Although I will always be curious why countries are letting those small, insignificant islands and countries manage all this wealth, and why they're trusted to do it. This can't be secure or safe. I'm curious about the diplomacy and the political implications of this.

What if their office get robbed? What if the island gets attacked? What if one of those shady bank defaults? What if one of the people who manage it suddenly die? I mean apparently there is a long list of why it's risky, and I don't understand how this is even legal at all. How do you wire all this money to such a small place, and how can they trust so few people to hide so much money? I have so many questions.

Partly because the US has compelled other countries to provide more transparency without joining that transparency organization itself.

"Congress responded with the Financial Assets Tax Compliance Act (Fatca), forcing foreign financial institutions to tell the US government about any American-owned assets on their books. Department of Justice investigations were savage: UBS paid a $780m fine, and its rival Credit Suisse paid $2.6bn, while Wegelin, Switzerland’s oldest bank, collapsed altogether under the strain. The amount of US-owned money in the country plunged, with Credit Suisse losing 85% of its American customers.

The rest of the world, inspired by this example, created a global agreement called the Common Reporting Standard (CRS). Under CRS, countries agreed to exchange information on the assets of each other’s citizens kept in each other’s banks. The tax-evading appeal of places like Jersey, the Bahamas and Liechtenstein evaporated almost immediately, since you could no longer hide your wealth there.

How was a rich person to protect his wealth from the government in this scary new transparent world? Fortunately, there was a loophole. CRS had been created by lots of countries together, and they all committed to telling each other their financial secrets. But the US was not part of CRS, and its own system – Fatca – only gathers information from foreign countries; it does not send information back to them. This loophole was unintentional, but vast: keep your money in Switzerland, and the world knows about it; put it in the US and, if you were clever about it, no one need ever find out. The US was on its way to becoming a truly world-class tax haven."

What if I just want a place to anonymously store my legally gained cash?

Unfortunately, it seems the normal people lost their privacy nowadays at the expense of the criminals and the "If you've got nothing to hide, you've got nothing to fear" argument has taken a stronghold in the financial sector.

You can argue that your assets are to be private to the general public but some countries do not have that assumption (Norway comes to mind).

If you transfer it to someone else (legally) then there's going to be another taxable event, and the IRS will know you no longer have it.

If you're trying to store cash anonymously from the public, there are many countries where that's possible. If you're trying to store cash anonymously from the government, there's not really a legal avenue for that.

That is a succinct summary of the initial complaint.

We're moving from a world where a buyer and vendor agreeing means something will happen to a world where buyer, vendor, bank and government all have to agree before something will happen. This is not a world that will cope well with change.

There are big incentives for governments to get involved in every transaction (by definition, they don't agree with anything that they get involved with and block). But we get back to the classic problem that they are only bureaucratic humans and make a lot of mistakes. Also issues of regulatory capture.

Although I'll throw in I'm interested in how much of an impact enforcing tax law has on the small and big pictures. One of China's competitive advantages is they claim a low tax rate as % of GDP, and most of the tax evasion I've seen personally is small businesses recycling money into the local economy. Changes to such dynamics will have far-reaching consequences.

No, we were never in that world. The only truly bilateral agreement is a gentlemen's agreement.

Trust usually relies on certain facts being public, and visible to a whole lot of people besides the transacting parties. "Who owns what" is a pretty important set of facts to agree on publicly.

And even if there's some assertion that an unknown someone owns something, _why_ should we respect it? Shouldn't we as a society just take it, and ask the owner to show himself if he minds? That seems a very reasonable solution to problems like tax paradises and shell companies if you ask me.

I would disagree in one key way. The initial complaint focused on this as a recent change. "it seems the normal people lost their privacy _nowadays_ at the expense..."

Certainly this is true from a technology perspective. No argument there.

But I don't think this is in any way novel from a _legal_ perspective.

Governments have, since at least roman times, taxed individuals based on the quantity of things they possessed or based on transactions. As long as it has been this way, the government has had a legal right to know your financial standing.

So, if the argument is that we're in novel _legal_ ground, I disagree. If the argument is that we're in a status quo legal ground, but in novel _technical_ and _enforcement_ ground, I'd agree.

Either we accept there will always be a few bad apples or everyone has to prove they aren't one of them.

The saying is "A few bad apples spoil the barrel", meaning "be vigilant about bad apples and get rid of them ASAP." I'm baffled and frustrated by the tendency to use "a few bad apples" as if the saying were "a few bad apples are no big deal, get rid of them if you happen to notice."

I actually don't think reasoning from vague analogy and folk wisdom is all that great an idea, but reasoning from the reverse is probably worse.

Feel plenty free to make the case that we should tolerate some level of misconduct - I might agree. But please don't refer to those involved as "a few bad apples" while you do it.

I was just using it as a way of expressing the issue at the centre of aiming to have a zero tolerance society.

Not tolerating misconduct will always lead to ever increasing intrusion into our lives and people that choose not to take part where they can will automatically be viewed with suspicion for it because the ignorant assumption is only people with something to hide would do that.

It's picking a nit - I acknowledged that in the very first sentence of my response.

Argue for what you want to argue for - I probably agree. Just don't use that phrase that way. Or do - just know that you will be annoying me (and apparently others - my comment got more upvotes than it deserved) and distracting at least some of your audience from your argument.

How would you have worded an analogy that you would consider more appropriate?

Most of the problems in democracies seem to exist, possibly magnified, in the alternatives.

So is the problem that our decider selection process is flawed and puts up deciders who don't think deeply, or is it (more likely) that whoever you put into that position is likely to come up with the same answers, because they tend to answer important questions, and then to provide a different justification because it sells better?

In a representative democracy, as opposed to a direct democracy, yes. In much of the US, we have a bit of both, in practice.

But even in the case of representative democracy, as long as deciders are judged based on (proposed or actual) actions, our decisions about the deciders will be based on what we think about those actions. To whatever degree it's a problem that we don't think too deeply about things, it will be a problem in a representative democracy by virtue of deciders thinking deeply about what people generally will think more than what will actually give the outcomes people generally want (where those differ - which is at least "sometimes" by the nature of our premise).

I think that's wrong on principle but they don't see anything wrong with it.

Whether you agree with it or not, money laundering laws usually go in this direction.

Land ownership is registered for good public purposes which does not unreasonably destroy privacy concerns - it's usually obvious who (person or business) controls the land anyway (who should a tenant pay the rent to? who gets to decide if you can be a tenant?) and it gives people a great deal of confidence that they know that whoever is recorded in the government land registry as having a right to sell the property actually has that right. The common law approach of having to hold a series of documents that identify a continuous line of owners going back to some unconfirmable initial grant by a long dead king is not in the interest of the purchaser of the land.

Moreover, the market distortions taxing land (as the primary source of government income) will have are generally positive. A person can no longer buy a house in the hope that the land it sits on will double in value. They can only buy a house in the hope that they are capable of making a profit out of it; the land purchase merely gives them the right to improve it.

The same advantages may be visible for taxation of share holdings: instead of simply trying to profit from someone else's actions, you would buy shares because you think the dividends will exceed other income sources for the same purchase. It may be legitimate to have anonymous share holdings which require active detective work, so it's possible this would be an unreasonable invasion of privacy.

I know I've said that we shouldn't do public policy by taxes but taxing wealth instead of income probably isn't easy. We can tax income because one person's income is another person's expense if I understand how this works.

The answer seems to be that how well it works varies heavily on what the asset.

That's really not the case if the asset is owned by an opaque offshore company or trust - it's then pretty much impossible to know who the beneficial owner actually is.

You can make use of Adverse Possession to take ownership of land. The owner must reclaim their property, (and prove their ownership) or loose all rights to it. Unfortunately in UK squatting in a residential property is a crime, amusingly adverse possession still applies - you could claim someone's house but go to jail.

It's a weak threat though, most luxury apartment blocks used for 'investment' have security, you need to reside continuously for 10 years, they will send the owner a letter, etc.

I would like to see the principle of 'use it or lose-it' for limited public goods like land.

The terms like "money laundering" are only recent and swept through without properly understanding the privacy implications (and probably didn't envisage the pervasiveness of modern electronic surveillance & data breaches in today's digital world).

Anyhow, advancements in cryptographic Zero-knowledge proofs could hold the key in solving some of these problems (proof that funds are clean without reveling the source). Currently there are some scalability problems, but progress is being made so I'm hopeful. Wikipedia has a good write-up about the basics of ZKP https://en.wikipedia.org/wiki/Zero-knowledge_proof

Citation very much needed. It depends on what you mean by "working".

There's references to tax evasion going back before the Roman Empire. For an example from the era of the Roman Empire, the topic of tax evasion is where the story of "give to Caesar what is his" (Mark 12:17) comes from. (I've found earlier Greek references going back to at least 300BC, but that's the easiest example to verify).

The state works better when it has funds to deliver on those plans - though there are many other factors that can disrupt it such as incompetence and corruption.

"Money laundering" may be a recent term, but it is not a recent concept. In fact some notable conquests on the ancient world wouldn't have been possible without concealing ill-gotten funds. It was a common tactic for avoiding paying tribute to a neighbour who defeated you.

Here's one example to ponder about: if we had this kind of surveillance earlier, would things like the Civil Rights Movement and generally the 60's counterculture come about? I.e. the era of "sex and drugs and rock'n'roll"? If only the authorities had the tools that they have today, oh boy! Don't like the liberation of sex? Is rock'n'roll the Devi's music? Fine. We'll close your PayPal account.

Privacy is very important for having a free society and freedom of expression. Financial privacy should be no exception.

If you measure anything, infant mortality, poverty, murder rates, diseases, nutrition, education, which of them fit any sensible definition of 'well'?

In my case, "worked well" meant something like a mix of: a) the world did not end, and b) everyday life in developed societies (which previously did not have total financial surveillance, but are now eager to achieve it) was more or less the same then as it is today.

In fact, to expand on b), it seems to me (admittedly from a completely intuitive and unquantified perspective) that we are quickly losing civil liberties today and that this aspect was better in the past.

You can apply the same style of reasoning to end-to-end encryption. Various actors are aiming for total surveillance in that area too, it is most likely a terrible idea and we have precedent that the world works reasonably well without it.

> Sure, why not? It has worked for many years before.

Taxing on trust alone is exactly where this little thread started.

as i understand, the "overwhelming majority" (lower and middle class) are not the focus of the problem here as they rarely use tax havens to circumvent taxes anyway (it's probably not cost effective). this is all about those who have the funds and motives to circumvent taxation, who happen to be a minority - even thought they're not a minority when it comes to taxable income; the 1% or whatever.

as for the rest of your argument, i don't completely agree. while you're probably right in practice, i.e. the authorities would have used their tools against those movements, the goals of those movements were different. the civil rights movement was probably illegal at the time but the goal was to change the laws to make it legal. same for sex. no millionaire wants to make tax evasion legal, as that would affect all tax payers, even those of the lower and middle class. they want that only for themselves.

i agree that (hard) drugs are probably a comparable example - it's illegal and puts a strain on society. on the other hand, use of hard addicting drugs can be categorized as an illness. so should we label money hoarding and tax evasion an illness? offer treatment options? allow them supervised safe spaces to evade taxes so we can offer them help?

i'm not convinced that financial privacy whould be no exception. there must be limits if it affects the others. i also don't think environmental pollution should be an issue of privacy - you shouldn't be able to pollute the air and claim it's nobodys business, as your factory stands on your own private plot of land.

Not to mention CGT been tweaked to ineffectiveness by previous governments by excluding assets from its calculations, notably housing, which has skewed CGT away from its original purpose and it's now more of a stick to whack at industries that aren't cozy with the current government.

In fact in many countries CGT is only used to refer to the LOWER version of the tax ... after all you should pay income tax whether you make your income digging ditches, house flipping, or day trading

According to [1] Warren Buffett's house is worth .001% of his total wealth, at $652,619.

And for Warren Buffet to pay sales tax proportional to someone with $500,000 in assets buying a $50,000 car, he'd have to buy the world's most expensive car - a $5 million Koenigsegg of which only 3 were ever made - 1700 times over.

[1] https://www.businessinsider.com/warren-buffett-modest-home-b...

It's a bit like a straw man fallacy.

It happens a lot less often on HN though in my experience.

Right after the bit you quoted I noted that WB buying an expensive car doesn't even things out.

The idea of sales tax as a replacement for income tax isn't new or lacking rigor. Over the years it's had a lot of support from both economists and politicians. The math, at least on the surface, does work.

Personally, I haven't spent enough time looking at it to have a lot of conviction one way or the other about it's viability.

But it's an interesting idea that isn't invalidated by comparing cars.

If you find something fishy - you penalize business for different misconduct and signal them to be compliant in the future.

In general big businesses/taxpayers will be compliant anyway (but use all the loopholes that exist in your tax law)

While smaller businesses will have trouble to be compliant not because they don't want to, but because they can't have their accounting straight.

So there is no good justification for government to scan every transaction without prior justification, since most actors want to be compliant anyway.

I come from post USSR country and have a small fortune accumulated abroad. I don't have to pay taxes from this money, since I'm not a tax resident in my country at the moment. But since laws in my country work against regular people and some of them are prohibitive to work abroad/in modern digital way - the moment I transfer this money back home, our tax authority will pull some outdated law and the burden of proof will be on me (with my bank account frozen)

I DON'T NEED THIS.

So please, 1st world countries, don't send information on my hard earned money, to our 25 year strong socialist dictator.

So how about $5 mil? Nice larger lot home in Palo Alto that some dying parents bought in 1940. Not even retirement money in the bay but could be middle class retirement in Alaska.

Where is your “obvious” line? Your handshake/battery analogy is shitty because it involves a victim and medical/first responder reports.

We’re talking about setting some line where we feel as a society it’s morally ok to start taking money that has already been taxed strictly based on “that seems excessive” without any logical criteria.

Truly anonymous, or even mostly anonymous money is basically isomorphic to bitcoin: it's mostly fraud and illegality, with just enough privacy advocates (and a few dirty preppers) to make it look legitimate.

[1]https://www.businessinsider.com/4-european-countries-wealth-...

I just want some privacy.

Obviously I hope my bank keeps a record of my assets with them. Perhaps they could merely keep my assets sealed in a box identified with a code and locked by a key, and they cannot open the box without the key, and I keep the only copy of that key. Perhaps the box is an encrypted database record and the key is a nice megabyte long random number which takes an hour to confirm. I can suppose it's secure (for the time being). And it's formally anonymous, since they don't even record that I posses the key.

But I still leave a trace when I access it. It's an intrinsic risk. I also risk dying every time I walk out of my house. I do things that have risk involved because it is necessary. Risk is not an argument against an activity.

Care to cite some? That's just a silly point. There's probably no area of regulatory theory more well travelled than taxation. Imagine a trick and someone has tried it, often thousands of years ago.

And it's even incorrect as a practical matter in the modern USA, where government revenue as a share of GDP has been going steadily downward for like 70 years now, even in the face of decades of deficits. It's literally the policy position of the ruling party!

Because government spending increased explosively before those 70 years. First, the government essentially took a loan from future generations through social security and second, there was an enormous war that the government mobilized the economy to fight. You would expect spending to go back down after both of them.

In addition to the soft tax of excessive inflation mentioned by the other poster, Elizabeth Warren and Bernie Sanders have proposed wealth taxes.

https://www.businessinsider.com/wealth-tax-definition-explai...

You can agree with that or not morally, but it is by definition a tax on already legal (and taxed during income) money.

My biggest issue with a wealth tax on the super-wealthy is that it would quickly morph into a wealth tax on everyone above lower-middle class.

Old article but the numbers have scaled proportionately...

"If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. That’s only a third of this year’s deficit. Our national debt would continue to explode." [0]

[0] https://www.forbes.com/sites/danbigman/2012/04/03/john-stoss...

Addressing that discontinuity is exactly what a wealth tax is about. I'm not completely sold on it myself (they're very hard to administer and a giant moral hazard), but don't allow yourself to be fooled into thinking it's a dumb or discredited idea. There's a real problem, and wealth taxes represent a real, if imperfect, solution.

It has?

https://www.usgovernmentrevenue.com/revenue_chart_1900_2020U...

It's about building a society that can be based on assumption of honesty and trust rather than surveillance and authoritarianism. At present, our electronic monetary system has morohed into something that resembles George Orwell's 1984.

Can you clarify what precisely you mean by this statement? Most empires historically-speaking have had sophisticated book-keeping methods. Chinese empires used to tax anyone who exited a city on the profits they made during their visit. The Romans when they took over Egypt, taxed the hell out of it and for that purpose kept meticulous records on all of the transactions that happened. The notion of Tax itself goes back to Mesopotamia.

(I wrote that based from history books I've read over the years. But this link will do: https://en.wikipedia.org/wiki/History_of_accounting#Ancient_...)

The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gathered, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.

-- Adam Smith, Wealth of Nations, Book V, Chapter 2, Part 2: Of Taxes.

https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/...

Smith's preference was for a tax on land, which is difficult to move off-shore.

Since that state was radically democratic, it may not have had the corrupting influence on the taxers as Smith suggests... but maybe it was a factor in the aristocrats allying with their rival Sparta to topple their own constitution.

At that point the difference between bandits and city state military was essentially just diplomacy in terms of how their neighbors and survivors would react to somebody putting killing or enslaving them.

I like the idea of land tax, but I like that statement even more. (Land tax, on paper, seems like it would be such a good idea, and transaction taxes are nowadays so invasive, that it's incomprehensible to me why we don't have them.)

Before the advent of computing and auditing it would be hard to tell if a blacksmith sold 50 or 55 swords. So income tax wasn't viable and instead taxation on lands were more common.

I don't know what you mean. Hong Kong is a trading port, and any wealth it "creates" is done by refining imported materials. This option is only available someplace lots of trade naturally occurs, like Hong Kong's river basin.

My point is that to collect property tax it's easier for the Government and Income tax is harder for the Government. It requires more reporting...

It has nothing to do with the value extracted.

If the only tax in a jurisdiction is a land tax and you don't own land, you don't pay tax. This will either be because you ideologically are opposed to paying taxes and you're willing to pay more in foregone profits/opportunity cost, or because there's better more profitable investments elsewhere in the marketplace, in which case land values will grow more slowly till an equilibrium is reached.

But since most transacations are tied to land somehow (because the good was imported at the port, transported by trucks that are stored in a truckyard, and sold to you by a person who lives in a house using mobile phones that connect to transmitter towers) so you won't be engaging in some kind of pure untaxed marketplace.

It'll probably create a stockmarket bubble though. Best to tax shares as well as land.

One of the executives in that bank is the older brother to a star witness in the Presidential impeachment inquiry. Yet no one really cares about crimes committed by corporations.

Lots of people do. They just don't happen to have the evidence to put those corporations in jail. The presumption of innocence is a valuable principle, but it cuts both ways. It defends you as much as it does corporations (who have A TON more resources to prevent/ mitigate a prosecution).

"Here is an example from one academic paper on South Dakotan trusts: after 200 years, $1m placed in trust and growing tax-free at an annual rate of 6% will have become $136bn. After 300 years, it will have grown to $50.4tn. That is more than twice the current size of the US economy, and this trust will last for ever, assuming that society doesn’t collapse altogether under the weight of this ever-swelling leach."

So, yes - if you want to anonymously store your legally gained cash you have options stateside.

That said ... this is the premise of some entertaining science fiction.

> That said ... this is the premise of some entertaining science fiction.

Or not. None of it it fictional. Feel free to clarify what you mean, but the only thing fictional is the entirety of your comment.

https://www.youtube.com/watch?v=NEu0o62ycmg

Economically speaking, this is Not Even Wrong.

Can you eat your cash? Can you fly using your cash? Can you build a phone with cash? No, you can't do anything with cash without a public exchange that might be accountable.

Unfortunately, people did buy the idea that ”Markets can work without accountability”, and that's what you do when laundering money in a fiscal paradise. Hopefully, crypto can drive us out of that craziness of money as a good.

Anonymously storing it makes it illegal. With Europe's negative interest rates, they're currently in the process of making personal storage illegal for large amounts (you're supposed to store it in a bank to pay negative interest).

Couldn't believe it, so I looked it up https://www.ft.com/content/74573de6-0a15-11ea-bb52-34c8d9dc6...

that is bizarre

But most of it isn't.

Which one's been audited?

This is another interesting part. How can the US "force" a sophisticated wealthy sovereign nation that culturally and morally values banking privacy (not only for the profits), like Switzerland?

It cannot be understated how much power, control and ownership the US has of the world financial system. If Switzerland did not comply, they would have been fully cut-off, unable to participate in any finance at all. It happened swiftly (no pun intended [1]), there was no discussion, only power.

Most of the west is mostly aligned with what the US is doing, so it's not a big deal. Every government wants more visibility, control and power over finances. It is akin to how the US military handles matters of physical force on behalf of the rest of the west.

Just a quick note that the US is equally powerful in the financial arena as they are militaristically, if not more so.

[1] SWIFT is one of the systems Switzerland could have been cut off from

Also check the relationship between Mauritius and Africa/India for another example of such a relationship. It is funny though how even in today's world the corrupt from developing countries still manage to move the money around so easily, it happens only because you have the ability to grease the right palms.

Forget about the island countries, i do not think even developed countries like UK (Russian money) or Canada (Vancouver real estate) cooperate enough if the person gets citizenship and is accused in a different country. I know because there is at least one documented case where the proceeds of a large scam in India were funneled to Vancouver real estate, how something like this is possible is beyond my understanding.

I think it's also a Hollywood meme - since I remember, the villains always had Swiss bank accounts to store their ill-gotten money.

Not trying to take a stance on the wisdom of these policies, but this is a nice example of how realpolitik/power-politics/game-of-thrones is still how the international world works.

As for "culturally and morally values privacy", I would find that a lot easier to believe if those privacy advocates had equally lobbied for the privacy of salary statements for the employed. But, hey, someone has to keep paying taxes, if the rich don't.

Now, deprived of other unsavory sources of wealth, Swiss Banks are eagerly dabbling in cryptocurrencies.

Or is the Swiss view generally more like what it has been historically, that they are neutral and provide a service that others can't.

While initiatives usually fail the popular vote, it is not so certain for this one. It has very broad support. All parties have to argue their position regarding initiatives that will get voted on. So yes certainly there is a debate on such issues.

[0] https://corporatejustice.ch/about-the-initiative/

35 years ago, there was a referendum that would have prevented banking privacy from being used to cover up crime. It failed decisively, but showed that at least 25% of the voters were in favor.

A few years later, after the ouster of Ferdinand Marcos, Swiss banks for the first time in my memory blocked some of his funds, and subsequently the banks were much more circumspect in dealing with dictators.

The next step was the debate about dormant Holocaust era accounts, which led to an official historical commission. That certainly led to domestic debate, which was complicated somewhat by the international pressure under which Switzerland found itself.

And finally, in recent years, after more scandals and stricter banking rules imposed especially by the US, the banks finally seem to be getting out of the organized crime business.

By taxing in 30% any money coming from institutions in countries not adhering to FATCA

Of course they could try to pressure SWIFT, but there’s no guarantee that would work.

This was the trade off Churchill was forced to agree to, as London was being bombed by the Nazis, if he wanted the US to join the war. Before the War the UK ran the World's finance, after the War it was the US. In short the US financial power was birth directly from its military power.

https://en.wikipedia.org/wiki/Bretton_Woods_system

This has a link to the PMoney episode you're thinking of, as well as a more recent discussion of the economic fight other nations possibly trying to supplant or at least be adjacent to the dollar as a reserve currency.

https://www.npr.org/sections/money/2019/07/30/746337868/75-y...

This is why the US does not want https://en.m.wikipedia.org/wiki/BRICS to succeed and will do much to sabotage it.

In the world of politicking, there are no good guys - just lesser of evils (or better the devil you know).

While others were unscarred they never "stood up" by the standards of the world scale even if they were also industrialized.

Current CT: Brexit has to happen before 2020 because otherwise City of London will be subject to EU rules that will cause current anonymities to be revealed.

And half of finance in London is not even located in the City (West End and Canary Wharf).

The UK is certainly not a tax heaven.

The city has had the deserved reputation for being a tax haven for well over a century.

https://www.newstatesman.com/economy/2011/02/london-corporat...

[1] https://jakubmarian.com/is-it-tax-haven-or-tax-heaven-in-eng...

Two reasons come to mind:

1. Switzerland (like EU countries) depends a 100 % on the US for defense, in the sense it would basically turn into Russia / China overnight if the US wasn't a military power protecting them. This alone gives the US pretty much unlimited political leverage.

2. The US has the number 1 world wide spying agency, which acts as the leader to other "Western" spying agencies (see point 1). This means the US knows everything about everybody and thus has unlimited political leverage over anybody. Again this reason alone gives them quite a bit of political leverage over even a country like Switzerland (hands down the most democratic country in the world). Even though Switzerland has political safeguards in place that no other country has (direct democracy); in this case I guess Swiss people didn't mind (or didn't care about) sharing banking info with the US. After all: this helps tax evasion, so why vote against that...

You give some other answers yourself :P

There's no reason for the US to compromise on anything with any country in the Western world. And they don't. See for example: leaked cables on Wikileaks for tons of examples of good deals for the US and shitty deals for all counterparts.

Neither Switzerland nor the EU depend "100%" on the US for defense, far from it. Some EU countries are among the biggest military spenders in the world. It's also difficult to see how Switzerland would "turn into Russia / China overnight" given that it's completely surrounded by the EU. How do you imagine that the Russians or Chinese will come to dominate Switzerland? Note that Switzerland managed to maintain its independence in WWII even though it was completely surrounded by the Axis.

Russia vs France: https://www.globalfirepower.com/countries-comparison-detail....

Russia vs Germany: https://www.globalfirepower.com/countries-comparison-detail....

The rest of Europe has no military power to speak of. Random example: the Dutch tank force consists of 0 tanks.

> How do you imagine that the Russians or Chinese will come to dominate Switzerland?

Admittedly Switzerland is probably one of the toughest to beat in Europe due to their strategic advantages (mountains, bunkers, infrastructure pre-rigged with explosives, relatively lots of reservists). However, just look at the numbers above. If the US didn't exist, the EU wouldn't be the EU unless they had 10x the military power they have now to defend themselves.

> Note that Switzerland managed to maintain its independence in WWII even though it was completely surrounded by the Axis.

A few facts about that:

1. It did so partly through secret deals with the Nazis. Ever wonder where the stolen gold of the dead jews was stored and smelted? Right... CH

2. The world's current military and political powers aren't comparable in any way to those during the second world war.

3. The Netherlands was neutral during the first world war. In the second world ware they fought the Germans for 3 days before they lost. That's right. 3 days. The fact that a country managed to stay neutral 70+ years ago says absolutely nothing about whether they would achieve the same again now, with totally different potential enemies. And a completely different distribution of military powers.

Russia doesn't have any power beyond posturing to overly sensitive Eastern Europeans and China can't project much beyond their loans (and that's if they're willing to spend the little currency reserves they have).

There's quite a bit of resistance to NATO in parts of Europe these days precisely because the US is both unneeded and overbearing.

But tax avoidance has also been dramatically reduced. If you want to avoid tax, pretty much the only way to do it is to either move to one of these places or find someone at a bank who will move your money for you illegally (this is pretty hard to do because the upside is often quite limited relative to the huge downside).

So money is definitely moving back within home countries, and that is far easier to control.

One point you missed is the importance of US financial control over institutions. The other plank of FATCA was the threat that the US would essentially block a bank/country out of the global financial system if they failed to cooperate. This kind of extra-territorial monitoring of the financial sector deeply annoyed everyone but..it was effective, and is a good example of a gain from US leadership of the international community (even Russia informally complies afaik).

Yet it's a known. And it remains in place.

Let's stop being so naive.

That seems a pretty hard pill to swallow.

But I don't think that proves the above comment incorrect.

Texas is also friendly to RVing, then some counties in Florida too recognize this but different counties had different views. Clay County in FL said that full time RVers aren't allowed to vote, yet a homeless person can claim they live at a park bench per federal laws. So they are making millions from RVers who barely even put ware and tear on the roads, so sounds like they found a perfect little niche from themselves in that area too, plus a valuable service when your former state you spent your entire life living in ditches you because you decided to live an alternative lifestyle.

Homeless people have the same problem, but homeless shelters can help people without any ID get one... Some argue people with $250,000 Diesel Pushers are homeless too, but it seems wasteful to get assistant from a homeless shelter when you are "homeless" by choice since other people those resources would be better spent helping, plus pretty sure you have to pick up your mail instead of them sending you a package with all your mail when you are across the country or even opening items and scanning them for you if you need access to a letter faster. I know people in RV groups prefer to call themselves "houseless" not "homeless"

Some guy works remotely for a medical marketing firm, traveling full time with his family living the life people dream of checking out all the different national parks all the way to the theme parks. While you are freezing your butt off in Ohio, they are camping at Fort Wilderness (the RV park at Disney world) but technically in the eyes of different agencies they're homeless. Some banks can give you trouble too. Didn't know homeless people could afford Disney!

So kinda interesting people who own property are treated differently than people who decide to travel full time. You could own property and never even go there and you'd be treated better than someone with no property at all for some reason. Seems very backwards, I guess society never considered people could work remotely and travel full time exploring, you are supposed to live in a house you are indebted to all your life, then maybe when you are in your 60s you can explore while you can barely walk or living off the tiny bit of social security you get, if it's even still around by time you reach that age.

For one (among other issues) it completely ignores the destruction of family farms and businesses, no longer able to operate due to heavy tax burdens put on them by the state, simply because one of the owners has passed away and they didn't have enough cash in reserve to pay what the government deemed they owe. Mine and your politicians forced the creation of these havens because of their wanton disregard for people's hard work and effort, and I'm not going to shed any tears of there being a way for some of them to protect it.

I know, the writer alludes to a one-world dictatorship that might one day have been able to prevent this 'horrible evil' from taking hold, but we're not there yet, thankfully.

Switzerland, WW2. There is safety in holding EVERYONE's money. Because the moment you try it, you enrage many, many, many people who have things that go boom. You can fuck with someone's politics, their car or even their wife. But once you fuck with someone's money, it's a whole new ball game.

> I don't understand how this is even legal at all

Bank fees are higher. The different "islands" that do this, really don't have a choice. WTF else are they going to do as income generation? There's only so many happy endings you can give in a day spa. It's also easier to "invest" and hide the money in tourist based enterprises on said islands. It totally makes sense to hire an interior designer for $10k an hour.

>how can they trust so few people to hide so much money

Because people don't like getting into car accidents. When you're "trusted" with something on that level, suddenly people make sure you either don't have or do have car accidents that magically attract stray bullets.

>I mean apparently there is a long list of why it's risky, and I don't understand how this is even legal at all.

Homie, avocado farmers in Mexico get kidnapped and executed because avocados are cash crops. Shit, look up "avocado stolen" or even "avocado semitruck stolen". No such thing as making bank and not having risk. Some of those truck drivers in the USA get killed. If you're going to get targeted for making money, might as well go all out.

Yep, even nuts get stolen!

A special tax firm approaches them and says, “yo, give us 10 million and we’ll save you $200 million in unnecessary taxes.”

The billionaire says, “sure, I’d like to use that money to build spaceships.”

That’s the amount of thought the billionaire has to put into it. The rest is attorneys and accountants doing the work.

Did you forget that billionaires can... pay people to do things for them?

If I were born and raised in the US, with all that anti-government and anti-tax rhetoric around me, I might feel similarly to the impassioned gentleman or lady above. Yet as it stands I am happy to pay for taxes as I see great value in them, and I would generally be happy for a tax rise if justified and needed.

Rich people have always had their own financial systems that are outside of, and one step ahead of, the regulations and rules the rest of us are subject to.

[0]: https://www.goodreads.com/book/show/10197857-treasure-island...

The system remains that way in part because a large number of people are duped into believing it is in their best interest to keep the system in place, despite the minuscule probability of actually benefiting from it.

https://projects.thestar.com/panama-papers/canada-is-the-wor...

https://www.cbc.ca/news/politics/fatca-tax-us-canada-1.53539...

LPs on the other hand, do not _if_ there is no economic activity in Canada and there's a tax treaty at play with the founding partner jurisdiction. Canada doesn't have the authority to tax foreign owned businesses unless they participate in the Canadian economy.

Eg: Your international entities can route money through a Canadian LP that is owned by your Barbados corporation. In this scenario there's no Canadian tax obligation and the money trail becomes harder to follow due to Canada's privacy laws (your company name might not be on your LP documentation). Your company does, of course, have to settle up the tax obligation with Barbados.

Some of the tax havens like Jersey, Isle of Man are British territories, Curacao is territory of Netherlands.

The big countries know what goes on on their little islands they just choose to ignore it for obvious reasons.

Treasure Islands is a great book if you want to learn more about this.

Politicians don’t know and have no desire to know, if you can’t tell by their willfully ignoring official political processes (regardless of whether one agrees with the motivation or not, to simply say you’re going to ignore it as folks like Sen. Graham have is nuts).

If they did they could be held accountable. Plausible deniability is a key legal position.

So politically zero fucks are given.

I mean we know more than one President was pals with a man the elite knew to be a statutory rapist. They don’t give a shit about human lives themselves.

You think they give a shit about ephemeral shit like money when they don’t worry about that?

The financial system has us mining bitcoin: ephemeral bullshit other people live big on.

How this forum can be so smart and so clueless is beyond me.

I have a fair bit of insight into this industry, both from friends, acquaintances, and family who use a variety of offshore structures to manage their wealth and from my own dealings (the company I founded and currently manage is offshored for tax and legal purposes).

What people don’t realise is that aside from a couple outliers offshore jurisdictions aren’t that shady at all and the major ones are usually under the protection and sometimes outright control of much larger and much more influential jurisdictions, with the United Kingdom being the leader here. If tax avoidance was as simple as just starting a business in a zero or low tax jurisdictions we would see a lot more of this kind of business being done in Africa (with the notable exception of Seychelles today) than the Caribbean overseas territories, but mature legal frameworks and more importantly reliable governments are incredibly important to both small time players who may stash some cash offshore as savings and large multinationals. If anything shady (civil unrest, wealth confiscation etc.) were to go down in the British Virgin Islands for example the United Kingdom has a nuclear option (as BVI is for all intents and purposes a Crown colony) to unseat the sitting government and bring order, which is incredibly valuable as an insurance policy.

Yes, it is possible to incorporate offshore corporations in less-reputable jurisdictions like Vanuatu or Seychelles, but doing business with these vehicles is next to impossible because no reputable bank in Singapore, Hong Kong, or Switzerland is going to want to have you as a customer if they don’t already know you due to compliance reasons. Without a bank account your ability to funnel and store money in these opaque conduits becomes rather difficult and there really isn’t any point any longer. Of course, there are small shady banks in certain jurisdictions (notably those that aren’t under indirect British control) that will take you on as a client, but then you run into the risk of them running away with your money or defaulting.

The money itself isn’t really managed by or from these island nations/colonies either, and in the cases where there are nominee directors the beneficial owner will usually have a power of attorney as well as an undated resignation letter from the nominee director which effectively gives them wherever they are total control of the company.

What is interesting is that crypto is changing all of this due it being completely outside the severely regulated financial sector, opening up a ton of opportunity for small island nations to compete on tax efficiency without being subject to the quite frankly draconian rules that usually places them on US/EU/OECD blacklists which can create severe consequences for the economies of said nations through sanctions.

Very interesting times indeed, and I think we will see more and more companies (particularly tech companies) being offshored than before in the next few years.

Having lived in the UK, I'm convinced that the real reason for Brexit is to preserve these offshore tax havens from any meddling by EU regulations.

It's not an accident that Brexit suddenly became crucially important to the Conservative Party only when the EU developed a new interest in unified financial regulations after all the turmoil of 2008-2011.

I can't say if the latest regulations have really made an impact. They have surely made banking in EU a lot more bureaucratic and a lot more expensive for a small business.

The last Commission President was literally the ringleader for tax theft: he was FM/PM of Luxembourg, and actively lobbied companies to domicile there, funnel revenue through Luxembourg (i.e. structuring for tax avoidance alone), and personally negotiated the 1% corporation tax deals.

...it always amazes me how little people actually understand about the EU.

Btw, the main issue for the Conservatives has been their inability to force the overseas territories to do things (what they actually think about tax havens is irrelevant now, events have moved on).

This has changed though, as certain European parties' voters have become irate about international tax evasion. For center-left PMs, stomping down on countries like Cyprus isn't going to lose them any votes and increasingly looks like a political win.

For Britain, the conundrum is that there's so much British money in the "nearshore" tax havens of Channel Islands and the Isle of Man. Whereas Luxembourg mostly cut sweetheart deals for corporations and Cyprus mostly dealt with non-EU foreigners who don't get to vote anyway, cleaning up the British tax havens would threaten the hidden wealth of Conservative voters directly.

The only way to avoid tax is to permanently move there. And, if you are familiar with either of those locations, you should know that the punishment fits the crime.

Also: it is far bigger than Luxembourg and Cyprus. Malta is basically a haven for financial fraud. Ireland is basically a tax haven now. And basically all of the East European nations are targets given the weak controls of their financial institutions (and Denmark as it turned out).

This may be terribly naive, but doesn't that make the business de-facto illegal? What kind of legitimate business deserves to buck paying into the systems that support them? As a default I want to disagree, but I would like to know what business needs to operate outside of these constraints.

Surely the businesses utilizing the favours of banks like Cayman are not being operated within tyrannical countries (which is the first and only reasoning I can see for operating in the manor you prescribed).

The very fact that they operate this way seems shady to me.

That said, I disagree. Context matters. The comment above isn't talking about moving a business, it's only talking about operating with as little fiscal impunity as possible. Or at least it reads that way—which is why I was asking for more input.

it seems to me that there's no reasonable way to lay claim to the work product of another person without being a total jerk... maybe i'm mistaken.

If you are worked up about this Cayman thing, then you should be apoplectic if your neighbor moves to Texas or Florida. What horrible, disgusting people who are leaving their former communities to rot! They raised taxes on the rich in order to transfer more wealth to the community, and then the rich up and leave! Such completely selfish actions are galling and it fills me with anger, as it should any self-respecting person. We need the government to track where people live each day, and then make them pay their taxes proportional to where they lived for the rest of their lives. It's only fair to the communities that protected and nurtured them.

We need to outlaw each and every tax dodge. Clipping coupons deprives the state of their sales tax, as the total price is on goods is lowered which reduces the total tax bill, which is why I'm against coupons. How long will we allow this madness to continue?

I'm not sure that I want the government to be responsible for doling out penalties for working (e.g. taxing somebody's productive efforts). I think it would be better if localities had sales taxes only. Penalizing people for visiting/living in a location (by taxing them proportionally for the rest of their lives) seems absurd, empowers a police state, and frightens me for the possible negative externalities of such a system.

Consider the case of a family that was persecuted out of a town (e.g. chased out by bigots)... should each of these individuals be penalized for the rest of their lives for having spent some amount of time "living" in that place?

Surely, that's not a good solution.

California has made horrible financial decisions for over a decade. To pretend it is somehow moral to trap people and their wealth to those decisions is complete insanity. Also it won't work, to point out the obvious.

These constraints that you speak of are entirely arbitrary (geographical delineation) and were designed for a time before the internet. I would instead ask the question why Western governments are refusing to get with the changing tides and reform their archaic taxation codes to account for an increasingly globalised economy.

>Surely the businesses utilizing the favours of banks like Cayman are not being operated within tyrannical countries (which is the first and only reasoning I can see for operating in the manor you prescribed).

Not at all. There certainly exists a subgroup of individuals, companies, and institutions that operate in jurisdictions where there is a huge amount of uncertainty, but there is also a very large contingent that offshores their business to reduce regulatory burden and reduce tax liabilities, many of whom are individuals and companies that you and I have heard of. I doubt they will be using Cayman National Bank though, it is more likely that they will be using banks that you and I have also heard of like Barclays or DBS.

Perhaps, in spite of my own cynicism, I believe people are capable of deciding how they want their societies to run (also in spite of our hiccups here in the Western world).

So again: why do such businesses deserve to operate with such impunity? A natural function of business is risk. Subverting reasonable social good is an active harm that is reasonable given the circumstances (like an ambulance or fire truck asserting the right of way on a city street), but I fail to see why that should apply to any and all business.

I'll be happy to be convinced otherwise—but I doubt I will be.

I know you're speaking out under the condition of anonymity, so I won't ask which business you're operating or employed by but I am immensely curious about which industry you're representing. It would help much in understanding your perspective.

I too feel like the person you replied to. Why can't our goverment get with the times and create infrastructure to support the new global economy.

There is a difference between keeping a government in check, and ensuring governance stays relevant. Western democracy usually ensures the former, but is not very good on the latter.

>Subverting reasonable social good is an active harm that is reasonable given the circumstances (like an ambulance or fire truck asserting the right of way on a city street), but I fail to see why that should apply to any and all business.

This is more of a political argument than anything else, and I'm not too keen on going into my political views on this matter (although I'm sure it is not too difficult to infer them from my posts). What I will say however is that I think you are conferring an arbitrary civic duty on corporations, with the dutiful obligations of which being up for a significant amount of interpretation across societies and jurisdictions.

Anyway I appreciate the thoughtful responses regardless.

Systemic corruption, governments are infested with corporate interests and tax avoiders.

Attempting to even the playing field would expose massive corruption.

Simply curious, how do you feel about the ethics of this? Is it to reduce the tax burden in your company's home country?

Yes, the tax liability is significantly reduced when using offshore structures and I don't necessarily see this as a bad thing especially since an ultra-low corporate tax rate makes it possible to offer our customers services at a lower price than otherwise - I see this as a good thing.

The second is that regulatory compliance is much, much, much easier especially when working in industries like finance, insurance, or crypto. The flexibility and clarity of the regulatory climate in offshore jurisdictions is a huge advantage as it makes it possible for us to focus on doing business rather than narrowly tiptoeing an arbitrary and complex regulatory line as is the case in "home" jurisdictions like the US or the EU. This is further compounded when you have a distributed workforce located in various jurisdictions (which sometimes changes on a week-to-week basis).

The claim that you’re transparently passing the savings of tax avoidance onto consumers rather than charging market-rate and pocketing the difference is both unlikely and unprovable. And even if you were charging less, this would essentially amount to an unfair, extra-legal competitive advantage.

It is not unfair, and it is not extra-legal. Anyone can offshore their company and in some cases it can take less than an day (incorporating an LLP in the UK takes a couple of hours) with virtually zero barriers of entry, all fully compliant with the relevant legislation.

If legal regulatory arbitrage (through tax havens) is unfair, then the corollary is that any kind of business profit arising from utilising uncommon knowledge is unfair. I think this position is untenable.

https://repository.law.umich.edu/articles/717/

This syllogism is so unsound that I’m not sure how to respond. I don’t think I’m arguing that, and I don’t think that using corporate tax havens is merely “using uncommon knowledge.”

Then why are you using a pseudonym?

To clarify, I don't necessarily agree with his position, but I disagree with your proposition that he is using a pseudonym for that reason.

This can be solved by simply operating well within the legal line. If you’re operating so close to the border of what’s illegal that you’re “tiptoeing the line” then maybe that is the root problem.

I’ve been in several businesses and not once ever had to stop and ask myself “is what I’m doing technically legal?”

Assuming ethics is not a concern

HK was/is an entreport to China. Before 1949, it was not as important as Shanghai. After 1949, it was where a lot of southern Chinese escaped and became a manufacturing/cheap labor hub, while also taking advantage of British civil service practices.

Post China's economic changes, HK became the bridge between the world and China's economy, plus the place for China's new rich to park their money "safely".

Today, it is losing/has lost that advantage, because China's corruption has taken hold of the government, and as a result, the "rule of law".