The Cost of Tax Havens

The Ugland House

If you have seen the news lately, then you have probably heard about the government’s crackdown on offshore tax havens.  The issues surrounding offshore tax havens are complex.  The U.S. Government of Accountability Office (GAO) is the investigative arm of Congress charged with auditing and oversight of these questionable tax havens for U.S. based corporations.  Since the GAO has yet to release a clear definition of a tax haven, we’ll leave the politics and possible solutions to this problem to others that are smarter.  Today we will focus on several reports released on the subject and how offshore tax havens affect you.

In 2008 the Senate released a report that estimated the United States losses $100 billion annually in tax revenues due to offshore tax abuses.   Following this, the GAO issued their report that found that 83 of the 100 largest publicly traded U.S.  Corporations reported subsidiaries in countries listed as tax havens or “financial privacy jurisdictions”.   The public face of tax havens has become the Ugland House in the Cayman Islands.  The GAO found that 18,857 businesses are registered at the address shown in the picture above.  Most businesses at the Ugland House have only a P.O. Box, yet are still able defer massive amounts of taxable income by U.S. standards.

Using the data from the reports above, the U.S. Public Interest Group issued their analysis of how these tax havens were costing U.S. taxpayers by state.  The group arrived at its analysis by dividing the $100 billion figure from the Senate report by the percentage of total federal income reported by each state.  For example, Illinois had a tax burden of nearly $5 billion shifted to taxpayers while Missouri had $1.7 billion. 

Consider this:  The revenues to finance improvements to make our infrastructure more efficient, our schools better and our parks cleaner comes from taxable income and these billions are not included.  No one enjoys paying taxes, but it’s a necessity that keeps are society and government running.  So the question becomes; who would you rather pick up the tab?