
from the EU. But now we are seeing a
reversal in position regarding the
EU, not much of a reversal but at
least a sigh of OK enough is enough.
In recent months the USA was exposed
by the New York Times Newspaper in a
scandal whereby they were monitoring
SWIFT wire transactions for some
years. SWIFT is a private company
that enables banks to communicate
with each other securely including
sending wire transfers. SWIFT
machines require a separate terminal
and line so as to make them most
secure. The USA served a court order
on the SWIFT people in New York to
turn over all the data they
requested and gag ordered them to
not mention what was going on. It
went on for two years. This got the
EU nations most upset. While they
have not actually prosecuted the
SWIFT people for violating the
banking laws of the various European
nations affected, there was serious
talk of it. Whether or not obeying a
USA court order to violate the
banking laws of other nations is a
viable defense has never been tested
in any court, yet anyway. The EU
position on this was they must get
the USA to understand their banking
laws call for privacy. This of
course is not exactly giving ground
for more privacy invasive laws which
is what we mean by a reversal.
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