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Wednesday, March 18, 2009

WSJ: In defence of tax havens!

Interesting article in the WSJ today from Richard Rahn from the Cato Institute.

No one probably cares. The world's free market governments, have gone not just socialist--but dictatorial.

Here is a first excerpt, which sets up a main point by him and my main point on this issue:
"Nevertheless, Sens. Carl Levin (D., Mich.), Bryon Dorgan (D., N.D.), and Max Baucus (D., Mont.), as well as officials of the Obama Treasury, want to make it more onerous and costly for American companies to do business around the world and for Americans to invest elsewhere. They would even make it more difficult for non-Americans to invest in the U.S.

Mr. Levin's bill is a hodgepodge of tax increases, more regulations and penalties on American taxpayers doing business in targeted low-tax jurisdictions. Mr. Dorgan's bill would prevent certain American companies that operate and are incorporated outside the U.S. from being treated as nondomestic corporations, thus denying them the right of tax deferral until their income is brought back to the U.S. Mr. Baucus, chairman of the Senate Finance Committee, is circulating a draft bill that, among other things, would extend the statute of limitations from three to six years for tax returns reporting international transactions. The Treasury Department is proposing expanded regulations on foreign financial institutions that bring needed investment funds into the U.S."

I think this pretty much sums up the government's cash grab. They always need more of your money, indeed.

This, while not the worst thing they have done in the past, should be a call to all out war from the business class against the government.

To some extent, these money laundering measures are warranted as we do have to clamp down on money laundering. But, the langauge has to be in a sense where it is not smattered with HIGHER taxes in any legislation that is moving forward and, secondly, what exactly is tax evasion must be defined.

Mr. Rahn's final point:
"The proposals by Messrs. Dorgan, Levin, Baucus and the Treasury will almost certainly have the unintended consequences of driving more U.S. businesses elsewhere, discouraging foreign investment in the U.S., and actually encouraging more U.S. investors to move their funds (either legally or illegally) not only out of the country, but to places in Asia or the Mideast that tend to be less cooperative with U.S. tax authorities than are the European and British low-tax jurisdictions."
Is something offshore jurisdictions should HOPE and PRAY for. Unintended consequence, indeed.

Any country that adopt a high tax structure on rellocating business from the US and the EU, will miss the critical opportunity from this dilema.
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