The U.S. tax code is “full of corporate loopholes that make it perfectly legal for companies to avoid paying their fair share.”
- President Obama, May 4
Indeed Mr. President, the US tax code is too complex should be simplified and overhauled. Yet, we all know that this will not happen today, tomorrow or in any future Obama administration. Still, the calls by politicians of all stripes to cast blame on others while they themselves do not enforce laws or regulations does put into question Obama’s claim that this will be the most transparent administration in history. During his press conference the President could not help but to point and wag the finger at the tax cheats, even if these “cheats” follow the law.
For the President, members of Congress or Gordon Brown and the back benchers in the House of Commons, it is far easier to divert attention from the massive expansion of both taxes and spending of these governments and place the blame on small offshore centers for the collapse of the banking and financial system. When the greatest economic power in the world attempts to shift responsibility for massive regulatory and financial oversight from itself to small newly independent countries one wonders about the underlying motivation of those in power in Washington and elsewhere.
Indeed, attempting to understand the causes of this unprecedented financial meltdown and explaining to taxpayers how we got into this mess is necessary. However it is disingenuous at best, and smacks of neocolonialism, when the large G20 countries insist on diminishing the sovereignty of nations, many of whom are recently independent and derive a large percentage of GDP from financial services, by imposing restriction on their economies while not applying the same standards in their own country.
Granted, the collapse of the financial system did not happen on Obama’s watch, but, the SEC and others regulators are paid to have been watching, and clearly there has been a dereliction of duty somewhere amongst the regulators in those same OECD nations now clamping down on the Swiss and other banking centers. Can we now trust the same people who were asleep on the job to now, somehow, manage to keep our money safe from another financial meltdown?
The attack by the OECD, G20, and the President on international tax havens does raise some interesting questions about blame and how to fix the financial system. However, we question the current administration’s and the OECD motives about casting blame on offshore financial centers and wonder if the President should focus his energy on the shores of the USA for the real culprits of this systemic crisis.
The fact is that this financial crisis has its roots in the failure of American regulatory officials to manage the risk positions of US Banks and insurance companies, was not mentioned by the President during his press conference. Instead, the President made it clear that all the bad guys had hide out in “unregulated” sectors in Switzerland, the Cayman Islands or other offshore centers and the good guys in white hats in Washington are unable to stop them because of lax international regulation.
The President used his May 4 news conference to play on the popular perception that somehow the massive financial collapse was perpetuated by greedy bankers, tax evaders and cheaters in New York and London who stole money from Joe Six Pack and then hid it in some un-regulated island paradise. Yet, as the President acknowledged in his speech, the US tax system is as much to blame for the financial mess that we are in, as the poor performance of the SEC and other US bank regulators
Indeed, if the US is really serious about global tax harmonization and regulation of offshore business, the President may wish to have a very close look at American tax regulations, SEC oversight of a very tarnished banking sector, and up close examination of why public stock listed American companies overwhelmingly incorporate in Delaware.
Claims by the President not withstanding, the Cayman Islands, where many American multinationals and banks have registered companies, including all of the TARP recipients of billions of US taxpayer funds, have much stricter corporate and banking restrictions than any of the US tax havens.
Again, the Americans should practice what they preach. Did you know that Wyoming, Nevada and Delaware do not adhere to the OECD guidelines on beneficiary ownership and other disclosures requirements, the type of restrictions that the big countries are imposing on the small offshore centers worldwide?
To single out the Caymans for public shaming because Bernie Madoff had a company there while he creating the largest Ponzi ever right under the nose of the SEC is comical. It is great for getting a headline, but does nothing for resolving the serious defects in the American regulatory system.
Surely, it is reasonable for the American President to insist that American multinationals pay their “fair share” of taxes. However, to claim that multinationals are cheaters then to blame other nations for their actions and placing these countries on “black-lists” for not agreeing to be regulated by the same people who brought you Enron, World Com, and other corporate accounting scandals is over the top even for a politician.
Lets not forget that Enron, the largest corporate ponzi scheme in history, was fully audited by the biggest accounting firms in the world and operating under the close supervision of the SEC for years undetected as a NYSE company. Now the President would have us all accept this same “highest standards” regulatory regime of the SEC and others by threatening smaller countries with economic blackmail.
American multinational corporations, like most corporations and citizens, are just following the law, however convoluted these tax laws might be in the US. The Americans should have respect for international law and sovereignty of nations must be respected.
First, Mr. President we suggest that you enforce your own laws on your own shores and implement the guidelines you call of in the OECD before trying to export stricter laws on other countries who have not contributed to the financial collapse which was made in the USA.
America, it is time to police your own states and clean up the cesspool in your own financial backyard. Try this before bringing your messy ways to legitimate businesses in small offshore jurisdictions and sovereign nations.
Mr. President, before you go about making all Americans pay their fair share of the TARP and other bailouts brought on by US regulatory incompetence, you should think twice about imposing your will on small countries that may have a better regulatory sector than your own when it comes to keeping the financial sector operating and not collapsing.
