There are many "tax haven" countries that have no income, sales, or property taxes because they host hundreds of banks and trusts that are used to conceal massive legal tax fraud. The best of them is Cayman Islands, a British Crown Colony South of Cuba. It had last time I looked offices of over 500 international banks. It has a strict tax secrecy law. U.S. and other tax officials cannot identify account holders or cash transfers. A great place for drug money, and for ordinary business money to hang.
For example, a Japanese automobile manufacturers makes parts and sells them at a deflated price to a subsidiary (supposedly unrelated) in CI. The Japanese firm makes no profit in Japan and does not pay corporate income tax in Japan. The CI Subsidiary sells the parts to the Japanese assembly plant in the U.S. at an excessively high price. Because of the high prices, the Subsidiary loses money and pays no US income tax.
The US and Japanese tax authorities cannot prove tax fraud, even though the parts were shipped directly to the US subsidiary plant and were never landed in CI at all. Profits build up in CI. The company buys American securities through international banks and holds them in CI. These funds can be used for anything, even reinvested in Japan or the US without paying any tax.
This is done every day. Check and see how much Japanese-owned firms pay in taxes in the US. Very little. Often nothing at all. And nothing can be done about it. There are dozens of tax havens. Many American businesses insure themselves through captive insurance companies in Bermuda ($54 billion in capital a few years ago the last time I looked). The premiums paid in US are deductible. The income of the insurance companies is not taxable in Bermuda. Vermont and Hawaii have tried to horn in on the "business." The whole process of international tax ducking is an international scandal, but it is too wonderful to stop. Of course, everyone denies that they are dealing with a controlled entity.
As untaxed reserves accumulate for individuals and corporations, it will become increasingly desirable for the rich to expatriate themselves to some tax haven. Saipan, in the U.S. Commonwealth of the Northern Marianas, has some enormous advantages. I hope when the Hawaiians finally win their independence, that they will implement tax haven rules. This place would be much improved by becoming very, very rich. |
