Tax Haven Expert James S. Henry On “The Pinstripe Mafia”

Flag of the British Virgin Islands

Flag of the British Virgin Islands (Photo credit: Wikipedia)

Posted August 24, 2013

by Jerry Alatalo

James S. Henry speaks at a TED talk about the massive industry which has been active, thriving, and unknown to most of humanity for decades. This is the industry of tax avoidance (zero taxes) and tax havens up and running in locations around the world.

The International Consortium Of Investigative Journalists ( broke the silence on this industry after receiving over 130,000 documents related to tax avoidance from the British Virgin Islands, which started a world-wide discussion. As of August 2013 there are reports that the G8 and G20 groups will be meeting to discuss this major issue.

The question that has to be asked is: Where have all of these world leaders been for the last twenty years while this industry has been going gangbusters?

If the International Consortium Of Investigative Journalists had not received those thousands and thousands of documents, would world leaders have still expressed any “concern” about tax havens? If those documents hadn’t been transferred to ICIJ and the story was never told, would these leaders have remained in “business as usual” mode, and remained silent?

Tax havens are no longer secret.

(The following is from an article posted on May 27, 2013. At the end you will hear from expert James S. Henry at his TED talk.)

The Cayman Islands, Cyprus, the Netherlands, Belize, Panama, Hong Kong… Offshore tax havens have operated all around the world for a long time. Fortunately the people have become aware of the size of the operations, to evade paying taxes, run by corporations and wealthy people.

Bankers, lawyers and accountants have been busy aiding firms and the wealthy avoid taxes with offshore smoke and mirrors for long enough now. Complex corporate structures, mysterious chains of ownership, confusing and irrational levels of ownership, along with hide and seek cutout owners are some of the tools of the tax haven industry. Understand that the tax haven industry is a huge industry.

For corporations and rich people the options are there to take advantage of low to non-existent tax rates and secrecy laws in other countries. The offshore tax haven industry is a very controversial subject. The bankers, lawyers and accountants involved in this multi-trillion dollar industry are known as “the pinstripe mafia.” The big four accounting firms of Price Waterhouse Coopers, Deloitte, Ernst and Young and KPMG, along with the too big to fail banks and the largest legal firms in the world are the facilitators of offshore tax havens.

Every day accountants, bankers and lawyers are working to find their clients “neutral taxation” (0%) or “tax optimization” (0%). As long as the actions taken are “legitimate and proper” (getting around the law) it is full steam ahead. They first find the free zones where money is transported by corporations, billionaires and millionaires in secrecy where nothing is visible. Here is where you can erase your clients’ steps so as not to worry about being found out by the taxman or the media.

The interests of those who would seek help to avoid taxes through the use of offshore havens are at odds with the rest of the people. The system is rigged to the tune of many trillions of dollars. This is the way it is on Earth. Perhaps the tide has turned here as exposure and awareness of this greed industry continues to grow.

The writer will admit that, if he had many millions of dollars, he is not at this time able to say with certainty that he would not be tempted to use an offshore tax haven. If such a situation came about he would hope not to go there. We are simply being fully candid with the reader.

It is of note that those with less financial resources have to pick up the tabs for those who use offshore havens. The conditions of societies suffer where companies and individuals evade paying their fair share of tax. Plainly and simply tax havens are not fair.

The accountants, lawyers and bankers involved have to keep this large industry secret or will risk losing their jobs, never working again in the business. Whistleblowers have to think long and hard before they make any decision to let these secrets out to the public and the media.

A wealthy woman Leona Helmsley said years ago, “We don’t pay taxes. Only the little people pay taxes.” The big four accounting firms are in charge of all the accounting rules and are not governed by any type of oversight. They are not accountable to anybody so there were no penalties suffered for their signing off on the health of the large too big to fail banks that recently crashed.

Cruelly, tax havens are funding deficits as governments are borrowing offshore funds. Democracy is diminished as corporations threaten to move offshore if tax rates go up on them and the wealthy people who own them.

There are estimates that anywhere in the range of 40-100 billion dollars per year is lost due to these tax avoidance and evasion schemes. When you add up all the banks in Switzerland, Antigua, Singapore, the British Virgin Islands and the many others you find a huge, legal, bordering on the immoral, unethical practice. Offshore jurisdictions offer lucrative advantages to clients who live outside of that region or country.

Offshore transactions happen outside of the client’s country of residence and financial secrecy is the key to the entire offshore tax haven industry. Clients are assured of confidentiality through laws and other means. Civil law, criminal law, bank policies and industry practices all combine to offer clients complete secrecy to the point where in many of these havens it is against the law for bank employees to show anyone information about client accounts.

Havens offer little or no tax liability on business operations outside of the haven, favorable laws for foundations, trusts and corporations, while working closely with the client’s financial and professional advisors. Shams and schemes are actively promoted, arrangements are made for secret control of accounts, false statements and documents are created.

Financial advisors and facilitators are found in New York, Los Angeles, Chicago, London, Singapore, Geneva and elsewhere to help clients hide assets and avoid taxes. Accounting schemes are engineered to blur or blind the vision of any person attempting to discover fraud and corrupt accounting.

The British Virgin Islands have a land mass the size of Washington, D.C. There are around 20,000 people who live there. In the British Virgin Islands there are more than 1,000,000 registered corporations.

Layers of secrecy have been created where multiple haven locations around the world connect in increasingly complex and secret ways. Fake securities transactions, phone transactions and phony accounting are a few of the tools used to avoid taxes.

Tax avoidance is a worldwide industry that has gone on for decades. It is not operated by tiny, crooked banks on tiny islands all over the world. It is a money-making industry run by the largest banks in the world along with the largest accounting firms and the largest law firms.

These firms are found in every large city on the planet. While clients enjoy the services and benefits of their home countries, they pay no taxes on their hidden wealth. The letter of the law has been met but the spirit of the law has been thoroughly trashed for decades. Any person or entity of any significant wealth will end up consulting a tax haven financial engineer.

These same facilitators of tax evasion end up in positions of power and control in government tax and treasury departments. The large accounting, law and banking firms have come to have no concern for societies and the well-being of ordinary citizens. It is all about profits, period. They use the language of drug pushers and talk about “satisfied clients.”

Enormous public expenditures are made to investigate and prosecute tax schemes. The taxpayer bears the cost while new and more complex schemes are in development now, in real-time, to wipe out client profits with smoke and mirror accounting. These schemes are marketed and sold to clients every business day. “You can increase your income by millions per year”, “profits are larger than the fines you will pay if caught”… Tax scheme products are many and are on the shelf for purchase by clients, just as the average person buys items off the shelves of the supermarket.

There is a lack of deterrence as firms that get caught end up paying fines that are smaller than the amounts realized from their illegal activities.

There are estimates that 500 billion dollars of tax revenues are lost per year to developing countries. The amount lost for developed countries is much higher, perhaps one trillion per year. It is interesting that this writer became aware of this world tax haven reality after seeing investigative reports at an obscure website. The main stream media has not done a major report on this important issue, ever. No politicians have made this information available to the people.

We have to ask why this tax haven secrecy has existed for decades. As this explosive issue is not being reported by the mainstream media, and governments have not dealt with it, the people will have to take the lead and start powerful actions.

Transparency of not just international financial transactions but of everything that is occurring on Earth is healing and healthy for all people. With total transparency comes total democracy.

It is convenient to direct the blame toward those on the lower end of the economic and wealth scale for problems with economies. It is very important to note that the attention has shifted correctly to those who hold the reins of power and are responsible for the realities affecting the human race on Earth.

It is understandable that those in the top-tier of wealth and privilege have no strong want to make any changes to things as they are. Here we find hope in the recent actions taken by the many men and women who are bringing the true reality of what is occurring on Earth to the people of the world.

Transparency will bring to light those problems which can then be dealt with through reforms which end the root causes, instead of treating the symptoms of human problems. Conventional economic wisdom does not pay close enough attention to power arrangements in societies and institutions.

The lack of total transparency, fraud regulations, monitoring and control has led to the current economic free fall. Inequality is the core problem which both caused the crisis and is a result of the crisis. Increasing inequality of human beings has concentrated wealth into the hands of an increasingly smaller group of people, who have captured political institutions and seized power at the expense of the average person.

There is a false belief that governments and markets are separate when in fact vested private interests, not the public interest, are served. Are we to see a race to the bottom or a race to the top? Models of development must be developed which are based on equality, not inequality, that keeps concentration of power in check for the people. Common goals need consideration as opposed to the goals of concentrated power, wealth and resources.

A super class of 6,000 individuals controls the world.

There is a lack of governance in the world of finance where citizens subsidize corporations and the wealthy, where social inequality is actually far worse than perceived. Diversions of wealth have especially hurt the developing countries where many billions of dollars have been transferred to developed countries’ citizens. The unfortunate economic conditions in societies of people have been given very shallow coverage by major media, as the root causes are never identified and reported.

There are hopeful signs of new beginnings as many thousands of the world’s wealthiest corporations and people have become exposed for tax evasion with accounts in offshore tax havens. These people are many times the most politically powerful in their home countries. These are the folks who make calls for austerity and higher taxes on regular citizens while hiding their stashes.

Corporations claim profits in those tax haven jurisdictions where taxes are the lowest. These activities are widespread, criminal and effectively poison the world’s economy. The recent expose of 130,000 client bank accounts from the British Virgin Islands has made many people aware of what is going on, while yet millions of corporate and individual accounts are still secret in the rest of the world.

Britain plays a big role in the control of islands around the world which have become tax havens. Huge profits are reaped in Switzerland, New York, Singapore and dozens of other cities and countries where the tax haven industry operates.

Estimates are that 100 billion dollars per year is lost to America as a result of individuals’ tax avoidance. The amount of corporate tax avoidance losses is much larger.