How Much Money Does the 1% Have Hidden in Tax Havens?

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Yves here. We’ve posted on Zucman’s important work in estimating how much wealth is hidden in tax havens, and it’s great to see him using his academic work as the basis for a book aimed at policymakers and laypeople.

By Gabriel Zucman, assistant professor of economics at the University of California, Berkeley. Excerpted from his new book, The Hidden Wealth of Nations: The Scourge of Tax Havens. Cross posted from Alternet

Tax havens are at the heart of financial, budgetary, and democratic crises. Let’s take a look: In the course of the last five years alone in Ireland and Cyprus—two offshore centers with hypertrophic financial systems—banks have gone almost bankrupt, plunging thousands of people into poverty. In the United States, Congress has revealed that one of the largest companies on the planet, Apple, avoided tens of billions in taxes by manipulating the location of its profits.

In France, the budget minister had to resign because he had cheated on his taxes for twenty years through hidden accounts. In Spain, the former treasurer of the party in power went to jail after having revealed a hidden system of financing through accounts in Switzerland. Accepting the status quo seems irresponsible. Each country has the right to choose its forms of taxation.But when Luxembourg offers tailored tax deals to multi-national companies, when the British Virgin Islands enables money launderers to create anonymous companies for a penny, when Switzerland keeps the wealth of corrupt elites out of sight in its coffers, they all steal the revenue of foreign nations. And they all win—fees, domestic activity, sometimes great influence on the international stage—while the rest of us lose. Inthe end, the taxes that are evaded have to be compensated for by higher taxes on the law-abiding, often middle-class households in the United States, Europe, and developing countries.

Nothing in the logic of free exchange justifies this theft. For some, the battle against tax havens has been viewed as lost from the start. From London to Delaware, from Hong Kong to Zurich, offshore banking centers are essential cogs in the financial machine of capitalism, used by the rich and powerful throughout the world. We can’t do anything about them, we’re told: some countries will always impose less tax and fewer rules than their neighbors. Money will always find a safe haven: strike here, it will go over there. Capitalism without tax havens is a utopia, and a progressive taxation of income and fortunes is destined to fail, unless we choose the path of protectionism. For others, the battle has almost been won. Thanks to the determination of governments and to multiple scandals and revelations, tax havens will soon die out. From the harsh words of large countries seeking new solutions ever since the financial crisis, they have all promised to abandon banking secrecy, and multinationals will finally be forced to open their books and pay what they owe. This is the triumph of virtue.What is missing in this debate is data.

Tax evasion by the wealthiest individuals and large corporations can be stopped, but only if we have statistics to measure it, to implement proportional penalties against the countries that facilitate it, and to monitor progress. It is with this goal in mind that I wrote this book, an economic study of tax havens. I gathered the available sources on the international investments of countries, the balances of payments, the on- and off-balance sheet positions of banks, the wealth and income of nations, the accounts of multinational companies, and the archives of Swiss banks. Some of these statistics had never been used before, and this is the first time that all this information has been collected, confronted, and analyzed with a single objective: to expose the true activities of tax havens and their costs to foreign nations. Let’s say it from the outset: These statistics have many imperfections, and the results of my study are thus in no way definitive. Our system for measuring world financial activity has many weaknesses. But this is no reason not to use it. In spite of any limitations, the available data shed an irrefutable light on the activity of tax havens; and there is no foreseeable progress in ending tax evasion without a quantitative picture of the extent of this fraud.

Only on the basis of such an evaluation, however imperfect, will it be possible to impose sanctions and follow any progress in the fight against the scourge of tax havens. The main conclusion of my investigation is that, despite some progress in curtailing it in recent years, tax evasion is doing just fine. There has, in fact, never been as much wealth in tax havens as today. On a global scale, 8% of the financial wealth of households is held in tax havens. According to the latest available information, in the spring of 2015 foreign wealth held in Switzerland reached $2.3 trillion. Since April 2009, when countries of the G20 held a summit in London and decreed the “end of banking secrecy,” the amount of money in Switzerland has increased by 18%. For all the world’s tax havens combined, the increase is even higher, close to 25%. And we are only talking about individuals here.Corporations also use tax havens.

Corporate filings show that US companies are shifting profits to Bermuda, Luxembourg, and similar countries on a massive and growing scale. Fifty-five percent of all the foreign profits of US firms are now kept in such havens. Since multinationals usually try to operate within the letter—if not the spirit—of the law, this profit shifting is better described as “tax avoidance” rather than outright fraud. But its cost is enormous—$130 billion a year for US firms alone—and since equity ownership is very concentrated, it essentially benefits only the wealthiest among us. An Action Plan To effectively fight offshore tax avoidance and evasion, I willoutline a set of coherent and focused measures. The first is to create a worldwide register of financial wealth, recording who owns which stocks and bonds. Financial registries already exist, but they are fragmentary and maintained by private companies such as the Depository Trust Company in the United States and the Luxembourg bank Clearstream.

The goal would be simply to combine them,to enlarge the field of data, and to transfer ownership of the data to the public. Combined with an automatic exchange of information between the banks of all tax havens and foreign tax authorities, a financial register would deal a fatal blow to financial secrecy. But how can all tax havens be compelled to cooperate? It is not enough to politely ask them to abandon the financial opacity that allows them to prosper. The second dimension of the plan of action I propose is to levy sanctions proportional to the costs that tax havens impose on other countries. Calls for transparency, new laws, or more bureaucrats are insufficient. Only combined international pressure can truly have an effect, by shifting the incentives of tax havens.

One type of possible sanction is trade tariffs. France, Germany, and Italy would be able to force Switzerland to disclose all the assets held there by their residents by jointly imposing customs duties of 30% on the goods that they import from Switzerland, because the costs for Switzerland would then be more than the income derived from its banks involved in tax evasion. Third, we need to rethink the taxation of companies.

The fixes recently proposed by the Organisation for Economic Co- operation and Development (OECD) are unlikely to enable much progress. Looking forward, the taxation of multinational firms should derive from their worldwide consolidated profits, and not, as is true today, from their country-by-country profits, because those are routinely manipulated by armies of accountants. A tax on consolidated profits would increase corporate tax revenue by about 20%; this would essentially benefit the large countries of Europe as well as the United States, where the kings of tax dodging—the Googles, Apples, and Amazons—produce and sell the most but often pay little in taxes. The Symbolic Power of Finance If we believe most of the commentators, the financial arrangements among tax havens rival one another in their complexity. In the face of such virtuosity, citizens are helpless, nation-states are powerless, even the experts are overpowered. So the general conclusion is that any approach to change is impossible.

In reality, the arrangements made by bankers and accountants, shown in the pages that follow, are often quite simple. Some have been functioning unchanged for close to a century.

There have of course been innovations, sometimes esoteric. And we can’t deny that there are still aspects of the functioning of tax havens that no one really understands. But, we know more than enough to be able to act against the fraud they perpetuate. Economists share some of the responsibility for the sense of mystery that still surrounds tax havens. Academics have for too long shown little interest in the subject, with some notable exceptions. But progress has been made within the past ten years, and we may rightfully hope for important advances in the near future. The fact remains that most of the progress in understanding tax havens achieved up to now—remarkable progress in many respects—can be credited not to economists, but to a certain number of pioneering nongovernmental organizations, journalists, political scientists, historians, jurists, and sociologists.

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28 comments

  1. Steve H.

    There is so much good about this work that I am suppressing the Medusa-like snark emerging from my head about the ‘them.’

    The subtext is inequality. Only those with too much can afford the cost of skirting their duties. And while the U.S. is not considered a tax haven, the fact that a negative interest rate for the banks (being paid to borrow) is even being considered is a sign of the deep rot which fuels this offshoring.

    1. Noni Mausa

      Indeed. The interest rate is only zero or negative for those who can afford to negotiate under those terms. For the average person, even investment income is earning a mere 2-3%, savings accounts earn some absurd amount like 0.5 to 1.5%, with the result being wiped out by a low but still steady inflation rate.

      Inquality has created two economies, with a gulf between. All that bridges the gulf is an occasional injection of liquidity here and there, as one might water one plant but not the one next to it. Enough to influence the desert next door, but not enough that it might become a lush and independent garden.

      1. Steve H.

        Good simile, that reminds me, my catnip and parsley need tending. It’s been dry and cool, and the parsley had been watered by putting it under an air conditioner, it really liked the condensation.

      2. Vatch

        Savings accounts earn some absurd amount like 0.5 to 1.5%

        Regular U.S. savings accounts rarely earn as much as 0.5%. Usually 0.1% is the maximum for ordinary savings accounts. To get anything as stratospheric as 0.5% or 1.5%, one must get a certificate of deposit, in which the money is locked up for many months or even a few years. Early withdrawal of one’s funds is subject to financial penalties.

    2. Nicholas Shaxson

      You’re right, Steve, that this is an excellent book, which I have on my table next to me. I have to object to your “the U.S. is not considered a tax haven,” though. That is absolutely wrong. See this,
      http://www.nakedcapitalism.com/2015/01/tax-haven-usa-vortex-shaped-hole-global-financial-transparency.html Also take a look at the next Financial Secrecy Index of the Tax Justice Network, due to be published on Nov 2 – with plenty of new info about Tax Haven USA.

  2. andyb

    Surprising that the author doesn’t mention FACTA and its selective enforcement by the DOJ. While European banks have been investigated and punished, very little has been done vis a vis Caribbean banks.
    Could it be that the ill gotten gains of the 535, SCOTUS, and the Executive Branch are all located there. Of all the accounts established in Caribbean banks, a significant portion can be traced to the 3 most influential DC law firms.

    1. sd

      Speaking of Washington DC, I’ve always wondered why the Riggs Bank scandal didn’t receive more attention. Ditto BCCI which could serve as poster child for off-shore name dropping.

      I think it’s safe to say, where there’s money, there’s corruption.

    2. Jim Haygood

      Surprising indeed. FATCA, the pilot program for his ‘automatic exchange of information,’ is a pig in poke:

      The House Ways and Means Committee estimated the Act will raise $792 million in new revenues. According to Newsweek, however, FATCA was not subjected to a rigorous cost/benefit analysis before Congressional passage of the legislation. The compliance cost to overseas financial institutions alone has been roughly estimated at $8 billion a year, approximately 10 times the amount of tax revenue “guess-timated” by Congress.

      http://seekingalpha.com/article/2311575-fatca-the-road-to-hell-was-paved-with-good-intentions

      So FATCA ain’t making us any money. As the article goes on to detail, its real-world effect is to make middle class Americans into pariahs when they try to open bank accounts overseas. Combined with global income taxation of Americans, it makes living as a U.S. expat somewhere between difficult and impossible.

      FATCA is a building block in the global panopticon. Submit and obey.

      1. bob

        We had a guy run for prez who took money laundering lessons from drug cartels and used the model for private equity.

        There are no laws anymore.

        If he had done what he and Bain continue to do, 20 years ago, he would be in jail, at the very least.

        If a guy runs for prez and no one points this out, is anyone surprised that the rest of corporate ‘merica is following in his ‘winning’ footsteps?

        Any company that wasn’t doing tax avoidance via the caymans has either joined the party, or are in the process via reverse mergers etc.. Afterall, the republican prez canadidate does it, why can’t everyone else?

        The brave new world of narcotraficante banking.

        1. blert

          Call the cops right now.

          Bain was a Johnny-come-lately to the game.

          https://en.wikipedia.org/wiki/Kohlberg_Kravis_Roberts

          KKR, not the narco-racketeers, was Bain’s model.

          There was and is absolutely no need to move hot money in a KKR or Bain LBO.

          Such deals don’t work that way at all.

          The principle for KKR’s deals is that Wall Street sentiment is often soft headed. Further, public boards of directors don’t optimize cash flow what-so-ever. So, it quickely proved easy as pie to take over low growth, low P/E stocks, and to shed marginal operations.

          Because of the Chinese super boom — and super low pricing — virtually every off patent manufacture moved onto ‘the bubble.’ This vast asset base became fat pickings.

          The easiest cost savings came by way of eliminating corporate overhead. Or, in other words, moving the HQ out of Manhattan// San Francisco// Boston… you get the idea.

          To show how common this is: The Washington Post is doing such dealings right now.

          Newsweek’s first big savings: shut down their Washington DC HQ. It was gold-plated.

          KKR and Bain didn’t care for that kind of prestige. Immense savings resulted from just that one standard operating procedure. I can’t think of an LBO that didn’t shed HQ office space like mad.

          Often the savings — from just that one decision — were enough to begin paying down the LBO debt.

          But, the boys were just getting started.

          The highest prices for the ‘pieces’ were only paid for going concerns. What this meant in practice is that KKR and Bain, et. al. were shedding jobs like crazy — but did so as these ‘lost’ jobs moved into new ownership. The big boys were letting other, smaller, players buy out the pieces — via LBO’s themselves.

          This moved the debt from KKR// Bain to the new owners.

          After enough sales, KKR // Bain et. al. were left with core businesses that were often nearly debt free. At such a threshold, the team was able to use internal cash flow to build the rump up into an attractive corporation — suitable for Wall Street.

          Between the leverage and savvy, IRR for the early deals often reached 200-500% compounded. ( Hyper leverage, eh )

  3. financial matters

    I think changes in the political structure will also help in this struggle. This sort of shining the light on this subject helps motivate political change. Richard Murphy is now a prominent advisor to Jeremy Corbyn.

    From Nicholas Shaxson’s 2011 Treasure Islands

    “Richard Murphy of Tax Research UK captures the artificiality of these arrangements. “Offshore is used to repackage what happens elsewhere,’ he said. “It is used to change the form, but not the substance, of a transaction.’ A world-famous totem to this artificiality is Ugland House, in the Cayman Islands, which Barack Obama once criticized for housing over twelve thousand corporations: “either the biggest building,’ he said, ‘or the biggest tax scam.’ When Obama said that, Antony Travers, chairman of the Cayman Islands Financial Services Authority, fired right back. Obama would be better advised to focus his attention in Delaware where, he said, ‘an office at 1209 North Orange Street, Wilmington, houses 217,000 companies.”

    1. blert

      The Delaware corporation succeeded the New Jersey corporation of one-century ago. At that time its governor (Woodrow Wilson) cracked down on practices and tax breaks that are today associated with Deleware.

      The REAL reason why corporate America loves Delaware has little to do with avoiding taxes, other entities provide THAT shield, it is that Delaware corporate case law dramatically favors existing boards of directors during proxy fights.

      Delaware permits poison pill provisions, too. ( massively diluting stock offerings// super dividends// golden parachutes // on and on …. )

      Delaware also has favorable treatments for the Board of Directors — in terms of personal liabilities. That’s a huge inducement for the Fortune 500 crowd.

      Hence, Antony Travers is comparing his apple to Delaware’s orange.

      Apple, Google and the rest have to leave the United States to set up real tax dodges.

      But there is a deeper issue: international manufacturing has become so globalized that nation-states have lost control. Any attempt to tax corporate incomes triggers horrific blowback from shifts in trade — if not the outright loss of ones own domestic giants.

      The REAL reason corporate income taxes keep dropping around the world is because the various sovereigns are compelled to limbo down, lest the biggest factories locate elsewhere. ( Ford to Mexico, for instance. )

      1. financial matters

        Yes, corporate governance is a mess abetted by the Delaware rules.

        Shaxson actually considers the US the number one tax haven/secrecy jurisdiction. London 5th, 3rd and 4th Switzerland and the Caymans, 2nd Luxembourg.

        ——–

        http://www.nakedcapitalism.com/2011/04/jim-boyce-tax-havens-or-financial-sinkholes.html

        “Second, “tax” havens are not just about dodging tax. Money flows to these places not only to hide from the taxman, but also to hide from the law. As secrecy jurisdictions, tax havens allow asset holders to hide their identities from authorities in their own countries, and often from authorities in the secrecy jurisdictions themselves. For a modest price, front men, dummy corporations, and multi-layered transactions provide anonymity.”

  4. David Mills

    Stop allowing corporations tax deferrals. Make them liable to pay when declared, especially for public companies. The introduction of punitive taxes on unremitted, tax-not-paid profits and prosecutions for D&O’s could also be effective. As an aside, getting rid of D&O’s insurance would go a long way to moderate their behavior – bring back fiduciary duty.

  5. Noni Mausa

    And no one is writing much about the unilateral effect of FATCA on ordinary citizens of other nations with the misfortune to have been born in the US or to US parents in other countries. Such people find they need to file special tax filings to the IRS, costing $3-500 a year, simply to prove they owe nothing. Or on the foreign banks that are forced to eat the cost of providing their financial information to the IRS even though those people may have never lived or worked in the US, and do not owe them any taxes, nor qualify for any benefits.

    Thousands of Canadians are lining up to renounce their unintended US citizenship, setting appointments months in advance and traveling hundreds of miles to the widely scattered consulates. This has become a non-trivial profit centre for the US. Till recently, it cost the person about $450 to renounce — this year they raised their fee to $2300 ($3066 US). For the five thousand who pulled the plug just this year, that’s a hefty $15.3 million from Canada alone. Can you spell “extortion?”

    The US is apparently one of the only two nations to impose birthplace worldwide taxation. The other is Eritrea.

    http://www.bnn.ca/News/2015/7/20/Why-some-Canadians-bank-info-is-being-sent-to-IRS.aspx

  6. FluffytheObeseCat

    Cracking down for real on tax evasion would be a great idea, but as everyone in New York and London knows, it had better include real estate. And art. The amounts now being laundered thru high end US and UK real estate is nontrivial.

  7. JLCG

    I wonder what happens to the money that is kept in tax havens. If it is not invested in something somewhere, it is no better than gold, in the sense that the holder expects that the money will keep its value. But if the money based in the tax haven is invested it is not a dead asset. It may not be invested in USA enterprises but it is invested somewhere else. Therefore the idea that tax havens prevent money from circulating seems to me to be false.
    Money kept by plutocrats circulates. They may buy yachts or tawdry palaces but it is in circulation. If that money is unproductive the reason rests upon the sterility of thought. Simply our system cannot imagine anything different from itself at this moment. Therein is the poverty of “growth”. Lack of imagination and lack of daring. The system is frightened by any future that will convulse its present satisfaction. Thus the demographic crisis which is at the root of our paralysis. We are afraid of the future and we have become paralysed. The only solution we envision is kill kill kill whomever dares modify the present status.

    1. Barni

      Part of the solution is exemplified in North Dakota. North Dakota is the only state with no debt, the greatest support for public education and health, and really low taxes. North Dakota is also the only state which owns its own bank. Basically when it borrows money it borrows money from itself and when it pays it back it pays it back to itself. In Germany 70% of banking is done by municipally owned banks; which in great part explains why Germany is doing better than any other western economy. In Switzerland, the Cantons have owned their own banks for 100’s of years, which explains its prosperity as much or more than its premier position as a banking center (and tax haven). In Canada, the central Bank of Canada was created in 1934-35. And it immediately began creating money (for the Canadian government to spend debt free into the economy) as all money has been created for 100’s of years, by moving a (the Canadian government’s) bank balance up. The government immediately began hiring people to build highways, railroads, ports, hospitals, schools etc. and as a result Canada exited The Depression in 1937-38; more than twenty years before the USA and Britain which have private for profit corporations as their central banks. (With the brief exception of a few years during WW2 when men were in the military and as a result the number of “unemployed” dropped drastically.)
      The IMF & World Bank created (again out of thin air by moving a bank balance up) SDR’s are an attempt to gain the ultimate financial and controlling upper hand on democratic governments which can then be controlled by debt and ultimately become so weak that they will be totally controlled by a few corporate owners and their minions in the IMF & World Bank; and ultimately replace democracy with the world wide autocracy of the 0.1% – effectively destroying democracy and controlling national governments so they cannot protect and serve their citizens nor protect their natural resources from total economic and financial predation.

  8. Bold'un

    You mention the disadvantages of fiscal havens but there are advantages as well: the huge one is that hidden offshore assets are a hedge/reserve against bad government at home (as well as against family and bankruptcy lawyers). History shows that this has often been a life-saver.
    We see middle-class Syrian refugees in their boats; guess what? Those with Swiss bank accounts and flats in Monaco are a whole lot more welcome: was that immoral or sensible for them to have prescient doubts about their government? Ditto with the Greek crisis: a desperate government was scouring for revenue and arbitrarily changing the rules pensions and whatever. Was it really sensible for Greeks to keep 100% of their savings in local government bonds? In fact those who kept some powder dry will be the very ones who enable a recovery once sustainable policies return.
    There are good reasons why governments have secret services and often pay them in tax havens so why should not private individuals have some secrecy too?

    1. craazyboy

      Well, if countries weren’t being run by oligarchs’ bribes and the oligarchs then gutting the country and hiding all income in offshore tax havens, then we might, just maybe, have fewer failed countries.

  9. Bold'un

    For an interesting illustration of the possibility of bad governance (and also the risks involved in tax haven investment as the losses happened in Luxembourg and Switzerland) see this breaking story about the former head of the IMF in Washington:

  10. NoSmokingGun

    While I concur with the analysis, I am not convinced that the solutions presented will ever become real and effective.

    If the analysis is correct, than we have to assume that a small group of people and corporations control huge amounts parked in tax havens. That would mean that these people/corporations do have the means to defend their interests. Be it to fight a finance register, punitive trade tariffs or tax increases. By whatever means necessary.

    There have to be other solutions.

  11. blert

    Preach it brother.

    My term of art: Macro-Embezzlement .

    We’re all familiar with embezzlement — wherein the looting is done before the victim realizes what’s up.

    Then, when the bleeding is stopped, comes the psychic shock as the asset destruction is revealed.

    Naturally the psychopathic thief wastes the criminal proceeds — with few exceptions.

    With macro-embezzlement, the proceeds are both wasted and stashed. (Switzerland)

    The modifier ‘macro’ is required to encompass the collective, mutually co-operative looting made possible when psychopaths ‘buddy up.’

    While broadly termed ‘corruption’ such a descriptor is inadequate for such an epic period of control fraud and corporatized deceits.

    In other words, embezzlement of society by theft syndicates — with the various players dividing up not so much as a ‘pot’ … a stash … but a cash flow stream.

    Systemic crime, then… well enough put as rackteering… racketeering without the ‘blood work.’

    Unlike the notorious mobsters, these are epic thieves of high intellect and education that hook up with fellow psychopaths to ‘skim without a trace.’

    After any classic, criminal heist… a truly ‘big score’… the logic of a once-in-a-lifetime pot of lucre has the players falling out… and in film noir… gunning each other down.

    Macro-embezzlement cuts the other way. There is no one ‘pot’ — just a river of cash. No-one dares fight over their ‘cut’ with gun play. For the single most important feature of macro-embezzlement is that it must be kept on the ‘down low.’

    Hence macro-embezzlement, by its nature, limits the pyschopathic players to ‘white collar’ criminal behavior.

    Further, the shear complexity of the macro-embezzlement — a blizzard of paper — becomes the ultimate legal shield. The common juror can’t follow the game should prosecution commence.

    In contrast, any ‘heavy stuff’ (violence) would mean sure convictions and prison terms. Bullet wounds and stabbings are things that the average Joe can comprehend.

    Jon Corzine, Bernie Madoff, et. al. are exemplars of such psychopathy. Corzine demonstrates that with enough grease and connections, one can prevent even an indictment.

    The primary reason that Greece is up against the wall is because her elites looted the cash flow stream made possible by the Euro scheme. Their stash sits, to a large degree, as Swiss bank notes, vaulted away, lest anyone get wise and return the loot to the citizens.

    This is how a kakistocracy runs the show.

    In our modern age, psychopaths have been able to network like never before.

    The only viable near term solution is the termination of the Euro.

    This would end the fiction that Athens is ever going to adopt the moral restraint of Paris or Berlin — feeble as it may exist there.

    The primary reason why the can is being kicked down the road: the asset write downs which must be acknowledged would have destroyed France’s largest banks. Hence, Paris internationalized her credit exposure. This is largely complete.

    The time must come for every Euro participant to step forward and bleed.

    The resulting liquidity implosion should put paid to any notions about being able to finance Merkel’s Muslim hijrah, itself best termed: macro-folly.

  12. anonymous123

    I hadn’t realized Zucman had come over to UC Berkeley. His prior collaborations with Saez were extremely valuable. Hopefully there will be more.

  13. Erwin Gordon

    These articles on tax evasion by the rich or middle class miss entirely the point. None of this would happen if we actually had a democratic system (such as in Switzerland) where the citizens actually had CONTROL OF THEIR MONEY and taxes could only be raised on them with their explicit consent (i.e. by voting for the tax in a referendum). Until that actually happens, it’s just daft to talk about this because the only difference between those who do and those who don’t is opportunity and resources (to do it).

    1. Barni

      In Switzerland the provinces – called Cantons – own their own banks and make a healthy profit for the citizens, Publicly owned banks are a major reason for Switzerland’s prosperity and stability. The issue isn’t about taxation (the only justifiable reason for taxation is to take inflation out of an economy), it’s about who creates money and how inflation is dealt with. As long as private for profit corporations control money supply and taxing (through higher interest on loans) “excess” money out of the economy, democracy will be continuously eroded. No sovereign government ever needs to borrow its’ own money, it can create as much as it requires and can tax any troublesome excess out of the economy. The current arrangement of sovereign country’s ‘borrowing’ their own currency at interest from private for profit corporations is anathema to democracy. When this happens fascism overtakes democracy and the vast majority are reduced to poverty.

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