Bring home cash in tax havens

There are many reasons why oligarchs, dynasties, fabulously wealthy barons and tycoons hide their wealth. One is if the wealth is stolen or irregularly accumulated and must be kept hidden to avoid the law and a public backlash. 

But politicians and political dynasties also hide their riches so as to maintain a humble image. Others do it to avoid taxes or to seamlessly transmit their money to the next generation.

So you go to the Cayman Islands or Panama or wherever and buy shell companies or form a foundation where the next generation has shares and you will give yours to them. When you die, the property quietly and without a fuss passes on to your heirs. Of course, great wealth attracts scrutiny, the attention of rent seekers, opportunists, beggars and jealousy of those less wealthy but who may have the capacity and power to come for your money.

Thirty-five former and serving world leaders were named as holding property outside of their borders in the so-called Pandora papers, records from law firms in the United Arab Emirates, Singapore, Seychelles, among others and ranging from the King of Jordan to Dennis Sassou-Ngueso of Republic of Congo. 

Also named as owning property and shares in anonymous corporations and foundations was the family of President Uhuru Kenyatta.

I read that few American billionaires have been revealed as having stashes in foreign havens. Maybe they just haven’t been caught. Being very rich in America is not a big deal: As of this March, the country had 664 dollar billionaires, worth a total of $4.18 trillion, according to Americans for Tax Fairness. There are 80 US billionaires in tech alone, collectively worth $1.6 trillion, according to Forbes.

So, being rich in America is like having two cars, not quite everyone has them, but it’s fairly commonplace. The US is, perhaps, the only place you can become a millionaire selling needles — in only one state.

Additionally, truly wealthy Americans pay very little in the way of taxes. Poor people and middle-class families pay more. Oligarchs like Donald Trump not only are experts at identifying loopholes so that they pay no taxes but also know how to make use of various government programmes to rake in lots of money in tax dollars in real estate incentives and so on.

Lost tax revenue

But in countries that are less wealthy, being rich, even in the unlikely event that all the money is legit and hard-earned, is in itself a problem. Everybody is poor, most probably through state corruption, and there is always somebody looking to become an overnight billionaire by stealing from those who have money.

In 2018, the Business Daily, quoting the National Bureau of Economic Research, a US think tank, reported that Kenyans held Sh5 trillion in offshore tax havens. That was equivalent to 65 per cent of the country’s GDP at the time or almost twice the national budget of that year.

I have seen an IMF report estimating that individuals are hiding much more money than corporations: Fortune 500 companies had $2.6 trillion in secret accounts in 2018 and individuals $8.7 trillion. The most obvious cost to countries of these colossal sums in secret places is lost tax revenue — between $500 billion and $600 billion, according to that IMF article. 

Poor countries pay a disproportionate price as a percentage of their GDP, a case of those with little to lose actually losing more than those who have plenty.

Through tax havens, countries lose capital; they are sucked of wealth like a pig that has been bled. If that money were available for investment by the private sector, or even in infrastructure by governments, much good would be done and a lot of development would be achieved.

Before the 2017 election, I used to write about a sense I had that a lot of corruption was going on, only we knew nothing about it. I have the same feeling that, quite apart from the sophisticated Pandora vehicles designed by the world’s oiliest bankers, a lot of this country’s money is hidden in Mauritious, Dubai, Macao and other such places and most of it from the tax purse. 

I have heard in bars that the way kickbacks are paid, a company is given a contract and allowed to inflate the cost many times over, or to do a shoddy job. In return, the company pays a certain proportion of the loot and deposits the money in those secret places in favour of the corrupt fellow in Nairobi. It is possible, I suspect, that there are people walking these streets who have more money in those havens than they and their entire clans stretching 10 generations into the future would ever spend.

I think we have an opportunity for introspection and to change course so that we care for each other more than accumulating wealth we’ll never use. It is also a chance to investigate all those who have fortunes abroad and to design schemes to force them to bring it home. And it is an opportunity, sure as night follows day, we’ll miss.

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