Distortions

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So capitalism is for poor people and socialism is for capitalists. This view is not just offensive. It is catastrophic.
Martin Wolf in August 2007, on calls by a hedge fund manager for the US Federal Reserve to bail him and his colleagues out.
This $1 trillion or more per year of illicit money that moves across borders and the structure that facilitates its movement is the biggest loophole in the global economic system.
Raymond Baker , June 2007
Any common sense person would say that a highly paid private equity executive paying less tax than a cleaning lady can't be right. ... I have not heard anyone give a clear explanation of why it is justified."
Nicholas Ferguson, chairman of SVG Capital, who built what is now Permira, Europe’s biggest private equity fund.
In direct contradiction to the theory of comparative advantage, which assumes that economic activities tend to gravitate towards geographically relevant areas, offshore has the opposite effect.
Ronen Palan p35 in Offshore Finance Centres and Tax Havens: the Rise of Global Capital, ed. Mark P. Hampton and Jason Abbott.
Many of the most damaging policies have been created in the name of Adam Smith, the original modern economist. If that eighteenth-century Scotsman could come back today, he might smite the plutocrats setting the government's bill of fare and cast out the rule-changers. No doubt he would remind us of his eighteenth-century insight that subsidy economics are inherently inefficient and wasteful.
David Cay Johnston, in his bestseller Free Lunch: How the wealthiest Americans enrich themselves at government expense (and stick you with the bill). p24 of the paperback version
Tax havens warp the foundations of market capitalism. David Ricardo's theory of comparative advantage says that production should gravitate towards geographically relevant areas: cheap manufactures come from China and France or Chile produce fine wines. But now we have thousands of companies operating from one building in the Cayman Islands, and a former Thai prime minister avoids paying tax on a $1.9bn sale through a British Virgin Islands company called Ample Rich Investments. Small wonder that people lack confidence in the global economy.
John Christensen, director of the Tax Justice Network, in The Guardian, May 2007
Experience is accumulating that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.
John Maynard Keynes , pre-dating the securitisation crisis by 74 years.
Enron and other big companies have escaped taxes in recent years through financial maneuvers so complex that the Internal Revenue Service has been unable to understand them.
Expert witness to Senate Finance Committee 13 February 2003
The advanced tax planning undertaken today by most global companies is as intelligible to the average person as particle physics.
Alan Rusbridger, editor of the Guardian, writing about the huge legal risks his newspaper has faced in addressing offshore tax abuses
The business model followed in all offshore secrecy jurisdictions is for compliant trustees, corporate administrators, and financial institutions to provide a veneer of independence while ensuring that their U.S. clients retain complete and unfettered control over “their” offshore assets. That’s the standard operating procedure offshore. Offshore service providers pretend to own or control the offshore trusts, corporations, and accounts they help establish, but what they really do is whatever their clients tell them to do. In truth, the independence of offshore entities is a legal fiction.
Senator Carl Levin, introducing the Stop Tax Haven Abuse Act, Feb 2007
Offshore represents a new and significant division of labour in regulation: ‘private’ regulation for the corporate citizen and ‘public’ regulation (the law, prisons and social welfare) for individuals.
Ronen Palan p37 in Offshore Finance Centres and Tax Havens: the Rise of Global Capital, ed. Mark P. Hampton and Jason Abbott.
The accountancy firm Grant Thornton worked out that the UK’s 54 billionaires paid income tax totalling just £14.7m (0.01%) on their £126bn combined fortunes.
The Observer, 2007
“Illicit, disguised and hidden financial flows create a high-risk environment for capitalists and a low-risk environment for criminals and thugs. When we pervert the proper functioning of our chosen system, we lose the soft power it has to project values across the globe. Capitalism itself then runs a reputational risk. As it is now, many millions of people in developing and transitional economies scoff at free markets, regarding the concept as a license to steal in the same way as they see other others illicitly enriching themselves.”
Raymond Baker, in his book Capitalism's Achilles Heel
International economic liberalization since the mid-1970s has entailed the substantial removal of border barriers (tariffs and currency controls), greatly reinforcing the movement towards deeper international economic integration. But this shift towards more `open’ national economies did not create a unified and free world market. Instead, like an outgoing tide, it revealed a craggy landscape of diverse national and local regulations. Trying to deal with these differences has generated an exponential growth of networks of regulatory cooperation, coordination and harmonization. These are no longer primarily of an international character, but also supranational and infranational, frequently by-passing central government. They also reflect and reinforce changing public-private forms, since these regulatory networks are very often neither clearly state nor private but of a hybrid nature. . . . Thus, there has been a movement from the classical liberal international state system, towards one that is often denounced as neo-liberal, but is perhaps better described as post liberal. ...To paraphrase David Vogel (Vogel 1996), the apparent shift to `freer markets’ has meant more rules.
The Retreat of the State: Challenges to Law and Lawyers Institute of Advanced Legal Studies, University of London 27-29th June 2006 Sol Picciotto Lancaster University Law School
Company directors feel under pressure to minimise taxes, but tax is a vital contribution to society, and it is offshore where this all goes wrong, and where our queasy feelings originate.
John Christensen, director of the Tax Justice Network, in The Guardian, May 2007
Time and again, a tax break that is big enough to make a difference to the behaviour of entrepreneurs and investors ends up being exploited in a way that was not intended. Tax officials are left scrambling to close loopholes after too much money ends up subsidising low risk assets, supporting businesses with no intention of expanding, or cutting the tax bills of wealthy individuals.
Vanessa Houlder in the Financial Times, 2007
When Senator Max Baucus held up the photo of the modest Cayman office building that houses over 12,000 shell companies I was tempted to comment that it was amazing that the weight from the brass plates had not sunk the building into the sand!
Jeffrey Owens>, head of tax at the OECD, 2007
"The only clear winners are large corporations. In return for building new facilities in many states, companies are actually getting negative income taxes. Subsidy packages routinely exceed $100,000 per job. Guess who's getting stuck with the tab. When the big boys pay less, either the rest of us pay more or the quality of our public services declines - and usually its some of both."
Greg LeRoy, The Great American Jobs Scam: Coroporate tax dodging and the myth of job creation, Berret-Koehler, 2005
I’m not sure it is riots on the streets yet. But it may not be far away, the way things are going . . . The industry certainly pays very low tax and that is not easy to justify,” he told the Financial Times. “Buy-out firms are stacking up cash offshore in ways that look bloody wrong to me,” he said, referring to the practice of locating funds in overseas tax havens and keeping carried interest rolling over."
John Moulton, the founder of the UK buy-out firm Alchemy Partners, July 2, 2007

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