The Price We Pay: As US Becomes a Top Tax Haven, How Hiding Wealth Offshore Robs the People at Home

November 03, 2015
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Guests

Harold Crooks

director of the new documentary, The Price We Pay.

James Henry

economist, lawyer, and senior adviser with the Tax Justice Network. He is former chief economist at McKinsey & Company. He’s interviewed in the documentary, The Price We Pay.

When it comes to sheltering the wealth of the super-rich, the United States is moving up the ranks. A new study says the U.S. is now the third most secretive country for offshore finances, trailing only Hong Kong and Switzerland. While recent U.S. laws force banks and other firms to disclose the assets of American citizens, Washington has been criticized for failing to share that information with other countries. A 2012 study by the Tax Justice Network on the "offshore economy" estimated that wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in offshore accounts or tax havens. The actual sums could be higher because the study only dealt with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts. The new documentary "The Price We Pay" tackles the issue of tax havens and their cost to the societies losing out on trillions of dollars in revenue. We are joined by the film’s director, Harold Crooks, and economist James Henry, senior adviser with the Tax Justice Network.

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TRANSCRIPT

This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: When it comes to sheltering the wealth of the super-rich, the United States is moving up the ranks. A new study says the U.S. is now the third most secretive country for offshore finances, trailing only Hong Kong and Switzerland. While recent U.S. laws force banks and other firms to disclose assets of American citizens, Washington has been criticized for failing to share that information with other countries. The Tax Justice Network says, quote, "Though the U.S. has been a pioneer in defending itself from foreign secrecy jurisdictions ... it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction." A 2012 study on the offshore economy estimated wealthy individuals and their families have between $21 [trillion] and $32 trillion of hidden financial assets around the world in offshore accounts or tax havens. The actual sums could be higher, because the study only dealt with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts.

Well, a new documentary tackles the issue of tax havens and their cost to the societies losing out on trillions of dollars in revenue. The film is called The Price We Pay. This is the trailer.

SEN. CARL LEVIN: Does Apple Inc. own directly or indirectly AOI, AOE and ASI?

PHILLIP BULLOCK: Yes.

SEN. CARL LEVIN: And where is AOI a tax resident?

PHILLIP BULLOCK: It does not have a tax residency.

JAMES HENRY: You know, we’re talking about 10 to 15 percent of the world’s financial wealth basically being invested offshore beyond the reach of tax authorities.

JOHN CHRISTENSEN: So, far from being a success story, I regard the city of London as the world’s biggest tax haven.

CHUKA HARRISON UMUNNA: Can you tell me how many subsidiary companies of your group are incorporated and operating in the Cayman Islands?

NARRATION: Barclays Bank at U.K. Public Accounts Committee.

BOB DIAMOND: I don’t have that number with me, either.

CHUKA HARRISON UMUNNA: You have 181.

TIM RIDLEY: There are $1.6 trillion booked to Cayman Islands banks. Almost none of that is actually in Cayman.

STUART FRASER: Many politicians have an illusion that they actually run their country, when actually they run their country within the confines that the global financial system places on them.

ANGUS CAMERON: There was a period before we had a welfare state. We had the welfare state under a certain set of conditions, and those conditions have changed.

SASKIA SASSEN: The social contract is broken.

UNIDENTIFIED: People didn’t invest money into services. I mean, you look at the state of the roads here, the most basic thing, and there’s potholes everywhere. Property tax, they’re introducing, water tax—all these new taxes, personal taxes.

MATT BRITTIN: What’s different about Google, we’re not selling books, and we’re not making coffee.

MARGARET HODGE: You’re selling advertising.

MATT BRITTIN: Consumers are based on the computer science. That is what creates the economic value for Google.

MARGARET HODGE: What does Bermuda create?

JARON LANIER: Kodak had hundreds of thousands of employees—really good, solid, middle-class jobs. The new world of photography is Instagram, which had 13 employees and sold for a billion dollars to Facebook.

NICOLAS COLIN: [translated] Businesses die from this industrial revolution. They stop paying taxes, and the benefits move the tax havens.

SASKIA SASSEN: At some point, more inequality is not simply more inequality. It needs another name. People are being expelled from livelihoods.

PROTESTERS: We are the 99 percent! We are the 99 percent!

JEAN ROSS: People used to, in their positions, use that money, to invest in our country, to invest in people, and they’re not doing it anymore. And as a nurse, I would say they’re probably a little bit mentally ill. It’s not normal to want to hoard all that money. And the people in this country need it.

MATT BRITTIN: We pay all the tax you require us to pay in the U.K. We paid 6 million of tax last year.

MARGARET HODGE: Yeah, maybe. We’re not accusing you of being illegal. We’re accusing you of being immoral.

AMY GOODMAN: The trailer for the new documentary, The Price We Pay.

For more, we’re joined by two guests. Harold Crooks is the director of the film, and James Henry is an economist, lawyer, senior adviser with the Tax Justice Network, co-authored their 2012 study estimating up to $32 trillion in hidden offshore assets worldwide. He’s interviewed in the documentary, The Price We Pay.

Welcome, both, to Democracy Now!

HAROLD CROOKS: Thank you.

AMY GOODMAN: Harold, let’s begin with you, why you made this film.

HAROLD CROOKS: Well, I made the film—I was approached with the offer to make the film by a well-known Canadian producer, Nathalie Barton, who had been contacted by a Canadian fiscal expert, Brigitte Alepin, who had written a number of books on the imminent collapse of public finances in the Western world, and they asked me if I would be interested in taking on the project.

And after I thought about it a bit, I realized that the issue of taxation is actually a lens through which we understand power—who has it, who doesn’t and whether the average person has a hope in hell of getting ahead in life. And once I had that perspective on it, I was happy to take on the project.

AMY GOODMAN: I want to turn to another clip from your amazing film, The Price We Pay. During a British parliamentary hearing in 2012, Labour MP Chuka Harrison Umunna questioned Barclays CEO Bob Diamond about his company’s tax practices.

CHUKA HARRISON UMUNNA: Would you say that one of the ways companies meet their obligations to society is through the payment of tax? Yes or no?

BOB DIAMOND: I think payment of tax is an important responsibility of businesses, yes.

CHUKA HARRISON UMUNNA: Could you tell me how many subsidiary companies your group uses and that are incorporated in the Isle of Man?

BOB DIAMOND: I don’t have that number with me. I’d be happy to look into it and get back to you.

CHUKA HARRISON UMUNNA: Well, according to the return that your group company put in last year, you have 30 subsidiaries operating in that jurisdiction. Can you tell me how many subsidiary companies you have operating in Jersey?

BOB DIAMOND: I don’t have that number with me, either.

CHUKA HARRISON UMUNNA: The number is 38. Can you tell me how many subsidiary companies of your group are incorporated and operating in the Cayman Islands?

BOB DIAMOND: Same answer.

CHUKA HARRISON UMUNNA: You have 181. Now, of course, all of these are well-known tax havens, which are used by companies. And a cursory reading of your group return shows that you have over 300 such companies operating in tax haven jurisdictions around the world. You will understand, Mr. Diamond, that there’s obviously—I mean, if you look at the facts that I’ve just presented, that would suggest that your bank is engaged in tax avoidance on a grand scale, would it not?

BOB DIAMOND: Well, I don’t know what you—what—I think "tax evasion" is a very clear phrase. And it’s a space we would never go to.

CHUKA HARRISON UMUNNA: I know. And I didn’t use the word.

BOB DIAMOND: And I—I chose the word "tax efficiency," which is our obligation, and it’s something that is in line with government policy.

CHUKA HARRISON UMUNNA: Your "efficiency" may be our "avoidance."

AMY GOODMAN: That’s a British Labour MP, Chuka Harrison Umunna, questioning the Barclays CEO at the time, Bob Diamond, about Barclays’ tax practices. James Henry, you are the former chief economist at McKinsey & Company. Also, you are featured in this film. Talk about what they were just speaking about.

JAMES HENRY: Well, the multinational companies and banks make this point all the time about being legal. You know, that dodges the fact that a lot of this regulatory business when it comes to corporate tax is very complicated, that these companies are intimately involved in influencing the law, and that, essentially, the international corporate tax system has devolved to a situation where it’s a question of whether you can set up the right subsidiaries in Ireland or Luxembourg or Bermuda, shifting billions of dollars offshore to tax havens. And there’s no longer a clear line between tax avoidance and tax evasion.

AMY GOODMAN: How much money are we talking about the U.S. losing? Why should this matter to everyday people who don’t use tax havens?

JAMES HENRY: Well, I think it matters in a lot of ways. But one, you know, direct estimate of this is at least $100 billion a year of lost tax revenue to the U.S. Treasury. We also, I think, are undermining the stability and the development of many countries around the world by essentially being one of the world’s largest tax havens. You know, it’s very common for wealthy Mexicans or Argentinians or Brazilians to put their money in New York as opposed to their own countries. And we made it a business not only to solicit this money, but also to conceal it and make sure that it’s tax-free when it gets here.

AMY GOODMAN: I want to turn to another clip from the film, The Price We Pay, where—this, again, in Britain—Labour MPs are questioning Amazon’s director of public policy, Andrew Cecil. The clip begins with Austin Mitchell questioning Cecil, then Labour MP Margaret Hodge speaks.

AUSTIN MITCHELL: I’m interested in why you pay so little tax, corporation tax particularly, in this country, so that we can pay some kind of benefit to all the booksellers you’ve put out of business, because undoubtedly you put a large number of booksellers, some of them local, in my case, out of business. And I don’t get, frankly, from all this interview, why Luxembourg is so lucky. I mean, the books are here, the warehouses are here, the billing is here, the business is here, the customers are here.

ANDREW CECIL: We have paid in excess of 100 million in payroll taxes in the last five years. We’ve paid tens of millions in business rates in the past five years. And—

MARGARET HODGE: I’ve heard this argument before. Let me just kill this argument, because it really makes me cross. On the one hand, so does every other business. So the community-based bookshop that you’re putting out of business also pays business rates, also pays its PAYE, also pays VA—actually, probably pays VAT in a way that you don’t, and you—in the same way. And you’re making it uncompetitive.

And the other thing is, you depend on the services that come out of the tax you pay. So, you know, you depend on the ability of your—of getting your goods around, so you’ve got to get in the truck, the roads in place. You depend on all those things.

And probably, worst of all, both you and Mr. Alstead employ people on probably minimum wage, if we’re lucky. And then we, the taxpayer, pick up tax credit bill for that, too. So we’re putting a lot of money back into the people you put, and you’re not putting enough tax into our economy. That’s what’s riling us all.

AMY GOODMAN: That’s Labour MP Margaret Hodge, interestingly, questioning Amazon. Amazon has just announced they’re opening their first actual bookstore—after putting out of business many actual bookstores around the country—in Seattle, Washington. But I’d like to turn to another clip from the film which features Labour MP Margaret Hodge, as we just were listening to her, and the vice president of Google UK, Matt Brittin.

MATT BRITTIN: What’s different about Google versus the other businesses you’ve been talking about, we’re not selling books, and we’re not making coffee.

MARGARET HODGE: You’re selling advertising space.

MATT BRITTIN: We’re—well, the services we provide to consumers are based on the computer science. That is what creates the economic value for Google.

MARGARET HODGE: What does Bermuda create?

AMY GOODMAN: That is again Labour MP Margaret Hodge and vice president of Google UK, Matt Brittin. The significance of these interactions that you put into your film?

HAROLD CROOKS: Well, the significance of the interactions is the culmination of a story with which the film begins. The film begins with the creation of offshore world—and I’ll try to do this very, very quickly. And we need a historical context for this. The British Empire collapses after the Second World War. London, which had been the capital of global finance up to that point, needs to find a new way to maintain its position as the capital of global finance. What it begins to do is transform its colonial dependencies, particularly in the Caribbean and other places, into secrecy jurisdictions or tax havens. That begins in the late ’50s and ’60s.

When we get into the 21st century, the high-tech corporations, the major high-tech corporations of the cloud economy, like Google, you know, like Amazon, etc., etc., have devised ways for gaming the system so that they are able to put their most valuable assets—the patents and intellectual property to their technology—and book them to a tax havens, where nothing is going on, with the result that hundreds of millions—and now, you know, there’s this estimate that over $2 trillion—of untaxed U.S. corporate profit is booked offshore. Well, offshore is really a fiction. It’s a legal and accounting fiction. The money is actually not there. It’s merely on a separate set of books in New York or London or Paris or New Haven.

And the point of all of this, Amy, is that the offshoring of the world’s wealth is undermining some of the major social innovations of the 20th century—the middle class, Social Security. These are things that never existed before the First World War. And they’re very, very dependent on a whole interconnected bunch of things—progressive taxation, to start with—all of which is being undermined by this offshore world that is now being gamed to the tune of trillions of dollars.

AMY GOODMAN: James Henry, we have 15 seconds. What do you think is most important to do right now?

JAMES HENRY: Well, there’s a global tax justice movement. It recognizes this is a global haven industry that we’re fighting, not just an archipelago of individual havens. And there’s all kinds of tax reform that we need to put on the agenda, going forward. But this is not something that’s going to be made in Washington. It’s going to be something that citizens have to get involved in.

AMY GOODMAN: Do you think Occupy began the movement?

JAMES HENRY: I think Occupy contributed to awareness, but I think, you know, we’ve got to make the focus on tax, because otherwise we have, essentially, these people are becoming citizens of nowhere, for tax purposes, and they have extraordinary representation without taxation.

AMY GOODMAN: We’re going to have to leave it there. James Henry and Harold Crooks, thanks so much for joining us. The film is The Price We Pay.

And that does it for our broadcast. We have a job opening, director of development. Check our website.

Watch Next
The Price We Pay: Inside the World of Big Corporate Tax Havens and Offshore Finance


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