Offshore was efficient, relaxed and fun: Everything that official America, Germany and Britain detest.
By the end of the 20th century, $12 trillion or more was lodged offshore. That fishy smell you associate with offshore was sprayed on by burghers and cowboys married to the "tax and spend" ideology that offshore rejects as ham-fisted and unnecessary. The true smell of offshore was that of freedom.
German and Belgian dentists abused offshore to bury earnings without paying the taxes due. Insurers went offshore to duck America's tax on worldwide income. It's hard to blame them, when taxes in the benighted onshore economies can reach 50 percent. And it's hard to trace them, because offshore believed in privacy, a lost concept in our brave new world of surveillance cameras and exception reporting.
The Organization of Economic Co-operation and Development, which inherited from Herr Hitler the notion that "might makes right," led the charge in the late 1990s with lists, threats and a grossly uneven playing field. The OECD mounted its self-righteous hobbyhorse and declared itself owner of the moral high ground.
One by one, the innocent offshore regimes abandoned their right to privacy, curtailed their freedoms and played the game by the white man's rules. In the face of bullying, the Caribbean, European and other small island nations gave in, except for a handful of brave holdouts.
In 2001, airliners were flown into tall buildings in New York City at the behest of fascists. Boy, what an opportunity that gave other fascists, known as the tax brigade. Under the cover of defending freedom, America introduced laws intended to paralyze terrorism, money laundering and crooked capitalists. The laws are a fiasco, penalizing only the innocent. Terrorists and drug dealers carried on regardless, but offshore took collateral damage, and was fatally wounded. And so began the death throes. In the first half of 2007, a series of moves was set in motion to finish it off.
Barack Obama sponsored the Stop Tax Haven Abuse Act in March 2007; those of us who embrace freedom know exactly what he means by "change." ACE CEO Evan Greenberg told his tax boys to find a way to move ACE onshore, to avoid going down with the ship. And Hillary Clinton, never one to let a bandwagon go unjumped-on, jumped on with an unworkable "insourcing" program.
Then the Germans bought a copy of a Liechtenstein bank's stolen hard drive from a petty thief--the rule of law apparently inapplicable--and used what they found to bring down 80 prominent German tax cheats, with more to come. Britain, not to be outdone, bought another copy of the stolen disk. The U.S. Congress probed the Cayman Islands. The logic became: Offshore is a criminal enterprise; we can't beat them, so we might as well kill their economies.
Offshore sensed it was doomed, but clung to hope. After all, its activities and operations were entirely legal and, indeed, represented a better mousetrap--as if any of that made any difference. The true villains are dentists, onshore taxmen, dishonest politicians, and defenders of a taxation system whose philosophy is "my country, wrong or wrong."
It's too soon to say if Greenberg's move to Switzerland will prove prescient. If so, great irony will attend. His father Hank created offshore; the son might deliver its deathblow.
ROGER CROMBIE is a Bermuda-based columnist for Risk & Insurance®.
June 1, 2008
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