One of the Bush administration’s first moves, as noted here at the time, was to rein back – but not entirely squelch – the Clinton administration’s efforts to crack down on off-shore tax havens. Now Treasury Secretary O’Neill has cut a deal with one of the most notorious tax havens of them all, the Cayman Islands. The deal gives tax cheats just 25 months to move their assets elsewhere before the IRS swoops in. And the deal apparently assures that any trail of wrongdoing prior to 2004 will be permanently sealed from view, so no one’s likely to get into too much trouble for whatever they’ve done thus far in the Caymans.
From Saturday’s New York Times:
‘What’s bad is people are going to think the government is doing something when this is just a fig leaf,’ said [Manhattan District Attorney Robert] Morgenthau, who disclosed last summer that Federal Reserve data show that $800 billion is being held in Cayman Island accounts for Americans, an amount equal to roughly one-third of all domestic bank deposits.
Tax experts also criticized the agreement because it did not apply to cheating on estate, gift and state-level taxes. . . . These criticisms were dismissed as laughable by Mark A. Weinberger, the Treasury Department’s senior tax policy official, who hailed the agreement.
The Times story made neither the front page nor even the front page of the business section. It ran on page C3. But $800 billion is not nothing (that bold-facing above was mine, not the Times’s). It’s enough to buy more than 20 million brand new BMWs with ‘4 channel, 4-wheel anti-lock braking systems’ and ‘speed-sensitive variable intermittent front windshield wipers with heated jets’ (among other features). Sitting one behind another in bumper-to-bumper traffic, these BMWs would extend around the Earth – at the Equator, where the Earth is really, really thick – more than twice (assuming BMW could actually produce that many vehicles in time to make my point, and that there were a road that ran the full length of the equator, with some very, very long causeways connecting the land masses). My point: This is a lot of money to have on deposit in a small Caribbean Island. Presumably, its owners chose the Caymans – and not, say, a bank or brokerage firm closer to home – for a reason. Could it be that they view the Caymans as a more stable nation than the U.S.? The world’s other superpower, somehow overlooked? No; that can’t be it. So what could the reason be?
Could it have something to do with taxes?
The 25-month delay gives tax cheats ample time to more their money to another tax haven, said Jack Blum, a Washington lawyer who specializes in financial frauds. ‘They have written this in a way so that the people who have been violating the law can get themselves out from under the mess by moving to another jurisdiction where there is no agreement,’ Mr. Blum said. ‘This is simply astonishing.’
It is, even more than usual, a grand time to be wealthy and powerful in America.
Quote of the Day
Guys, just remember: if you get real lucky, if you make a lot of money, if you go out and buy a lot of stuff, it's gonna break. You got your biggest, fanciest mansion in the world. It has air conditioning. It has a pool. Just think of all the pumps that are going to go out. Or go to a yacht basin any place in the world. Nobody is smiling and I'll tell you why: something broke that morning. The generator's out, the microwave oven doesn't work, the cook's gay. Things just don't mean happiness.~Ross Perot to Harvard B-School students, quoted in Forbes
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