- Tax Haven USA

Written by Donald Hank

Tuesday, 15 September 2009 14:30

Panama Canal, Panama Is Panama a tax haven? Some Democrats think so and oppose a free trade agreement with that nation on that basis. Chief among them is John Kerry, who acquired millions in cash and real estate tax free simply by saying “I do.” There are good reasons to oppose a free trade agreement with Panama that is modelled on NAFTA, not the least of which is that NAFTA-style agreements have at their base more to do with dissolving the national sovereignty of the nations party to the agreements than they do with allowing free and unfettered trade.

Aside from the desireability of a free trade agreement, what should be made of those folks accusing Panama of charging little or no tax on foreign investments and not reporting bank account activity of foreign nationals? To start, it is worth noting that besides the United States, many countries like Germany, the UK, Japan, China and Sweden do not believe Panama is a tax haven. France and Russia have already stopped listing it as such.

Some questions arise:

Is it hypocritical for a large rich country that is a known tax haven to accuse a small poor country of being one and to threaten to make it poorer as a punishment?
Does a tax haven for the rich have more or less impact than a tax haven for the poor?

The answer to the first question is yes.

The answer to the second is a bit more complex.

American companies and individuals hire illegal immigrants, in many cases, who do not pay taxes on their incomes. Many of these immigrants get mortgages without producing any documents. One retired HUD official said as many as 5 million illegal immigrants had gotten mortgages under the CRA-driven subprime scam. Although that figure was disputed, clearly, many immigrants working illegally in the United States made investments in homes — that would be foreign investments, not a penny of which was reported to the U.S. government.

So is tax haven USA draining less money from our treasury than tiny countries like Panama? Since neither the United States nor Panama report how much is being spent, the accusers have been accusing with impunity. But let’s analyze what we do know.

In 2006, the Mexican government reported that Mexicans working in the U.S. had sent $20 billion in remittances back to their families in 2005.

Now, assuming that only a negligible percentage of these remitting Mexicans are here legally, if they send about $20 billion home to Mexico every year, and if they make up about half (56 percent) of the illegal immigrant population, we can get a rough idea of how much illegal immigrants in general are earning.

We can safely assume this $20 billion sent by Mexicans represents probably not even a tenth of what this group earns in the United States yearly, particularly since: 1) not all of them remit money; 2) it is expensive to live here; and 3) the mortgage payments made by millions of them would have them too strapped to be sending a tenth of their income home.

Mortgage holders would represent a significant percentage of the group. So let’s say, conservatively, that the actual earnings of these Mexican immigrants were at least 10 times that amount, or about $200 billion. Now, since Mexicans are only about half the number of illegal immigrants, the remainder (Asians, Arabs, Africans, other Latins, Russians, etc) earned about the same amount, or at least another $200 billion. Add this to the $200 billion earned by the Mexicans and that’s about $400 billion in one year. If only half of this money was taxed, that leaves us with lost revenues on at least about $200 billion. Give or take a little either way, it is pretty clear that the United States lost billions in revenues through these tax haven policies.

Now I asked whether a tax haven for the poor could have more impact than a tax haven for the rich. The Center for Immigration Studies said in 2002:

Illegal alien households are estimated to use $2,700 a year more in services than they pay in taxes, creating a total fiscal burden of nearly $10.4 billion on the federal budget in 2002.

So aside from the billions lost in tax revenues, the United States is socked by huge social-services costs to tax payers. Now let’s compare this to Panama.

Recent IMF figures show that foreigners have about $13.6 billion invested in Panama banks, but the percentage of American investors is small. Colombia has invested $1.7 billion, mostly in construction. Most of the other major building projects are being undertaken by rich Venezuelan refugees. There is one high-profile U.S. builder here, Donald Trump, whose share in the construction market is $220 million. And since this investment amount is published, Trump’s case does not qualify as evidence of a tax haven policy.

Need I mention that none of these foreign investors uses free social services?

Thus, not only is any tax loss to the United States from Panamanian fiscal and financial policies minimal as compared to our loss from often not taxing the labor of illegal immigrants, but the loss due to these de facto U.S. tax haven policies is inestimably greater due to extra astronomical social payments.

To help put Mr. Kerry’s mind at ease, let me relate my personal experiences in this free wheeling financial climate.

Attempting to open a bank account in Panama, we were told that, according to Panamanian banking law in addition to the usual verifiable ID and other usual documents, we would need:

1) A letter from someone who had a bank account in Panama, stating they knew us,
2) A letter from our bank in the US saying we had a bank account there,
3) A utility bill showing we resided where we said we did,
4) Proof of income
5) A letter from an American citizen stating he/she knew us.

Further, they needed to know about how much we would be depositing and withdrawing every month and how many times we intended to deposit and withdraw. If our account balance falls below $500 at any time, we pay a heavy monthly fee. We can get a “credit” card but only if the full amount spent is covered by money in our account (yes, that’s more like an ATM card). These strict policies are aimed at preventing money-laundering.

Clearly Panama has bowed to major pressure from the United States, to the point of virtually harassing its bank clients and being accused of being a tax haven.

By contrast, illegal aliens come to U.S banks, plunk down cash and open an account, often without providing so much as a simple form of ID — or at most providing only a consular ID obtained under the shoddiest imaginable requirements. Imagine how easy money launderers have it in the United States.

Here is a Biblical quote for John Kerry and his fellow Panama bashers:

How can you say to your brother, 'Brother, let me take the speck out of your eye,’ when you yourself fail to see the plank in your own eye? You hypocrite, first take the plank out of your eye, and then you will see clearly to remove the speck from your brother's eye.--Luke 6:42

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