Tuesday, November 25, 2008

Uncle Sam, my favorite Damsel in Distress

One doesn’t easily perceive of Uncle Sam as a damsel in distress. Still, if you’re the kind who likes playing Sir Galahad, one damsel in distress is as good as another.

Being a professor at a leading southern university is like putting up a billboard on a busy highway. Congress invites me to testify on what to do with its treaty-partners who are using the US tax treaties to spin off a sizable portion of the national wealth into offshore incentive arrangements. A treaty is a deal between partners intended for the benefit of one another. But the way these disloyal treaty partners are operating is to permit the use of what should have been a fair deal between equals, as a conduit to third parties to deprive the US of trillions of dollars of taxable income.

The visit to Congress and the reception that the Ways and Means team gives me are a summit experience in my professional life. It was as if they opened Washington DC for me. I leave with etchings and paintings, books about the Constitution and Capital Hill, and big beautiful American flags to grace my home and office.

I explain, in a worse than tedious fashion, to the Committee, how “treaty shopping” works: how sharp attorneys and accountants employ a carefully chosen treaty link or series of links to create a plumbing conduit to suck profits out of the US through a country like the Netherlands and to dump them tax-free in the Bahamas. My recommendation comes straight to the point: Immediately cancel the treaties that are not useful to the US and inform all the disloyal treaty countries that they are to stop the abuse or face cancellation of their treaties by the US.

It’s nice to see the advice that one gives turn into action – and, even more so, into successful action. Immediately, the treaties with the Netherlands Antilles and the British Virgin Islands are terminated, and the treaty with the Netherlands is redrafted. US big business now has to use Wall Street instead of Curacao, Road Town, and Amsterdam.

From now on, the US whams down on treaty shopping, and this attack works even better as the US pulls in support from other high tax countries and from the OECD, in blacklisting abusive tax leak countries. Trillions of dollars are now being pulled back into the national coffers that would otherwise have been lost. While I am pleased to receive an invitation from Harcourt’s and then Aspen Publishers in New York to write a book on the tax havens of the world from the point of view of US law, I receive unpleasant comments from my colleagues who do not entirely approve of my report on how the Netherlands, the Netherlands Antilles, and the British Virgin Islands
abuse their tax treaties with the US. They point out the career cost to them, as well as to myself, resulting from the technical testimony given to Congress. The worst comments come from the Beltway Bandits. These are the consultants whose offices are on the Beltway surrounding Washington DC. The revolving door is when you set up projects for yourself while in office and collect your favors later. No one entertains you better than former senators and congressmen when they think that you may be useful – and no one drops you harder when they see that you are not.

Tax Planning Tips from the Naked lady on the White Horse

Lady Godiva’s husband, Leofric Earl of Mercia, promises to remit the oppressive taxes that he has imposed on the inhabitants of Coventry if she will ride nakedthrough the streets at noon. Lady Godiva duly directs the people to keep within doors and shut their windows. Then, accompanied by two stalwart soldiers, she undertakes the ride with only her hair covering her body. On her return Leofric issues a charter freeing the city of Coventry “from servitude.” Leofric’s payoff does not lie in indulging a penchant for vicarious exhibitionism. On the contrary, he uses the incident to head off a dangerous tax revolt led by his own good lady.

“Not only has Dr Spitz never lost an international tax case – no plan he has constructed
has ever been challenged”
- Offshore Investment


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