Tax evaders stash 21 Trillion dollars...

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Forums › Finance and wealth management › Tax evaders stash 21 Trillion dollars...

bradi

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#106644 28-Jul-2012 13:46

So, with everyone in the "know" telling us we need to accept that the global economy is unstable, what do you think about the global elite stashing 21 Trillion dollars for their own little slush fund?

http://boingboing.net/2012/07/22/21-trillion-has-been-stashed.html

Why isn't anyone asking the big question about Government debt? Who owns the debt and why are they bankrupting the world?

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#663293 28-Jul-2012 14:34

Interesting topic, but the first question that occurs to me is why do people not correctly format links:?

http://www.geekzone.co.nz/forums.asp?forumid=4&topicid=106418

It's easy!! on any platform!! arrggh!

freitasm

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#663294 28-Jul-2012 14:42

He's new around here - anyone with less than 10 posts can't post hyperlinks ;)

gzt

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#663318 28-Jul-2012 15:20

Oh great. Well ahem um er.. consider that a warning lol..

JimmyH

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#663714 29-Jul-2012 19:40

Interested to see how they produced that estimate. $21 trillion is a staggeringly large number - the GDP of the United States is only around $15 trillion. My first reaction is that, without working my way through what they assumed to calculate it, it seems implausibly large.

@bradi - regarding who owns government debt, government's typically borrow money by issuing bonds (there are a couple of other ways). The purchasers of those bonds own the debt. Most of them would be ultimately held by investors (companies and individuals). For bonds in the wholesale market, they would typically be held by pension funds, banks (who need to keep a portion of their assets in something safe and liquid), high net worth investors and other central banks (parking their currency reserves). Typically, you are looking at having upwards of $100,000 to invest before you can sensibly play in the wholesale market. If you are in Kiwisaver, the chances are that you indirectly have a chunk of your savings invested in NZ Govt debt.

Retail bonds are held by smaller investors - typically individuals and smaller entities like family trusts. Kiwi Bonds are a good example - the NZ government issues these to savers in amounts as small as (from memory) $1000.

gzt

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#663717 29-Jul-2012 19:48

I looked up the source material for the stories:

http://www.taxjustice.net/cms/front_content.php?idcat=103.

The researchers copped some criticism from Oxford Uni. Based on the summary - Oxford Uni's main point was the researchers showed capital leaving places like Nigeria into Switzerland but did not account for capital flow in the other direction. The researchers response to that - there is no way that much money went back into the country.

bradi: Why isn't anyone asking the big question about Government debt? Who owns the debt and why are they bankrupting the world?

Do you have an answer to that one?

bradi

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#664220 30-Jul-2012 20:53

JimmyH: Interested to see how they produced that estimate. $21 trillion is a staggeringly large number - the GDP of the United States is only around $15 trillion. My first reaction is that, without working my way through what they assumed to calculate it, it seems implausibly large.

@bradi - regarding who owns government debt, government's typically borrow money by issuing bonds (there are a couple of other ways). The purchasers of those bonds own the debt. Most of them would be ultimately held by investors (companies and individuals). For bonds in the wholesale market, they would typically be held by pension funds, banks (who need to keep a portion of their assets in something safe and liquid), high net worth investors and other central banks (parking their currency reserves). Typically, you are looking at having upwards of $100,000 to invest before you can sensibly play in the wholesale market. If you are in Kiwisaver, the chances are that you indirectly have a chunk of your savings invested in NZ Govt debt.

Retail bonds are held by smaller investors - typically individuals and smaller entities like family trusts. Kiwi Bonds are a good example - the NZ government issues these to savers in amounts as small as (from memory) $1000.

Thanks JimmyH, appreciate your comments and your excellent summary... consider me educated :)

bradi

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#664221 30-Jul-2012 20:54

gzt: I looked up the source material for the stories:

http://www.taxjustice.net/cms/front_content.php?idcat=103.

The researchers copped some criticism from Oxford Uni. Based on the summary - Oxford Uni's main point was the researchers showed capital leaving places like Nigeria into Switzerland but did not account for capital flow in the other direction. The researchers response to that - there is no way that much money went back into the country.

bradi: Why isn't anyone asking the big question about Government debt? Who owns the debt and why are they bankrupting the world?

Do you have an answer to that one?

Nope, wish I did. I'd feel a lot happier about raising my kids into the future, having a $400,000 mortgage and look at my Kiwisaver account a lot more seriously.

Sorry just thought about this and I suspect you're hoping I'll understand now that I have a post explaining how Treasury works, and that you found (link please) someone, somewhere disputing that the numbers are wrong. Personally I don't think it matters that the numbers are $21 Trillion or $1 Billion, or that some money went back into the original country where the cash flow started (LOL, Nigeria, I am sure they're better off now that Oxford Uni got involved).

For me, it's more about the fact that no matter how you play it, the world's resources are owned by a very small number of corporations, and they are not paying their fair share... nor do they seem to care about global economic stability.

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gzt

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#664489 31-Jul-2012 12:13

No. glad to see you are on the same planet as the rest of us. I was half expecting to get spammed with links to illuminati conspiracies and contrails. There was a spate of that on geekzone a while back before the mods confined them to their own thread lex luther style.

The work the project is doing clearly shows there are serious problems with transparency and offshore banking that need to be addressed. I'd guess it is a lot closer to 21 Trillion than 1 Billion ; ). With the world becoming ever closely linked financially there is no good reason the situation should continue like that.

Zeon

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#664493 31-Jul-2012 12:19

If people are inclined to stash that much money away it could be a sign that their taxes are too high. Tis is the argument around a flat tax at a lower rate - people will be less inclined to cheat the system so tax take in some models actually increases.

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gzt

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#664522 31-Jul-2012 12:50

Zeon: If people are inclined to stash that much money away it could be a sign that their taxes are too high. Tis is the argument around a flat tax at a lower rate - people will be less inclined to cheat the system so tax take in some models actually increases.

There is also the question of tax avoidance and evasion (illegal) vs strategy for tax minimisation (mostly legal).

For instance, Bono moving U2's royalty holding company from Ireland to the Netherlands to reduce tax payments from an expected 12.5% to somewhere close to 0% is perfectly legal.

Bono is not the world's worst corporate citizen of course but it illustrates the point. Giving back 12.5% is not particularly onerous, he just moved it because he could.

DarthKermit

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#664649 31-Jul-2012 14:55

Companies like Google and Apple use all sorts of methods for tax minimisation. They both pay very little tax on their vast annual profits.

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BlueShift

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#664650 31-Jul-2012 15:00

How many zeros are there in 21 trillion? is it 21,000,000,000,000? If so, my maths says that's about $3000 for every living man, woman & child on the planet.

mattwnz

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#664658 31-Jul-2012 15:10

DarthKermit: Companies like Google and Apple use all sorts of methods for tax minimisation. They both pay very little tax on their vast annual profits.

In a way you have to wonder why, because paying tax is giving back to your country to support it's infrastructure, health, and less fortunate.
I am a firm believer in people/companies paying taxes and paying their fair share, and not using accountants/lawyers to look for tax minimisation.

bradi

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#665059 31-Jul-2012 23:56

This has always struck me as strange. Plus if they are taking money out of the NZ economy how does it get back into our economy so we can balance our books and grow?

John2010

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#665305 1-Aug-2012 12:03

There seems to be considerable misunderstanding by some here as to how corporate tax works and a belief that a corporate that pays no tax itself on profits (legally) is somehow irresponsible, mischievous or even corrupt.

Wasn't a subject I had given much thought to until a few years ago when I did an assignment for a country's government where company profits were not taxed and so a number of multinational corporates head officed there. The assignment I was doing was nothing to do with banking, finance or taxes and the country was a respected one, not some corrupt state or pretender, so an ideal place to consider things as an onlooker able to ask questions.

It is important to keep in mind that the concept in most countries is that company profits be only taxed once, so in NZ (and others) the extent to which the company's profits are taxed while in the hands of the company is passed on to the shareholders as in effect a credit (imputation, in NZ) so the outcome is that the shareholder receiving a dividend pays tax on the difference between what the company has paid and his own marginal tax rate.

So, if we take the case of a company that locates its HO in a country (Country A, say) that does not tax company profits, when the company distributes profits as dividend to its shareholders in Country B its shareholders pay tax on all of that dividend at their marginal tax rate as tax residents of Country B. The effect is then that the company profits that are distributed get taxed at the marginal tax rates of each of its shareholders.

It is then left that undistributed (retained) profits are not taxed but these are what the company uses for needed working capital or capital expansion (which includes product development, research, etc as well as equipment, etc, etc). In NZ and other countries that tax company profits these things come out of profit left after those profits have been taxed and dividends paid. There are two points of view, one is companies should pay tax on all profits, even if retained and the Government will guide the way they use taxed retained profits in the way the Government thinks it knows best through tax incentives, grants, etc (such as for research and development, through depreciation rates, etc), and the other is that retained profit is not taxed and the company be left to make its own decisions as to whether those profits are used for research and development, expansion, etc. The first is an interventionist approach which is used by most advanced economies, although some have much lower company tax rates than NZ (e.g. Hong Kong is 16.5%).

While there are a number of other advantages for a corporate to be headquartered in a country with no taxes on profits, a biggy is that they avoid the high legal and accounting costs of complying with, as in most countries, very complex company tax law, and also the high costs associated if one accidently or while following professional advice get it wrong, or the Revenue wrongly claims one got it wrong, and suddenly be faced with large tax bills or the big costs of challanging the Revenue in court.

The attraction to the host country is that it gets to provide financial (banking, insurance, etc) and other professional services to the corporates headquartered there, provides jobs and those generally well paid quality ones at all levels, etc. So, the country I refer to was one of the world's most prosperous (no evidence of poverty such as one sees in parts of NZ, for example, and I drove around all of it to check), that despite it having no natural resources whatsoever. It also did not use cheap immigrant labour, etc, etc as is often claimed for such prosperous small countries; in fact it was extremely difficult to get a work permit for anything other than very specific roles and then strictly time limited.

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