In the beginning of the week, The Guardian released a number of new documents that have identified wealthy individuals and corporations who have created tax havens to avoid paying high taxes. Some of the biggest names and companies that have been identified are members of President Trump’s cabinet, the royal estate of Queen Elizabeth II, singer Madonna and Bono, and the companies named are Amazon, Nike, Apple, Walmart, and many more. With these tax havens, over 8% of household financial wealth is held offshore, which represents a loss in annual global tax revenue of around $190 billion. However, if you take into consideration the tax evasion made by these multinational corporations, more than $7.6 trillion may be hidden in these different tax havens. That is quite a bit of money.
What are some ramifications of these tax havens? Are they illegal? Well not quite. Having a tax haven for your personal assets or for these huge corporations is not illegal, but they are quite controversial. There is a difference between tax evasion and tax havens, tax evasion is absolutely illegal. That is when you simply try and avoid paying taxes altogether. A tax haven is storing your assets in a country where the tax rates are much lower. So the individuals who have tax havens are not avoiding taxes, but paying taxes in a country where the rates are much lower.
So what’s the big deal if they are not breaking any laws? First and foremost, if these individuals call themselves Americans, or residents of any other country, then they should be paying their fair share of taxes, especially since they can afford to do so. There is definitely a buildup of resentment of these persons and corporations because everyone else is paying taxes back to their country, and cannot afford high-end lawyers and accountants who can set up these offshore accounts.
Another big reason why these tax havens are controversial is because many times offshore accounts can be linked to illegal activity. The main one being money laundering, as well as drug trafficking, and others who want to operate in secrecy. While it is impossible to speculate on whether or not any people or corporations mentioned in the Paradise Papers are doing anything illegal, it is still seen as an unfair advantage that the wealthy have over common individuals.
And while the Law Office of Nicholas J. Del Pizzo does not specialize in tax law, we find that it is important to make those aware of what’s happening around us. If you are in need of a lawyer, please feel free to contact the Law Office of Nicholas J. Del Pizzo today!