Praetorian Trust

From FT,  September 21 2009

Willis, the world’s third-largest insurance broker, plans to move its global headquarters from Bermuda to the Irish Republic, becoming the latest in a string of multinational companies to leave the low-tax Caribbean island.
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Willis follows Accenture, the consulting group, and about 10 others in announcing a move away from Bermuda since Barack Obama became US president and began to take a much tougher line on tax havens , saying their widespread use by American businesses was “the biggest tax scam in the world”.

This has stoked fears of a crackdown on Bermuda-based companies that have significant operations in the US and worries about potential reputational damage from being seen as a tax avoider.

Full text article: http://www.ft.com/cms/s/0/aa7df612-a6cf-11de-bd14-00144feabdc0.html

Wegelin & Co Private bankers: Farewell America

We live at a time of shifting power and influence in the world. Asia is on the rise, and Brazil too, probably. Australia will catch on to their coattails, and Europe may once more be able to position itself within these countries’ recoveries. The USA will remain the unquestioned military power and also an enormous repository of debt and other problems. Because they are painful, and there is always an inclination to shift the blame for them onto third parties, re-dimensioning processes always harbour the potential for aggression. Switzerland is currently experiencing just this. But it won’t end there. Potential aggression and economic progress are mutually exclusive. Which is why we are well advised to take a general farewell of America. This will be painful, for the USA was once the most vital market economy in the world.

But for now, it’s time to say goodbye.

(Wegelin & Co Private bankers, Investment commentary No.265, 24.08.2009)

(Full text article here)

Dear Sirs:

We are dismayed by your unsubstantiated assertion that “International tax evasion has become a major threat to government finances in countries big and small…” (Views 24.08.09 “ IF SWITZERLAND CAN…Providing the names on UBS secret accounts…end of International tax cheating”)

This is clearly untrue.

Surely it is not popular to defend those who choose to avoid paying taxes: all citizens should pay taxes according to the law. In fact,in the US and most European nations ( save perhaps in Italy where tax avoidence seems to be a national sport) most people pay their taxes. Many people in Europe, and particularly those that can afford it in the US, attempt to minimize there taxes by government approved and legal tax planning. In the western countries and Japan, tax evasion is hardly the norm, however,tax avoidence is a legal an acceptable practice for all citizens, both businesses and individuals.

Tax havens exist because tax laws vary from country to country and tax paying citizens the world over , just as multinational corporations, like to keep there hard earned money in their own pockets, and out of the hands of spendthrift politicians and governments. To suggest Switzerland exists and gains substantial benefit from the ill gotten wealth of tax cheats is both an unfair characterization and out right wrong. Indeed, the country does benefit from the fact that other nations tax may not have business friendly tax regimes, but this may have more to do with the Swiss notions that the state serves the individual and not the other way around.

The fact is, that even if the US government could recover all of the estimated 18 billion dollars of assets hidden by wealthy Americans abroad, it would not be enough to fund just one month of the wars in Iraq and Afghanistan. ( Congressional Budget Office report 2009). To state that the tax cheats, and those with secret accounts, have somehow placed government finances at risk in the face of this one simple fact about US government spending, let alone the current policy of fiscal easing, is quite disingenuous.

Perhaps the real threat to government finances are not the few individuals with secret bank accounts, and they are not to blame for the either the implosion of the financial system or the explosion of government spending. Rather, it is the government printing press and the many ways that our elected officials choose to spend our tax dollars, that is destroying both value and government finances in countries both large and small.