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Tax Havens

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April 15, 2009 – Comments (4) | RELATED TICKERS: DEA , DBE

Tax Havens

I don’t know what they are or what they are for. People seem to think they are some nefarious countries designed to help deadbeat companies avoid paying their tax bills in the countries where they really do business. People say they intentionally create the ability for corporations and individuals to hide their money and avoid paying taxes. I don’t know anything about that.

The OECD made a list of Tax Havens in 2000. The Cayman Islands, Barbados, Luxembourg, Switzerland all made the list, as did Belize, Ireland and the Seychelles among others.

Just because a company has a subsidiary in a Tax Haven does not mean they do not have legitimate business being there. With a population of 50,000 there is certainly legitimate business to be doing in the Cayman Islands. For instance Berkshire Hathaway has 27 foreign subsidiaries, one in the Tax Haven of Ireland. Costco has 3 foreign subsidiaries, one in the Tax Haven of Bermuda. PepsiCo spreads 70 subsidiaries among the Tax Havens but to be fair it is hot in Bermuda and they may need thirteen distributors there. Marathon oil has 115 foreign subsidiaries, 76 in Tax Havens and 65 in the Cayman Islands. Exxon Mobil has 122 foreign subsidiaries, 32 in Tax Havens, and 18 in the Bahamas.

Other examples would be Bank of America with 311 foreign subsidiaries, 115 in countries considered Tax Havens, 59 of which are in the Cayman Islands.  Goldman Sachs has 55 foreign subsidiaries, 29 in Tax Haven countries and 15 in the Cayman Islands. Hartford Financial Services has 32 foreign subsidiaries and 7 in Bermuda.  JPM has 163 foreign subsidiaries and spreads 38 between 11 Tax Havens. Lehman Bros had 141 foreign subs, 57 in Tax Havens, 31 in the Cayman Islands. Morgan Stanley has 568 foreign subs, 273 in Tax havens, 29 of which are in Luxembourg, 14 in the Marshall Islands and 158 in the Cayman Islands. Citigroup has 1240 foreign subsidiaries, 427 in Tax Havens, including 17 in Panama, 18 in Singapore, 19 in Cost Rica, 21 in Jersey, 40 in Hong Kong, 90 in the Cayman Islands and 91 more in Luxembourg.

My grandfather used to hide cash in the basement for emergencies, and every once in while he would forget where and lose it.

Before we replaced the money the banks lost, maybe we should have looked in the hiding places.

Michael Mundaca, The Deputy Assistant Secretary of International Tax Affairs and the Fox watching this Henhouse, questions the value of this GAO report because of the quality of the lists and the suspicion that some of the Tax Havens might not be actually Tax Havens.

I  would like to thank Mr Mundaca for his diligent service to his Country, and would like to share it with the Citizens of the United States of America.

You can read the report here;

http://www.gao.gov/new.items/d09157.pdf

4 Comments – Post Your Own

#1) On April 16, 2009 at 1:29 AM, Donnernv (< 20) wrote:

A side note for individual citizens considering emigrating, for whatever reason.  The US government isn't stupid, and they have done everything in their power to make emigration for tax purposes as difficult as possible.

US citizens are taxed on their income wherever in the world it is earned.  No other country does this.  It doesn't matter what you do; if you follow the law, you will be taxed.

So, the only route is to become a citizen (not just a resident) of another country.  This is not easy to accomplish.  It's an important distinction.  It is fairly simple to become a resident of another country.  But a citizen...no.

Most countries require a 3-10 year residency before you can even think of becoming a citizen.  Until then, send it to Uncle Sam.

There are only a couple of countries where you can become a citizen (and renounce your American citizenship) quickly.  One is Bar..?.  Don't remember.  Bad choice.  The other is St. Kitts.  In effect, they will "sell" you virtually instant citizenship.

It's not cheap.  All in, it's about $400,000.  This does, however, include the cost of your purchased residence.  Realistically, add $500,000 to buy a house appropriate for folks who can afford this route.  From this home, it's easy to travel anywhere in the world whenever you chose.  The St. Kitts passport is universally accepted.

About six weeks and it's done.  Ah, but that's not the end of the story.  If you are a foreign citizen, you must pay US taxes on any income you earn in the USA.  The US taxing authorities aren't stupid.

So it's only ultimately successful if you earn the bulk of your income outside the USA.  Stocks and bonds, et al, are fine.  They can easily be transferred to your new country.  Earnings from US-based companies are not OK.  Any compensation from the USA is not OK.

And of course, you cannot come back into the USA for the first year.  After that, it eases up a bit.  Of course, there are a lot of nitty-gritty details, but that is the essence of it.

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#2) On April 16, 2009 at 1:44 AM, JibJabs (89.72) wrote:

Donnernv- I'm planning on going to China to teach english and will be paid significantly less that 30,000 USD a year unless I'm very lucky. How much do you think will go to taxes?

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#3) On April 16, 2009 at 2:45 AM, Donnernv (< 20) wrote:

In all likelihood, you will be taxed in China.  Then you will be taxed in the USA, but will receive a tax credit (reduction) for the taxes you paid in China.

But at that income level, the amount due to the USA will probably be minimal.

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#4) On April 16, 2009 at 10:47 AM, EHoyle80 (< 20) wrote:

Some advice on gold buying and selling from the Stock Research Portal: “It is much more sensible to speculatively trade and take profits if the trader is a non-taxed entity than if he/she/it is taxable on profits taken.”

 

Via Stock Research Portal 

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