The morality of tax havens

Is it immoral that Malcolm Turnbull is wealthy?

No, who cares?

Is it immoral if a large part of Malcolm Turnbull's wealth is unpaid tax, 'stolen' public monies which, as a consequence of not being paid, leaves disadvantaged kids disadvantaged, under-staffed hospitals floundering, medical costs so high that sick people get sicker, schools underfunded, road tolls instead of public roads, cut disability care, unfunded mental health care, Medicare threatened with taxes and 'privatisation', reduced pensions to the most in need, and so on?

Yes.

The Prime Minister makes no bones about where his financial affairs have been (legally) placed; his financial affairs have been moved to the Cayman Islands which is a 'tax haven'.

Google identifies several definitions of "tax haven".

First from Investopedia.com is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment, tax havens also provide little or no financial information to foreign tax authorities.

Second from Wikipedia is a tax haven is a state, country or territory where, on a national level, certain taxes are levied at a very low rate or not at all, it also refers to countries which have a system of financial secrecy in place.

The third definition of tax haven from businessdictionary.com is a foreign country or corporation used to avoid or reduce income taxes, especially by investors from another country.

So we know there are two main reasons for using the Cayman Islands to place ones financial affairs - secrecy and tax avoidance.

We don't know how Prime Minister Turnbull makes his money, after all, that is secret in the Cayman Islands.

My guess is that he doesn't make anything useful, or provide useful services so it is a fair bet that he buys and sells stocks and shares.

If a person buys shares for $2 million and sells them for $3 million, s/he has made a capital gain of $1 million.

In Australia s/he would have to pay tax on the $1 million capital gain but, if the transaction is made in the Cayman Islands where no capital gains tax is payable, the entire $1 million capital gain becomes profit.

S/he is richer than s/he would have been if s/he had just paid the flaming taxes s/he was morally, but not legally, required to pay.

Let us say there is an Australian company earning heaps of money, big profits.

However, driven by 'private profit' rather than concern for the 'Common Good', the company executives try to find a way to reduce their profits without actually reducing their profits, here is one of many ways they can do that.

A foreign company is set up by the Australian company, let's say the fake company is set up in America.

The American company borrows $1 billion on the American money market at 2 per cent interest and lends it to a Cayman Islands company at 2 per cent, no profit has been made and no losses.

The Cayman Island company lends the $1 billion to the highly profitable Australian company at 9 per cent interest.

The Australian company deducts its interest bill (9 per cent of $1 billion, almost $10 million from its profit)

It pays no tax on the $10 million.

I suspect Prime Minister Turnbull is doing nothing illegal but clearly these secret tax manipulation activities are immoral, they offend any definition of 'fair go' so, why are they legal?

Sometimes we hear commentators and politicians speak of tax 'loop-holes' which are there accidentally and are 'found' by clever lawyers employed by big companies for that purpose.

This story about 'loop-holes' is just a way of wrapping corrupt and immoral practices in a bogus claim.

The truth is the big end of town wants the legislation, the big end of town consciously and deliberately lobbies politicians so that these practices are legal.

Then when we protest their corruption, they scream indignantly just as the Prime Minister does, "But I do nothing illegal".

No, you do nothing illegal, because you wrote the rules, the big end of town looks after the big end of town.

Big end of town Malcolm is guilty of much worse than immoral but legal practices because by engaging in immoral tax haven practices as Prime Minister he encourages all other would-be participants.

When the Prime Minister is engaged in bad behaviour it teaches others that this bad behaviour is okay.

At a more sinister level, when the Prime Minister is deeply immersed in immoral practices, all the other immoral elements from the big end of town know that they too can act secretly and avoid tax, with impunity, after all, the Prime Minister does the same thing.

In this case, big end Mal is leading the pack; he knows this pack, as a commentator has already written "Malcolm Turnbull Is the Big End of Town".

You thought it was crook that a Prime Minister Tony Abbott's daughter was given a secret $60,000 'scholarship' for which no-one else could compete.

Just think about what a Prime Minister is doing to the tax base of his country when he trumpets the legality of, and gives respectability to, the practice of large numbers of wealthy and corporate Australians hiding their financial dealings in secret and tax avoiding foreign 'havens'.

These practices should be criminalised with huge penalties of community service and gaol.

They massively rob the public purse, they destroy the revenue side of the Australian economy, and they starve the public sector in general and the essential Social Wage in particular.

Like all corrupt practices, it tears at the democratic fabric of our country and reduces the legitimacy of the political process as many people believe that "politicians, they are all the same, corrupt and in it for what they can get for themselves."

Email, 27 Dec 2015

Van Davy, Pearl Beach