World’s Worst Tax Haven Threatens to Expand its Operations

“What they sell is escape: from laws, rules, and taxes of jurisdictions elsewhere, with secrecy as their prime offering.”

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

The UK chancellor, Philip Hammond, recently suggested that if the EU fails to budge over granting the UK market access after Brexit, Britain could transform its economic model into that of a corporate tax haven. In other words, in the event of a so-called “Hard Brexit”, which is the only option that would offer the UK any hope of self-rule in the foreseeable future, the British government would extend the City of London’s business model to the rest of the UK.

Unbeknownst to even many Brits, the “City of London Corporation” has functioned for centuries as an offshore island inside Britain, even inside London, a tax haven in its own right, as Nicholas Shaxson, author of Treasure Islands, writes in the New Statesman:

The term “tax haven” is a bit of a misnomer, because such places aren’t just about tax. What they sell is escape: from the laws, rules and taxes of jurisdictions elsewhere, usually with secrecy as their prime offering.

Provided you have fat bundles of cash, you get to enjoy rights and privileges offered by no other jurisdiction on Planet Earth. The City of London’s legal system takes US-style corporate personhood to a whole other level.

Unlike any other UK local authority, individual people are not the only voters: businesses can vote, too. Political parties are not involved – candidates stand alone as independents – and this makes an organized challenge to City consensus all but impossible. More than 70 percent of the votes cast during council elections are cast not by residents, but by corporations – mostly banks and financial firms. And the bigger the corporation, the more votes they get, with the largest firms getting 79 votes each.

Not only is the City of London paradise on earth for rights-seeking corporations; it is also the rotten, beating heart of a vast, secretive financial web cast across the globe. As Shaxson points out, each of the Web’s sections – the individual havens in the Caribbean and elsewhere (all of them Crown dependencies) – trap passing money and business from nearby jurisdictions and feed them up to the City, just as a spider catches a fly.

That Theresa May’s conservative government is considering extending this model across the whole of the United Kingdom should come as no surprise, despite the gaping hole it’s likely to leave in the government’s own coffers. After all, it is a whole lot easier for a government to build a national economic model based on undercutting the corporate tax regimes of neighboring states in a frantic race to the bottom than one based on supporting the emergence — or in the case of the UK, reemergence — of a globally competitive business sector.

But there is also a clear tactical purpose behind the UK government’s latest move. It’s the classic ruse of divide and conquer, something that Britain has long excelled at.

Right now an epic, albeit quiet, battle is being waged in Europe over who gets to set the region’s future fiscal policy: national governments, as has been the case for centuries, or the European Commission? For years, the Commission has been seeking to use the popular canard of corporate tax avoidance as justification for expanding its own powers through the homogenization of taxation rules and practices across the 28-member Union. Suffice to say, not every country is happy about it.

The Commission is even in the process of drawing up a tax haven black list — deeply ironic for an organization that is led by a man who, as prime-minister of Luxembourg from 1995 to 2013, did everything he could to frustrate concerted EU action on corporate tax in order to protect Luxembourg’s own tax regime. As the Lux Leaks scandal showed, that regime included ultra-low tax rates on corporate profits, often less than 1%.

The purpose of the Commission’s black list is clear: to set common standards for European (and perhaps even global) tax regimes and shame those that fail to make the grade into complying with them.

One country that is almost certain to make the black list is Ireland, whose low corporate tax rate (12.5%) and special tax deals have attracted many of the world’s biggest corporations to set up mailbox offices there, which have in turn attracted the opprobrium of the EU’s growing army of tax inspectors.

Last year they slapped Apple with a €13 billion retroactive tax bill, apparently owed to the government of Ireland, its decades-long partner in one of the biggest tax-avoidance schemes of living memory. The Commission argued that the arrangements represented illegal state aid. Ireland’s finance minister Michael Noonan warned that the Commission, with the support of both Germany and France, is “opening a back door through state aid to influence tax policy in European countries.”

But not everyone’s on board. Countries like Austria, with its chronically opaque banking system; the Netherlands, a fiscal paradise that is second home — albeit in the form of a mailbox — to 48% of the Fortune 500; Luxembourg; and, of course, Ireland, will hold as fast as they can to their current tax models. A couple of months ago Hungary’s government raised the stakes by unveiling plans to cut its corporate tax rate to 9%, significantly lower than Ireland’s 12.5%.

The race to the bottom is already on. The fiercer it becomes, the more damage it risks doing to European unity on fiscal matters. By announcing that it, too, is considering becoming a corporate tax haven, the UK, Europe’s third largest economy, just put the cat among the pigeons. By Don Quijones, Raging Bull-Shit.

But who benefits from the War on Cash? Read…  Power & Profit Fuel War on Cash in Europe

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  25 comments for “World’s Worst Tax Haven Threatens to Expand its Operations

  1. HBGuy says:

    Taxation of any kind is theft. If you want to deal with the real problem, go after the criminals in government and Central Banksters who never have enough, even if they control the virtual printing presses.

    • walter map says:

      “Taxation of any kind is theft.”

      Don’t worry HBGuy, taxes are for little people. Parasites don’t pay taxes: they corrupt governments to tax the subject population and deflect the blame, thereby avoiding any repeat of what happened to the Ferme générale.

      There’s no more efficient way to socialize the costs and privatise the gains unless you want to go in for direct pillage and plunder, but this way you don’t have much risk of your victims fighting back.

    • Mary says:

      Thanks for saying that. Tax havens are good as they help you defend against the progressives and leftists

      • PIGL says:

        If you require massive systems of organized crime to protect against “leftists”, maybe you need to reevaluate just what it is you are protecting.

        But if you truly believe all taxation is theft I’m afraid you have a bigger problem what with your brain being missing.

        • Mary says:

          Left socialists are nomless guilty of organised crimes for that matter. I am not a criminal if I want to minimise my tax. You do not write a cheque to HMRC out of the goodness of your heart, do you?

        • d says:

          It is the obligation of the company executive, to put the legal and financial right’s, as wells as the long term well being, of the shareholders asset’s and profits, before those of the state. Legally.

          You are no different to them.

          Avoidance is legal. in this world of wasteful leftist over-taxation it is mandatory.

          As much of the leftist over-taxation, stays in the pockets and bellies of the leftist administrators, and the Administration employees who mostly vote, LEFT.

          Thats how greece got itself into such a mess.

          They created a situation of massive tax resistance among the few who were actually paying any.

          Once “Tax resistance” develops amongst the main tax payer group. The state has a serious problem as it is frequently accompanied by Capital flight.

          Greek bank’s would have no capital short fall’s, would not have neeede several State EU funded bailout’s. Or have an excess % ration of NPL’S. If all the greek citizens brought 80% of their money, back to greece.

          People with money, will do something about it, when they feel they are being overtaxed, or the tax collected, is being wasted, or siphoned off.

          The first thing they will do, is put what they can, beyond the reach of the state, and its tax collectors.

    • Raymond C. Rogers says:

      Some taxation on buisinesses is necessary, as it needs certain services and the infrastructure to operate. But I do agree that at a good portion is downright theft. And before anybody goes about railing about large corporations, let me remind you that there are many more small buisinesses than there are fortune 500 companies. For every one large company that is evading any taxation, there are probably tens of thousands that are crippled and crushed by the same system.

      • walter map says:

        “Some taxation on buisinesses is necessary, as it needs certain services and the infrastructure to operate.”

        Besides, somebody has to pay for the coporate welfare and corporate bailouts.

        “For every one large company that is evading any taxation, there are probably tens of thousands that are crippled and crushed by the same system.”

        I’d be happy to see your evidence, if any, but in view of how tax evasion has become the world’s growth industry, that really does sound like a load of self-serving hooey.

        • Raymond C. Rogers says:

          Your a real pest, spamming these message boards. I imahine people who read these comments want to see various perspectives, not the never ending rants of Walter Map.

          You don’t even reply with logical retorts.Not once here or elsewhere did I support corporate welfare. And your insistence that small buisinesses are not getting crushed because there are large companies that skirt tax rules is a non-sequitur. By the way many of those large companies you hate so much are, run by and owned by, Libs much like yourself.

        • walter map says:

          “Your a real pest, spamming these message boards.”

          I guess this means you won’t be joining my fan club after all.

    • d says:

      “Taxation of any kind is theft.”

      Technically its extortion with menaces.

      A certain degree of taxation is necessary to fund the police and a defense force.

      Road’s are also have to get paid for somehow. Or built and maintained by the local people. Which was mandated by Tokugawa in Japan and a similar system was used in some feudal regions of Europe.

      Big socialist self interest government. which has grown out of all proportion to need since WW I. Is another matter.

      Some knew the monster that had been created, even then.

      The, warmongering, greedy, grasping, egotistical, mongrel french, have so much to answer for.

    • Kent says:

      “taxation of any kind is theft.”

      Disagree. Theft is the illegal taking of someone’s property. Taxation is perfectly legal. And since property doesn’t exist without government, surely those who have property must be willing to give a portion back to the government in order to ensure its further survival.

      • Dan Romig says:

        “And since property doesn’t exist without government, …”

        That is debatable Kent, IMHO. On 1 July 1995, I paid $74,100 to purchase the 125′ by 50′ lot in South Minneapolis that had a 1350 square foot home on it. The transaction was duly recorded by Hennepin County, but the deed of ownership was transferred from the previous owner to me.

        Now it is certainly true that Hennepin County extracts its biannual property tax from me in order for me to keep the deed of ownership free and clear, but that does not equate to the statement that without government, the property would not exist!

        Yes, I must give a portion back to the government to ensure further ownership, but at any time, I can sell to deed and walk away.

        As James Madison explained, government exists to protect property – not the other way around. “The rights of persons, and the rights of property, are the objects, for the protection of which Government (the United States, eh?) was instituted.”

        • Kent says:

          “but that does not equate to the statement that without government, the property would not exist!”

          It is land and a house. It only becomes property when you have exclusive use to it. And the government creates the exclusive use, ergo the government creates the property.

          Murder is similar to taxation in that it doesn’t exist without government. Murder is the illegal killing of people. But the government through capital punishment, war and police actions kill people every day and it is perfectly legal, and therefore not murder.

    • Jonlaughing says:

      If you really think that all taxation is theft I can suggest a few places in the world where you don’t have to pay at all. Interested? Somalia, Eritrea, Ivory Coast, Nigeria, BokoHaramLand, Iraq, Syria… But the trade-off for no taxes is no law, order, security, water, health care. Are you going to step up and live your dream of no taxes? And don’t forget to take your wife and kids too, you can surprise them on Valentines day with a one way ticket!

  2. Justme says:

    Great article. I have read up on City of London before somewhere, but what I do not understand is how a municipality can enact its own set of financial laws. Anyone?

    • walter map says:

      The usual way. You keep bribing MPs until you get what you want.

    • walter map says:

      Try to understand. In the old days, members of Parliament weren’t paid. MPs were expected to compensate themselves by selling their offices, with graft and corruption. Old traditions die hard.

    • d says:

      Lichtenstein, San Marino, Luxembourg, Monaco, All old principality’s with sovereignty.
      London although not a principality has always been a legally independent municipality. Just like them.

      Many king’s of England backed down to London as with out it’s support you would no longer be king for long.

      When Edward the IV Returned from exile and regained his crown on the field it was then a question of would London accept him for the second time as king.

  3. chris Hauser says:

    ah, perfidious albion, it’s all their fault.

    i wasn’t bothered by inequality, but now it just won’t leave me alone.

  4. Chicken says:

    Something else is afoot, to believe they need to annex mom and pop sixpack’s zipcode to share wealth their private insider rackets produce, seems naive?

    Note how nothing is straightforward cut and dry and a litany of obligatory addendums are always tagging along.

    • Chicken says:

      ie: Look more closely some kind of hidden infinite loophole.

      • walter map says:

        Maybe you can explain something to me before I go.

        If taxes are so harmful to the wealthy of the world, why is their wealth going through the roof while everybody else is getting crushed?

        They wouldn’t lie to me would they? Why, that would be wrong.

  5. Tom kauser says:

    Terri may is getting a bit ahead of herself?
    Sharing ? Has she taken leave?

  6. ML says:

    Tax is revenue for the public sector, the state. The role of the state is to provide and maintain the framework for civilised society. With a bit of thought. that can be done without much intervention or imposition. And with a bit of care it coukd create a society its citizens would be oroud of.

    It’s when the state interferes and dictates and crosses the line by competing with businesses sucg that spending is profligate that resentment starts and results in taxpayers seeking ways to minimise their contribution to the state coffees.

Comments are closed.