So, after the Panama Papers, the latest leak, called Paradise Papers, once again reveal how the rich “legally” (but not legitimately!) avoid paying their taxes and make play with their money in even illegal ways, well hidden behind aiding and abetting global institutions. Meanwhile, working Americans are getting squeezed out of their last drop of blood and persecuted like criminals when they have any foreign income, for instance when our jobless economy drives them out of the country or they are married to a foreign spouse.
First, in case you haven’t heard about the recently published Paradise Papers, here is a TV report (sadly with a dubious focus on laying bare even the flimsiest Russian connections to the Trump cabinet, as if we really needed those to realize that practically all current big-time politicians and their Big Money associates are utterly corrupt):
(Note: if the video linked above gets deleted, you may search the Internet for the title: “Paradise Papers: Millions of Leaked Docs Reveal Shady Ties & Tax Evasion by Trump’s Inner Circle”)
But let’s now cut down to the bone:
II. The Privilege of the Rich
I want to keep this relatively short (despite having a lot of ground to cover). So, here, to start with, is a most quick look at how the rich enjoy total financial freedom: Basically, they hire or make use of financial experts who know loopholes in this or other countries and have the ability to set up straw-man trusts or mailbox companies overseas in nations which – either through lack of development or out of a willful strategy for pulling in foreign funds – don’t regulate and tax big money sufficiently, or at all. Most, but not all of them, are micro-nations, the size of a county, or small island nations (most commonly tropical ones); but England has two nearby ones: Jersey and The Isle of Man. In our hemisphere, Caribbean Islands vie for being the best of all cheats.
There are all sorts of loopholes, and – as a former German Finance Minister explained – they are like the heads of a hydra. You lop off one, and two new ones grow back. A common trick is to register a company in one of those tax havens, have it receive all the profits from a giant global business, and pay no or very little taxes because that pretty island collects little to no taxes. Then, you buy your private jets and yachts with that money, naturally registering them on one of those islands to avoid any import taxes, as well.
To some degree, larger nations also offer loopholes. For instance, you can register two companies in the Netherlands. One receives the payment for whatever you sell, but it avoids taxes by paying the lion’s share of the money to the second company in the form of license fees which the first company can deduct from taxable income and which the second company doesn’t have to tax because license fees are not taxable in the Netherlands — for obviously only one reason: the Netherlands, a global financial genius for centuries(!) which gave humanity its first giant multinational investment bubble burst (involving tulips), want that money to come within its borders where it may then be spent.
Germany has just had news of one of its own loopholes in real estate. If you buy a skyscraper or similar big building in Germany, renovate it, and resell it at a huge profit, you can avoid all taxes on your sale (tens of millions of dollars) by selling two small parts of it (apartments or offices) to two strawmen. A weird German law then makes the deal completely tax exempt.
Of course, American giants like Apple, Amazon, Twitter, Facebook, and Google, avoid taxes by having their profits go to places like Ireland or the Bermudas and storing them there until our lobbied, corrupt politicians from the Republican and “Democratic” Party put through a tax reform or similar bill that will let them bring the money back here at a huge tax discount. They sell this fraud to us as a government action to bring foreign-held money back home and finally collect corporate taxes, conveniently playing down the gigantic tax discount involved. If you are rich in the U.S., you actually don’t even need to avoid taxes through any of these offshoring loopholes. Your income tends to be in the form of capital gains (as opposed to paid work), and thus you only get a mere 15% tax rate anyway (keyword: the Bush Tax Cuts, extended by Obama by the way).
As for all those global tax havens, the late German Chancellor Helmut Schmidt, shortly before his death, famously said that they could easily be closed and investigated, since they are all well known. But, as I hinted in the previous paragraph, our pretend-representatives in government have completely opposite goals. They enrich themselves by enriching their corporate and billionaire donors, getting kickbacks, and then exploiting the tax loopholes themselves. Tit for tat. Meanwhile, you and I are left holding the bag and are paying taxes through our noses if – after all the other ways in which we are getting robbed by our rigged system – enough earned income is left with us to exceed the rather low personal tax exemption that is meant to keep us from starving so that we can be ripped off a little longer before we get too old and sick and are scheduled to die by withholding healthcare from us.
III. The Bleeding of the Non-Rich
So, now that we have had a brief look at how the rich avoid taxes, hide their money, and can use it to commit crimes (such as bribing our government officials and buying our elections) — all undercover created by both foreign governments and our own — let’s take a look at how things go for us disowned people, the working class, we who have been born to rent ourselves out as a kind of rented slaves, toiling for the rich who live in such splendor and have so many means not only to receive free money taken from our fruits of labor in the form of low wages, loan interests, and fees, but also to not have it touched by taxes.
Well, first of all, we typically get no free money. We don’t have dividends rolling in for no work at all. Instead, we finance the dividends the rich get for free by essentially paying rent for our right to live on this world, on which the rich hold papers that give them title of possession. We must pay rent, called rent or mortgage, for housing. We must pay a kind of rent for our right to work in the form of company profits that are taken out of our paychecks and go to the CEO and shareholders. We must pay rent for higher education in the form of interests on student loans. The same goes for any other loans made necessary by the insufficient incomes this rentier system creates. Whenever we buy something, we often must pay rent in the form of profit margins which can be exorbitant as in the example of the infamous price-gouging in healthcare and pharmaceuticals. We must pay additional rent on our food and other material things that we buy in the form of sales tax, as well as added rent on our labor in the form of income tax. And most of these rents go to the rich, either directly or through our unfairly taxing and subsidizing governments which tax workers and exempt or even subsidize the rich and their corporations. How else do you think that the top 1% own more wealth than the bottom 90% and receive more income than the bottom 50%?
You, see, the federal government can issue unlimited dollars to pump into the economy — and when it is invested in the poor, it creates a happy middle class and flourishing economy, like FDR did — but if it invests that money into the too-big-to-fail banks like Obama did, everything only gets worse for us. Since money needs to circulate (like blood in the body), the government needs to take it back through taxes. And when those taxes are taken from us disowned people instead of the rich and their corporations, then it is us – the working people of America and the world – who lack the means for a good life, while the rich swim in oceans of money they don’t know what to do with, except to buy up even more of our planet’s and nations’ resources, and the governments while they are at it.
IV. The Ultimate Irony
And here is the ultimate irony concerning news such as the Panama and Paradise Papers. If you, as a working American, are driven out of the country by our increasingly jobless economy — which results from the rich wringing out our economy like a wet towel — our government then pretends to fight tax evasion in foreign tax havens by persecuting you like a criminal for the “crime” of living and working in a foreign country. Funny, isn’t it?
To look up the details, just google keywords like FBAR and FATCA. You see, except for two rogue nations, all nations on Earth simplify taxation by restricting themselves to taxing only those folks who live within their borders. The two rogue nations are two developmental countries called Eritrea (a small African dictatorship) and the United States of America.
With regards to Eritrea, it is difficult to compare the full unlimited U.S. income, capital gains, gift, and estate tax liability of US citizens (and mere Green Card holders(!) and spouses of Americans) living outside the U.S. to the minimal $3 to $4,000 USD charge for a Eritrean tax certificate that must be paid only by those Eritreans abroad who wish to get passports, marriage-, or birth certificates from Eritrea.
Get ready to compare this to the other developmental nation:
As an American, you could possibly be “lucky” of sorts, if you earn under $100,000 USD from exclusively foreign employers, earning nothing on the side, say by publishing in the U.S. Your U.S. taxes (not your asset declarations!), at least, then can become relatively simple via the Foreign Earned Income Exclusion, which greatly limits travel to the U.S., though. Take a vacation in the U.S. to visit your relatives, and you may blow it and be criminalized because you stayed a day too long. If things are not so simple (mixed incomes and such), you must juggle both countries’ taxes to try and subtract your foreign taxes from U.S. taxes, even when the foreign tax agency certifies your taxes way after April 15th. Either way, you must declare in both nations, having more than double your usual tax time trouble considering how much more complicated it is to declare U.S. taxes from abroad. Most tax software simply won’t do it. The rest of tax software probably makes mistakes or will handle only your federal tax but at the end inform you it can’t handle your state tax. And, of course, you get no W2s or 1099s from foreign employers and must furthermore convert all foreign money into U.S. dollars based on a particular day’s exchange rate. In addition, the rules and laws are unbelievably complex.
When it comes to the U.S., the sheer jungle of regulations and laws applied to expats is the largest rainforest on Earth. There exist all sorts of reporting and taxing requirements, complicated by exemptions that are supposed to prevent double taxation, the risk of which only exists because the U.S. insists on reaping where it didn’t sow. These regulations are further complicated by individual agreements between foreign nations, the U.S., and individual U.S. states. In addition to having to file Income Tax returns (and possibly pay extra taxes on top of your residential country’s taxes) with the IRS and any number of U.S. states who choose to consider you a nonresident resident (or some such similar word), you also have an annual obligation to separately file “Foreign Bank and Financial Accounts” (a.k.a. FBAR) with both the IRS and the Treasury (with which you never had to deal before) if you dare to save some money in excess of $10,000 (say, for a down payment on a little house someday).
As soon as you have more than $10,000 total in your bank accounts (or any other forms of assets) located abroad, even if that money isn’t yours but that of your foreign spouse with whom you share a bank account, you are liable for being fined $10,000 or half of the money, whichever is more, when you – oh so criminally – fail to report these assets (and on time!). This reportable sum actually is that very hard to determine the highest amount that you had at any given time throughout the past year (no bank will calculate this for you), and you then have to convert it into U.S. dollars using the exchange rate of an uncleanly defined date (probably from December 31 and found on the IRS site somewhere).
There’s no court process when they decide to penalize you. The agency just decides that you did wrong, and can come after you to the tune of $10,000 or 50% of all you own… and not just once, but EVERY SINGLE YEAR. If it decides your reporting failure was willful, they can even fine you for $100,000 or 50% of your value – or up to $250,000 with criminal charges and up to 5 years in prison – (way more than most of us working people can ever save in a lifetime!), again EVERY YEAR! For billionaire bandits (a.k.a. the robber billionaires) this is chump change, of course, in essence, another tax loophole.
Maybe, at this point, when you are criminally charged, you could try to defend yourself in court (difficult if you live abroad, for sure). I have read that in determining whether the failure to file a required FBAR was willful, courts have thus far found that the government must prove its case by only a preponderance of the evidence (just enough evidence to tip the balance) rather than by the more demanding standard of clear and convincing evidence beyond reasonable doubt.
They don’t even care if you reported all of your money as income, back when you earned it, and already paid your full taxes on it to either your new country, or the U.S. (say, if the money was your U.S. savings you took with you to start a new life abroad), or both. Despite you having paid all taxes, and maybe more than your fair share of your earned money thanks to double taxation, they can still create the fiction of you being a tax-evading criminal and financially rape you – an honest, hard-working income earner – caught in the jungle of traps they set up for us non-rich people.
You might now think that there exists an escape, after all: how can the U.S. touch you in a foreign country? Forced Compliance, that’s how! Worldwide, financial institutions that do not comply are subjected to a 30% withholding on every transaction from a US financial institution. Since they don’t want to lose 30% of all those transactions, foreign banks, therefore, become accomplices of this U.S. persecution of its expat citizens and permanent residents (and even their foreign spouses and children). Furthermore, underpayments of tax attributable to non-disclosed foreign financial assets you somehow missed on your tax returns (maybe assets related to your trying to build a home or saving money for retirement, assets often tax-exempt inside the U.S.) will be subject to an additional substantial understatement penalty of 40 percent.
This tyrannical persecution of innocent workers utilizing Forced Compliance is such a mess that, in some countries, banks have begun to refuse opening bank accounts for American citizens or have even closed existing accounts. Naturally, in today’s economy, you need to have a bank account in order to be able to receive your wages (paychecks don’t exist anymore in many countries) and to pay government fees and taxes. So, how can you still live and work abroad, then? Likewise, aspiring business people (say, you want to become self-employed or partner with an existing business to escape the lifelong exploitation by employers) are also greatly disadvantaged globally if they happen to have American citizenship. Since they have to report on any, even partial, corporate ownership, many companies refuse to partner with Americans. Up to now, I was speaking of more or less low-income earners but have now crossed the line into high income. American high-income earners abroad are also disadvantaged because they may have to pay double taxes, namely taxes both abroad and in the U.S., a country they may never even return to, and which does nothing for them in return for those taxes.
People who, known or unbeknownst to themselves, were born on U.S. soil or a U.S. ship, can be assaulted with ruinous tax back-pay and asset-non-reporting penalties on the lives they have lived abroad (in their true home countries), never having gone to school or worked in the U.S., just because of that technicality of U.S. citizenship they may not even be aware of. A reverse DREAM act… a nightmare, in fact. These are the types of laws our American politicians enact with their limitless hubris. We are indeed the rogue nation on Earth.
And this persecution is perpetrated by a country which declared independence from its mother nation because of taxation without representation and which, soon after, went to war with the North African Barbary States who, with their ship-raiding corsairs, likewise reaped where they had never sowed.
Since it is so horrid, increasing numbers U.S. expats try to escape this persecution by renouncing their U.S. citizenship. The current estimate for this year is 6,813. That’s a 26% rise from 2016’s total of 5,411, which was itself a 26% jump from 2015 and the highest record, so far.
However, renouncing U.S. citizenship not only requires expatriates to settle any alleged outstanding taxes but – just as in our plantation slavery days – you must buy your freedom with a hefty fee of currently $2,350 USD. Furthermore, choosing that route can affect whether you will be able to collect Social Security. Social Security will depend on the US agreements with the country in which you chose to reside. In some countries your benefits from Social Security cease. I hear, you also must spend one day in the U.S. every 30 days or 30 consecutive days in the U.S. every six months. Lot’s of unaffordably expensive travel for a non-rich person overseas (the kind who does need his earned social security benefits in old age!), if that’s true. If you don’t abide by one of these time frames you lose your Social Security benefits. Giving up your American citizenship can also affect benefits for dependents and survivors. So, escaping the foreign-income and asset tax (and confiscation) maze can open another can of worms related to the money which the States took from you all your working U.S. life to eventually return to you in your old age and thus allow you a dignified retirement for you and/or your spouse or widow(er), financed with your working-life money. But as a former slave who bought himself free from its U.S.-governmental owner, you may be stripped of these life savings of yours.
V. Final Words
So, if you belong to the disowned and essentially enslaved American People, the non-rich, I mean, you will be robbed, ripped off, and bled dry one way or the other. But if you are rich, you get oodles of free money and don’t even have to pay taxes. That’s the system that our corrupt politicians from the twin-party-tyranny have built up around us while we were watching sports or movies, attending classes, working our jobs, and doing our daily chores, all the while trusting in the rectitude of our political and economic system. The paper paradise of the rich is the paper hell for the rest of us. Pitchforks and torches anyone?
Dirk Droll is the Publisher and Senior Editor of Beanstock’s World.
To all lovers of the Paradise Papers, here is another video:
(Note: if the video linked above gets deleted, you may search the Internet for the title: “‘Paradise Papers’ Expose Giant Elite Tax Dodging Scheme”)