Taxcast: South Dakota as Tax Haven, Stopping Corporate Tax Dodgers

Yves here. Nicholas Shaxson’s Treasure Islands, a path-breaking book on tax havens, or what he calls “offshore,” pointed out that the US was the biggest tax haven. This Taxcast describes how even more tax avoiders are using the US, this via a South Dakota dodge.

Originally published at Tax Justice Network

In this month’s Taxcast, our monthly podcast: we look at tax justice and public procurement – the efforts to hit tax dodging companies where it really hurts on a local level – trying to stop them bidding for public money for public contracts. Also:

  • how massive amounts of money are flowing into Tax Haven USA to circumvent the flawed Common Reporting Standard – South Dakota is apparently raking in tax evading capital
  • the slippery world of ‘residence planning’ and the ‘synthetic residency’ dodge
  • we discuss the UK’s Criminal Finances Bill likely to be passed this year, which includes proposals for ‘Unexplained Wealth Orders’ and holding tax evading enablers to account. An amendment to the bill could force UK satellite tax havens, the overseas territories to create public registers of the real owners of companies, something they’ve so far refused to do.
  • and we consider the British threat to the EU: ‘if you give us a bad Brexit deal, we’ll push regulation-lite, tax haven UK even further in a race to the bottom and shoot ourselves in the foot.’

Featuring: John Christensen of the Tax Justice Network, Paul Monaghan, co-founding Director of the Fair Tax Mark and Miguel Alba, Policy researcher in private sector and tax policies in Oxfam Intermón, Spain Zonas LIbres de Paraisos Fiscales initiative. Produced and presented by Naomi Fowler for the Tax Justice Network.

Audio Player

Download the mp3 to listen offline anytime on your computer, mobile/cell phone or handheld device by right clicking here and selecting ‘save link as’

‘I would like to see a world where…some of the…providers, if it was possible, such as Microsoft and Apple [were] potentially not being able to operate on these public service contracts and the quid pro quo would be those businesses that were trading ethically… could start to pick up the contracts that were being vacated by the tax avoiders.’

Paul Monaghan, co-founding Director of the Fair Tax Mark

 ‘If we can make a European or a global movement fostering tax responsibility or social responsibility in general from public procurement policies I think that is a really interesting transformative tool for getting changes.’

Miguel Alba, Policy researcher in private sector and tax policies in Oxfam Intermón, Spain

Zonas Libres de Paraisos Fiscales initiative

‘this race to the bottom on tax, social protections and environmental protections…[is] an astonishing exercise in self-harm by the British…the vast majority of people in Britain will lose out as their public services are cut further, as their living standards decline and as their environmental standards are degraded. So at the end of the day, engaging in a race to the bottom is a losing strategy, it’s a sign of weakness on the part of the British government because after all, who wants to win a race to the bottom? There is no limit to the amount of subsidy big companies will chase if they’re given the opportunity by weak politicians.’

John Christensen, Tax Justice Network

Want more Taxcasts? The full playlist is here.

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  1. Clive

    It was only regulatory intervention that stopped the big U.K. financial services providers from going all-out in a bid to establish industrial scale tax evasion operations to boost revenue after the GFC. Even my comparatively tame TBTF had a serious business plan to set up (expand, really, they were already in the game to a smaller degree) international operations to attract deposits on a don’t-ask-don’t-tell source of funds basis and offer “advice” on how to hide from national tax codes.

    They would, natch, charge a hefty fee for this. But potential private clients — not exactly likely to be picked from Girl Scout groups — would be happy to pay.

    At the time, the idea smelt so bad, even the hopeless FSA called a halt. But those plans are ready to roll, they just needed to be dusted off. Key to enabling this was the establishment of subsidiary branches in EU (and, to a degree, beyond — Dubai for instance — anywhere that there were people with a lot of money who wanted it kept nice and quiet under the counter with no questions asked) to draw in the customer base. Stupidity, the EU is thinking, when approached by the international banks, great, lets allow them to set up shop, it’ll be one in the eye for London.

    So make no mistake, the Tory government isn’t kidding around. It is quite prepared to gut pretty much all financial regulation and turn the U.K. into some kind of gangster state engaging in racketeering with the EU member states (and further afield too). Don’t for one second think they won’t do it. They are already laying the groundwork (bit too long winded to go into here).

    1. cirsium

      I would be very interested to learn more about the groundwork. Would it be possible to write a post for Naked Capitalism on this subject?

  2. Daryl

    Interesting. South Dakota is actually well-known in the RV world because they have no income tax and will give you residency with just a mailbox. Very loose vehicle registration requirements as well. Catering to tax avoiders of all income levels!

    1. Lynne

      Well……the reason the big money came in was not because of income tax. It’s because state law allows dynasty trusts, and so far as I can tell, it does no good to anyone in SD.

      The RV crowd, on the other hand, does. They do cause some consternation when it comes to voter registration, however. A few years ago, our county got nasty letters from some outfit in Texas about how we must not be keeping the voter rolls up to date because we had more voters than the census said we should. They got a polite letter telling them not to tell us how to do our jobs. And then, there have been complaints that perhaps RV voters might skew election results. That pretty much died down when the only impact seems to be a significant drop in voter turnout rates. Even much of that drop, however, may not be due to RVers not voting. We had to close a polling place when the feds made us pay the “maintenance” and software contracts for voting machines, which they tell us we MUST have in each polling place. And, by the way, how many people have actually looked at those contracts? They have in the contract that the company providing the machine and software will not guarantee the accuracy of vote counts.

  3. blert

    The cows have left the barn.

    It’s no longer possible for any national authority to harvest corporate incomes as a tax base.

    The wage arbitrage of globalism has also kicked in for corporate income tax arbitrage…

    Which is even easier to game.

    There is no turning back.

    1. Pespi

      A good reason to propose a wealth tax as a replacement for income tax, and then once their guard is down, BOOM, income tax is back

  4. Lynne

    The sad thing is that SD gets nothing out of the people parking their cash there. It was pushed by some Sious Falls lawyers who figured they would get rich setting up trusts. Unfortunately for them, people figured out they don’t need to live here and the SF lawyers are having their lunch eaten by the big out state firms. At least with the RV crowd, the state gets the annual licensing fees and the number boost in residency figures.

  5. Pespi

    Could the tax haven/corporate oversight race to the bottom be described as a ‘tragedy of the commons’
    If in non currency sovereign states, or states with dollar denominated debt, that untaxed money is subtracted from the overall pie, keep eating slices and you’re left with an empty tine

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