How tax havens helped to create a crisis

By Sol Picciotto (Financial Times)

5 May, 2009

Banks employ large teams of highly paid people to devise transactions mainly for the purpose of avoiding tax. These activities seem to be far more profitable than the humdrum business of managing payments and channelling savings towards investment. Why?

The answer shows the close link between tax avoidance and the speculation that has fuelled financial instability for 30 years. There were clearly other causes of the current crisis but the faults of the international tax system were a big contributory factor.

International tax co-ordination depends on treaties based on a model devised 80 years ago. To prevent double taxation, the treaties generally give governments the right to tax returns from an investment in the investor's country of residence. Business profits, meanwhile, are taxable in the “source” country where the activity takes place.

But for most of the past century, international investment was dominated by multinational corporations, which could choose the location of their sources of funds and organise their affiliates' capital structures. This enabled them to devise techniques to ensure that they were not taxed unfairly, as they saw it, exploiting ambiguities in the concepts of residence and source using legal entities formed in convenient jurisdictions. Such methods were also pioneered, with rather less legitimacy, by wealthy people resentful of high income taxes.

The relaxation and final abandonment of exchange controls in the 1970s led to the blossoming of “offshore” finance and a boom in tax havens. These depend on both outright tax evasion and the exploitation of grey areas by tax avoidance. Since large multinationals are as much financial as business entities, they have freedom to devise complex financial structures – financial institutions, such as banks, even more so: in recent separate surveys by the US Government Accountability Office and the Tax Justice Network, the largest user of tax havens in every country surveyed was a bank. Tax authorities have enormous problems puzzling out these structures. If they can, it is often hard to characterise them as shams.

The leading countries themselves are also host to major financial centres, from which most of these activities are directed. The revenue authorities in these countries, not least the US and the UK, have been cowed into accepting these activities for fear of losing finance business.

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And, from Lies, damned lies and tax haven nonsense

Something pernicious is going on in the undergrowth. British tax havens are trying to establish clear blue water between their activities and those of their commercial rivals in Austria, Liechtenstein, Luxembourg and Switzerland. This is based on lies. "We are transparent they say: we do not have banking secrecy and we have signed up to tax information exchange agreements that meet the OECD standard."

Let's nail this nonsense before it goes any further. The British tax havens do not rely on banking secrecy, because they use a far more secretive mechanism for protecting their tax evading clients. This mechanism is called a trust. Trusts are a British common law entity which extend as far back as the Crusades to Palestine. But they have become the basis of highly abusive practices because they are not registered with any public authority and they are not required to reveal any information on public record. Trusts provide the underpinning for the British tax evasion industry, which is probably the largest in the world when you take account of all the British satellite tax havens on the Crown Dependencies and Overseas Territories.

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How Obama's tax reforms could impact Microsoft's bottom line

By Todd Bishop (Tech Flash)

10May, 2009

President Obama's proposal to overhaul U.S. tax policy on international profits, unveiled last week, has raised objections from big companies that would end up paying considerably more in taxes under the plan. One is Microsoft, whose financial statements provide a case study in the benefits and drawbacks of the current system.

Microsoft in its 2008 fiscal year reduced its effective tax rate by 7 percent, or more than $1.6 billion, as a result of foreign earnings taxed at lower rates, according to its latest annual report. That and other factors cut Microsoft's tax bill to $6.1 billion last year, on $23.8 billion in pre-tax income. That's an effective tax rate of less than 26 percent, compared with the U.S. statutory rate of 35 percent.

By comparison, five years earlier, Microsoft trimmed only 1 percent from its tax bill as a result of international earnings. The subsequent increase in tax savings accompanied an overall jump in Microsoft's business overseas. But the company also was among those listed on a recent Government Accountability Office report on large U.S. corporations with subsidiaries in notorious tax havens.

The debate hinges on policies that let companies with international operations avoid higher U.S. tax rates by reinvesting their foreign earnings overseas.

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Atlantic nuclear submarine accident

A TMS interview with Jan Oberg, Founder of the Transnational Foundation for Peace and Future Research (TFF), about the Nuclear Submarine collision in the Atlantic Ocean, 3-4 February.

~ Source: The Transnational Foundation for Peace and Future Reseach ~

Prosecution of Bush Six back on

The Daily Beast's Scott Horton reports that a judge in Spain decided today that an investigation of Bush officials involved in torture policy will go forward and can lead to prosecution.

In a ruling in Madrid today, Judge Baltasar Garzón has announced that an inquiry into the Bush administration's torture policymakers now will proceed to a formal criminal investigation. The ruling came as a jolt following the recommendation of Spanish Attorney General Cándido Conde-Pumpido against proceeding with a criminal inquiry, which was reported in The Daily Beast on April 16.

Judge Garzón previously initiated and handled investigations involving Chilean dictator Augusto Pinochet, Argentine “Dirty War” strategist Adolfo Scilingo and Guatemalan strongman José Efraín Ríos Montt, often over the objections of the Spanish attorney general. His case against Pinochet gained international attention when the Chilean general was apprehended in England on a Spanish arrest warrant. Scilingo was extradited to Spain and is now serving a sentence of 30 years for his role in the torture and murder of some 30 people, several of whom were Spanish citizens.

Now, Garzón has announced a preliminary criminal inquiry into the Bush administration torture policy, specifying the evidence that a crime had been perpetrated against Spanish subjects, but not yet specifying the specific targets of the investigation. Judge Garzón's decision revealed a deep engagement with documents which had been released in Washington in the last two weeks, particularly a group of memoranda prepared by lawyers in the Bush Justice Department's Office of Legal Counsel, a report of the Senate Armed Services Committee, and a memo released by the Senate Intelligence Committee, making it likely that he would focus on the authors of the torture memoranda and other lawyers who worked with them.

The OLC memoranda gave a green light to the use of techniques such as waterboarding, hypothermia, stress positions, sleep deprivation of as much as 11 days, and confinement in a coffin-like environment with stinging insects in exploitation of a prisoner's phobias with respect to specific prisoners, demonstrating that the lawyers had been deeply engaged in the process of application of torture techniques and not merely giving abstract legal guidance. The Senate Armed Services Committee report provided a detailed chronology of the process of formulation of policy respecting the treatment of prisoners, with a special focus on the introduction of torture techniques. The Senate Intelligence Committee memo detailed the steps leading to issuance of the OLC memos and identified the Justice Department lawyers and others involved in the process. Garzón noted, they "reveal what had previously been mere conjecture: namely an authorized and systematic program for the torture and mistreatment of persons denied their freedom without any charge whatsoever and without the rights the law grants any detainee."

Garzon's investigation focuses on charges of conspiracy to introduce and implement a regime of torture at the detention facilities at Guantánamo in Cuba, where five prisoners investigated by Garzón were held. Four of the prisoners have now filed claims with Garzón in which they press charges that they were tortured during their captivity and their claims were validated at least to some extent by a June 2006 ruling of the Spanish Supreme Court, which overturned a conviction on the grounds that it was secured with evidence gathered through torture. The case has been pending since the time of their turnover from U.S. authorities with Judge Garzón, who has attempted to prosecute the five under counterterrorism statutes.

Garzón is also seeking to have the criminal complaint of a Spanish human-rights organization against the Bush Six—six top Bush administration officials—recently reassigned by the chief judge of the Audiencia Nacional to Judge Eloy Velasco, referred back to him for purposes of consolidation with his new preliminary investigation.

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What do you mean, "It's a free country?"

From Hope is poison of the will in the face of fear

by Herb Ruhs, MD (Unknown News)     

1 May, 2009

Out of a sense of decency for the mental suffering of those who may read my words, I have maintained authorial silence in the face of the now iconic "first hundred days." I am tempted to twist the oft repeated lefty bad joke about the new boss and say, "Meet the first hundred
days, same as the last hundred days." Not exactly the same of course. We can never step in the same polluted stream twice. At least until time travel comes.

But to a first approximation, the first hundred days of Obama are similar enough to the last hundred days of Bush to pass for identical at an appropriate distance. Sure there have been some heart warming reversals of key cruel policies, and for the aid these changes have brought to the needy and suffering we give thanks, but we are still at war using massive weapons against innocent civilians, we are still watching our treasury being actively looted, the military budget is still growing, houses continue to be repossessed by the same banks that are draining the treasury and condemning our children and grandchildren to perennial debt peonage, organized criminal syndicates are still operating with impunity in the US and around the world essentially unmolested, military recruiters are still wooing early teens into the military like so many serial pederasts (my personal favorite example of legalized child abuse), but ...

Oh hell! Anyone with a modicum of intelligence could make a list a mile long of such abuses instituted by government at the behest of wealthy individuals and large corporations who have invested in their political futures by participating in the system of legalized bribery that we euphemistically call "campaign contributions." It is a big picture problem.

Here at the one hundred and first day of the Obama administration I think it is time to begin letting go of the denials that we have perfumed with hope, so we can stand the stench of our rotting minds. Hope is such a funny thing. The kind person never seeks to undermine a person's hope as they confront great challenges to their survival. But it is a mistake to generalize from the individual to the general public. For the general public, the custodian of  consensual reality, hope is often a poison of the collective will, a collective surrender in the face of fear, of the ability to test reality. For a people to undertake the future in a blinded condition is to ensure that disaster will strike.

The US population is locked in this state of agitated immobility. You can practically hear the mental gears grinding and shearing metal as people vainly try to incorporate their current experience with the propagandized myths that they have being fed their entire lives. What do you mean, "It's a free country?"

Our democracy has been leached away by a mass media that has no incentive to deal with substantial issues and controversies and every incentive to provoke the public to a condition of automatic emotional reactivity that is the social equivalent of a lobotomy.

But there is good news on the horizon. At some point, and for many, many people already, the damage caused by a government, a military, a corporate management elite and a mass media, all under the control of organized crime, will force folks to awake from their trance and start to think about how to confront the depth of corruption that we have allowed to develop.

One good sign is that, in some states at least, folks are beginning to dismantle the old political horse-trading system where red meat was regularly thrown to enough extreme interest groups to establish effective rule by coalitions of the insane coddled by a class of corrupt professional politicians. The awakening of the New England region to its humanistic traditions after a century of somnolence, as evidenced by the epidemic of marriage law reform at the moment, is heartening. The success of clean money campaigns in a number of states has brought enough ordinary people into representative government to have succeeded in making state governments the current beach head in the war to protect the civil and human rights that our thoroughly corrupt Federal government has rejected, along with much of the rest of the Constitution, with extreme prejudice.

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