The Journal Register (Medina, NY)

Opinion

July 15, 2011

CONFER: Overseas tax havens

MIDDLEPORT —  

U.S. corporations evade paying taxes by setting up shop in the Cayman Islands.That has been said so often by so many people that it almost seems to be an urban legend.
It’s not.
The Cayman Islands is home to countless American corporations. As a matter of fact, the true number is unknown because Cayman laws ensure complete secrecy for financial transactions and it is virtually impossible for any foreign government to investigate the goings-on of any company, even those that undoubtedly have the greatest percentage of their operations within the inquiring home country.
The numbers that are known are pretty staggering. The nation of 47,000 people has 2 corporations for every resident and a mutual fund for every five residents. Merrill Lynch alone has 158 subsidiaries in the Cayman Islands. One address — the Ugland House in Georgetown — is home to 19,000 corporations, 9,000 of which are American. It is no larger than a resort hotel so, obviously, those 19,000 companies don’t do business there. Instead, they simply use it as a legal address and mailing address as a sort of claim for Cayman residency.
The Cayman Islands aren’t the only tax haven on Earth. Other commonly-used nations are Bermuda, Liechtenstein, Monaco and the Bahamas. All of them have one thing in common: They have low or no corporate taxes. U.S. firms set up shop (or at least say they do) in these places via subsidiaries through which are funneled impressive amounts of financial activity, mostly through the nebulous ether of accounting records. Since that corporation is supposedly headquartered in the haven (although business is actually done elsewhere), the U.S. government cannot collect a tax on it as the subsidiary is not a “citizen” of our country. It’s a simple shuffling of papers that prevents Corporate America from paying an untold amount (at least $70 billion) into federal coffers every year.

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