Offshore Tax Evasion – Panama Papers Update

A recent study based on the Panama Papers and HSBC Swiss Bank Private Bank public information leaks verify that the superrich evade nearly 1/3 of their taxes due (See Guardian 6/1/17 article, “Super rich evade nearly 1/3 of their tax due”).

The study was lead by researchers at the Norwegian University of Life Sciences and the University of Copenhagen, which studied wealth statistics in Norway, Sweden and Denmark (where detailed records of personal wealth are available). The study found that similar or higher level of tax evasion were to be found among the super rich in other countries. Examples cited included: Latin America, Europe and Asia where there is more offshore wealth ownership than Norway (& other countries studied).

The Study’s findings confirm that the top .01% of the world’s wealthiest people who own 50% of the world’s wealth use offshore tax havens to hide their wealth (i.e. those who have assets over 31 million pounds or nearly $40m US).

The political and economic ramifications of this pervasive worldwide tax cheating by the Super-rich worldwide can be seen in many countries where the populace lives on $2 per day, where the schools, hospitals, roads, bridges, ports are either non-existent or crumbling, where health care is in short supply so pervasive disease, health issues and suffering are massive.

The career politicians and the respective taxing agencies turn a” blind eye” and allow the proliferation of tax cheating which bankrupts entire cities (see Detroit, Michigan, numerous cities in California and other places), states (the State of Illinois is virtually bankrupt), and countries Greece’s financial fiasco is the direct result of a reported 89% of their taxes due being uncollected.

Without tax revenues, governments cannot fund needed social services. Crime rises. Criminals are enriched. Even in the United States which has the Internal Revenue Service the world’s leading and pre-eminent taxing authority the Super-rich have made a mockery of taxes.

Estimates in the US are that up to 10m US taxpayers have undisclosed offshore accounts involving trillions of dollars in assets held secretly in the 80 world wide tax havens lead by Switzerland and the United Kingdom territories and crown dependencies. According to published studies, the United States/ State & Local Governments are out $184 B per year in tax revenues as the Super-rich hide their assets offshore, do not report their income while bankrupting US states and cities, underfunding US pensions and destroying the US safety net of health, education and transportation. While less than 1% of these taxpayers live in $25m+ homes, drive $3m cars (see new Bugatti car), travel on their privately owned jets and take cruises on their giant yachts the rest of America pays the Bill.

Who invented these rules? How can the Super-rich cheat on their taxes and get away with these tax crimes?

In the US not paying taxes due on undisclosed assets and unreported income subjects “Tax Cheats” to criminal prosecution for 4 separate felonies for tax crimes: willful evasion of tax, obstruction of tax collection, conspiracy to commit tax evasion (if done in tandem with another party, and filing false income tax returns by failing to report their income. These 4 tax crimes have statutory punishment of up to 16 years in jail.

If the Tax Cheats use their tax evasion proceeds to buy assets it is then designated as money laundering. If they use mail or wire transfer as a result of the asset purchase (which may include telephone calls, checks, wire transfers or related correspondence) each of these are separate felonies with 20-year jail sentences.

Since 2006 when Senator Carl Levin introduced the Stop Tax Haven Abuse Act the US Congress has known that nearly $200B per year in taxes due goes uncollected. Over the last 11 years nearly $2 Trillion in taxes have been uncollected. The IRS has responded with three separate offshore voluntary disclosure programs commencing in 2009.

In the last 8 years, as of 2017, the IRS has collected $9.9B from 55,800 taxpayers. Less than 1% of those cheating on their taxes have been held to account for their tax crimes. Nearly $2 Trillion in federal/state/local tax is missing from affected governments.

If this what the IRS calls success, how do they define failure?

The world wide tax system is clearly broken, it is up to all global taxpayers to demand that their elected officials do what is necessary to fix it or it will stay broken at which point everyone loses except those criminals who successfully cheat on their taxes.

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