Today one of the United Kingdom's leading left-wing newspapers, The Guardian, a proud mouthpiece for the radical anti-tax haven Left, posed this question about the American State of Delaware: "It lacks the palm fringed sandy beaches of the Cayman Islands. Or the craggy Alpine peaks of Liechtenstein. But should the second smallest U.S. state, Delaware, go on a blacklist of globally notorious tax havens?"
Now I must admit a certain sympathy for Delaware and its good people, from the duPonts up north, to the many Perdue chicken farmers down south. And it is the home of the illustrious and talkative Vice President of the United States, Joe Biden, Barack Obama's chosen running mate.
You see, the Maryland congressional district that I had the honor to represent for eight years in the U.S. House of Representatives bordered on almost the entire Delaware state line. It was my pleasure to know and work on common problems with Delaware residents and their congressional delegation, (although Senator Biden was usually difficult and always talked too much).
The First State
A wedge-shaped chunk of land 96 miles long sitting halfway between Washington and New York, the State of Delaware, (the "First State" because it was the first of the 13 former British colonies to ratify the Articles of Confederation on December 7, 1787), is home to 870,000 people, a scant 0.3% of all Americans.
But more than half of the United State's publicly traded corporations are incorporated here, including 60% of the Fortune 500 firms. A single low rise, yellow brick building, 1209 Orange Street, in Wilmington, is the legally registered office of more than 200,000 companies including Ford, American Airlines, General Motors, Coca-Cola and Kentucky Fried Chicken.
The lure of Delaware is two-fold. On the fiscal side, the state, as do most tax haven, has a territorial tax system that only imposes a corporate income tax on profits that are earned within the state. Subsidiaries operating elsewhere in the U.S. don't have to pay Delaware taxes either.
Tax Havens "Bad"
When those New World Order G-20 geniuses met in London, you will recall that tax havens were their chosen bête noire.
Impotent to do anything real about the global recession, Obama, Brown, Sarkosy and Merle got their collective jollies attacking small jurisdictions for imaginary sins -- imaginary because tax havens had little or nothing to do with causing the global recession. The recession clearly is the evil product of greed and group idiocy in Wall Street and the City of London, aided by both countries politicians.
The assembled G-20 hypocrites pledged "to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems."
They also produced a blacklist of 34 supposedly "bad" tax havens, the sole criterion for "bad" being these jurisdictions will not automatically turn over requested tax information about foreigners with bank or financial accounts in their countries.
Of course the authors of the "bad" jurisdictions list carefully excluded themselves, including the United States and the United Kingdom, two of the leading tax havens in the world.
The Mouse Roars
In London few G-20 voices were raised against this blatant U.S. and U.K. hypocrisy -- but one brave soul did speak up, and loudly so.
The Grand Duchy of Luxembourg's Prime Minister, Jean-Claude Juncker,(left) told it like it was: "I find the treatment of certain states to be incomprehensible." Juncker had said previously that if Luxembourg were put on any international list of offshore financial centers then "Delaware, Nevada and Wyoming should also be named and shamed as tax havens."
"The G20 has no credibility as an undertaking if Delaware, Wyoming or Nevada or far-flung islands from the United States [the U.S. Virgin Islands] are not on the blacklist," he told lawmakers at the European Parliament in Brussels. If there must be a blacklist then, America should have its place on it," he said.
The three U.S. states Juncker named are popular locations for incorporating businesses because of the tax advantages of doing so, while the U.S. Virgin Islands also offer major low tax benefits.
Unfair Fatuous List
"I don't hear any other prime minister than myself ... raising this problem, Juncker wryly observed. "Why doesn't Brown say to Obama, put an end to the tax havens on American territory."
Juncker, who chairs the group of 16 EU nations that use the euro, added a parting shot: "The G20 has no credibility if Delaware and several other tax friendly U.S. states are allowed to pass under the radar: If there must be a blacklist, then America should have its place on it. I would like all the bold leaders in Europe who insisted that those three EU countries [Luxembourg, Belgium and Austria] that practice banking secrecy drop it, show the same courage towards the United States."
Juncker was not the first to raise Delaware's alleged status as a tax haven. In 2008 the Brazilian Congress and its politicians took aim at the second smallest state in the U.S. A Brazilian law defined Delaware as a tax haven right along with the Cayman Islands, Panama, the British Virgin Islands and Bermuda, among others, and imposed tax penalties on Brazilians doing business with them.
Grand Duchy No Tax Haven
Fact is that Luxembourg is primarily a business and banking haven, rather than a personal tax haven and also a haven for international holding companies and investment funds. The effective corporate tax rate is over 30%. Personal income taxes can range up to 38%. Holding companies, which have enjoyed a special status since 1929, escape most taxes. Microsoft, FedEx, AOL, iTunes and Skype are among companies with global or European headquarters there.
Its strong financial privacy laws are enhanced by the fact that it is one of three EU nations that are exempt from tax information sharing with other EU member states. Tiny Luxembourg over the years has become a major EU financial hub, thanks to its bank secrecy rules and low taxes.
Obama Demagoguery Recalled
The issue Juncker raised about Delaware and its 200,000 corporations in one building contrasts nicely with a bit of political demagoguery Mr. Obama repeatedly used during the 2008 U.S. presidential campaign.
Obama several times referred to an office building in the Cayman Islands that, he said, supposedly housed 12,000 U.S.-based corporations. "That's either the biggest building in the world or the biggest tax scam in the world," he said. The building is Ugland House, (left below) the home office of the international law firm, Maples and Calder. It is the address of almost 19,000 companies, many of them American.
In both Delaware and the Cayman Islands, there is nothing sinister about foreign corporations registering there. That act allows them to take advantage of their home country's lawful tax breaks allowed for foreign investment and income earned offshore.
True Intent: Destroy All Financial Privacy
As I have said before, all this G-20, leftist, Big Brother anti-tax haven pressure is a smoke screen for welfare state tax collectors aiming for complete destruction of financial and personal privacy for everyone, (just as the so-called PATRIOT Act has done in the U.S.) These tax bureaucrats demand access to every citizen's financial lives, no matter where you live or where you may have assets.
For them abolishing bank secrecy is not enough. They also want to end lawyer-client privilege, mandatory publication of all beneficial ownership of private trusts, private corporations and private foundations, plus the imposition of a global system of total tax information exchange among all nations. The G-20 meeting well may have advanced these anti-liberty goals, with Obama in the lead.
The false assumption of all these leftists is that personal and financial privacy must now yield to Big Brother government's unlimited right to know all. They want a complete end to what little remains of financial and personal privacy, constant tax collector fishing expeditions into your private business, banking and personal papers, plus international rules that make every human being who dos business outside their home country a constant target for tax persecution.
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