If Tax Havens Did Not Exist They Would Have Be Invented To Permit The Rich To Keep Their Wealth

Martin McCauley writes from London: The Treasury Minister informs us that paying the plumber in cash is immoral. I suppose slipping the cleaning lady a few readies is also immoral.

What nonsense! The minister claims that cash payments cost the Exchequer about £2 billion a year. How does he know? Presumably, some Treasury nerd closed his eyes and picked a number. The Treasury’s ability to predict the performance of the economy is now in tatters. So why pay any attention to what the Treasury buffs say?

No, there is a much greater problem than plumbers and cleaning ladies being paid in cash: tax havens. One estimate is that $32 trillion is now hidden in these dark recesses of the financial world. How do you discover the quantity of money moved out of countries into safer venues? A lot of guessing must be going on or the author knows so much about tax havens that he may soon need a bodyguard. Apparently about 100,000 families account for half of the money. They are the super super rich. They rule the world.

The way the present tax system is working more and more money will leave this country. We urgently need a new, simpler tax system. A flat tax of say 20 per cent and no possibility of avoiding it. Ban ISAs and other government sponsored ways of avoiding tax. The Isle of Man has such a system – there is also no capital gains tax or inheritance tax there either – and tax avoidance and tax havens are unknown species.

So what gave rise to tax havens? They are a purely Anglo-Saxon invention. Britain and America lead the world when it comes to governmental and legal sponsored ways of avoiding tax. Does that come as a surprise to you? What tax havens can you name? Jersey, Guernsey, Cayman Islands, Bermuda, British Virgin Islands – all ruled now or in the past by London. Then there is Switzerland. However that loophole has been closed after the US government forced the Union Bank of Switzerland to name its American clients. Then the German government persuaded a bank clerk in Liechtenstein to put all account holders on a disc and sell it to them. So bang went that tax haven.

Now take the European Union. It is common practice to fulminate against the Anglo-Saxons for encouraging citizens to transfer their money into their coffers. So you would expect the EU to be leading the charge to ban tax havens. Not a bit of it. Luxembourg and Austria are tax havens and veto any such legislation. Hypocrites, do I hear you say? You do not need to be Sherlock Holmes to work out that the rich and super rich in France are moving their wealth out after François Hollande announced his intention to tax incomes over a million euros a year at 75 per cent.

A guess is that rich Russians have moved $800 billion offshore over the last 20 years. In China billions are moved out of the country every year. First to Hong Kong and then further afield. Why is this? After all income tax in both countries is very low. The reason is political uncertainty. Once you have stolen a million from the state or made it legitimately you send it abroad.

However, the trillions in safe havens do not lie in dark vaults. They are invested in all types of enterprise. So they contribute to world economic growth. Some people might say that the super rich are much better at investing than governments. Given the millions, even billions, wasted by the British government on computer systems and other failed projects, there is a lot of truth in this.

Anglo-Saxon law is the most developed on the planet. It is no surprise that it can move money around myriad jurisdictions. America has 5 per cent of the world’s population but 50 per cent of its lawyers. They all have to make money. So the possibility of any state or group of states outfoxing the super rich is zero. Anyway those in government are also putting their wealth in tax havens. So why should they close the system down? If you are a Tory you move your money out of the country to ensure that Ed Miliband does not get his paws on it when he becomes Prime Minister. If you are rich you avoid paying tax but if you are poor you have no choice: you pay.

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1 Comment

1. longbettlisa says:

   July 26, 2012 at 4:09 am

   Is that another comedian coming out the closet? I imagine they all gutted even if they are saving a fair penny. Does this include the new taxports for places like Switzerland Martin? I have been to the Cayman Isles its very nice I not surprised they are going there. And, well this week is the Olympics the best bet if for people to come here, should be a hoot and will hopefully entice people to pay their taxes and other things here.