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The Sovereign Society
Offshore A-Letter
January 24, 2003
COMMENT: This Mouse Will Roar
Dear A-Letter Reader: As Horace once wrote: "Parturiunt montes; nascitur ridiculus mus." Or as we would now say: "The mountain labored and brought forth a mouse."
That sums up the European Union tax collectors' latest jerry-built plan to squeeze taxes out of Europeans who dare to have cross border cash or investments outside their home nations. After more than a decade of
debate, on Tuesday the EU Finance Ministers cobbled together a face-saving deal that: * Requires only 12 of 15 EU member states to implement automatic tax information exchange (among themselves) on interest paid to
non- resident account holders on bank deposits and debt securities. * Exempts Austria, Belgium, and Luxembourg from this system, unless
non-members such as Switzerland (and the US) agree to do the same. (No chance!) Instead these three will levy a stepped w/h tax on non- resident savings, from 15% in 2004 to 35% by 2010.
Yesterady
Switzerland said it will go along with levying a graduated tax on all EU account holders, but would not reveal names or otherwise compromise its banking secrecy laws. (We will see!)
Now, what happens to
financial privacy in the British tax havens, the Isle of Man and the Channel Islands, Jersey and Guernsey? UK Chancellor Brown loudly guaranteed that all three havens, plus the UK Caribbean colonies (including
Bermuda), will go along with tax information exchange. Yesterday the Cayman Islands officially stated that they would not go along with London and the EU. (Independence, anyone?)
All these British havens
previously made clear they would not share tax information unless they were guaranteed a "level playing field" where all other nations also ended financial secrecy. Constitutionally, it is doubtful London
can force the crown dependencies to do so, although UK colonies certainly can be (and have been) coerced.
And keep in mind that this "level playing field" notion foresees the US, Liechtenstein,
Monaco, Andorra and San Marino adopting "equivalent measures." The Bush White House already announced in October it will not go along with any EU automatic financial information exchange.
Honest
assessments from leading financial observers in Europe and the US say this half-baked EU deal will lead, at first to major capital movements into Switzerland and The Exempt Three. If the Swiss tax rises to 35% tax
(and even before), cash will flow to tax havens such as Panama, Hong Kong, even the US, venues that don't tax or expose foreign investors, absent legal due cause. Panama, already the largest banking center south of
Miami, has no tax info exchange agreement with the US, and eagerly awaits profits from the EU's financial insanity.
The tip off that the EU taxocrats did not get what they truly wanted came from the head of
the Organization for Economic Cooperation and Development. He denounced the deal as very damaging to the OECD's 'harmful tax practices' initiative. (Within weeks the OECD had planned to trumpet a new blacklist off
haven nations that dare to impose no taxes on foreigners or rat on offshore investors. Well, forget it!).
After all, there's only a few tens of trillions of dollars (or euros) at stake here. T'would be the
supreme irony if those who set out to destroy tax havens provided brand new leases on their useful, historic lives. Ever see that delightful Peter Seller's flick, The Mouse that Roared?
That's the way that it looks from here.
BOB BAUMAN, Editor
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