How To End Tax Havens? One Idea

REIT Taxes Avoid TaxesImage source: Pixabay

I’m not crazy about the idea of wealthy people and corporations avoiding taxes by creating subsidiaries with no economic function in tax havens.  Sometimes I wonder if the budgets could be balanced if we were able to eliminate the tax havens.

So, why not have a meeting of NATO of the G-20, or even the Useless United Nations, and discuss a common strategy of dealing with rogue nations/city-states that invite people and corporations to do business through them in order to avoid taxes.

One strategy could be this: use NATO to blockade these places, and tell them to end their tax-avoidance-facilitation policies, or else.

Now that ‘s a little harsh, but almost all of the tax havens with the exception of Ireland are little places that can’t defend themselves.  But maybe there is an alternative.

The coalition of the willing would go to each of the tax havens, and make a deal with them.  “If you raise your tax rates and definition of income to our levels, we will remit foreign aid to you to partially compensate you for your loss.  Remember, we can use military or economic sanctions against you — think of Iran, or North Korea.”

Why it won’t Happen

The main reason it won’t happen is that wealthy supporters of politicians will complain, and many politicians are wealthy themselves.  Sad, but true, and it will remain so until a significant nation nears default.

By David Merkel, CFA of alephblog



About the Author

David Merkel
David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.