Thursday, November 09, 2017

Why Do the Rich Get to Secede?

The Guardian editorial puts tax havens and those who use them to shirk taxes in a useful perspective. It's a group of privileged individuals who are seceding from society.

Well, not really seceding. No, they continue to enjoy all the privileges and benefits of society. They want it, and usually get it, both ways.

It’s clear a dramatic shift is under way: not only is the amount of wealth flooding into tax shelters around the world rising to unprecedented levels, but so much of wheeling and dealing is also done by a tiny fraction of humanity. Some of this is historical: until the early 1980s the wealthy really could only squirrel away their cash safely in Switzerland. Since then there has been an explosion in no-tax, high-secrecy locations at the same time that deregulation and globalisation swelled the ranks of the super-rich. Tax havens have facilitated the rise in global inequality. If it feels like there is one set of rules for the rich and another for the poor, it is because there is. A report in September, co-authored by the economist Gabriel Zucman, estimated that approximately 10% of global GDP – about $7.8tn (£6tn) – is held offshore. This is about the size of Japan’s and Germany’s economies combined. The academic says 80% of all offshore cash is now owned by 0.1% of the richest households. In Britain the top 0.01% of households stash about a third of their wealth in tax havens – and, once this is accounted for, their share of wealth is significantly higher today than in the 1960s.

When a group at the top of society secedes and forms a globally mobile republic, able to choose which jurisdiction they wish to operate under, the public is right to ask why we allow this to happen. Why should taxes just be for the little people?

This is true of corporate entities as well as individuals. Increasingly – and worryingly – the international profits of many corporations are showing up in tax havens. It’s no good for ministers to claim the sharing of information on British residents will assuage public anger. There’s little evidence that the tax authorities or the police have the resources to go toe-to-toe with the global elite. The government could shrink the tax avoidance industry overnight – by banning giving public sector contracts to big consulting firms that offer tax advisory services. If crown dependencies and overseas territories want to trade on an association with Britain then tell them to accept mainland standards for regulating financial services.

After the austerity years of private affluence and public impoverishment, there are few takers for the idea that the rich shift cash offshore for laudable reasons. The public mood is one of cynicism, not merely scepticism – and it’s justified by the revelations that politicians have failed to take seriously enough for years.

It's time to treat the rich for what they are, scofflaws. First of all we have to make this practice illegal, civilly and criminally. We need treaties, agreements among every advanced nation, every place these reprobates enjoy living to cast them out and deny them the privileges of civil society. We need effective means to punish them by recovering every dime they've offshored with interest and stiff penalties.  No more nonsense like the sweetheart deal Ottawa lavished on KPMG and its tax cheat clientelle.

Put their very citizenship in jeopardy. If they wish to be part of as "globally mobile republic" then that's their choice and they can take their chances elsewhere.


John B. said...

If we're going to stick with the concept of nation states, it would be advisable to examine and reconsider all the implications of accepting that citizens be entitled to hold multiple citizenships. After that we might be able to develop applications that address growing secessionist sentiment among the privileged. Let's not leave it up to them to decide at their convenience when it's time to depart for Libertopia.

Anonymous said...

Registering a corporation, establishing a trust or banking in a tax haven should all create a legal presumption of tax evasion. After all, facilitating tax evasion is a tax haven's raison d'ĂȘtre. It would then be up to the taxpayer to establish that this presumption was wrong, or face the consequences.

The kid glove treatment of KPMG points to a couple of problems - privatization and "too big to fail." Prosecuting KPMG to the full extent of the law and convicting them of criminal fraud would likely have a significant impact on their global business, just as Arthur Anderson's conviction in the Enron scandal resulted in that firm's bankruptcy.

KPMG is one of the Big 4 international audit and tax consulting firms, and it includes among its clients the federal and provincial governments. A criminal conviction would put an end to those cozy relationships. Now, why Canadian governments would want to continue receiving advice from a firm that cooks up tax evasion schemes for high flyers is beyond my limited understanding, but apparently they do. So criminal prosecution is out. And now KPMG and other players know they're above the law and the rule of law takes another kick to the 'nads.