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​What price taxation? Swiss privacy and the truth about offshore banking

Patrick L Young is expert in global financial markets working in multiple disciplines, ranging from trading independently to running exchanges.

Published time: March 04, 2014 12:32
AFP Photo / Fabrice Coffrini

Nowhere was the unedifying hubris of the bankster classes more obvious than in Swiss real estate. Not the private banking halls off Zurich’s Paradeplatz but rather their office portfolio in the heart of the USA.

Whole city blocks were adorned with the logos of UBS, Credit Suisse et al. Skyscrapers of delusion oxymoronically offered ‘private offshore banking’ despite being rooted within US territory.

When the bubble burst western nations became fixated with finding every last shekel to fund their big government spending machines, whether to pay for war, social services or most ludicrously of all, bank bailouts. Thus Michigan Democratic Senator Carl Levin, began a quest to repatriate taxes from those depositing dollars ‘overseas’ by the trouser load (sometimes literally).

Higher standards have been applied to offshore centers. Naturally it’s never enough for the hard leftists living in fruit trees knitting their own sweaters from mango leaves or whatever, but then again they don’t actually endorse economic growth as anything other than a bourgeois fantasy. Each to their own (so long as they don’t restrict my freedom of enterprise)! However, ridiculous myths ultimately obscure the offshore financial truth, which contradicts the delusion that offshore finance is a panacea to save governments from a fate worse than debt.

Yes, I always thought Manhattan branches providing deposit slips for Geneva were destined to pay recompense. Realistically, the most efficient way to stop such behavior is simple taxes, which encourage compliance (qv Russia’s 13% flat rate). Faced with a labyrinthine tax code, there was the unedifying spectacle of citizens parking their patriotism at the door of Credit Suisse believing they could outsmart the IRS. Government officials swiftly realized UBS wasn’t providing a concierge payday check cashing service.

Typical of all good fiscal pornography, stories abound of secret agent style antics. Diamonds smuggled in toothpaste tubes, statements hand delivered in copies of Sports Illustrated. Isn’t that a bit bourgeois? Why not a proper plutocrat magazine devoted to super yachts, or private jets?

Those who lived and profited in the USA but evaded tax (regardless of prevailing rates) earned contempt.

AFP Photo / Karen Bleier

Then again nobody can damn private banking outright: a little secrecy is not such a bad thing either. Naturally that appalls those keen to damn anybody with a calfskin wallet as a plutocrat but hear me out...

Democracies have a nasty habit of collapsing into chaos. Invasions and poor government are not conducive to civic function. Citizens are entitled to protect hard earned savings. Europe suffered devastating confiscation during and after WWII. The original Swiss private accounts were created to help those fleeing Nazi confiscation - thus private banking saved lives. Nowadays Venezuelan citizens remain desperate for offshore accounts before Bolivarian kleptocrats steal their assets.

A recent Senate committee hearing provided typically bilious grandstanding amongst the Washington elite. However, Senator Tom Coburn (Republican - Oklahoma) was somewhat droll cutting through an argument about not breaking Swiss privacy laws with Credit Suisse General Counsel Romeo Cerutti, by asking him which jurisdiction he preferred to be jailed in: Switzerland or the USA.

Alas beyond the hype, there is no pot of gold at the end of the rainbow. Lost revenue does not equal the amount of money held overseas (a common high tax movement canard). In truth, the 1% could barely cover a few days of government spending.

Self-appointed offshore tax crusader, Senator Levin, believes the IRS loses 100 million dollars annually through money offshore. On a governmental scale, that’s chicken feed... Nationally, total taxation lost to offshore funding is equivalent to less than one hour of the government’s $2.7 billion daily borrowing.

The insatiable big government beast wants to keep plundering to feed its crazed military industrial corporate socialist spending addiction. If you want to get annoyed, ignore these miserly plutocrats and concentrate on how corporatist socialist government feeds big business at the expense of the little guy: 2013 subsidies to Fortune 500 companies alone totaled $63 billion! Let’s attack that bloat and hence shrink government and taxation to deliver a bottom up innovative economy.

Considering how government wastes money, worries arise with national debt approaching $18 trillion. Perhaps escaping the system is an idea? Sending funds offshore or into bitcoin to avoid a government which is so out of control in its spending that it could yet become another Argentina. However, a lot of people say that’s controversial...

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

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