Mitt Romney’s candidacy has opened up a whole new discussion about offshore tax shelters. I had assumed that this was something that was quite complicated to set up, and thus only wealthy people with armies of expensive accountants and lawyers could take advantage of them.
But a fascinating report by NPR’s Chana Joffe-Walt on today’s Morning Edition informs me that it is extremely easy to do. She describes how a simple search on the internet put her in touch with people that do this for you and one of them said that within a week she could set up for Walt a shell company in Belize that had Swiss bank accounts. She could even sell Walt a pre-existing shell company that already had a board of directors in place if she needed people to think that her company had been around for a while.
The other fascinating tidbit was that of all the countries in the world that allow the setting up of these off-shore tax shelters, the easiest one in which to do so, because it had the laxest regulations, was – the US! It turns out that it can be done here in a day and you don’t even have to give your real name because they do not even require proof of identity.
As has been frequently said, what is shocking is not the things that are illegal but the things that are legal. The only reason that the rich get away with these kinds of tax avoidance strategies is because only they do it. If all middle class people also set up tax shelters the way the rich do, the government would go broke so fast that they would be forced to take action to make sure that everyone paid their fair share of taxes.
I strongly recommend listening to Joffe-Walt’s report. She promises a follow up report that examines what exactly people do with such companies. It should be worth watching out for.
I was listening to this story this morning as my wife drove me to work. She is a former investment banker, and I said, “I suppose that this is nothing new to you.” Her reply was, “I don’t see what’s news about this, it’s just a backdoor IPO.” Apparently, it’s first year M&A (mergers and acquisitions) material.
I’ll have to check it out later, but isn’t the reason rich people do that mostly because it’s only worth it for them to do it?
I make a comfortable income, but I don’t think I have enough disposable to put into another account somewhere to make it worth the few hundred (more?) I’d save on my federal taxes.
I’ll take a look later, though, maybe it will be worth it, and I’ll get all my friends to do it too. I wouldn’t mind if that actually prompted real tax reform.
That is a good point. Maybe Joffe-Walt will address it in her follow-up.
As others smarter than me have said, the law is less about what’s right than about who’s in charge.
Attacks on Romney’s account have Swiss worried: http://www.swissinfo.ch/eng/politics/foreign_affairs/Attacks_on_Romney_s_account_have_Swiss_worried.html?cid=33150520
🙂