A letter in the Financial Times today
From Mr James S. Henry.
Sir, As a member of the global board of Tax Justice Network, I was delighted to see your editorial “Cameron’s taxing question for G8” (January 25) commending David Cameron for his latter-day conversion to the long overdue cause of cleaning up corporate tax dodging.
But I do take exception to one sentence in your editorial, in which you remarked that “countries such as Britain and the US, while not themselves tax havens, can do much to improve transparency”.
In fact, of course, the US and the UK have for decades been the two largest “tax havens” in the world, especially for the wealthy elites of developing countries.
Both countries have carefully designed their tax codes and banking laws so that if, say, you happen to be a super-rich “non-resident alien” or “non-dom” from a country such as Mexico, Brazil, the Philippines or Nigeria, you and your entire family can live virtually free of all income and estate taxes – in the US case for at least half the year, in the case of the UK all year round.
In the US case, even when the half-year is up, you can then rotate over to your villa or yacht in any number of other residential havens. And if you simply want to maintain your investments here, by way of Delaware or Nevada corporations and trusts, whose secrecy rivals those of the very best “offshore” jurisdictions, that is even easier.
At the same time, since the US, the UK, and indeed most OECD countries have very spotty “automatic information exchanges” with developing countries, unless you are extraordinarily generous, your home-country tax authorities are unlikely to ever hear about all your first-world income and wealth.
So you can easily become a transnational “citizen of nowhere” for tax purposes. As such, you will have added your pile to what TJN estimates is now at least $21tn-$32tn of cross-border private wealth that is owned by the new private global elite – much of it invested by way of the US or UK “spider net” of secrecy jurisdictions.
Probably with the help of able US and UK private bankers and haven lawyers, you will have managed to achieve, for yourself and your family dynasty, across borders and time, that wonderfully anti-democratic ideal combination: political representation plus minimal taxation.
James S. Henry, Sag Harbor, NY, US, Senior Advisor and Global Board Member, Tax Justice Network
Henry, a former chief economist of McKinsey's and a veteran investigator of the offshore phenomenon, has more experience than almost anyone in the world of the blood and guts of the private banking industry and its offshore locales. (We hope that the FT doesn't mind our reproducing this letter, given that it comes from us originally.)