In short- no, not inherently. Tax havens are a tool. And like any tool, they can be used for legitimate purposes, or misused. The primary problem with tax havens is their most important, perhaps defining feature: secrecy and non-transparency. “Secrecy and non-transparency” certainly sounds a bit nefarious, however. We could just as easily use the term privacy, an idea that is cherished by Americans. We wring our hands as we have watched our right to privacy erode in recent years, often in the name of security and safety from terrorism or drugs or crime. In this light, it might seem fair to say that citizens should demand the right to privacy in their financial matters. The counter-argument, of course, is- why do you care about your privacy if you have nothing to hide?
Well, the fact of the matter is that there are plenty of legal things a person might like to keep private. It is hard to imagine the government ever having a compelling interest in my Amazon.com purchase history, however entertaining it may be to peruse. If I donate money to one political party or another, shouldn’t that be as private as the ballot I cast in an election? (Consider the recent allegations that the IRS specifically targeted conservative organizations for scrutiny). As long as I’m paying my taxes, why does the government need to know exactly how much money I have and where I am keeping it? If I want to keep my pre-marriage assets separate from spouse, why shouldn’t I put them where neither the spouse nor court has easy access to them? These are valid concerns, but as with most issues, they need to be weighed against the public interest.
Unlike matters of national security, privacy in financial matters has an inherently seductive way of encouraging people to cheat. Most rational people would never think, “Hmm, no police are watching me right now. I could kill this guy right here and I’d get away with it!” But when April 15th rolls around and I am filling out my taxes, and I’m looking at the difference between owing the IRS thousands of dollars or collecting a nice fat refund check…. well, then the decision gets a lot more difficult. After all, I’m not hurting anyone by stealing a little bit of money out of Uncle Sam’s bottomless bank account. It feels like a victimless crime- the sort of crime that average people are much more comfortable with committing.
Because the IRS cannot possibly investigate the finances of every citizen, they rely largely on honesty, backed up by information like W-2 statements and 1099’s, the reporting of banks and brokers and other financial institutions. And the possibility of an audit, along with financial or criminal penalties, gives citizens extra encouragement to be honest with their taxes. But even in this system, tax evasion is ubiquitous. Tax havens circumvent transparency and reporting, and place financial records beyond the reach of the IRS, courts, and regulators. This threatens the viability of this entire system. If police could not obtain a search warrant or arrest warrant, investigating crimes would be nearly impossible- just flee to the nearest privately owned place that will shelter you, and you are beyond reach. With computerized banking, money can be moved beyond the reach of the law at the touch of a button. Often the only hope of recovering ill-gotten gains are insiders with detailed information on accounts and transactions. Such information can help courts compel individuals to turn over their fraudulently obtained wealth, under threat of criminal charges.
Nor is the misuse of tax havens a small-scale problem, with only a small number of individuals or corporations using tax havens to defraud the government. With an estimated twenty or thirty trillion dollars held in off-shore accounts, and the increasing number of massive penalties being paid by corporations for illegally abusing tax havens, it is becoming more clear every day that there is a massive fraud being perpetrated on the public in the US and many other countries- hundreds of billions of tax dollars that should be going into government coffers are instead staying in the hands of corrupt individuals and corporations. And while regulators and the public are slowly becoming aware of this fraud, the hucksters perpetrating the fraud – surrounded by their high-priced lawyers, accountants, private bankers and consultants – are refining their tactics, finding new loopholes, and getting better at covering their tracks.
Whistleblower Justice Network Can Help You
Whistleblower Justice Network partners with whistleblowers worldwide to expose large, institutionalized tax fraud. Utilizing whistleblower programs, including the IRS Whistleblower Program, the SEC Whistleblower Program, and the False Claims Act, we aid whistleblowers in bringing tax cheats to justice.
If you have meaningful information regarding a tax haven or related tax scheme that you believe is illegal, robbing the United State of America of taxes it is owed, Whistleblower Justice Network can help. Working alongside world-class legal counsel, we will ensure you are protected to the fullest extent of the law and that you receive credit for the information you bring to the U.S. government. Partnering with whistleblowers is all we do. Visit us at www.whistleblowerjustice.net, or call us at 844-WJN-4ALL, to learn if we can help you.