How the wealthy and corporations use loopholes to hide profits, avoiding taxes

In his book, Moneyland, Oliver Bullough details how wealthy individuals and large companies take advantage of a long list of loopholes to hide profits and leverage their control over the world. With a combination of geography and demography, Bullough takes readers on a journey of the corrupt practices followed by some of the most influential entities in the world.

Tax havens and lenient laws are part of what makes such an extreme level of corruption possible, and seemingly legal. Known tax havens like the Cayman Islands, Bermuda, and Switzerland have been used by corporations and individuals around the world to hide profits and reduce tax fees for decades. With little to no taxes owed on profits in these locations, tax havens are extremely inviting to the greedy. But how does it work?

The idea is quite simple. For example, a company in the United States merely has to open a subsidiary located in a tax haven to reroute profits and enjoy the more lenient practices of that area. This practice is only made safer for the individuals involved due to the fact that most tax havens have little to no legislation preventing or criminalizing such acts.

In his book, Bullough noted that thousands upon thousands of corporations can be found among tax havens, while very few individuals actually reside in that area. By claiming that profits come from various subsidiaries, corporations can avoid millions of dollars in taxes each year. However, as this practice seems to be increasing, tracking down a company’s profit shifting can be quite complex.

Large companies that take advantage of tax havens are likely to have multiple subsidiaries located in multiple tax havens, where profits get maneuvered to varying accounts in the form of miscellaneous fees, sales, and investments. Some companies have hundreds of subsidiaries headquartered in a variety of well known and emerging tax havens. Company financials quickly become a maze of mysterious charges, assets, and transactions designed to place funds just outside of the reach of the parent company’s government. Tracking down the identity of the company responsible for the subsidiaries can also become tricky, as most information is kept as vague as possible.

However, tax havens aren’t the only tools utilized by the corrupt. Laws and government facilitated programs also help companies and individuals hide their profits, evade taxes, and enjoy exclusive benefits. For example, an existing loophole in the United States includes the EB-5 program, which allows any individual who invests $500,000 to $1 million to obtain a visa. According to reports, this program alone is responsible for funding billions of dollars in United States based projects, like the Hudson Yards project in Manhattan. Tracing these investments mainly leads to China, where many of the wealthy have earned their visa and stashed profits using this loophole.

According to Bullough, many of these practices have been made possible through today’s advancing technologies, which have made international business easier and more efficient than ever before. While globalization on its current scale certainly has it benefits, it also invites a high level of corruption.

But, what does all of this mean for the health of the global economy? Taking advantage of laws, loopholes, and tax havens mean large companies can avoid millions of dollars in taxes and hide profits, making them more powerful than ever before. And it’s no secret that powerful corporations have the money and influence to shape our current laws and infrastructure. However, an even darker side of this corruption is the developing countries who are losing mass amounts of money from corporate tax evasion. With profits rerouted to tax havens, the country where the business actually occurred is then robbed of the tax fees owed to them. And for developing countries, these funds are detrimental to their advancement and well-being.

In his book, Bullough explains how these complex systems are “impoverishing millions, undermining democracy, helping dictators as they loot their countries.”. These effects are made worse by an overall lack of regulation, which fails to be improved upon. While the scope of these shady practices is coming to light, it is uncertain whether preventative measures will be taken in the future. However, a more important factor to consider is the possible effect that these acts will have on our global health if left unregulated, as well as their direct effect on our democracy.

To learn more about tax evasion, financial fraud, and more, visit the Jeffrey Newman Law Whistleblower Help Center and blog!