They Spin Tall Tales

Feral Beasts Spin Their Offshore Fairy Tales
In one of his last public addresses, British Prime Minister Tony Blair has referred to the news media in general as a "feral beast!" In case you were wondering, "feral" means "characteristic of wild animals; ferocious; brutal." In other words, Blair - and I agree - sees the press as a wild and brutal pack bent on making "news" regardless of the truth or the damage done.You can see this kind of media damage if you happened to catch Senator Max Baucus (D-Mont) on the news, and his completely phony attack on the Cayman Islands. Baucus and some of his leftist Senate colleagues, Dorgan (D-ND) and Levin (D-Mich), have been practicing the Big Lie technique perfected by Hitler's Propaganda Minister, Josef Goebbels. Without a shred of proof these worthies have spun out a tale about offshore tax havens. They're claiming tax havens are responsible for what they call the "tax gap." According to these demagogues, U.S. taxpayers are underpaying their taxes and under reporting their income by as much as US$100 billion annually, by stashing away their cash in offshore havens. With what passes as a straight face, Baucus and others piously claim they suspect that Americans are using bank secrecy laws and the ability to channel income through tax-free offshore vehicles to evade reporting income to the Internal Revenue Service.And like all good storytellers, Baucus has found what he thinks is a dandy illustration of these sinister offshore doings. It's a five-story office building in the Cayman Islands, called the Ugland House. It's a nondescript structure that's home to over 12,000 companies legally incorporated in the islands. At a recent Senate hearing, Baucus dramatically held up a photograph of the building, demanding to know what the companies in it were doing. Now he has carried the ch! arade further by ordering U.S. government inspectors to fly to the Car ibbean to inspect "shady transactions" in the building.Of course, the disingenuous Senator knows very well that the building is an official registry for corporations, mutual funds, hedge funds, insurance companies, trusts and other legal entities. And it's not just used by Americans, but by people from all over the world. The Cayman government said "substantially all" of the answers to questions the Senate committee was requesting were "fully in the public domain."Many U.S. firms have subsidiaries registered in the Cayman Islands. Big energy companies such as El Paso Corp., Transocean Inc. and GlobalSantaFe Corp. have subsidiaries there. Most U.S. companies have corporate units offshore for strategic, financial and tax reasons and they make no attempt to hide them. And why shouldn't they? U.S. law allows corporations who register in the Caymans or in other tax havens to reduce their tax burden from the 35% the! IRS taxes on domestic profits to zero offshore. (The U.S. 35% corporate tax is one of the highest in the world). The Cayman government collects neither personal nor business taxes. So why shouldn't U.S. companies reduce their tax expenses, allowing them to lower their prices, increase their profits and up their shareholder dividends?As Dan Mitchell of the Cato Institute says: "There is nothing wrong with lots of company registrations, of course, but politicians cannot resist going for cheap headlines."