Offshore Tax Evasion and the City of London (UK)

In an explosive article for the UK Independent, author Paul Holden poses a rhetorical question, “David Cameron vowed to crack down on offshore tax evasion so why has it disappeared from the Tory Manifesto?”

Previously in 2016, Italian Mafia expert and author Roberto Saviana labeled the UK “the world’s most corrupt country” citing the vast sums of “dirty money” that flow into London via the British territories and crown dependencies which are non-transparent tax havens.

In the City of London (the financial center of London) a vast interconnected cluster of bankers, lawyers, accountants and advisors get paid huge sums of money to facilitate tax cheating by hiding funds for the super-rich as evidenced by disclosures on the Panama Papers and the Swiss Leaks. These tax-cheating professionals have created a cottage industry for their criminal tax evasion pursuits and are the “Enablers” of the tax crimes and money laundering which has the City of London at their epicenter. The Tax Justice Network has cited them as the biggest threat to financial transparency.

In 2016 the OECD estimated that $240B per year in tax revenue is lost annually due to worldwide tax cheating. Separate US estimates are that $184B per year in Federal/State/Local taxes are lost annually to offshore tax evasion. US taxpayers who illegally do not declare assets held offshore or income from those assets are distinguished from US multi-national corporations who, under existing US tax law, do not have to pay tax on offshore profits until the funds are repatriated to the US. This inconsistency in US tax law smacks of both lack of patriotism and general unfairness to all those patriotic Americans who faithfully pay their taxes annually.

In 2012, the Tax Justice Network estimated that between $21 Trillion – $32 Trillion is held as private wealth for super-rich individuals worldwide in 80 worldwide tax havens. The UK is at the head of the list sponsoring numerous worldwide tax havens holding trillions of dollars in financial wealth. Offshore tax evasion for the super rich does not yet account for the proceeds from the offshore tax evasion which are used to “launder” these criminal illicit funds and are used to purchase worldwide real estate, art, yachts, private jets, jewelry and gold bullion.

The corruption of the super rich, the failure of elected officials or taxing authorities to seriously pursue these tax and other crimes has led to a world wide network of less than 1% of the population controlling the vast world wealth. Russian oligarchs, Saudi princes, corrupt politicians, dictators, despots, drug dealers, arms traffickers, sex slavery trade all benefit and get to keep their ill gotten gains. They live the life of wealth and ostentatious exhibitionism while driving around in their $2m cars, from their $25m+ homes to go and board their private jets and boats. Simply put, the worldwide tax system is a “rigged game” where the super rich cheat on their taxes, launder their tax evasion proceeds into expensive assets and get away with it.

As the bank robber, Willie Sutton once replied when asked why he robbed banks stated, “that’s where the money is”. The superrich do not rob banks, they rob national treasuries. In the 2005 US Supreme Court Case Pasquantino, the Court analogized those who do not pay their taxes as embezzling funds from their national (or state) treasury.

IRS/2009-2012 Offshore Voluntary Disclosure Program

Since 2009, the IRS has established 3 different Offshore Voluntary Disclosure Programs (most recent version implemented in 2012 and significantly modified in 2014). In 2017, the IRS has reported that to date (8 years later) the IRS has received 55,800 taxpayer disclosures of unreported offshore accounts/income and has collected $9.9B in tax, interest and penalties.

While the United States has annually nearly $200B in lost federal, state and local tax revenue from the tax cheating done by the super rich (facilitated and enabled by their legion of advisors), since 2009 the IRS paltry collection efforts has netted less than $10B from less than 60,000 US taxpayers despite 3 separate Offshore Voluntary Disclosure Programs implemented by the IRS since 2009. While the IRS estimates there may be up to 10 million US taxpayers with undisclosed offshore accounts, they have not even found 1% of these taxpayers.

In the UK territories the British Virgin Islands named in the Panama Papers, a small island in the Caribbean with 28,000 population, since the 1980’s, when they legislated account secrecy laws, has created over 1m companies (with no disclosure of the actual owners) of which 479,000 are still in existence. Over ½ of the thousands of companies set up by disgraced Panama Papers law firm Mossack Fonseca were in the BVI.

The social, political and tax ramifications of this entirely corrupt worldwide system depends on the secrecy of the tax havens, and the expertise of lawyers, accountants and bankers who facilitate these crimes. The sad truth is: they are bankrupting their own countries.


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