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May 5, 2009

President Obama Cracks Down On Off Shore Tax Havens

ugland-house-cayman-islands  In life some people have most everything stacked in their financial favor but it doesn’t stop them from being greedy.  The wealthy in America have had tax breaks that allow them to keep more of what they earn AND the wealthy have also had laws that have allowed them to move their monies out of America (where they earned the money) to countries where they don’t have to pay taxes on that money and therefore keep more money in their greedy little paws while keeping tax money out of the Feds bank account. 

The wealthy has been successfully hiding their money from the American government for decades; money that could help America to pay for military expenditures; money which can help to build roads; money which can be used to repair bridges; money which can be used to pay for natural disasters, etc.  President Obama is going to change some of that.

President Obama has decided to crack down on corporations who move their money out of the country in order to avoid paying taxes.  He announced proposed changes in tax law that would end much of these loopholes and could raise about $21 BILLION in revenue each year.

united-bank-of-switzerland-zurich  The move comes as the IRS continues its crackdown on offshore accounts through a high-profile investigation involving thousands of people with Swiss bank accounts managed by the United Bank of Switzerland (UBS)  in Zurich. The proposal restricts the ability of companies to defer taxes owed on profits earned overseas and eliminates a popular method, known as “check the box”, for reducing taxes through transfers of money to overseas affiliates.  The proposal will also target individuals whom the IRS suspect of hiding income offshore and these individuals would bear the burden of proof, rather than the IRS.  With the proposed changes IRS penalties for failing to make required disclosures about foreign accounts would be doubled in some cases under the plan.

The plans still have to get through Congress, but the president said he was determined to close offshore tax loopholes.  President Obama said, “On the campaign, I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 businesses claim this building as their headquarters. Either this is the largest building in the world or the largest tax scam in the world. And I think the American people know which it is.”

The President was referring to The Ugland House on Church Street in the Cayman Islands – pictured above – which now has 18,000 corporations registered as having their headquarters there!  Look at the picture, do you think 18,000 corporations have their offices there?

The Cayman Islands is a tiny overseas territory of Britain.  The Cayman Islands have more registered businesses than they have people.  The Cayman Islands is the fifth-largest banking center in the world with $1.5 trillion in banking liabilities. With a population of 50,000 it has the highest per capita income in the Caribbean and 90% of its economy is based on ‘financial services’.  There is no income tax or capital gains tax or corporation tax. The government’s primary source of income is indirect taxation such as sales tax, value added tax or goods and services tax.

The government also charges licensing fees to financial institutions that operate in the islands as well as work permit fees for foreign workers ranging from around US$500 for a clerk to around US$20,000 for a CEO.

I love the fact that President Obama has come into office and shows his strong commitment to national defense, strong commitment to balance our budget and an unapologetic commitment to moral and family values that he is not afraid to wear on his sleeves. I am happy to see President Obama trying to get America fiscally healthy again.  It’s a difficult task, but I’m glad to see his efforts in trying to reclaim money that have been stolen from the American government so we can spend what we have and not have to continue borrowing from China and adding to our children and grand-children’s tax debt.

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