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Beware, the Borderless Tax Man Cometh

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Yves here. Readers presumably know that the US departs from the practice of pretty much every country in the world in taxing its citizens on worldwide income. Spain is breaking new ground in making citizens and residents declare foreign assets…which most see as a precursor to taxation. And of course, a move to tax out of country income or assets will increase the interest of countries to do more intensive snooping into the financial affairs of their inhabitants.

By Don Quijones a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media. Cross posted from Testosterone Pit

It’s no secret that the Spanish government is desperate for money these days. Like a junkie experiencing the early spasms of withdrawal, Rajoy’s administration has been frantically surveying its surroundings for anything of value to steal or pawn.

Last year it reneged on pretty much all its election pledges by unleashing the most severe austerity regime in the country’s democratic history, with 27 billion euros of cuts and a 7% rise in utility prices. Taxes were hiked across the board and, as in Greece, privatised hospitals and other public services were hastily fast-tracked into the pockets of multinational corporations. But all to no avail.

Despite its austerity drive, the government failed dismally in its attempts to meet the Troika’s 5.3 percent budget target for 2012, and by May this year had already given up on meeting the 2013 target. With time fast running out and the Troika’s goons breathing heavily down its neck, the government began frantically searching for new, more imaginative ways of raising funds.

And in January, 2013, it seemed that it had found the perfect answer – namely, to target the funds of expatriate residents and nationals living overseas. The government stealthily announced a new law that obligated any resident in Spain with more than 50,000 euros worth of savings, assets or real estate overseas to declare all of it – and with pin-point accuracy.

While the government insists that the new law is merely an information-gathering exercise, failure to declare or any errors in the information provided would result in a penalty of 10,000 euros, or more. Anyone who declared their assets after the deadline – April 30th – would have to pay a minimum fine of 1,500 euros.

With the prospect of a new, extremely desperate tax man on the scene, thousands of ex-pats are now [quite understandably] considering leaving Spain.

One person who is wracked with worry is the retired Spanish-born father of a close friend of mine. After moving to London in the sixties, he has built his life in the U.K., where he owns the small house in which he and his wife have been living for the last 30 years. But he is also a regular visitor to his country of birth, where he officially remains a resident and owns a small property on the Costa Blanca.

Since he doesn’t travel in ex-pat circles, my friend’s father didn’t find out about the new legislation until it was already too late.

“It’s horrible to see the stress this new law is causing my 74-year-old father,” says my friend, who, naturally, would prefer to remain anonymous. “A man who wants to do everything by the book and be 100 percent in compliance with the law. Because he wasn’t informed of this new requirement, and didn’t send his Modelo 720 in the short time window available, he now faces what seems to be unlimited fines whether he now sends in the form or not.”

Not only can years of hard work and saving seemingly be taken away in a flash, he is now living with this uncertainty hanging over his head, which I really hope will not have a negative effect on his health.”

Tax Collecting Goes Global

The Spanish case is testament to the ever-closer cooperation taking place between national tax authorities. For years now, the U.S. government has demanded that all overseas nationals declare their annual income. And starting in 2014 all banks in Britain will report directly to the IRS and vice versa.

Perhaps most ominous of all, the first four items on the declaration of the recent G-8 Meeting addressed the need for governments to share information to, quote/unquote, “fight the scourge of tax evasion.”

Which, let’s face it, would be all well and good if their primary targets were not the little men in the street like my friend’s father but rather the multinational corporations, banks and hedge funds that for years have been paying a pitiful fraction of the billions of euros of taxes they owe in the countries they operate. Call me cynical, but I find it somewhat hard to believe that the very same political leaders who casually and covertly meet up with the chief executives and chairmen of the world’s largest corporations in fora such as the annual Bilderberg meeting are about to throw their corporate owners partners overboard.

As Nicholas Shaxson writes in his book Treasure Islands, “The offshore system is the secret underpinning for the political and financial power of Wall Street today. It is the fortified refuge of Big Finance.”

There are, by his estimates, anywhere between 10 and 20 trillion dollars sitting offshore in tax havens and half of world trade, in one way or another, is processed through them. And it’s not just about paying less taxes. Tax havens also offer their clients secrecy and escape from both financial regulations and criminal laws.

Ironically, the host country of the recent G-8 Meeting, the U.K., and more specifically its financial capital, the City of London – which, it’s worth mentioning, is an entirely separate sovereign entity – is one of the world’s biggest offshore tax havens. By offering banks around the world the opportunity to skirt the democratic laws of the nations in which they operate, London has been an essential accomplice in the rise of the too-big-to-fail paradigm, not to mention the myriad financial crimes that have been committed in its name.

The Real Agenda

In the coming months and years, governments will try to propagate the idea that they have suddenly found religion. As if singing from the same hymn sheet, they will tell us that they now understand the importance of tackling the “scourge” of tax evasion and the illegal economy.

Many taxpayers will no doubt swallow the propaganda whole. As such, they will happily allow their governments to share all their personal financial information with other countries and regional or international bodies such as the EU, the IMF, the World Bank and the Bank of International Settlements. After all, it’s the least we can do in the war against tax evasion.

But just as Edward Snowden’s recent disclosures have shown that the NSA’s wire-tapping and Internet snooping is much more about social and political control than it is about fighting terrorism, our governments’ sharing of our private financial data will be geared at consolidating financial control over our lives.

In the U.S. Judicial Watch has just announced that it has obtained records from the Consumer Financial Protection Bureau (CFPB) revealing that the agency has spent millions of dollars for the warrantless collection and analysis of Americans’ financial transactions. The documents also reveal that CFPB contractors may be required to share the information with “additional government entities.”

By creating a global cross-reference of everything that moves in the financial world, governments will be able to track every penny we earn, spend or save. It’s no coincidence that the self-same governments have been implementing increasingly draconian measures to limit the use of cash in the economy while at the same time promoting the use of digital alternatives such as mobile money, which can be much more easily tracked and traced.

The war against privacy is being fought on a broad spectrum of fronts, chief among them the financial front. And what remains of our economic freedom, whether as earners, savers or spenders, hangs in the balance as the iron grip of government control tightens. For if information is power, then complete informational awareness of the kind our governments seek represents potentially the final stepping stone to absolute power.

Given the hunger of the tax man, and the financial fiascos, debacles, and nightmares everywhere, how do you protect your assets? There are no easy answers, but here is a place to start…. Diplomatic Immunity For Your Assets In Interesting Times!

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26 comments

    1. psychohistorian

      After hearing that Monsanto bought Blackwater and is mostly owned by Bill Gates I am wondering when they are going to come to my house and tax me for my snap peas that I get to start harvesting tomorrow?

      1. toni

        Good point. I wonder if there’s a practical way to camouflage my vegetable garden?

  1. ambrit

    Friends;
    It’s official; there is a “One World Government,” and it’s not political in nature, it’s economic!
    As if any of the readers of this site didn’t know that already…

    1. F. Beard

      Banks need government privilege to be other than the cheap embezzlers they are.

      So why are they allowed those privileges?

  2. Skeptic

    “By creating a global cross-reference of everything that moves in the financial world, governments will be able to track every penny we earn, spend or save.”

    The above is all you need to know but it is not only the financial world, it is the whole world. They want a piece of “every penny”. Thus, CASH will be the next to go because with CASH still in existence, they cannot track every transaction. Most businesses around here are all pushing the use of credit or debit cards. If you use them, you are selling your freedom, cheap!

    A few years back in my jurisdiction, they wanted to put GPS chips on recycling containers but the public outcry prevented it. But it proves even GARBAGE is money and they want to track it.

    Just wait til they get those RFID chips on all appliances, furniture, etc. and you will see your Property Tax hit the roof! And then they will stick one in YOU.

  3. Capo Regime

    Ha–I used to think Martin Armstrong was a bit nuts on his suggestion that the various efforts at tracking transactions and monitoring all activity was not about fighting terrorism but an ever tightening tax net. He was right–its not about ferreting out terrorists and cash its about being able to squeeze out every penny of taxes. An of course blackmail to potentially trobulesome regulators, politicians and activists.

    1. nonclassical

      ..or not-perhaps you should study-read Shaxton’s “Treasure Islands”, and Naylor’s “Hot Money”=inform yourself…

  4. diptherio

    apparently, I have been labeled as a spammer by the server (or whoever). can’t post comments on links page. trying over here…

    testing…

  5. Massinissa

    Title sounds a bit off… We should fix it.

    “Beware the borderless taxman cometh for the 99%”

    There we go, fixed it.

  6. Mario Panziero

    Eh, the global Taxman, scary intrusive prospect isn’t it?
    Indeed, most people will swallow whole propaganda pieces, much like some will swallow any piece without a second tought.
    I dare you to consider the following: exactly who complains the most about taxes? Of course, you might say, those who actually pay taxes do, that is the laypeople from which most of the revenue has been, is and will be extracted, that is, the 99%.
    Not at all, I advance: most laypeople pay taxes and are the least vocal about them – they remember every now and then during elections.
    The other lucky few who sip martini in tax heavens cry rivers and shout a lot more, lest they actually were to lose any of those virtual paradises.
    Now some of them will cry rivers for lost privacy and claim that the Financial Big Brother will harm us all.
    The hell with you, I say. Where were you when the insidious menace of outsourcing to places were people is paid $100 a month was sold to the western world as a blessing? Maybe conniving and lobbying for tax havens? So why should laypeople bother fighting “the good fight”, for all they know is that the boot of corrupted state and of the inefficient, profit privatizing, cost socializing private enterprise has been firmly on their neck for the last 30 years?

  7. allcoppedout

    One world government would at least stop the usual statement that the actual one world government rolls out to stop us doing anything sensible.
    We are so pathetic we can’t stop them hounding Snowden and accept a system that allows rich people to pretend they earned their money. I’d favour revolution if I hadn’t seen the kwality of the people I’d be fighting in front of.
    GWP (gross world product) was $71 million in 2012 (nominal). The estimate of money held offshore is clearly a guesstimate at between $10 – 20T – I’ve seen higher and in the past the rich have turned out to have a lot more swept under the carpet. My guess is $40T and counting.
    Add to this wads of other wealth and we almost certainly have a whole year’s GWP to invest if we take it all from them. And why not, as the rich rarely die in the wars they kill us off in?
    We are now so stupid we don’t even see the person who always wins in snakes and ladders is cheating. Anyone else noticed the fact that Snowden has nowhere to run may be part of the same story of the rich finally being run to ground?

    I think Prism generally a good thing – it has a god-like quality that information systems always promise – the all seeing eye that will prevent teenagers masturbating, having sex and not getting pregnant or venereal diseases under threat of mortal sin. Transparency of borders is great in the sense of being able to track down crooks, lousy for the freedom fighter. Soon posting here (and there) may be routinely summarized for employers. We will spend our last days scurrying in the dark fly-posting Samizdat.

    We can really only protest transparency because of Big brother. In the past we balked at ‘intrusions into the family’ – look how horrible many families turned out to be and how stupid many social work and police ‘intrusions’ have been (and how many kids have been saved)?

    Irony apart, we need some new language on this and what a transparent democracy would be. I doubt anyone would want to start such a debate with ‘I know, let’s create offshore tax havens’!

  8. Maju

    I do not share the position of Don Quijones in this case: logically a tax-starved state, has to do everything in their hand to comprehensively tax its affluent citizens and foreign residents. He’s probably right on the information not being delived correctly but there must be a proactive war against tax heavens and the Depardieus of the world who try to avoid taxation so shamelessly.

    Rather than just fines, I’d put severe jail penalties for major capital evasion and such, I’d also rise corporate taxes (on profits especially), tax housing market speculation (empty homes for more than a year for example), nationalize the large utilities (so all their brutal profits go to the state), make severe laws against closure of companies (instead of what they are doing today, which is exactly the opposite, allowing the destruction of the economy on the whim of globalist investors) and declare sanctions against every single tax heaven, beginning with Andorra, Gibraltar and most other English offshore pseudo-autonomous colonies outside of EU jurisdiction.

    In any case I don’t see why people or corporations should be allowed to have tax free assets in say, Jersey or the Caymans, and not be taxed for them elsewhere where they are liable under the law. Tax heavens are the most direct threat to the economy worldwide, they must be actively fought against by all means necessary.

    But in any case don’t just expect the destituted worker class to pay for state expenditures, because they just can’t.

    1. RepubAnon

      Yes, isn’t it interesting that being taxed on world income only applies to people who have corporeal bodies, as opposed to corporations, who are also people according to the Citizens United ruling, but whose income is taxed differently?

  9. capo regime

    Am plenty informed. you have other info then share w some grace=cultivate yourself and learn some manners

  10. Cortina

    The borderless tax evader has been here for a long time and is here to stay.

    Free trade agreements and tax havens exist for one purpose only. To ensure transnational corporations and wealthy individuals can carry out their extractive processes free from interference by sovereign states.

    The only faint hope for us (the powerless masses) is to persuade our “democratically” elected representatives to roll back decades of neoliberal dogma and free trade agreements. All income of residents (capital gains, salary, rent etc) to be treated as equivalent for tax purposes. A wide range of intelligently calculated tariffs on imported goods and services. Strong capital controls in place, withholding taxes on income and dividends paid to foriegn residents.

    Residents income from overseas should not be taxed. In monetary terms income from overseas is effectively an export. The onus should be on the host country to manage their capital outflows and “imports”.

    Some may feel this will inhibit “free” exchange of goods and diminish our choice. In reality the choice of goods is rapidly shrinking because of trade liberalisation and the growth of global monopolies. We have to change vector soon. The alternative is further descent into corporate sponsored fascism.

  11. clarence swinney

    The Failure of Republicans to deliver on their promise that tax cuts would be mostly self-financing is a large factor in the deterioration in our long-run fiscal outlook.
    There is little evidence that the Bush huge tax cuts, or any other tax cuts, directed at the job creators, have had a noticeable effect on economic growth. The promise of broadly shared prosperity has not been realized. Over a decade we lost 1900B of promised revenue from the Bush Tax Cuts. Let em expire. Bush added $6100 B to our debt . 5800 to 11.900.
    9-30-01=5800—9-30-09=11,900

  12. Walter Map

    You have to tax the rich.

    Here’s why.

    The world’s worst problems are largely the fault of the rich. Make them pay for wars, poverty, and ecological destruction, and I guarantee you will have less of them. A lot less. Because the rich will either pay to ameloriate them, or will be motivated to otherwise reduce them.

    Taxing the poor and the middle class ultimately only increases the idle, wasteful, self-destructive, and genocidal wealth of the rich, and does nothing to reduce wars, poverty, or ecological destruction. The way taxes are presently structured the rich are incentivized to maximize those problems, not minimize them.

    This approach, therefore, reduces humanity’s worst problems into a single problem: how to tax the rich. Good luck with that one. The rich are determine to pillage the planet until there’s nothing left to steal.

    1. F. Beard

      Why allow people to get rich unjustly in the first place? Why are the banks and the most so-called “credit-worthy” allowed to steal or at best “borrow” without true permission the purchasing power of everyone else?

  13. F. Beard

    According to MMT, taxation by the monetary sovereign is to control price inflation by destroying fiat. But the central bank also creates fiat (sometimes called “reserves”) by Open Market Purchases, currency swaps, etc.

    So at least some taxation would be unnecessary without the central bank.

  14. kevinearick

    Reflections of Humanity

    Another day at the circus, watching people watch people lose their pensions, fall into ill-health, and get thrown out of their homes…so those watching can play with their toys…watching the latest empire incarnation, a rigged lottery of artificial competition, confirming compliance with jobs, sucking the spirit of independence dry…ho, hum.

    Thank God we have Facebook to let us all extend this pretension, a US Navy to enforce the outcome, and a flag, complete with a bow of fireworks, to wrap it all up in, with a nice piece of paper, called the US Constitution, granting divine providence to a succession of petty dictators, employed as scapegoats to misdirect responsibility for as long as possible…

    From chaos comes order, and from order comes chaos. Your job is to balance the two in a cascading effect so the work can move forward, to bring humanity to bear. Space travel, through false assumptions, is always the problem. And you are always the solution. Whether the elevator gets there on time or not is up to you.

    Within the empire, you are always going to walk into a f-ed up mess, because excessive control is being applied, because the critters are listening to voices in their collectivist head, from the past. Anyone can, and most do, replicate behavior to increase efficiency, speed in the wrong direction. And it doesn’t take a rocket scientist to rebel aimlessly, to be overwhelmed by the majority and confirm the process.

    From the empire majority’s perspective, paid in its own debt to extend ignorance as widely as possible, you are the problem, to be ferreted out. From God’s perspective, you are the solution, keeping the empire busy, with busy work. The reason the global economy has grinded to a relative halt, to suit the majority interest in itself, is because the majority is busy with capital replication specialization, while labor prepares the next phase.

    The light circuit is wired up, but the rest of the elevator is being modernized. Escape velocity will occur when you are paid to raise your family, which is the backbone of any economy, when the motor circuit is complete and the façade, the new dress, can be applied. To the extent you can wear multiple hats, to wire the event horizons in time, renewed elasticity will ignite economic circulation.

    For Labor, marriage only under the authority of God (with which you have a personal relationship without intermediary) is the constitution. It never agreed to accept the US Constitution, the latest incarnation of civil authority, as its master. Written constitutions are designed to guide the mass of ignorance into alignment, not to celebrate independence.

    Empires always bait and switch with false promises, employing whatever traditional myth is required to eliminate thinking. The empire majority cannot work, by design to conserve capital, which is why it cries for entitlement jobs, and why the US Navy protecting it is a civil, not a military, organization, leaving it rudderless in the Stupid Zone.

    Agency is an old woman with a dead womb, married to a eunuch, civil law parading as military law. War is no accident; it ignites when the empire majority runs out of economic slaves to feed its ponzi and maroons itself in History. Government is a derivative, stuck in a derivative gear, employing derivatives.

    Unlike gold, marriage as a private institution is both rare and fundamentally necessary, because without confidence in the future the ongoing assumption of solvency disintegrates. If you allow government feedback, promises in a rigged lottery, to determine your priorities, you have no one to blame for tyranny but yourself.

    Those who produce children to produce set the lead time for productive young people, which is the best defense against tyranny, leaving consumers behind to grow their empire, busying themselves hunting down producers to tax, to subsidize the past. A consumer service economy is for people who are already dead but haven’t been told so by the accountants.

    Leave others behind, to destroy their own marital foundations; you have much better things to do, like raising your own children and providing for your parents in old age. The Family Law disincentives have simply grown so large that few can mount the stairs against the herd coming down. Monogamy has outlasted all comers accordingly.

    Naturally, an insecure, skill-less, peer pressure society is going to covet with greed, and, backed by the US Navy in this iteration, the empire majority thinks that not stealing is stupid, especially when the civil rules of law are specifically framed to grant the right as an entitlement in exchange for compliance. The ponzi has always been pay-as-you-go on a cash basis. The only change is demographic deceleration, which unwinds accounting position.

    Simply tune in the gravity you require to sling-shot your development, and then tune out the empire. The US Navy will protect the artificial demand and supply of consumption until it can’t, which is when you may expect the bomb. Speaking of 1937, what was the nature of capital-labor relations at that time? Is that really labor at the negotiating table?

    Labor doesn’t negotiate; it navigates the unknown, which is why you will not find it in your History book. Measure the known twice and solve the problem once, to give your kids as much lead time as necessary. History rhymes for a reason, and if you have ever navigated through a dead zone you know why. Expect the unexpected and adapt. Insurance is surest path to death.

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