Mitt Romney: Cayman Islands Accounts Used By Foreign Investors To 'Not Be Subject To' U.S. Taxes

[maddezmom]

WASHINGTON -- Some tax experts are alarmed by Mitt Romney's apparent admission that Bain Capital set up offshore accounts in the Cayman Islands to help wealthy investors avoid paying U.S. taxes.

During an interview with the National Review's Robert Costa, Romney said that offshore sub-companies in the Cayman Islands help foreign investors avoid paying taxes on investments in the United States. Bain Capital currently has 138 such sub-companies headquartered in the Cayman Islands.

"The so-called offshore account in the Cayman Islands, for instance, is an account established by a U.S. firm to allow foreign investors to invest in U.S. enterprises and not be subject to taxes outside of their own jurisdiction," Romney said. "So in many instances, the investments in something of that nature are brought back into the United States. The world of finance is not as simple as some would have you believe. Sometimes a foreign entity is formed to allow foreign investors to invest in the United States, which may well be the case with the entities that Democrats are describing as foreign accounts."

By taxes "outside of their own jurisdiction," Romney is referring to taxes imposed by the U.S. government.

"He's basically admitting here that the Bain funds are set up in the Cayman Islands to help people avoid tax," said Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, a nonprofit tax reform group. "If you want to cheat on your taxes, boy, they're making it really easy."


more: http://www.huffingtonpost.com/2012/07/18/mitt-romney-cayman-islands_n_1683891.html?utm_hp_ref=elections-2012

[The Magistrate]

1. This Fella Can't Help Himself, Ma'm

Puts his mug in the trap even without any cheese....

"Romney loves America like a tick loves a dog."

[grantcart]

7. Give the man the microphone.

And when he is finished and hands it back,

give the thing back to him again.

[hifiguy]

3. Drip, drip,drip, drip,drip,drip.

Whoosh.

[cleduc]

4. So let's see if I have this straight

Someone from a foreign country invests let's say $1,000,000 in a US stock. In theory to this point, this is good.

Like most Bain investments, this is a lucrative quick flip while Bain promptly layoffs American workers and gets the outsourcing set up, chops R&D/Engineering and customer service and the fabric of the company etc to improve (facetiously) the company's bottom line but really to "increase the investment value"....

Then the foreign investor cashes in his chips in this casino operation when Bain flips it and he yanks his money plus the lucrative profit out. Let's say he doubles his money. So a net $1,000,000 leaves the shores of the US without a dime being paid in taxes to the US!!

Of course, no American can do this unless they have a network of foreign bank accounts set up to hide the money - where it came from and went to - from the IRS ....

Sound like a good deal to the average American?

To me, it's like a foreigner putting a siphon hose up to the US economy to drain 'free' cash from it ... only sadly, it's still legal on the surface. But the GOP will tell you about the front end of the deal that "investment is good" while ignoring the back end of the deal and what really happens to that investment with Bain. They were quick hit artists rarely hanging on to anything they built because the corporate foundation of what they built so frequently wasn't a good one.

I'm shooting from the hip a little on the above but that's my initial reaction.

[Ruby the Liberal]

6. The theory is that they pay taxes on the gains in their home country.

The purpose for "tax havens" is to use countries with no investment taxes as the conduit so that the transactions just pass through seamlessly. Privacy laws and numbered accounts assist with this, and most tax haven nations allow/promote those as well.

One of the elements of the Patriot Act is to try to identify large sums of money coming and going - why you have to show ID to open an account in the US now.

[Igel]

11. I don't think so.

If they leave the money offshore, it can't be put in US stock, not on the NYSE or other US stock exchanges. If they just wanted US company stock, they could get that on the London SE or through a broker.

If they invest $1 and make $1 in the US, they'd only pay US taxes on $1. Doesn't matter if the investment money's brought in or not. It's the gains and where the gains are earned that matters. Your scenario has a foreign investor somehow earning profit in the US and then not paying taxes on it when the money's sent abroad. As though sending it to the Caymans and not to the investor's home country mattered in the least.

The key is that the money stays off shore, but the profit doesn't pass through US territory. Here's one scenario. If I thought about it, I'd probably find more, including some that sound dodgy. This scenario doesn't sound in the least dodgy to me--it avoids US taxes, but doesn't evade them. It just keeps US taxes that don't need to be paid by foreign nationals from being paid--with no possibility of them being called "traitor to the US" because they don't owe the US any loyalty, and paying US taxes would probably mean they wouldn't have to pay taxes to their own countries. (So which would be traitorous--not paying US taxes or not paying their own local taxes?)

So let's say Bain's going to invest $10 million in Crappy Steel's overseas plant in ThaiNam.

You can do this two ways. You can give the money to Bain, in the US. It takes the money and puts it into ThaiNam where it makes, over 5 years, $8 million in profit for you. Now it has to come back to Bain, because the investment is inside the US. Therefore that foreign investor pays US taxes on $8 million. He probably won't have to pay taxes in his home country because most countries give "credit" for overseas income taxes. Pay 20% here and you don't pay 10% in Ireland. But you still pay more in income tax than you needed to, and it didn't go to your own country. In fact, if you knew you'd have to pay that additional tax then you'd want a higher rate of return on your investment. Your investment would go elsewhere a decent portion of the time.

OR you can put the money in an offshore account held by an offshore Bain subsidiary. They take the money and invest it in the plant in ThaiNam. Same profit. But the profits are returned not to US territory, but to that offshore account. You pull your $18 million out and take it home to pay taxes there (because you're taking $18 million in, there'd be a bank transaction record and some fisc somewhere would probably notice.) No US taxes were paid to the foreigner, but none were due. Bain had two offshore subsidiaries in 2000: Sankaty, in (I think) the Barbados (Bahamas?) and had irrevocable power of attorney for PEP, in Australia.

Why is this a potentially good thing for the US? Because it's still a US company, and the equipment and additional profits that result from the $10 million investment stay with the US company. Even if it doesn't help workers in Youngstown, OH, the profits will still eventually increase the worth of a US company or be returned to the US, generating tax revenue and either more investment or dividends, mostly to US persons. Since Bain managing directors want their income and their US investors want their income, the profit will mostly be repatriated.

You can quibble: But surely if a US investor has this profit that will return to him he could just do the same "scam," invest the money through an offshore subsidiary? Sure. Except that US tax law is weird in global terms: You, a random investor, pay US tax on any profit you earn in the US, no matter where you are in the world; and you, US citizen, pay US tax on any income you earn anywhere in the world. The US has a claim on every citizen's income and any income earned on its soil--and doesn't (IIRC) give credit for taxes paid overseas. You may be able to evade taxes and build your empire overseas, but eventually either you leave the country and retire to the south of France or the money crosses the US border and is noticed and taxed.

[Ikonoklast]

5. Only a matter of time before she really lets loose.

[stopbush]

8. But what about Romney's OWN MONEY sitting in these accounts?

Bain set them up so foreigners could use them and avoid US Taxes, but isn't the point that Mitt had HIS money sitting in these accounts as well? Whose taxes was he trying to avoif paying?

[Rincewind]

13. Maybe Willard

doesn't consider himself an American citizen. Or maybe, just maybe, Willard ISN'T an American. Has anyone seen his birth certificate? I know he showed something during the primaries, that he said was a birth certificate, but that was a "Certificate of Live Birth", which according to the world's leading expert on documents, Donald "weasel on his head" Trump, is NOT a birth certificate. Maybe Sheriff Joe will investigate.

[Igel]

9. Clever.

Romney probably didn't think of it. But clever.

[kentuck]

19. He's a tax-dodging scam artist.

He makes his own rules.

[sunyasi]

10. Checkmate

Game over. Bwa ha ha ha ha !

[Angry Dragon]

12. I guess Willard really does not care for America

what an out of touch ass

[rks306]

14. Romney is not foreign

The only reason people use tax shelters is not to pay taxes. Not very patriotic. Draft dodgers should not be able to run for President.

[flyguyjake]

15. Push for the returns!

We've got to push this issue. You know damn well he's hiding all kinds of shit in his tax returns! Such as scam artist!

[madrchsod]

16. yup.."the boy`s gone crazy..."

[mwooldri]

17. I wonder if David Cameron has thought about this.

If the über wealthy are popping all their money into Bermuda (a Crown Dependency), the Cayman Islands, the States of Jersey, or any other British Crown Dependency...

He should have a chat with Her Majesty, get some kind of ruling through the Privy Council and ensure that there is at least a certain amount of capital gains tax (say 15%) in all Crown Dependencies. Any Capital gains tax above any amount already in place (or not in some cases) would then be used firstly to pay the United Kingdom government for services they provide the Dependencies. Once that is paid, the rest of the capital gains tax would be repatriated pro-rata back to the countries the money came from in the first place.

I know last time something similar to this was tried in the 18th Century the British lost a number of colonies as a result. However through the use of the terms "globalisation" and "austerity", and ensuring that the residents of the dependencies are not negatively impacted as a result then it might work.

It'll piss off a few rich people I'm sure. But a measure like this could easily pass UK parliament and can pass the legislatures of the dependencies and if not it can be imposed on them.

But it's just an idea. That way if the rich people really want to avoid the taxes they'll have to become citizens of these tax havens. Therefore, they can meddle less with US politics as a result.

[kentuck]

18. Of course, it sounds a little shady...

Because it is!

Bain Capital is not doing this pro bono. They are not a "foreign account". I am not a tax expert so I am not aware of that part of the US Tax Code that would permit a company such as Bain to make such decisions on their own without legal authority. Otherwise, it would seem to me to b illegal.

The Congress and the US Government can decide what businesses come into this country and what businesses leave this country and what their tax liabilities would be - not Bain Capital and not Mitt Romney.

[allan01]

20. re: Mitt Romney: Cayman Islands Accounts Used By Foreign Investors To 'Not Be Subject To' U.S. Taxes

actually folk have been been using cayman islands as a tax haven for years. also for a while it was "trendy " to send us based corperate offices there too , just to escape tax purposeses.

[sinkingfeeling]

21. Maybe, someday Romney can "learn to be an American".

[maxrandb]

22. So Willard scams the system so "foreign" corporations can avoid US taxes

and it's Obama who is "foreign"????

Somebody stop this fucking train. I need to get off!

[dsharp88]

23. So why is HIS money there?

I understand the accounts are to let foreign investors avoid paying US taxes, but he's not a foreign investor unless, of course, he's either posing as a foreign investor to avoid paying taxes or giving his money to foreign investors to put in the accounts as though it was the foreign investors' money so Romney could avoid paying taxes on it.

It would be tax fraud for either of those latter two options.