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Hacker Publishes 2TB of Data from Cayman National Bank (twitter.com)
1549 points by andruby 20 days ago | hide | past | web | favorite | 468 comments



After watching The laundromat, I think it's big news.

Although I will always be curious why countries are letting those small, insignificant islands and countries manage all this wealth, and why they're trusted to do it. This can't be secure or safe. I'm curious about the diplomacy and the political implications of this.

What if their office get robbed? What if the island gets attacked? What if one of those shady bank defaults? What if one of the people who manage it suddenly die? I mean apparently there is a long list of why it's risky, and I don't understand how this is even legal at all. How do you wire all this money to such a small place, and how can they trust so few people to hide so much money? I have so many questions.


A recent piece in The Guardian argues that South Dakota and other US states are actually becoming the go-to place to store anonymously your illicit cash and make sure that your heirs can inherit it without taxes forever: https://www.theguardian.com/world/2019/nov/14/the-great-amer...

Partly because the US has compelled other countries to provide more transparency without joining that transparency organization itself.

"Congress responded with the Financial Assets Tax Compliance Act (Fatca), forcing foreign financial institutions to tell the US government about any American-owned assets on their books. Department of Justice investigations were savage: UBS paid a $780m fine, and its rival Credit Suisse paid $2.6bn, while Wegelin, Switzerland’s oldest bank, collapsed altogether under the strain. The amount of US-owned money in the country plunged, with Credit Suisse losing 85% of its American customers.

The rest of the world, inspired by this example, created a global agreement called the Common Reporting Standard (CRS). Under CRS, countries agreed to exchange information on the assets of each other’s citizens kept in each other’s banks. The tax-evading appeal of places like Jersey, the Bahamas and Liechtenstein evaporated almost immediately, since you could no longer hide your wealth there.

How was a rich person to protect his wealth from the government in this scary new transparent world? Fortunately, there was a loophole. CRS had been created by lots of countries together, and they all committed to telling each other their financial secrets. But the US was not part of CRS, and its own system – Fatca – only gathers information from foreign countries; it does not send information back to them. This loophole was unintentional, but vast: keep your money in Switzerland, and the world knows about it; put it in the US and, if you were clever about it, no one need ever find out. The US was on its way to becoming a truly world-class tax haven."


> place to store anonymously your illicit cash

What if I just want a place to anonymously store my legally gained cash?

Unfortunately, it seems the normal people lost their privacy nowadays at the expense of the criminals and the "If you've got nothing to hide, you've got nothing to fear" argument has taken a stronghold in the financial sector.


Because the social contract of most countries is that your legally gained cash is to be taxed in one form or another and thus has to be known by the tax authorities?

You can argue that your assets are to be private to the general public but some countries do not have that assumption (Norway comes to mind).


By "legally gained cash" I mean that taxes have already been paid for it.


Then, by definition it's not anonymous because the authorities know that you have it.

If you transfer it to someone else (legally) then there's going to be another taxable event, and the IRS will know you no longer have it.

If you're trying to store cash anonymously from the public, there are many countries where that's possible. If you're trying to store cash anonymously from the government, there's not really a legal avenue for that.


> If you're trying to store cash anonymously from the government, there's not really a legal avenue for that.

That is a succinct summary of the initial complaint.

We're moving from a world where a buyer and vendor agreeing means something will happen to a world where buyer, vendor, bank and government all have to agree before something will happen. This is not a world that will cope well with change.

There are big incentives for governments to get involved in every transaction (by definition, they don't agree with anything that they get involved with and block). But we get back to the classic problem that they are only bureaucratic humans and make a lot of mistakes. Also issues of regulatory capture.

Although I'll throw in I'm interested in how much of an impact enforcing tax law has on the small and big pictures. One of China's competitive advantages is they claim a low tax rate as % of GDP, and most of the tax evasion I've seen personally is small businesses recycling money into the local economy. Changes to such dynamics will have far-reaching consequences.


> We're moving from a world where a buyer and vendor agreeing means something will happen to a world where buyer, vendor, bank and government all have to agree before something will happen.

No, we were never in that world. The only truly bilateral agreement is a gentlemen's agreement.

Trust usually relies on certain facts being public, and visible to a whole lot of people besides the transacting parties. "Who owns what" is a pretty important set of facts to agree on publicly.


No, that does not necessitate transactions to be public, just provable (and, arguably, legal).


If I don't know even know what's your property, how should I respect it?

And even if there's some assertion that an unknown someone owns something, _why_ should we respect it? Shouldn't we as a society just take it, and ask the owner to show himself if he minds? That seems a very reasonable solution to problems like tax paradises and shell companies if you ask me.


> That is a succinct summary of the initial complaint.

I would disagree in one key way. The initial complaint focused on this as a recent change. "it seems the normal people lost their privacy _nowadays_ at the expense..."

Certainly this is true from a technology perspective. No argument there.

But I don't think this is in any way novel from a _legal_ perspective.

Governments have, since at least roman times, taxed individuals based on the quantity of things they possessed or based on transactions. As long as it has been this way, the government has had a legal right to know your financial standing.

So, if the argument is that we're in novel _legal_ ground, I disagree. If the argument is that we're in a status quo legal ground, but in novel _technical_ and _enforcement_ ground, I'd agree.


It's a trust but verify thing I believe. If the cash is anonymized, how can they know if the owner of this cash did in fact pay their taxes on it? Either they blindly trust everyone to properly declare all of their income, or they need to have some form of traceability.


So everyone is assumed to be a criminal until proven otherwise?


If you've gone to a movie they don't let everyone in and assume they had a ticket. Doesn't mean they think of you as a criminal.


I mostly have in mind the KYC strip-tease one must go through nowadays do open an account or purchase anything over $1000. There's no privacy these days.


That's the problem with making zero tolerance the ultimate goal of society.

Either we accept there will always be a few bad apples or everyone has to prove they aren't one of them.


Nit, but it's a pet peeve of mine:

The saying is "A few bad apples spoil the barrel", meaning "be vigilant about bad apples and get rid of them ASAP." I'm baffled and frustrated by the tendency to use "a few bad apples" as if the saying were "a few bad apples are no big deal, get rid of them if you happen to notice."

I actually don't think reasoning from vague analogy and folk wisdom is all that great an idea, but reasoning from the reverse is probably worse.

Feel plenty free to make the case that we should tolerate some level of misconduct - I might agree. But please don't refer to those involved as "a few bad apples" while you do it.


Moved to a house with a few apple trees last spring and.. yeah. You have to pull those out quick or you'll be bringing the farmer next door wheelbarrowfulls of soft apples for animal feed :-(


You're overthinking my point. I don't care about the folk wisdom of bad apples.

I was just using it as a way of expressing the issue at the centre of aiming to have a zero tolerance society.

Not tolerating misconduct will always lead to ever increasing intrusion into our lives and people that choose not to take part where they can will automatically be viewed with suspicion for it because the ignorant assumption is only people with something to hide would do that.


I wasn't addressing your point. I was addressing your wording.

It's picking a nit - I acknowledged that in the very first sentence of my response.

Argue for what you want to argue for - I probably agree. Just don't use that phrase that way. Or do - just know that you will be annoying me (and apparently others - my comment got more upvotes than it deserved) and distracting at least some of your audience from your argument.


Clearly you understood the intent behind my wording.

How would you have worded an analogy that you would consider more appropriate?


The simplest change would probably be "bad actors".


And our society seems to have picked the latter because it sounds good when it comes out of the mouth of a politician. This is probably a weakness of democracy.


It's probably a weakness of democracy, sure, but it's not as though "total financial freedom and anonymity" are common properties of non-democratic states.

Most of the problems in democracies seem to exist, possibly magnified, in the alternatives.


IIUC, the "problem with democracy" being pointed to is not the outcome in this particular case, but the general tendency for us to make decisions that sound good without thinking too deeply.


In a democracy, we're not the ones who are making the decisions. The decisions are, by and large, out of our control. We decide who makes the decision, but the same decisions tend to get made on the majority of issues.

So is the problem that our decider selection process is flawed and puts up deciders who don't think deeply, or is it (more likely) that whoever you put into that position is likely to come up with the same answers, because they tend to answer important questions, and then to provide a different justification because it sells better?


> In a democracy, we're not the ones who are making the decisions.

In a representative democracy, as opposed to a direct democracy, yes. In much of the US, we have a bit of both, in practice.

But even in the case of representative democracy, as long as deciders are judged based on (proposed or actual) actions, our decisions about the deciders will be based on what we think about those actions. To whatever degree it's a problem that we don't think too deeply about things, it will be a problem in a representative democracy by virtue of deciders thinking deeply about what people generally will think more than what will actually give the outcomes people generally want (where those differ - which is at least "sometimes" by the nature of our premise).


I think it's more of a weakness of societies with resources. The drive to ensure 'goodness' is even stronger among authoritarian governments


It's fine to check the ticket before letting people in. However, movie theater employees can also interrupt people in the middle of the film to check their tickets. People pay money to see a movie and are interrupted because the theater staff can't determine who has or hasn't paid.

I think that's wrong on principle but they don't see anything wrong with it.


If "property is theft" is too harsh, how about "property is theft until proven otherwise"?

Whether you agree with it or not, money laundering laws usually go in this direction.


How else do you propose taxation is assured? Blind trust?


Tax assets not transactions.

Land ownership is registered for good public purposes which does not unreasonably destroy privacy concerns - it's usually obvious who (person or business) controls the land anyway (who should a tenant pay the rent to? who gets to decide if you can be a tenant?) and it gives people a great deal of confidence that they know that whoever is recorded in the government land registry as having a right to sell the property actually has that right. The common law approach of having to hold a series of documents that identify a continuous line of owners going back to some unconfirmable initial grant by a long dead king is not in the interest of the purchaser of the land.

Moreover, the market distortions taxing land (as the primary source of government income) will have are generally positive. A person can no longer buy a house in the hope that the land it sits on will double in value. They can only buy a house in the hope that they are capable of making a profit out of it; the land purchase merely gives them the right to improve it.

The same advantages may be visible for taxation of share holdings: instead of simply trying to profit from someone else's actions, you would buy shares because you think the dividends will exceed other income sources for the same purchase. It may be legitimate to have anonymous share holdings which require active detective work, so it's possible this would be an unreasonable invasion of privacy.


> Tax assets not transactions.

I know I've said that we shouldn't do public policy by taxes but taxing wealth instead of income probably isn't easy. We can tax income because one person's income is another person's expense if I understand how this works.


Reminds me of annecdote of old tax policies on things like silverware and the difficulty in believing and searches from one austere preacher who anomalously for his station didn't own a single set. And others like the tax on windows which lead to boarding up of windows in slums and became derided as a tax on light and air.

The answer seems to be that how well it works varies heavily on what the asset.


"it's usually obvious who (person or business) controls the land anyway"

That's really not the case if the asset is owned by an opaque offshore company or trust - it's then pretty much impossible to know who the beneficial owner actually is.


Sort-of.

You can make use of Adverse Possession to take ownership of land. The owner must reclaim their property, (and prove their ownership) or loose all rights to it. Unfortunately in UK squatting in a residential property is a crime, amusingly adverse possession still applies - you could claim someone's house but go to jail.

It's a weak threat though, most luxury apartment blocks used for 'investment' have security, you need to reside continuously for 10 years, they will send the owner a letter, etc.

I would like to see the principle of 'use it or lose-it' for limited public goods like land.


Sure, why not? It has worked for many years before.

The terms like "money laundering" are only recent and swept through without properly understanding the privacy implications (and probably didn't envisage the pervasiveness of modern electronic surveillance & data breaches in today's digital world).

Anyhow, advancements in cryptographic Zero-knowledge proofs could hold the key in solving some of these problems (proof that funds are clean without reveling the source). Currently there are some scalability problems, but progress is being made so I'm hopeful. Wikipedia has a good write-up about the basics of ZKP https://en.wikipedia.org/wiki/Zero-knowledge_proof


> Sure, why not? It has worked for many years before.

Citation very much needed. It depends on what you mean by "working".

There's references to tax evasion going back before the Roman Empire. For an example from the era of the Roman Empire, the topic of tax evasion is where the story of "give to Caesar what is his" (Mark 12:17) comes from. (I've found earlier Greek references going back to at least 300BC, but that's the easiest example to verify).

The state works better when it has funds to deliver on those plans - though there are many other factors that can disrupt it such as incompetence and corruption.

"Money laundering" may be a recent term, but it is not a recent concept. In fact some notable conquests on the ancient world wouldn't have been possible without concealing ill-gotten funds. It was a common tactic for avoiding paying tribute to a neighbour who defeated you.


I don't think you need any citation or reference to know that even as early as 20 years ago there wasn't as much pervasive computerized record keeping and surveillance as there is now. By "worked well" I mean people paid their taxes and the overwhelming majority were law abiding.

Here's one example to ponder about: if we had this kind of surveillance earlier, would things like the Civil Rights Movement and generally the 60's counterculture come about? I.e. the era of "sex and drugs and rock'n'roll"? If only the authorities had the tools that they have today, oh boy! Don't like the liberation of sex? Is rock'n'roll the Devi's music? Fine. We'll close your PayPal account.

Privacy is very important for having a free society and freedom of expression. Financial privacy should be no exception.


Majority of people paid their taxes, but many didn't, many more than today. Think of mafias of all kinds. So law abiding majority had to pay more to cover state expenses. Without computerized record keeping taxes were collected in person, often with support of armed force. And tax evasion could be as simple as hiding in the woods when tax collector comes. It worked, but not so well.


Yet the world itself worked rather well. That must either mean that taxing working well is not necessary for the world to work well or that it worked better than you are implying.


What does 'worked well' mean?

If you measure anything, infant mortality, poverty, murder rates, diseases, nutrition, education, which of them fit any sensible definition of 'well'?


This question works both ways. If a radical change is being argued for, such as total financial surveillance without possibility of anonymous transactions, then I would expect the person making the argument to put forward a benchmark showing that total financial surveillance is making the world better.

In my case, "worked well" meant something like a mix of: a) the world did not end, and b) everyday life in developed societies (which previously did not have total financial surveillance, but are now eager to achieve it) was more or less the same then as it is today.

In fact, to expand on b), it seems to me (admittedly from a completely intuitive and unquantified perspective) that we are quickly losing civil liberties today and that this aspect was better in the past.


You're aware that depending on where you are in the world you can sample a vast range of development levels, so where exactly do you wish to move to have this well functioning society where people are taxed on trust alone?


I never implied taxing on trust alone, I'm simply arguing against total financial surveillance. Taxing in the mid-20th century did not rely on trust alone and it was a nice mix of trust and manual investigation in suspicious cases. I think such a mix is optimal for a predominant number of human activities and total surveillance should (almost?) never be reached for.

You can apply the same style of reasoning to end-to-end encryption. Various actors are aiming for total surveillance in that area too, it is most likely a terrible idea and we have precedent that the world works reasonably well without it.


> How else do you propose taxation is assured? Blind trust?

> Sure, why not? It has worked for many years before.

Taxing on trust alone is exactly where this little thread started.


I know, but based on context, I estimated that quip to be somewhat reactionary. The alternative is obviously not to leave out any kind of enforcement. The alternative is to go back to the kind of enforcement that was used and worked fine several decades ago.


Have we entirely eliminated tax evasion today? Money laundering continues. Our current approach of criminalising everyone and their dog isn't efficient.


Money laundering is ironically an inversion usually as part of ensuring the money looks legitimate is ensuring that the taxman gets a cut.


> By "worked well" I mean people paid their taxes and the overwhelming majority were law abiding.

as i understand, the "overwhelming majority" (lower and middle class) are not the focus of the problem here as they rarely use tax havens to circumvent taxes anyway (it's probably not cost effective). this is all about those who have the funds and motives to circumvent taxation, who happen to be a minority - even thought they're not a minority when it comes to taxable income; the 1% or whatever.

as for the rest of your argument, i don't completely agree. while you're probably right in practice, i.e. the authorities would have used their tools against those movements, the goals of those movements were different. the civil rights movement was probably illegal at the time but the goal was to change the laws to make it legal. same for sex. no millionaire wants to make tax evasion legal, as that would affect all tax payers, even those of the lower and middle class. they want that only for themselves.

i agree that (hard) drugs are probably a comparable example - it's illegal and puts a strain on society. on the other hand, use of hard addicting drugs can be categorized as an illness. so should we label money hoarding and tax evasion an illness? offer treatment options? allow them supervised safe spaces to evade taxes so we can offer them help?

i'm not convinced that financial privacy whould be no exception. there must be limits if it affects the others. i also don't think environmental pollution should be an issue of privacy - you shouldn't be able to pollute the air and claim it's nobodys business, as your factory stands on your own private plot of land.


Design tax policy so that it doesn't force the government to be involved in every single transaction people engage in. Something like a land value tax, perhaps.


They have something similar in Aus called the Capital Gains Tax and it is something that is inherrently political, unfortunately you can't uncouple the government from as they provide the public service that maintain and collect taxes. Honestly the public service should be answerable to parliament, not government.

Not to mention CGT been tweaked to ineffectiveness by previous governments by excluding assets from its calculations, notably housing, which has skewed CGT away from its original purpose and it's now more of a stick to whack at industries that aren't cozy with the current government.


The US has a CGT, capital gains are taxed at your normal marginal income tax rate unless you hold them for a minimum time in which case you pay a slightly lower rate. Though they do provide some exemptions for the family home. Not all that political thing.

In fact in many countries CGT is only used to refer to the LOWER version of the tax ... after all you should pay income tax whether you make your income digging ditches, house flipping, or day trading


Tax the corporation when an individual buys goods. Essentially a much bigger VAT.


VAT is regressive - that is it takes a proportionately larger chunk the poorer you are - often considered unfair. For example if I and Warren Buffet buy a car then I have spent a much larger percentage of my overall wealth than he does


Warren Buffet is likely to buy a much more expensive car, or cars.

He's spending more on everything than you are.

That doesn't even things up, of course, but then neither does the current system. It would arguably be closer to even.

The beauty of a universal sales tax (as an alternative to income tax), in addition to the fact that the wealthy consume more of everything, is that a transaction tax is more difficult to lobby loopholes into.

And, of course, it potentially doesn't need as large (read expensive) a bureaucracy to manage and enforce it.

It also removes the burden of record keeping/reporting from consumers and payroll tax from employers.

A lot of people have spent time thinking about the idea. One example: https://fairtax.org/

It's not a problem free solution of course, but neither is the current one. Someday a proposal for a transaction tax might even make it out of committee.


> Warren Buffet is likely to buy a much more expensive car, or cars.

According to [1] Warren Buffett's house is worth .001% of his total wealth, at $652,619.

And for Warren Buffet to pay sales tax proportional to someone with $500,000 in assets buying a $50,000 car, he'd have to buy the world's most expensive car - a $5 million Koenigsegg of which only 3 were ever made - 1700 times over.

[1] https://www.businessinsider.com/warren-buffett-modest-home-b...


It's one of those annoying internetisms that people often pick one part of a post or idea, take it out of context, and respond to that misrepresentation.

It's a bit like a straw man fallacy.

It happens a lot less often on HN though in my experience.

Right after the bit you quoted I noted that WB buying an expensive car doesn't even things out.

The idea of sales tax as a replacement for income tax isn't new or lacking rigor. Over the years it's had a lot of support from both economists and politicians. The math, at least on the surface, does work.

Personally, I haven't spent enough time looking at it to have a lot of conviction one way or the other about it's viability.

But it's an interesting idea that isn't invalidated by comparing cars.


In the grand scheme of things, Warren Buffet does not spend any money on taxable products. He invests money, but investments cannot be taxed in a VAT scheme, for obvious reasons.


Different VAT categories exist though. Not every country uses them but it's a tool in the toolbox. On the other hand, taxes in a lot of European countries are regressive.


Once the cash is in the bank it becomes really hard to verify. It’s not like a ‘tax paid’ marker is added to every dollar in your account.


Nor could it, with the millions of rounds of taxes an average paper dollars will see.


> Nor could it, with the millions of rounds of taxes an average paper dollars will see.

Somebody said a computer can't do something, somebody prove them wrong!


If you want to make money stop being fungible, well, you probably could use computers for that. But is it a wise idea?


Risk based assessment. You look at macro parameters that businesses submit and if it flags you among other companies you dive deeper and request information from business itself. More friendly approach to

If you find something fishy - you penalize business for different misconduct and signal them to be compliant in the future.

In general big businesses/taxpayers will be compliant anyway (but use all the loopholes that exist in your tax law)

While smaller businesses will have trouble to be compliant not because they don't want to, but because they can't have their accounting straight.

So there is no good justification for government to scan every transaction without prior justification, since most actors want to be compliant anyway.

I come from post USSR country and have a small fortune accumulated abroad. I don't have to pay taxes from this money, since I'm not a tax resident in my country at the moment. But since laws in my country work against regular people and some of them are prohibitive to work abroad/in modern digital way - the moment I transfer this money back home, our tax authority will pull some outdated law and the burden of proof will be on me (with my bank account frozen)

I DON'T NEED THIS.

So please, 1st world countries, don't send information on my hard earned money, to our 25 year strong socialist dictator.


Money is a claim on future production, and you don't get to transfer that claim over other people's work without caveats, whether it's inheritance tax, limits on gifts, or wealth taxes.


Of course. I'm not talking about avoiding taxes, or skirting other laws. The issue here is simple privacy for the common law abiding people.


What you own can never be an entirely private matter. It's fundamentally about your relation to everyone else in the world, things you are allowed to do that they aren't.


"work" is doing a lot of work here, especially when talking about generational wealth.


That’s certainly a popular view, but it’s not a given by any means. You will find plenty of people that think giving their children $100 should be possible without any government intervention or taxation. Unless you’re against that as well, we’re talking about arbitrary lines for when the government gets to wet its beak.


There’s an arbitrary line between handshake and battery, yet most people and the law system can see the difference. Claiming there’s no qualitative difference between someone giving $100 dollar to their child as a birthday gift, and inheritance of billion dollars, seems like a weak argument.


Then it should be obvious, no? Is $1 million ok? That’s a small single family home in Palo Alto in disrepair.

So how about $5 mil? Nice larger lot home in Palo Alto that some dying parents bought in 1940. Not even retirement money in the bay but could be middle class retirement in Alaska.

Where is your “obvious” line? Your handshake/battery analogy is shitty because it involves a victim and medical/first responder reports.

We’re talking about setting some line where we feel as a society it’s morally ok to start taking money that has already been taxed strictly based on “that seems excessive” without any logical criteria.


Validation of which requires a functioning pervasive VAT or similar mechanism to prevent laundering and fraud. There's no way to win here.

Truly anonymous, or even mostly anonymous money is basically isomorphic to bitcoin: it's mostly fraud and illegality, with just enough privacy advocates (and a few dirty preppers) to make it look legitimate.


Some countries have a tax on wealth in addition to income tax. (Switzerland for instance, maybe US in a few years)


These 4 European countries still have it [1]. Apparently it's difficult to enforce, probably for reasons touched on in this thread.

[1]https://www.businessinsider.com/4-european-countries-wealth-...


Say there's a wealth tax? At no point can you be be sure it will never have tax implementations ever again.


I'm not talking about dodging taxes. Also, if there happens to be a new tax, I'll pay it, and I'm not a criminal,

I just want some privacy.


Well that nicely circles back to the OP article, which shows that privacy is either an illusion or a gamble, depending on your perspective.


Well, privacy has to be gamble. If I do something, I leave a trace. I might directly interact with someone (buying drugs, for instance) or it might be in the privacy of my own room. But I'm always gambling that (a) anyone who I interact with won't dob me in and (b) no third party will detect my actions.

Obviously I hope my bank keeps a record of my assets with them. Perhaps they could merely keep my assets sealed in a box identified with a code and locked by a key, and they cannot open the box without the key, and I keep the only copy of that key. Perhaps the box is an encrypted database record and the key is a nice megabyte long random number which takes an hour to confirm. I can suppose it's secure (for the time being). And it's formally anonymous, since they don't even record that I posses the key.

But I still leave a trace when I access it. It's an intrinsic risk. I also risk dying every time I walk out of my house. I do things that have risk involved because it is necessary. Risk is not an argument against an activity.


because "You didn't build that!"


Also, governments are finding new and creative ways to put new taxes on already legal money.

So yeah, privacy matters.


> Also, governments are finding new and creative ways to put new taxes on already legal money.

Care to cite some? That's just a silly point. There's probably no area of regulatory theory more well travelled than taxation. Imagine a trick and someone has tried it, often thousands of years ago.

And it's even incorrect as a practical matter in the modern USA, where government revenue as a share of GDP has been going steadily downward for like 70 years now, even in the face of decades of deficits. It's literally the policy position of the ruling party!


>And it's even incorrect as a practical matter in the modern USA, where government revenue as a share of GDP has been going steadily downward for like 70 years now

Because government spending increased explosively before those 70 years. First, the government essentially took a loan from future generations through social security and second, there was an enormous war that the government mobilized the economy to fight. You would expect spending to go back down after both of them.


>> Also, governments are finding new and creative ways to put new taxes on already legal money.

In addition to the soft tax of excessive inflation mentioned by the other poster, Elizabeth Warren and Bernie Sanders have proposed wealth taxes.

https://www.businessinsider.com/wealth-tax-definition-explai...

You can agree with that or not morally, but it is by definition a tax on already legal (and taxed during income) money.


We already have estate and property taxation, though. It's not like wealth taxes don't exist, they're just levied at specific times or on specific kinds of assets.


True. Typically property taxes are to fund things at a local level though, and not sent back to the federal government for massive programs.

My biggest issue with a wealth tax on the super-wealthy is that it would quickly morph into a wealth tax on everyone above lower-middle class.

Old article but the numbers have scaled proportionately...

"If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. That’s only a third of this year’s deficit. Our national debt would continue to explode." [0]

[0] https://www.forbes.com/sites/danbigman/2012/04/03/john-stoss...


Uh... your point is about a wealth tax but your facts are about income taxation. In fact, there isn't a whole lot of net "income" reported by the very wealthy, because most of what they make is sheltered investments of various forms. Yet , they have a very large chunk of the total assets owned (like 30% of the country is billionaire assets!), completely disproportionate to the fraction they pay in tax.

Addressing that discontinuity is exactly what a wealth tax is about. I'm not completely sold on it myself (they're very hard to administer and a giant moral hazard), but don't allow yourself to be fooled into thinking it's a dumb or discredited idea. There's a real problem, and wealth taxes represent a real, if imperfect, solution.


> the modern USA, where government revenue as a share of GDP has been going steadily downward for like 70 years now

It has?

https://www.usgovernmentrevenue.com/revenue_chart_1900_2020U...


It's not only that.

It's about building a society that can be based on assumption of honesty and trust rather than surveillance and authoritarianism. At present, our electronic monetary system has morohed into something that resembles George Orwell's 1984.


It was possible for many empires to tax effectively before modern bookkeeping. Property tax needs very little in the way of financial records to administer.


> modern book-keeping

Can you clarify what precisely you mean by this statement? Most empires historically-speaking have had sophisticated book-keeping methods. Chinese empires used to tax anyone who exited a city on the profits they made during their visit. The Romans when they took over Egypt, taxed the hell out of it and for that purpose kept meticulous records on all of the transactions that happened. The notion of Tax itself goes back to Mesopotamia.

(I wrote that based from history books I've read over the years. But this link will do: https://en.wikipedia.org/wiki/History_of_accounting#Ancient_...)


The general principle of a tax which can be levied fairly, equally, clearly, and with low costs of collection or effort, are not new:

The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gathered, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.

-- Adam Smith, Wealth of Nations, Book V, Chapter 2, Part 2: Of Taxes.

https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/...

Smith's preference was for a tax on land, which is difficult to move off-shore.


About arbitrary taxation, I understand that's how they handled it in ancient Athens. Some nobody would say something like "It's been a while since we taxed the Alcmaenids, I propose they pay for the next Panathanea festival".

Since that state was radically democratic, it may not have had the corrupting influence on the taxers as Smith suggests... but maybe it was a factor in the aristocrats allying with their rival Sparta to topple their own constitution.


In Athen's case I don't think it technically counted as corruption in the "misappropriation" sense as the intended beneficiaries received it. Given the number of votes to "pillage and enslaved their neighbors" it would certainly count morally if not for the fact it was "the norm".

At that point the difference between bandits and city state military was essentially just diplomacy in terms of how their neighbors and survivors would react to somebody putting killing or enslaving them.


> Smith's preference was for a tax on land, which is difficult to move off-shore.

I like the idea of land tax, but I like that statement even more. (Land tax, on paper, seems like it would be such a good idea, and transaction taxes are nowadays so invasive, that it's incomprehensible to me why we don't have them.)


Thanks. It just came to me :)


Not who you replied to, however modern taxation requires lots of information to work. For instance income tax works, because every employer is reporting how much they paid you. Then you report how much money you got paid, then factor in deductions such as specific contributions to charities etc. All of which are reporting to the Government at the same time.

Before the advent of computing and auditing it would be hard to tell if a blacksmith sold 50 or 55 swords. So income tax wasn't viable and instead taxation on lands were more common.


HK raises practically all of its revenue from land and (until China started screwing it up) it was one of the richest, most developed places on Earth.


>HK raises practically all of its revenue from land

I don't know what you mean. Hong Kong is a trading port, and any wealth it "creates" is done by refining imported materials. This option is only available someplace lots of trade naturally occurs, like Hong Kong's river basin.


I mean the government raises its tax revenue almost exclusively by leasing land and taxing real estate transactions instead of taxing income like we do in the West.


This system isn't very exportable, I can't imagine the nationalization of land being a popular move no matter how low you promised to make income tax.


Okay and?

My point is that to collect property tax it's easier for the Government and Income tax is harder for the Government. It requires more reporting...

It has nothing to do with the value extracted.


My point is you don't need income tax at all to maintain a developed society as demonstrated in HK, Washington State, etc.


What if I choose not to spend my wealth on property?


If the only tax in a jurisdiction is an income tax and you choose to make your money through capital gains, you don't pay tax.

If the only tax in a jurisdiction is a land tax and you don't own land, you don't pay tax. This will either be because you ideologically are opposed to paying taxes and you're willing to pay more in foregone profits/opportunity cost, or because there's better more profitable investments elsewhere in the marketplace, in which case land values will grow more slowly till an equilibrium is reached.

But since most transacations are tied to land somehow (because the good was imported at the port, transported by trucks that are stored in a truckyard, and sold to you by a person who lives in a house using mobile phones that connect to transmitter towers) so you won't be engaging in some kind of pure untaxed marketplace.

It'll probably create a stockmarket bubble though. Best to tax shares as well as land.


Money is inherently social, I don't buy this argument.


But apart from the tax authorities need anyone else know?


For most people no, which is why people’s tax records for example are generally not available to the public.


I live next to a bank who paid an $8.9 billion fine for money laundering. Another bank, Italy’s largest, laundered money for 10-years for Iran, Cuba and Libya in the United States. They paid a $1.3 billion fine, pled to conspiracy and received deferred prosecution.

One of the executives in that bank is the older brother to a star witness in the Presidential impeachment inquiry. Yet no one really cares about crimes committed by corporations.


A great many people care about crimes committed by the corporations. But, unlike Rupert Murdoch, we have no ability to influence the prosecutors.


> Yet no one really cares about crimes committed by corporations.

Lots of people do. They just don't happen to have the evidence to put those corporations in jail. The presumption of innocence is a valuable principle, but it cuts both ways. It defends you as much as it does corporations (who have A TON more resources to prevent/ mitigate a prosecution).


If you read the article South Dakota is a great choice. It's a fantastic read on the history of how these states to harbor cash came to be. This part of the article sums it up in a very compelling manner:

"Here is an example from one academic paper on South Dakotan trusts: after 200 years, $1m placed in trust and growing tax-free at an annual rate of 6% will have become $136bn. After 300 years, it will have grown to $50.4tn. That is more than twice the current size of the US economy, and this trust will last for ever, assuming that society doesn’t collapse altogether under the weight of this ever-swelling leach."

So, yes - if you want to anonymously store your legally gained cash you have options stateside.


That example is a bit ridiculous. Yes, compounding is powerful. But there’s also inflation, and a single passively invested $1mm is never going to own the entire economy (if nothing else, returns would be distorted by scale).

That said ... this is the premise of some entertaining science fiction.


First it's factual. By qualifying it as "ridiculous" serves what purpose exactly? The point is that $1MM is used as an example and you could swap that amount with $50MM, $100MM to showcase greater gains in exponentially less time. That is the point the article is making overall. No billionaire is going to harbor $1MM in a trust with the intent to have some heir pull it out in 200 years. But the people with those means can leverage the same monetary vehicle to do the same thing in much shorter time frames with higher initial investment.

> That said ... this is the premise of some entertaining science fiction.

Or not. None of it it fictional. Feel free to clarify what you mean, but the only thing fictional is the entirety of your comment.


Perhaps you're thinking of this classic scene from Red Dwarf:

https://www.youtube.com/watch?v=NEu0o62ycmg


> That is more than twice the current size of the US economy, and this trust will last for ever, assuming that society doesn’t collapse altogether under the weight of this ever-swelling leach.

Economically speaking, this is Not Even Wrong.


Those numbers are less impressive after you correct for inflation. Meanwhile if a deposit is truly anonymous, I don't see how I could ever be reassured that I could ever withdraw the money later.


Maybe, because you don't own your cash, your cash is a credit that society acknowledges to you, so hiding it from which makes it valuable is nuts.

Can you eat your cash? Can you fly using your cash? Can you build a phone with cash? No, you can't do anything with cash without a public exchange that might be accountable.

Unfortunately, people did buy the idea that ”Markets can work without accountability”, and that's what you do when laundering money in a fiscal paradise. Hopefully, crypto can drive us out of that craziness of money as a good.


This is quite a good point. No-one is stopping you from stockpiling Oil, Gold, or whatever.


Unfortunately financial crimes are (apparently) particularly easy to hide, and "follow the money" has proven the only way to bring some individuals to deserved justice.


The problem is that our participation in the financial system affects other people. We also get benefits from that system such as auditing and regulation of our banks to protect our rights and interests, so it’s reasonable that we pay the price for this and one of those is some measure of privacy. Not all our privacy, just some of it.


> What if I just want a place to anonymously store my legally gained cash?

Anonymously storing it makes it illegal. With Europe's negative interest rates, they're currently in the process of making personal storage illegal for large amounts (you're supposed to store it in a bank to pay negative interest).


>Europe's negative interest rates

Couldn't believe it, so I looked it up https://www.ft.com/content/74573de6-0a15-11ea-bb52-34c8d9dc6...

that is bizarre


ideally, governments only need to know how much each person spent/earned. Not where and how. But , it seems there is no way to make even tiny amounts of purchases without a bunch of people sharing your full details with each other.

On the other hand, there's crypto


Which is not anonymous.


Some of it is - ZCash for example.

But most of it isn't.


What about the last thread I read that concluded Monero was the answer here?

Which one's been audited?


Zcash is more likely to be secure than Monero. Both have their issues, but the Monero system is significantly easier to de-anonymize.


> forcing foreign financial institutions to tell the US government about any American-owned assets on their books

This is another interesting part. How can the US "force" a sophisticated wealthy sovereign nation that culturally and morally values banking privacy (not only for the profits), like Switzerland?

It cannot be understated how much power, control and ownership the US has of the world financial system. If Switzerland did not comply, they would have been fully cut-off, unable to participate in any finance at all. It happened swiftly (no pun intended [1]), there was no discussion, only power.

Most of the west is mostly aligned with what the US is doing, so it's not a big deal. Every government wants more visibility, control and power over finances. It is akin to how the US military handles matters of physical force on behalf of the rest of the west.

Just a quick note that the US is equally powerful in the financial arena as they are militaristically, if not more so.

[1] SWIFT is one of the systems Switzerland could have been cut off from


Fun fact: There is a commonly understood reference in India since as long as i've known. It is that all the corrupt businessmen and politicians stash their money in 'Swiss banks' and if this money could be repatriated a lot of Indian problems will be solved. I know this is exaggerated but this is what even the most average of Indian knows and the country does not have the leverage (at least so far till CRS) to do anything about historical wrongdoings.

Also check the relationship between Mauritius and Africa/India for another example of such a relationship. It is funny though how even in today's world the corrupt from developing countries still manage to move the money around so easily, it happens only because you have the ability to grease the right palms.

Forget about the island countries, i do not think even developed countries like UK (Russian money) or Canada (Vancouver real estate) cooperate enough if the person gets citizenship and is accused in a different country. I know because there is at least one documented case where the proceeds of a large scam in India were funneled to Vancouver real estate, how something like this is possible is beyond my understanding.


> There is a commonly understood reference in India since as long as i've known. It is that all the corrupt businessmen and politicians stash their money in 'Swiss banks'

I think it's also a Hollywood meme - since I remember, the villains always had Swiss bank accounts to store their ill-gotten money.


> It happened swiftly (no pun intended [1]), there was no discussion, only power.

Not trying to take a stance on the wisdom of these policies, but this is a nice example of how realpolitik/power-politics/game-of-thrones is still how the international world works.


it's not like power politics ever went away, the question is how they are being utilized


As a Swiss, in a way it was sobering to see one of our dominant industries brought to heel so quickly. On the other hand, it was very satisfying to see those banks, who for decades had hid behind their hand tailored secrecy laws to do business with Nazis, dictators, and drug dealers, and were domestically untouchable, finally clean up their acts.

As for "culturally and morally values privacy", I would find that a lot easier to believe if those privacy advocates had equally lobbied for the privacy of salary statements for the employed. But, hey, someone has to keep paying taxes, if the rich don't.

Now, deprived of other unsavory sources of wealth, Swiss Banks are eagerly dabbling in cryptocurrencies.


Sincere question: Do the Swiss have any moral debates about the source of wealth from third world countries' dictators, politicians etc and the impact on these countries of their action of enabling the 'theft' ?

Or is the Swiss view generally more like what it has been historically, that they are neutral and provide a service that others can't.


The traditional view is indeed that we shouldn't legislate things happening in other countries. As an example for what is going on though, we're set to have a vote on the Responsible Business Initiative[0] under which "companies will be legally obliged to incorporate respect for human rights and the environment in all their business activities [...] abroad".

While initiatives usually fail the popular vote, it is not so certain for this one. It has very broad support. All parties have to argue their position regarding initiatives that will get voted on. So yes certainly there is a debate on such issues.

[0] https://corporatejustice.ch/about-the-initiative/


There have been debates for at least 40 years. People like e.g. Jean Ziegler were highly critical of banking practices when otherwise they were still being seen as business as usual: https://en.wikipedia.org/wiki/Jean_Ziegler

35 years ago, there was a referendum that would have prevented banking privacy from being used to cover up crime. It failed decisively, but showed that at least 25% of the voters were in favor.

A few years later, after the ouster of Ferdinand Marcos, Swiss banks for the first time in my memory blocked some of his funds, and subsequently the banks were much more circumspect in dealing with dictators.

The next step was the debate about dormant Holocaust era accounts, which led to an official historical commission. That certainly led to domestic debate, which was complicated somewhat by the international pressure under which Switzerland found itself.

And finally, in recent years, after more scandals and stricter banking rules imposed especially by the US, the banks finally seem to be getting out of the organized crime business.


You can view it as that the previous strategy of the biggest players was to give some scraps to other countries like Switzerland to have them as (unofficial) allies, and now they are out for the whole cake and not willing to share anything.


> This is another interesting part. How can the US "force" a sophisticated wealthy sovereign nation that culturally and morally values banking privacy (not only for the profits), like Switzerland?

By taxing in 30% any money coming from institutions in countries not adhering to FATCA


It seems to me that they could only prevent transfers to US citizens, or transfers that somehow get routed through the US?

Of course they could try to pressure SWIFT, but there’s no guarantee that would work.


I'm not so sure how aligned the EU is with the US anymore. A lot of what some EU politicians say is about not being able to trust the US. Verhofstadt gives me such an impression at least.


Switzerland isn’t part of the EU.


It's a part of a lot of European treaties and it's aligned with the rest of Western Europe on most things.


>Just a quick note that the US is equally powerful in the financial arena as they are militaristically, if not more so.

This was the trade off Churchill was forced to agree to, as London was being bombed by the Nazis, if he wanted the US to join the war. Before the War the UK ran the World's finance, after the War it was the US. In short the US financial power was birth directly from its military power.


I don’t think it was a deliberate agreement per se, I feel like it was just the natural outcome after the US helped rebuild a lot of Europe. The previous world order had been ripped apart by the war, and the US was the world’s largest economy by the end.


It was deliberate, on one of the financial summits over the future of financial system after WWII a US changed all the word of GOLD to USD. there was a planet money episode about it.


Yes it was agreed upon that the US Dollar became the underpinning of international finance at the Bretton Woods conference near the end of WWII.

https://en.wikipedia.org/wiki/Bretton_Woods_system

This has a link to the PMoney episode you're thinking of, as well as a more recent discussion of the economic fight other nations possibly trying to supplant or at least be adjacent to the dollar as a reserve currency.

https://www.npr.org/sections/money/2019/07/30/746337868/75-y...


It's the "hidden" rewards of winning the war. The US didn't take any territory (cept leaving bases behind). But they can reap the financial control and profit immensely via this indirect control.

This is why the US does not want https://en.m.wikipedia.org/wiki/BRICS to succeed and will do much to sabotage it.

In the world of politicking, there are no good guys - just lesser of evils (or better the devil you know).


It was also pretty much the only economy left standing. I don’t think that can be overstated enough.


The entire New World was left standing.


True. The US was an industrial behemoth before even formal involvement in the War and was preposterously powerful in the area. They didn't have it diminished by bombing and gained manufacturing capacity instead of losing it.

While others were unscarred they never "stood up" by the standards of the world scale even if they were also industrialized.


It was not the UK that ran/runs the world's finance, it's the tax haven of the City of London, with its overseas branches in UK territories that still runs the world's finances.

Current CT: Brexit has to happen before 2020 because otherwise City of London will be subject to EU rules that will cause current anonymities to be revealed.


I am not aware of any tax that is specific to the City of London. How is it a tax heaven?

And half of finance in London is not even located in the City (West End and Canary Wharf).

The UK is certainly not a tax heaven.


Haven, not heaven. :)

The city has had the deserved reputation for being a tax haven for well over a century.

https://www.newstatesman.com/economy/2011/02/london-corporat...


Thanks. Got caught exactly by what this website describes [1]. “Heaven” was logical from French.

[1] https://jakubmarian.com/is-it-tax-haven-or-tax-heaven-in-eng...


Interesting - didn't know most other languages had it as paradise.


The title is the only part of that page suggesting the City itself is a tax haven.


Well that's simply not true. Even if you want to ignore that one, there's plenty of other articles and books exploring the topic.


> This is another interesting part. How can the US "force" a sophisticated wealthy sovereign nation that culturally and morally values banking privacy (not only for the profits), like Switzerland?

Two reasons come to mind:

1. Switzerland (like EU countries) depends a 100 % on the US for defense, in the sense it would basically turn into Russia / China overnight if the US wasn't a military power protecting them. This alone gives the US pretty much unlimited political leverage.

2. The US has the number 1 world wide spying agency, which acts as the leader to other "Western" spying agencies (see point 1). This means the US knows everything about everybody and thus has unlimited political leverage over anybody. Again this reason alone gives them quite a bit of political leverage over even a country like Switzerland (hands down the most democratic country in the world). Even though Switzerland has political safeguards in place that no other country has (direct democracy); in this case I guess Swiss people didn't mind (or didn't care about) sharing banking info with the US. After all: this helps tax evasion, so why vote against that...

You give some other answers yourself :P

There's no reason for the US to compromise on anything with any country in the Western world. And they don't. See for example: leaked cables on Wikileaks for tons of examples of good deals for the US and shitty deals for all counterparts.


> Switzerland (like EU countries) depends a 100 % on the US for defense, in the sense it would basically turn into Russia / China overnight if the US wasn't a military power protecting them.

Neither Switzerland nor the EU depend "100%" on the US for defense, far from it. Some EU countries are among the biggest military spenders in the world. It's also difficult to see how Switzerland would "turn into Russia / China overnight" given that it's completely surrounded by the EU. How do you imagine that the Russians or Chinese will come to dominate Switzerland? Note that Switzerland managed to maintain its independence in WWII even though it was completely surrounded by the Axis.


China vs France: https://www.globalfirepower.com/countries-comparison-detail....

Russia vs France: https://www.globalfirepower.com/countries-comparison-detail....

Russia vs Germany: https://www.globalfirepower.com/countries-comparison-detail....

The rest of Europe has no military power to speak of. Random example: the Dutch tank force consists of 0 tanks.

> How do you imagine that the Russians or Chinese will come to dominate Switzerland?

Admittedly Switzerland is probably one of the toughest to beat in Europe due to their strategic advantages (mountains, bunkers, infrastructure pre-rigged with explosives, relatively lots of reservists). However, just look at the numbers above. If the US didn't exist, the EU wouldn't be the EU unless they had 10x the military power they have now to defend themselves.

> Note that Switzerland managed to maintain its independence in WWII even though it was completely surrounded by the Axis.

A few facts about that:

1. It did so partly through secret deals with the Nazis. Ever wonder where the stolen gold of the dead jews was stored and smelted? Right... CH

2. The world's current military and political powers aren't comparable in any way to those during the second world war.

3. The Netherlands was neutral during the first world war. In the second world ware they fought the Germans for 3 days before they lost. That's right. 3 days. The fact that a country managed to stay neutral 70+ years ago says absolutely nothing about whether they would achieve the same again now, with totally different potential enemies. And a completely different distribution of military powers.


As a European, considering the hypothetical scenario of Russia or China steamrolling their military in to our territory I don't have much faith in how long we'd hold out. We're good at bureaucracy and social things, not at fighting.


>in the sense it would basically turn into Russia / China overnight if the US wasn't a military power protecting them

Russia doesn't have any power beyond posturing to overly sensitive Eastern Europeans and China can't project much beyond their loans (and that's if they're willing to spend the little currency reserves they have).

There's quite a bit of resistance to NATO in parts of Europe these days precisely because the US is both unneeded and overbearing.


This is right.

But tax avoidance has also been dramatically reduced. If you want to avoid tax, pretty much the only way to do it is to either move to one of these places or find someone at a bank who will move your money for you illegally (this is pretty hard to do because the upside is often quite limited relative to the huge downside).

So money is definitely moving back within home countries, and that is far easier to control.

One point you missed is the importance of US financial control over institutions. The other plank of FATCA was the threat that the US would essentially block a bank/country out of the global financial system if they failed to cooperate. This kind of extra-territorial monitoring of the financial sector deeply annoyed everyone but..it was effective, and is a good example of a gain from US leadership of the international community (even Russia informally complies afaik).


> This loophole was unintentional,

Yet it's a known. And it remains in place.

Let's stop being so naive.


That Guardian article is weird because it doesn't even mention federal taxes. How does a south dakota state trust help someone legally evade federal taxes?


No income, wealth or estate tax for trusts. And you don't even have to live in south dakota.


Beneficiaries of trusts pay income tax on distributions.


> This loophole was unintentional

That seems a pretty hard pill to swallow.


Laws can have bugs too


Well put. Software is largely built of contracts; so are laws and any other interfacing agreements (as cold as that sounds).


Agreed. It's also human nature to game systems for their own advantage. The same evolutionary triggers that had us develop tools to reap rewards from the physical environment... well, we develop mental/abstract tools to reap rewards from the "intellectual" environment. There will never be a well intentioned law with enough "lock tight" wording that won't be gamed by someone out there at some point. The same, there will never be security that won't be eventually overcome at some point.


Sure. That's fair.

But I don't think that proves the above comment incorrect.


its a feature not a bug


And just like with software, often they are considered "features" not bugs.


The article says "Money in trusts grows tax free". Not sure that is true. I think and I could be wrong (someone please correct me) but the trust would still have to pay federal taxes at the highest rate after the first $5000.00 it makes for the tax year.


Delaware was never the most transparent place on Earth either.


FATCA + foreign jurisdiction = 0


South Dakota is also popular with full time RVers and digital nomads. Many other states you have to rent or own a house to get a license etc. But South Dakota recognizes full time travelers, so you can rent a PMB and spend 1 night at a hotel and campground to be considered a resident. Which is pretty neat. So some states like Michigan or Ohio are strict along with many others, so if you sell your house to retire to travel the nation in your RV they won't accept a mail forwarder so your only option is to burden a friend or family member to handle your mail pretending you live with them when you don't. So you are stuck having to become a resident of a new state.

Texas is also friendly to RVing, then some counties in Florida too recognize this but different counties had different views. Clay County in FL said that full time RVers aren't allowed to vote, yet a homeless person can claim they live at a park bench per federal laws. So they are making millions from RVers who barely even put ware and tear on the roads, so sounds like they found a perfect little niche from themselves in that area too, plus a valuable service when your former state you spent your entire life living in ditches you because you decided to live an alternative lifestyle.

Homeless people have the same problem, but homeless shelters can help people without any ID get one... Some argue people with $250,000 Diesel Pushers are homeless too, but it seems wasteful to get assistant from a homeless shelter when you are "homeless" by choice since other people those resources would be better spent helping, plus pretty sure you have to pick up your mail instead of them sending you a package with all your mail when you are across the country or even opening items and scanning them for you if you need access to a letter faster. I know people in RV groups prefer to call themselves "houseless" not "homeless"

Some guy works remotely for a medical marketing firm, traveling full time with his family living the life people dream of checking out all the different national parks all the way to the theme parks. While you are freezing your butt off in Ohio, they are camping at Fort Wilderness (the RV park at Disney world) but technically in the eyes of different agencies they're homeless. Some banks can give you trouble too. Didn't know homeless people could afford Disney!

So kinda interesting people who own property are treated differently than people who decide to travel full time. You could own property and never even go there and you'd be treated better than someone with no property at all for some reason. Seems very backwards, I guess society never considered people could work remotely and travel full time exploring, you are supposed to live in a house you are indebted to all your life, then maybe when you are in your 60s you can explore while you can barely walk or living off the tiny bit of social security you get, if it's even still around by time you reach that age.


That article is so one-sided it hurts. It gives few and silly examples of what trusts are actually used for, like it characterizes one by a rich woman leaving millions in care for her dog after the woman died, in order to convince the reader that trusts must be often wasteful and frivolous.

For one (among other issues) it completely ignores the destruction of family farms and businesses, no longer able to operate due to heavy tax burdens put on them by the state, simply because one of the owners has passed away and they didn't have enough cash in reserve to pay what the government deemed they owe. Mine and your politicians forced the creation of these havens because of their wanton disregard for people's hard work and effort, and I'm not going to shed any tears of there being a way for some of them to protect it.

I know, the writer alludes to a one-world dictatorship that might one day have been able to prevent this 'horrible evil' from taking hold, but we're not there yet, thankfully.


>What if their office get robbed? What if the island gets attacked?

Switzerland, WW2. There is safety in holding EVERYONE's money. Because the moment you try it, you enrage many, many, many people who have things that go boom. You can fuck with someone's politics, their car or even their wife. But once you fuck with someone's money, it's a whole new ball game.

> I don't understand how this is even legal at all

Bank fees are higher. The different "islands" that do this, really don't have a choice. WTF else are they going to do as income generation? There's only so many happy endings you can give in a day spa. It's also easier to "invest" and hide the money in tourist based enterprises on said islands. It totally makes sense to hire an interior designer for $10k an hour.

>how can they trust so few people to hide so much money

Because people don't like getting into car accidents. When you're "trusted" with something on that level, suddenly people make sure you either don't have or do have car accidents that magically attract stray bullets.

>I mean apparently there is a long list of why it's risky, and I don't understand how this is even legal at all.

Homie, avocado farmers in Mexico get kidnapped and executed because avocados are cash crops. Shit, look up "avocado stolen" or even "avocado semitruck stolen". No such thing as making bank and not having risk. Some of those truck drivers in the USA get killed. If you're going to get targeted for making money, might as well go all out.



Anything and everything has a "dark side". That's why these, "Gasp! Oh my goodness, I can't believe there are such vile people in this world" comments piss me off. It's a clear sign of willful ignorance and naivety. The same goes with, "I can't believe people have offshore accounts. Those terrible rich people. Adam Neumann is so terrible for setting up in his contract to get a 1.7b bailout." Bitch, what would you do in their position? Don't lie. You'd probably ask why Adam didn't go for the even $2b. There isn't a single person in this HN thread who, if they made enough to get taxed 35%+ of their income, wouldn't tax shelter the shit out of their money. I already know they lie their ass off on their taxes. Why not take a dependent or two away from your taxes, just so you can pay a more moral share of the tax burden? Claiming moral righteousness due to inability is just shoving your head in the sand.

Thanks for the article by the way. Got to admit, those folks have a great heist story. "We stole $10m worth of deez nutz!"

Ever wonder if someone does a heist and the press shorts the value, do those guys want to correct them? "Excuse me, we stole $12.4m worth of nuts. We are professionals after all, thank you very much." Not going to lie, it would piss me off if I ever did an art heist and the news says, "$10 million dollar painting stolen..." Mofo, you forgot a zero! You're making me look bad!


If I had $1.7b I would not give a shit about the taxes I had to pay because my family would be set for generations no matter what. That's what I don't get about the super rich that obsess over taxes, the insane greed when you could be doing absolutely anything else you wanted to.


Lol, billionaires don’t spend any time thinking about this.

A special tax firm approaches them and says, “yo, give us 10 million and we’ll save you $200 million in unnecessary taxes.”

The billionaire says, “sure, I’d like to use that money to build spaceships.”

That’s the amount of thought the billionaire has to put into it. The rest is attorneys and accountants doing the work.

Did you forget that billionaires can... pay people to do things for them?


In Scandinavia, 30%+ tax rates are pretty much where people start, and it doesn't take too high an income to be right up at 35%. Yet those countries don't seem to be collapsing from tax evasion, and surely there must be some Scandinavian readers here.


Myself and most all my coworkers are on 40%, and obviously tax evasion is not on anyone's mind. I think it comes down to your social environment and values.

If I were born and raised in the US, with all that anti-government and anti-tax rhetoric around me, I might feel similarly to the impassioned gentleman or lady above. Yet as it stands I am happy to pay for taxes as I see great value in them, and I would generally be happy for a tax rise if justified and needed.


You'd think it's the small island and countries managing those bank, but it's not. The banks are from the rich and for the rich, the country is just a ruse.


Exactly. Any big bank in the world has.... suspicious... operations in these places and will let you bank through them as if it's an account you have at home.


There is a great book you should read called Treasure Islands[0]. It's equal parts fascinating and infuriating, and makes you realize the system has never been set up fairly.

Rich people have always had their own financial systems that are outside of, and one step ahead of, the regulations and rules the rest of us are subject to.

[0]: https://www.goodreads.com/book/show/10197857-treasure-island...


Reminds me of a quote from the film The Usual Suspects-- "The greatest trick the Devil ever pulled was convincing the world he didn't exist."

The system remains that way in part because a large number of people are duped into believing it is in their best interest to keep the system in place, despite the minuscule probability of actually benefiting from it.


The book shows that a lot of the people who sustain that system (by writing the laws we are all subject to, but leaving convenient loopholes in them) do actually benefit quite a bit.


> why countries are letting those small, insignificant islands and countries manage all this wealth

Some of the tax havens like Jersey, Isle of Man are British territories, Curacao is territory of Netherlands.

The big countries know what goes on on their little islands they just choose to ignore it for obvious reasons.

Treasure Islands is a great book if you want to learn more about this.


Many tax havens are actually quite stable and have very reliable banking systems. Canada encourages "snow washing" with Limited Partnerships. Canada's banks are quite good and the corporate legislation allows a degree of anonymity. This structure has no obligation to file taxes in Canada. The partners in the structure have to pay taxes however if the partner is not a Canadian entity that obligation is in some other jurisdiction.

https://projects.thestar.com/panama-papers/canada-is-the-wor...


But Canada shares banking data with the IRS.

https://www.cbc.ca/news/politics/fatca-tax-us-canada-1.53539...


Yes, Canadian tax residents have serious obligations, as do US citizens (no matter where they live)!

LPs on the other hand, do not _if_ there is no economic activity in Canada and there's a tax treaty at play with the founding partner jurisdiction. Canada doesn't have the authority to tax foreign owned businesses unless they participate in the Canadian economy.

Eg: Your international entities can route money through a Canadian LP that is owned by your Barbados corporation. In this scenario there's no Canadian tax obligation and the money trail becomes harder to follow due to Canada's privacy laws (your company name might not be on your LP documentation). Your company does, of course, have to settle up the tax obligation with Barbados.


Only for Americans.


You’re curious about them from the perspective of a normal citizen

Politicians don’t know and have no desire to know, if you can’t tell by their willfully ignoring official political processes (regardless of whether one agrees with the motivation or not, to simply say you’re going to ignore it as folks like Sen. Graham have is nuts).

If they did they could be held accountable. Plausible deniability is a key legal position.

So politically zero fucks are given.

I mean we know more than one President was pals with a man the elite knew to be a statutory rapist. They don’t give a shit about human lives themselves.

You think they give a shit about ephemeral shit like money when they don’t worry about that?

The financial system has us mining bitcoin: ephemeral bullshit other people live big on.

How this forum can be so smart and so clueless is beyond me.


Using a throwaway for obvious reasons.

I have a fair bit of insight into this industry, both from friends, acquaintances, and family who use a variety of offshore structures to manage their wealth and from my own dealings (the company I founded and currently manage is offshored for tax and legal purposes).

What people don’t realise is that aside from a couple outliers offshore jurisdictions aren’t that shady at all and the major ones are usually under the protection and sometimes outright control of much larger and much more influential jurisdictions, with the United Kingdom being the leader here. If tax avoidance was as simple as just starting a business in a zero or low tax jurisdictions we would see a lot more of this kind of business being done in Africa (with the notable exception of Seychelles today) than the Caribbean overseas territories, but mature legal frameworks and more importantly reliable governments are incredibly important to both small time players who may stash some cash offshore as savings and large multinationals. If anything shady (civil unrest, wealth confiscation etc.) were to go down in the British Virgin Islands for example the United Kingdom has a nuclear option (as BVI is for all intents and purposes a Crown colony) to unseat the sitting government and bring order, which is incredibly valuable as an insurance policy.

Yes, it is possible to incorporate offshore corporations in less-reputable jurisdictions like Vanuatu or Seychelles, but doing business with these vehicles is next to impossible because no reputable bank in Singapore, Hong Kong, or Switzerland is going to want to have you as a customer if they don’t already know you due to compliance reasons. Without a bank account your ability to funnel and store money in these opaque conduits becomes rather difficult and there really isn’t any point any longer. Of course, there are small shady banks in certain jurisdictions (notably those that aren’t under indirect British control) that will take you on as a client, but then you run into the risk of them running away with your money or defaulting.

The money itself isn’t really managed by or from these island nations/colonies either, and in the cases where there are nominee directors the beneficial owner will usually have a power of attorney as well as an undated resignation letter from the nominee director which effectively gives them wherever they are total control of the company.

What is interesting is that crypto is changing all of this due it being completely outside the severely regulated financial sector, opening up a ton of opportunity for small island nations to compete on tax efficiency without being subject to the quite frankly draconian rules that usually places them on US/EU/OECD blacklists which can create severe consequences for the economies of said nations through sanctions.

Very interesting times indeed, and I think we will see more and more companies (particularly tech companies) being offshored than before in the next few years.


> ...the United Kingdom being the leader here.

Having lived in the UK, I'm convinced that the real reason for Brexit is to preserve these offshore tax havens from any meddling by EU regulations.

It's not an accident that Brexit suddenly became crucially important to the Conservative Party only when the EU developed a new interest in unified financial regulations after all the turmoil of 2008-2011.


The EU has plenty of tax heavens and satellite states. Some exist to serve the old rich (luxembourg, monaco) and others chose that path because, unless you are already a rich country, capital in EU is sparse, which further leads to brain drain. That's how countries like ireland and cyprus manage to recover faster than others.

I can't say if the latest regulations have really made an impact. They have surely made banking in EU a lot more bureaucratic and a lot more expensive for a small business.


The EU has an unbelievable number of tax havens. It is one of the last places in the developed world where you can genuinely clean dirty money with ease.

The last Commission President was literally the ringleader for tax theft: he was FM/PM of Luxembourg, and actively lobbied companies to domicile there, funnel revenue through Luxembourg (i.e. structuring for tax avoidance alone), and personally negotiated the 1% corporation tax deals.

...it always amazes me how little people actually understand about the EU.

Btw, the main issue for the Conservatives has been their inability to force the overseas territories to do things (what they actually think about tax havens is irrelevant now, events have moved on).


Juncker made for a convenient political foil in many ways, but ultimately EU policy is made by national leaders in the European Council. The shady practices of Luxembourg and Cyprus were previously of no interest to the national leaders who had bigger fish to fry.

This has changed though, as certain European parties' voters have become irate about international tax evasion. For center-left PMs, stomping down on countries like Cyprus isn't going to lose them any votes and increasingly looks like a political win.

For Britain, the conundrum is that there's so much British money in the "nearshore" tax havens of Channel Islands and the Isle of Man. Whereas Luxembourg mostly cut sweetheart deals for corporations and Cyprus mostly dealt with non-EU foreigners who don't get to vote anyway, cleaning up the British tax havens would threaten the hidden wealth of Conservative voters directly.


This isn't the case. All the main financial institutions in the Channel Islands and IoM are global so they KYC properly. More to the point though: the information-sharing is pretty much gold standard (bank accounts have been shared for a while but now beneficial ownership of companies is shared too).

The only way to avoid tax is to permanently move there. And, if you are familiar with either of those locations, you should know that the punishment fits the crime.

Also: it is far bigger than Luxembourg and Cyprus. Malta is basically a haven for financial fraud. Ireland is basically a tax haven now. And basically all of the East European nations are targets given the weak controls of their financial institutions (and Denmark as it turned out).


Netherland has Curacao as its tax haven even when its part of the EU.


> tax and legal purposes

This may be terribly naive, but doesn't that make the business de-facto illegal? What kind of legitimate business deserves to buck paying into the systems that support them? As a default I want to disagree, but I would like to know what business needs to operate outside of these constraints.

Surely the businesses utilizing the favours of banks like Cayman are not being operated within tyrannical countries (which is the first and only reasoning I can see for operating in the manor you prescribed).

The very fact that they operate this way seems shady to me.


I still can’t believe it’s legal to move from SF to Texas if you were born and raised in SF. You owe the good people of San Francisco repayment for raising and nurturing you. Leaving after all that education and local services is a corrupt tax-dodge into a state without income tax.


I'm not American, and most people aren't. You might need to tailor your metaphor.

That said, I disagree. Context matters. The comment above isn't talking about moving a business, it's only talking about operating with as little fiscal impunity as possible. Or at least it reads that way—which is why I was asking for more input.



There’s legality and morality. Moving all my wealth to Cayman (or Texas) may be 100% legal but I thought we were debating ethics. All of these HNers decamping from NYC and SF to Florida and Texas are horrible awful people depriving the local governments of California and New York their deserved taxes!


You should probably look further into the brain drain which is a global theme with complex ethics. Independent people moving are not really bad or necessarily hurting a state they leave as they send remittances, move back to retire, etc. The overall affect of states incentivizing bulk drains can be brutal though as can the resulting investment decisions of a state that knows it's brightest will be drained. At any rate, in the big scheme of things don't worry about NY and SF, they (and even their own domestic victims) are not victims of drain on average.


When you say "deserved taxes", what precisely is the reasoning behind this deservedness?

it seems to me that there's no reasonable way to lay claim to the work product of another person without being a total jerk... maybe i'm mistaken.


It's mind blowing to me that people get angry about moving wealth to a lower tax country like Cayman, but are totally milquetoast about moving someplace within the same country that has the same effect of lowering one's effective taxation.

If you are worked up about this Cayman thing, then you should be apoplectic if your neighbor moves to Texas or Florida. What horrible, disgusting people who are leaving their former communities to rot! They raised taxes on the rich in order to transfer more wealth to the community, and then the rich up and leave! Such completely selfish actions are galling and it fills me with anger, as it should any self-respecting person. We need the government to track where people live each day, and then make them pay their taxes proportional to where they lived for the rest of their lives. It's only fair to the communities that protected and nurtured them.

We need to outlaw each and every tax dodge. Clipping coupons deprives the state of their sales tax, as the total price is on goods is lowered which reduces the total tax bill, which is why I'm against coupons. How long will we allow this madness to continue?


Seriously having difficulty detecting whether this is sarcasm, so forgive me if I am taking some bait...

I'm not sure that I want the government to be responsible for doling out penalties for working (e.g. taxing somebody's productive efforts). I think it would be better if localities had sales taxes only. Penalizing people for visiting/living in a location (by taxing them proportionally for the rest of their lives) seems absurd, empowers a police state, and frightens me for the possible negative externalities of such a system.

Consider the case of a family that was persecuted out of a town (e.g. chased out by bigots)... should each of these individuals be penalized for the rest of their lives for having spent some amount of time "living" in that place?

Surely, that's not a good solution.


LOL maybe those communities should adopt some sane taxing policies instead of going all in on Nimbyism and "Imma take all your stuff because I know better how to dole it out".


Well, it’s called competition and I think it is a healthy feedback force.


Texas receives more federal dollars than it contributes. The real tax dodge is perpetrated by state governments that manipulate the federal budget to their benefit.


That's a lie. Texas pays more in federal taxes than it receives.


Thats not a lie, Texas breaks even some years and not on others. The surrounding states are wildly dependent on federal money at the same time they insult the people of the states that contribute to their own upkeep.


Terrible analogy.


> I still can’t believe it’s legal to move from SF to Texas if you were born and raised in SF. You owe the good people of San Francisco repayment for raising and nurturing you. Leaving after all that education and local services is a corrupt tax-dodge into a state without income tax.

Lol you again. How many times must you hear this to understand: Total freedom implies freedom of movement. You do not own people. You never will. You have no moral basis.


pretty sure OP was sarcastically trying to highlight the possibility that some premises may not be safe to leave unexamined. though tone is much more something I'd expect to see on Reddit than HN, it's a valid criticism.


No. He has repeatedly made the same comment (or "meme", "canard"). It is not insightful commentary; it is not much more beyond propaganda at this point.

California has made horrible financial decisions for over a decade. To pretend it is somehow moral to trap people and their wealth to those decisions is complete insanity. Also it won't work, to point out the obvious.


Pleased to see the "no borders" argument being made, but the more important one is to the south of California.


>This may be terribly naive, but doesn't that make the business de-facto illegal? What kind of legitimate business deserves to buck paying into the systems that support them? As a default I want to disagree, but I would like to know what business needs to operate outside of these constraints.

These constraints that you speak of are entirely arbitrary (geographical delineation) and were designed for a time before the internet. I would instead ask the question why Western governments are refusing to get with the changing tides and reform their archaic taxation codes to account for an increasingly globalised economy.

>Surely the businesses utilizing the favours of banks like Cayman are not being operated within tyrannical countries (which is the first and only reasoning I can see for operating in the manor you prescribed).

Not at all. There certainly exists a subgroup of individuals, companies, and institutions that operate in jurisdictions where there is a huge amount of uncertainty, but there is also a very large contingent that offshores their business to reduce regulatory burden and reduce tax liabilities, many of whom are individuals and companies that you and I have heard of. I doubt they will be using Cayman National Bank though, it is more likely that they will be using banks that you and I have also heard of like Barclays or DBS.


I'm sorry but that just sounds absurdly reductive to me. It makes a gross assumption that people are incapable of keeping their government in check.

Perhaps, in spite of my own cynicism, I believe people are capable of deciding how they want their societies to run (also in spite of our hiccups here in the Western world).

So again: why do such businesses deserve to operate with such impunity? A natural function of business is risk. Subverting reasonable social good is an active harm that is reasonable given the circumstances (like an ambulance or fire truck asserting the right of way on a city street), but I fail to see why that should apply to any and all business.

I'll be happy to be convinced otherwise—but I doubt I will be.

I know you're speaking out under the condition of anonymity, so I won't ask which business you're operating or employed by but I am immensely curious about which industry you're representing. It would help much in understanding your perspective.


I'm going to be honest. As an American it feels like my government is not in check. Not at all. They are failing to represent the wishes of constituents.

I too feel like the person you replied to. Why can't our goverment get with the times and create infrastructure to support the new global economy.


>It makes a gross assumption that people are incapable of keeping their government in check.

There is a difference between keeping a government in check, and ensuring governance stays relevant. Western democracy usually ensures the former, but is not very good on the latter.

>Subverting reasonable social good is an active harm that is reasonable given the circumstances (like an ambulance or fire truck asserting the right of way on a city street), but I fail to see why that should apply to any and all business.

This is more of a political argument than anything else, and I'm not too keen on going into my political views on this matter (although I'm sure it is not too difficult to infer them from my posts). What I will say however is that I think you are conferring an arbitrary civic duty on corporations, with the dutiful obligations of which being up for a significant amount of interpretation across societies and jurisdictions.


Yeah. I don’t think we can avoid the breach into politics on this subject, though, since it seems inherently political and I can tell we have some fundamental philosophical differences!

Anyway I appreciate the thoughtful responses regardless.


>I would instead ask the question why Western governments are refusing to get with the changing tides and reform their archaic taxation codes to account for an increasingly globalised economy.

Systemic corruption, governments are infested with corporate interests and tax avoiders.

Attempting to even the playing field would expose massive corruption.


> get with the changing tides and reform their archaic taxation codes to account for an increasingly globalised economy.

they don't know how.


"the company I founded and currently manage is offshored for tax and legal purposes"

Simply curious, how do you feel about the ethics of this? Is it to reduce the tax burden in your company's home country?


There are two dimensions here, one is the tax liability and the second is regulatory compliance.

Yes, the tax liability is significantly reduced when using offshore structures and I don't necessarily see this as a bad thing especially since an ultra-low corporate tax rate makes it possible to offer our customers services at a lower price than otherwise - I see this as a good thing.

The second is that regulatory compliance is much, much, much easier especially when working in industries like finance, insurance, or crypto. The flexibility and clarity of the regulatory climate in offshore jurisdictions is a huge advantage as it makes it possible for us to focus on doing business rather than narrowly tiptoeing an arbitrary and complex regulatory line as is the case in "home" jurisdictions like the US or the EU. This is further compounded when you have a distributed workforce located in various jurisdictions (which sometimes changes on a week-to-week basis).


> an ultra-low corporate tax rate makes it possible to offer our customers services at a lower price than otherwise - I see this as a good thing.

The claim that you’re transparently passing the savings of tax avoidance onto consumers rather than charging market-rate and pocketing the difference is both unlikely and unprovable. And even if you were charging less, this would essentially amount to an unfair, extra-legal competitive advantage.


> ...unfair, extra-legal competitive advantage.

It is not unfair, and it is not extra-legal. Anyone can offshore their company and in some cases it can take less than an day (incorporating an LLP in the UK takes a couple of hours) with virtually zero barriers of entry, all fully compliant with the relevant legislation.

If legal regulatory arbitrage (through tax havens) is unfair, then the corollary is that any kind of business profit arising from utilising uncommon knowledge is unfair. I think this position is untenable.


I thought most OECD countries have rules for companies being tax liable at their "effective place of management" and "arms length" etc principles to prevent funneling money to tax havens. Or is it just the correct loopholes you need to know about to ignore all of this?


It's very much a big proxy war between big economies. Currently the countries benefit from tax havens where growth is the highest (because these investment/offshore vehicles/vessels are low tax and the yields are reinvested, and the tax is reaped by the country where it gets invested; even if the profit was originally from a different country - but it's transferred to the tax haven via various schemes, like the intellectual property royalty payments and so on.)

https://repository.law.umich.edu/articles/717/


> If legal regulatory arbitrage (through tax havens) is unfair, then the corollary is that any kind of business profit arising from utilising uncommon knowledge is unfair.

This syllogism is so unsound that I’m not sure how to respond. I don’t think I’m arguing that, and I don’t think that using corporate tax havens is merely “using uncommon knowledge.”


> It is not unfair, and it is not extra-legal

Then why are you using a pseudonym?


"If you have nothing to hide, then you have nothing to fear" isn't a reasonable position to hold, and your statement basically amounts to it. There's plenty of reasons to want to stay anonymous when talking about business such as this.

To clarify, I don't necessarily agree with his position, but I disagree with your proposition that he is using a pseudonym for that reason.


If such a scheme were the only thing allowing you to make a profit, would you appreciate this guy drawing attention to it? In fact, you could protect your operation by submitting numerous tips to tax agencies across the world, causing his business to fail due to the immense cost of litigating such complex cases, even though he would be cleared if he could afford the defense. Everyone gets the right message: the public hears that tax havens "don't work", whistleblowers learn to keep quiet, regulators notch up another win, and the truly powerful get to continue dodging taxes.


> makes it possible for us to focus on doing business rather than narrowly tiptoeing an arbitrary and complex regulatory line

This can be solved by simply operating well within the legal line. If you’re operating so close to the border of what’s illegal that you’re “tiptoeing the line” then maybe that is the root problem.

I’ve been in several businesses and not once ever had to stop and ask myself “is what I’m doing technically legal?”


> quite frankly draconian rules that usually places them on US/EU/OECD blacklists

Assuming ethics is not a concern


I think the true moral crime here is preventing sovereign nations (using bullying tactics no less) who lack natural resources and other income-generating resources from offering convenient and flexible regulatory climates to business who need it. Singapore and Hong Kong were two countries that did this for decades and look where they are now - why shouldn't Vanuatu or Seychelles be offered the same opportunity?


SG is strategically located in Asia and has taken advantage of that.

HK was/is an entreport to China. Before 1949, it was not as important as Shanghai. After 1949, it was where a lot of southern Chinese escaped and became a manufacturing/cheap labor hub, while also taking advantage of British civil service practices.

Post China's economic changes, HK became the bridge between the world and China's economy, plus the place for China's new rich to park their money "safely".

Today, it is losing/has lost that advantage, because China's corruption has taken hold of the government, and as a result, the "rule of law".


That's a really crafty way of saying "they did it, so I should be able to do it"


Sure OK, but I want my "moral right" to a social democracy of the Nordic style. How come the Swedes and Norwegians can have a functioning socially responsible government but the UK gets a bunch of incompetent capitalists?


You're still an EU citizen, you have a legal right to take advantage of the Swedish social democracy.


You have to be carful about letting just anyone waltz up and become a pay to play citizen - or you end up like Malta.


Who's ethics? Really. Who's.

Ethics isn't a black and white thing and people feel differently globally about whats ethical.

Take copyright. That's a western thing, but personally I think we can do without. I like China's ethics on copyright even though most westerners would disagree.


What ethics? China has nominally had standard, WTO-compatible copyright protections for decades. The problem is inconsistent and often corrupt enforcement.

The sine qua non of any legal system is consistent application of the law: https://en.wikipedia.org/wiki/Rule_of_law If you don't have the Rule of Law, you don't have much of anything.

Western companies would have you think that China systematically ignores copyright, patent, and trademark protections, sort of like that there's a quasi-legal norm of simply ignoring those protections. But that's a strategically misleading characterization designed for Western audiences.


US government would have you think that China...

The US did exactly the same thing to the UK back in the early 20th century. All developing economies do. Protecting "Intellectual Property Rights" are only relevant to a nation's economy when those rights have value in that economy.

Nations that are in the "developing" state are generally the destination of outsourced manufacturing from developed states. They are arbitraging their lower costs of labor, less developed regulatory environment ("light touch", "economic development zones") and lower standards for environmental and other protections.

China is starting to enforce IPR because it now has the developed capacity to create IP.


Perhaps you're referring to the 19th century? The U.S. didn't recognize foreign copyrights until 1891: https://en.wikipedia.org/wiki/International_Copyright_Act_of... But when it did happen the enforcement apparatus (rule of law) executed the protections quickly and efficiently, AFAIU.

The difference with China is that China does recognize foreign copyrights. Why does the difference matter? Because consistent recognition in China can't happen with a simple passage of a law--that law exists. Any promises they make can't be upheld as their entire administrative apparatus is intertwined with communist party politics, and deficiencies in the political machine are what make enforcement so costly. Excepting espionage and trade secrets, I've never seen any evidence of an official or even unofficial policy of looking the other way for IPR violations; what I have seen is plenty of evidence that the processes for enforcement are byzantine, regardless of whether you're a domestic or foreign owned company, and too slow to catch violators such that it remains profitable. Have you been to developing countries? The black and grey markets are huge. You can't suppress these by fiat; you can only replace them, organically, with legal alternatives. (Same as digital piracy in the U.S.) The leadership can move mountains but they can't move a million mole hills nearly as easily.

The situation can and likely will improve without any major legal or political reforms. What you need, if you wish to accelerate this, is to incentivize the monied interests in China. How to do that? Maybe tie their foreign IP protections, particularly patents[1], on their domestic enforcement of copyright? That way corporations have an independent, self-serving interest in regularizing and normalizing copyright enforcement up and down the value chain, such as by building out their own value chain to replace the black and grey markets. Foreign trademarks are readily enforced in China, within the limits of what the bureaucracy can achieve, precisely because domestic companies have an interest in enforcement of their own trademarks domestically. And I'd bet big money that many of Disney's problems have already been solved by multiplexes owned by corporate conglomerates, which help to displace pirate DVD shops. Omnibus trade deals aren't going to get that done, and there's ample proof of this because there have been many.

You can't address a situation without understanding why it's happening. You can't ascribe simple motivations to such complex systems.[2] Whether you're Xi Jinping, Donald Trump, Vladimir Putin, Fidel Castro, or Hugo Chávez, you can't simply decree that some complex reform happen; things are more likely to go sideways or backwards. (OTOH, if you control the media--and even if you don't--you can simply declare that it happened, and more often than not enough people will believe you, or at least be satisfied.)

[1] Because language and cultural barriers means they're unlikely to have major export markets in copyrightable materials any time soon.

[2] I mean, you can. People do all the time, obviously. Simple narratives are an easy sell. But political reforms built on simple narratives don't have great track records.


In most cases, setting up your business there saves you no tax. It only saves you tax if you are a resident or if you don't tell the govt where you are a tax resident that you have a business there (not telling your govt is tremendously risky given that most of this information is now reported).

The main reason businesses are set up there is the legal benefits. Not just a stable legal environment but also because it is far easier to deal with international investors (most countries withhold tax from foreign investors at source, you can claim it back but that hits your ROI).


Depends on the country. Some countries have treaties letting your home corporation receive dividends from its foreign affiliate tax-free. Canada allows this kind of thing.

Then there's how to wash your Canadian income into this foreign operation...

There was a big case of a uranium mining company in Canada that sold options that effectively forced it to forever sell its product to its recently setup Swiss subsidiary at the "glut" price. If the price went up, all the profit would go to the Swiss subsidiary. If the price stayed low, they'd just liquidate the subsidiary.

Voila.


> Simply curious, how do you feel about the ethics of this?

This seems like standard practice for many companies who operate offices in foreign countries. It is easier (compliance) and cheaper (compliance and taxes) to have foreign subsidiaries.

What ethical violations are you envisioning?


If you want to talk ethics you should probably start at the government. Ethics should start with the higher level. The average business owner/s trying to LEGALLY minimize their tax is hardly unethical comparatively to the sovereign that allows it in a first place. If we are talking guys like Google then yes. Those just buy governments.


Note that in his write-up of how the hack was accomplished (someone pasted a link in another comment) the hacker specifically mentions his attack was on Cayman National Bank of the Isle of Man. From cursory research it appears to be based there, not in the Cayman Islands.


The isle of Man is an odd place, curiously not part of the UK, linked to a lot of financial shenanigans. e.g. A disproportionate number of private jets are imported into Europe via The Isle of Man for tax reasons. (Link: https://www.theguardian.com/uk-news/2019/apr/05/isle-of-man-...)


For those interested in this subject, I can't recommend the documentary "The Spider's Web: Britain's Second Empire" [1] highly enough. The guy who behind it not only did an excellent job, but did it for a tiny fraction of what a bigger studio would have spent for a much more inferior end result.

[1]https://www.youtube.com/watch?v=np_ylvc8Zj8


* her -- she refers to herself as a girl multiple times in the writeup

edit: or possibly they/them -- I'm seeing conflicting info circulating around



:|


> Although I will always be curious why countries are letting those small, insignificant islands and countries manage all this wealth

This is easy, after all hiding cash is needed by everybody. And when it comes to finance , there are no countries only financial interest. Of course nothing bad will happen to these financial heavens, because they are protected by the richest and most powerful people and organisations.

"The Spider's Web: Britain's Second Empire"[1] gives a good overview of how this started.

[1] https://www.youtube.com/watch?v=np_ylvc8Zj8


> I don't understand how this is even legal at all.

A lot of the process is not legal. That's why it is a scandal when they find this kind of information. But the existence of this type of service is practically guaranteed for the same reason: a lot of the money in these accounts was acquired in shady, if not totally ilegal ways. Even if countries make it completely illegal, there will be a lot of clients for offshore accounts. You can think of this as a modern version of pirates hiding their illegal treasures in some Caribbean island.


>why countries are letting those small, insignificant islands and countries manage all this wealth

Enlightened self interest. Those "insignificant" islands are generally speaking countries. By showing respect for the rule of law even in situations where they could easily overwhelm with force or economic power smaller nations, the larger ones reinforce that the law matters.

The larger countries use as a defense the idea that something is an "internal matter", IE it's no one else's business. If they bully their way into other smaller countries' business, then they open themselves up to the same interference.

Might does not make one right. Law does.


That's a pretty noble, if naive reason. "Rule of law" stops where economic interests begin and always has. Rule of law didn't stop the invasion of Iraq. Rule of law hasn't stopped the countless CIA backed coups in South America. Rule of law didn't stop funding/promoting the Arab spring.

Larger countries constantly bully smaller ones and will continue to do so anytime it's economically convenient. The reason Grand Cayman exists is because the people with money that control global politics want it to exist. That's the beginning and end of the story. There's a reason the Panama Papers went away quietly despite the assassination of the human who exposed it...


>There's a reason the Panama Papers went away quietly despite the assassination of the human who exposed it.

The human who exposed it is still anonymous. A journalist who wrote using the Panama Papers as a source was murdered, most likely by local Maltese exposed by the journalist.

There has been $1B plus in taxes recovered as a result of the publication.


>There has been $1B plus in taxes recovered as a result of the publication.

How many people are in prison? How many middle class folks get by with a slap on the wrist for tax evasion?


Most people that get caught for tax avoidance get punished civilly (fines etc).

Corporates can't be put in prison and piercing that veil takes a lot of work. Getting the money disgorged is a good step.


> funding/promoting the Arab spring.

Details? By whom? What for? Is this claim based on anything?


> Rule of law didn't stop the invasion of Iraq. Rule of law hasn't stopped the countless CIA backed coups in South America. Rule of law didn't stop funding/promoting the Arab spring.

These places were all considered "rogue states" at some point, i.e. places that openly neglected the very same rule of law which protects others. Being a 'rogue' state may leave you open to being bullied, but that's hardly inconsistent with rule of law being very important.


"Rule of law" doesn't mean picking and choosing whom it applies to. Saddam was our best buddy when he was using mustard gas in Khuzestan against the right people.

International politics is rule by power rather than rule of law. The person you're replying to got it right.


what criteria were/are used to make that consideration? because it sure as hell seems the US and Israel qualify, at least recently, for largely subjective definitions that i can come up with. alternatively if there are objective definitions, let's see them and decide for ourselves.

it seems, then, the only thing stopping these rogue states are powers or coalitions of powers with the potential to dominate them (or i guess survive) via conflict, either via subterfuge or military means, and the will to do so. put more simply, reigning in Iraq or Nicaragua is a hell of a lot easier than Israel. why is that, if not for power differentials?


> These places were all considered "rogue states" at some point, i.e. places that openly neglected the very same rule of law which protects others.

That still doesn't change the reality that the US broke international laws [0] under the pretext of supposedly enforcing them.

And it did so in a very calculated and premeditated way [1] that justified everything on a domestic legal basis, while completely disregarding international law and institutions like they do not matter at all.

Imagine if China would pass a law declaring how their soldiers and government officials can't be held accountable by any international body, how would that be framed by US media?

Yet in the US, this has been established legal reality for close to two decades and plenty of US Americans defend it like it's the most normal thing in the world due to their internalized "exceptionalism".

[0] https://www.theguardian.com/world/2004/sep/16/iraq.iraq

[1] https://en.wikipedia.org/wiki/American_Service-Members%27_Pr...


I think it is a mistake to think that relations between sovereign nations is based on "rule of law". Yes there are legal principles involved, but mostly, sovereign nations deal with other sovereign nations via realpolitik.

On the other hand, I think that within a sovereign nation the adherence to "rule of law" has a more substantial meaning and relevance.


Realpolitik is a sham, it got us two world wars. After these, rule of law became, for a short prosperous time, more dominant, at least in Western Europe.

These things (laws, ability to peacefully cooperate, ethics) are like religion, if you believe in them, they, for all intent and purposes, exist.

But we are infused with an ideology of rational distrust, because a small amount of people can't mentally grasp any alternative to power. so we dig our own graves.


this doesn't pass the smell test for me. first, we're talking about powerful vs. not so let's not use area as a proxy for power; that's not appropriate.

given that, history is rife with examples of powerful nations basically looking the other way when other countries not in their playpen get "bullied". these large international bodies e.g. League of Nations, UN have all failed generally when powerful entities decide they want to shake things up. individuals countries, obligated by treaty, also failed when e.g. Germany decided it wanted to chow down on "certain" parts of Europe. consider pre-WW2, Israel, what the US has done post-WW2, China/Xinjiang, etc. etc.


What about Israel? Israel isn't expanding, all lands it conquered were in wars it didn't initiate. when a chance for peace came, it gave these lands back.

Did you see a map recently? Do you grasp the size of Israel vs it's neighbors? (The Sinai desert, which Israel gave back to Egypt as part of the peace agreement is x3 larger than Israel)

You can't clamp together imperialists like US Germany and China with Israel defense strategy, that's just weird.

Now don't get me wrong, some israeli leaders did/do crappy things, but never at the scale of China US or Germany, or for that matter any colonial country. It's a whole different scale.


> Israel isn't expanding, all lands it conquered were in wars it didn't initiate.

That's not strictly true. You're forgetting the 1947–1949 Palestine war, the first part of which was effectively a civil war where there's ample evidence of Jewish militias, with premeditation, taking part in land grabs every bit as much as the Arab militias.

In the West and especially in America this aspect is overlooked and even denied, as it doesn't fit the narrative of Israel as the underdog. Conversely, in the Muslim world this is pretty much the only aspect they want to discuss, for similarly self-serving reasons.


That's not really accurate. Israel accepted the division plan the British offered where part of the land was to be Israel and the other Palestine. The Palestinians didn't accept it, and 5 Arab armies attacked the newly founded Israel while calling for driving all the jews to the sea. (Mean while Ben Gurion asked the local Arab population to stay and promised equal rights in the new country. Both right wing and left wing Israeli leaders of that time talked about equal rights, while the Arab leaders talked about annihilation, and asked the local Arabs to leave while the clean the land from jews)

Israel fought back, and got territorial gains. Of course there were Jewish militias, Jews in British Mandate era were constantly being attacked by local arabs.

Anyway, even with all the complications of this era and our ability to form a tidy nerrative, the comparison of Israel to American and Chinese empirialism is just crazy talk. This stays true even if you totally accept the Arab narrative.


> these large international bodies e.g. League of Nations, UN have all failed generally when large, powerful entities decide they want to shake things up.

The UNSC is actually a pretty successful institution, all things considered. It gives "shakeups" a reasonable chance of being defused, and that's good enough most of the time. Enlightened self interest has to do the rest, of course - so failures will occur, but they ought to be rare. And Nazi Germany, the PRC in Xinjang etc. aren't exactly models of the rule of law!


> Although I will always be curious why countries are letting those small, insignificant islands and countries manage all this wealth

Those small, insignificant islands and countries are current or former british or european colonies. And considering they are primarily located in the caribbean, the chances of them being successfully attacked is zero - good luck going up against the might of the US Navy.

> How do you wire all this money to such a small place

Whether it's $10 or $1000000, it's just a number (a few bytes) on transfer or just a few more digits on a check.

> and how can they trust so few people to hide so much money?

It's easier to trust a few rather than the many.


> the chances of them being successfully attacked is zero

Mother nature can successfully attack whole islands.


Do you think the money is on those small islands? Or on Guernsey? Or the British Channel Islands? No, the money is in New York and London at the usual banks who earn money on fees and can work with the deposits. The banks on those islands don't have a data center, or a bank vault. They only legally have the money on paper, but "their" money is in the banks in NYC (Caribbean) and London (former Empire).

Interesting read "Treasure Islands: Tax Havens and the Men who Stole the World", Nicholas Shaxson


Most of these assets, although "located" in obscure places, are actually warehoused right back here in the US of A.

Their status as being "held" outside the US is mostly a fiction existing on paper which allows for privacy and tax avoidance.


Because the people who run "countries" use these services.


> Although I will always be curious why countries are letting those small, insignificant islands and countries manage all this wealth, and why they're trusted to do it.

Probably because the people who run the state are also people who take advantage of these tax loopholes. I don't believe the US even needs foreign countries to hide taxes this well, we have better mechanisms in e.g. South Dakota.


Hanlon's razor. Also, a Michelle Obama quote[0].

[0] https://www.newsweek.com/michelle-obama-tells-secret-i-have-...


>Although I will always be curious why countries are letting those small, insignificant islands and countries manage all this wealth,

British Overseas Territory


Big growing economies benefit from tax havens, because they get capital more easily, because the profits can be extracted at a low cost from other countries.

https://news.ycombinator.com/item?id=21571339

And naturally, as others noted, the security is quite good.


Most people don't know the US is the preferred tax haven of the world.


We aren't a tax haven. We are a wealth haven. People buy assets here like real estate. They are more concerned with the strong privacy rules and strong protections for property. In terms of actually earning money, that is better left to tax havens or special economic zones.


The Cayman Islands has robust financial regulations and is a financial center.

It is also reliant on the UK for military assistance, and as you can see the bank records for this particular institution are digital.

You are grouping everything together with misplaced isolationist paranoia.


The Cayman Islands is a vassal state of the global one percent as a tax shelter. Let's call it what it really is. It's not a global financial center the way NYC or Hong Kong or Tokyo are.

It's a sand bar with a bunch of post office box company registries and some banks. I hear there is also good snorkeling.


Great scuba diving. Highly recommend a visit. :-)


>is a vassal state of the global one percent as a tax shelter

Just FYI, to be in the global one percent you need an income of $32,400 per year


That won't get you into the global 1%.

Around 70 million people are earning more than $50,000 per year in the US.

Western Europe, Canada, Australia, Japan, South Korea, China, etc. combined also have a very large number of people similarly over that line.

Your figure probably needs to be 100% higher.


Do you have a source for that? We're pushing 7 billion people on the planet.

Here's a source that uses that $34k figure: https://www.investopedia.com/articles/personal-finance/05061...


That's pretty straightforward. There are 128 million people working full-time jobs in the US. The full-time median income in the US is between $48,000 and $52,000 for 2019 depending on your source. The BLS says it's about $48k for the third quarter of 2019.

The often quoted lower median figure, in the $30,000s ($34,000x for 2019; it was ~$33,700 for 2018), is the median income for all US workers, including people working relatively few hours.

Being conservative, the US has at least 60x million people making $50,000 or more per year. That's ignoring anything that doesn't show up in the BLS numbers.

Now consider how massive the rest of the global economy is and the tens of millions of people in dozens of other countries with high incomes. The US all by itself eliminates the possibility of $34,000 being the 1% line.

With the strict US median at the $34,000 line, that's ~78 million workers at or above that level. Again, that's for one country.

China has a very large number of people earning around the US median now, due to their scale. They add tens of millions of more people to the over $34k group. Then include Western Europe, they add tens of millions more. And so on.


Good point. Looks like my number is outdated, it's from the worldbank data from a decade back


Individual or household?


Their legislative branch is extremely competent at evaluating and passing competitive laws for business and banking, their executive branch is extremely competent at providing the administrative services and modern digital facilities for international business and banking, and their judicial branch is extremely competent at resolving disputes.

The government's budget is also balanced without passive taxation of this sector.

Most jurisdictions, whether they are other island nations or a state in the US are not competent in any of these regards and this has utility on this planet.

It would be an understatement for me to just point out how much I don't care how uncompetitive other nations are in this regard, and I also don't care about the challenges for them to become competitive.


>Their legislative branch is extremely competent at evaluating and passing competitive laws for business and banking

as if races to the bottom are challenging

>this has utility on this planet

The only utility the Caymans serve is unfettered human greed.


If my sole purpose was to be good at X things, I'd be good at them.


Somebody tell the British Virgin Islands, St. Kitts & Nevis and the Seychelles

They seem to have missed the memo :D

I feel like if I had said the Caymans was incompetent I feel the replies whether from you or others would have said “well of course they are” but anyway their regulators and public servants are often US educated at prestigious universities


The money isn't being kept there for safety, it's being kept there for anonymity and easy access. These countries don't ask any questions when you show up and ask to withdraw a million dollars. Maybe you're withdrawing that money to buy a yacht, maybe you're withdrawing it to buy drugs, maybe you're withdrawing it to pay for a seat on Epstein Air. Banks in developed countries ask questions, these banks in these countries ask 0 questions.


Yep, and the moment someone starts asking questions or being "uncooperative" they are dealt with - as was Amine Halawi in [0].

[0] https://theintercept.com/2019/10/26/jho-low-1mbd-comoros-off...


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