Paradise for the Rich
The German word for tax haven – Steuerparadies, literally “tax paradise” – is a bit of an oxymoron. After all, whose mind wanders to the Garden of Eden when filling out IRS Form 1040? A more common reaction is acquiescing to the aphorism that only two things in life are certain: death and taxes. And in the afterlife – that is to say, in heaven – at least there’s no such thing as an income tax deduction.
But that’s just how mere mortals think, those with normal-sized bank accounts. For the richest among us, there are plenty of ways to reach tax salvation without crossing to the other side. In tax paradise, many earthly constraints – of the kind most people cannot escape – are lifted. It is a place of exclusionary insouciance.
For some, tax havens are as normal as smoking a joint
The Paradise Papers lift the veil on people who evade things like taxes, regulations and sanctions, thus neglecting the most important thing of all: their societal responsibility. Doing so has become so common these days, so run-of-the-mill, that tax havens are no longer unsavory haunts populated by pariahs, but collective meeting points for economic elites for whom Irish-Dutch-Caribbean tax structures are as widely accepted as smoking a joint is in broader society. When a corporation goes looking for the ideal place to establish tax residency, it expects the host country to demand neither taxes nor transparency – and it most certainly cannot have a political opposition that would dare question such privileges.
The term tax paradise is misleading for another reason as well. There’s absolutely nothing idyllic or exemplary about them. The Isle of Man, for instance, a beneficiary of the EU’s customs union due to its status as Britain’s plus-one, offers the option of importing private jets into the European Union VAT-free. It’s an example of how the governments of microstates and law firms write special rules for the over-privileged. There are, of course, legions of ordinary taxpayers who would love to save on VAT, whether they’re buying fruit, diapers or concert tickets, but are simply not allowed to. In tax havens, the wealthy can save 4 million euros in taxes on a single airplane – more than most people will earn in their entire lives.
Those targeted by allegations stemming from the Paradise Papers often decry such stories on the grounds that they never broke any laws. This is consistent with the ethos of tax havens, which holds that beneficiaries of the system are to be left alone, thank you very much. But there is an obvious public interest in exposing the machinations of tax nirvana: Which companies are optimizing their bottom lines there? Which cabinet-level politicians are shrouding conflicts of interests? The customers of tax havens may have agreed to a level of secrecy with their complicit lawyers, but that contract is not binding for the rest of us taxpayers who have yet to reach the fiscal Promised Land. Indeed, the Paradise Papers could even spur a debate over why so many people are permitted to neglect their responsibilities to global society. Such a debate is as necessary as ever: Various leaks in recent years may have done some damage to tax havens, but the offshore industry is still flourishing.
The beneficiaries of this system – including nearly every major multinational – are as much to blame as the service providers. In their worldview, every nation serves a purpose: The Filipinos sew t-shirts, the Germans buy them and the Dutch devise ways to avoid taxes through fiscal skullduggery. For companies that pride themselves on their 15 percent tax rate, globalization is downright heavenly: They get all the advantages with none of the restrictions. This is shameless, indeed scandalous – even biblical gardens didn’t have these kinds of perks.
Governments bear a responsibility to change the status quo, but an imminent banishment from this paradise doesn’t seem likely. Donald Trump, the false prophet of America’s downtrodden, likes to lash out on Twitter against unchecked elites, but he too has indulged in tax havens. Republican scripture holds that mankind may only thrive where taxes wither and that tax havens are to be exalted and emulated, not shunned, by the world’s economies. Trump’s latest ambitions for rewriting the American tax code suggest this is the direction in which the U.S. is headed, not the other way around.
Tax havens are not the way to achieve heaven on Earth. They are by definition exclusive, because not everyone can afford absolution. There is a message in their isolation, one aimed at the excluded masses with their pesky social state, rules and democratic processes: Go to hell.