Saturday, July 28, 2007

12,000 Companies Stuffed Into a Caribbean Mystery Spot

Posted by Guest Blogger at 11:00 AM on July 20, 2007.

Eddie Torres: Congress abandons the ostrich position and orders the GAO to investigate the laws of physics.

This post is by AlterNet reader Eddie Torres.

As August rolls around, parents and kids across America will load up the family car and head down the highway looking for fun and sun with photo ops and memories that will last a lifetime. For generations now, American family vacations have included impulse stops at places where "balls roll uphill… water flows up spouts… ordinary objects defy gravity and cling to the wall without support… and people stand at impossible angles."

These "Mystery Spots" are often near a freeway or major vacation route and attract drive-by tourists on their way to grander destinations, but Sandlot Science says: "many visitors consider mystery spots to be a premium ticket."

Premium ticket indeed.

Senator Max Baucus (D-Montana), Chairman of the US Senate Finance Committee, has been fascinated for the past 2 months by what may be the most spectacular and expensive mystery spot in the western hemisphere, where madcap attorneys and accountants have managed to squeeze 12,000 companies into a single 5-storey building. Along with billions of dollars in unpaid taxes.

The miracle building's name?

Ugland House.

This freak of nature is conveniently located on Grand Cayman Island in the city of Georgetown, with scenic views of Hog Sty Bay. What intrigues Senator Baucus the most about Ugland House is the ability of its 12,000 companies to use bank secrecy laws and tax-free offshore investment vehicles to evade reporting taxable income to the IRS. These mysterious illusions are referred to by Baucus as "shady transactions".

In May, Mr. Baucus asked officials from the Government Accountability Office to go to the Caymans and investigate Ugland House. Oh, to be a GAO investigator when that call came down the line…

GAO boss: "Hey, who wants to go down to the Caribbean and nail a bunch of tax cheats to the wall?"

GAO lucky bastard: "Gee, that might take… months. What kind of expense account do I get?"

The GAO will be looking into what Congress and the IRS call the "tax gap", which is the amount of under-paid taxes due on under-reported income. IRS estimates that the tax gap in 2001 was as high as $345 billion. If that gap was maintained over the 7 years of the Bush Administration, the US Treasury is short $2.4 trillion. Which is just about enough to pay for Iraq and Afghanistan and bomb Iran. Hence the urgency of locating the missing funds.

Here's the key quote from Senator Baucus: "If American companies are setting up shop at the beach just to avoid their tax obligations, we can't keep our heads in the sand."

In response, a financial official for the government of the Cayman Islands said: "We should be delighted to assist any interested persons in quitting the ostrich position as it relates to the Cayman Islands, provided that the norms of inter-jurisdictional discourse and co-operation are respected."

That's quite a position, that ostrich position. It has served Congress well for 7 years, but now its leaders are poking their heads up and saying 'let's hop in the family car and see what's out there, it can't be all bad… can it?'

So, when you and the kids are visiting the Mystery Spot in Santa Cruz, CA or the Mystery Spot in St. Ignace, MI or even Mystery Hill in Marblehead, OH keep your eyes peeled for thousands of companies stuffed in a sock drawer.

Senator Baucus says Congress is done with the ostrich position and will gladly dispatch the GAO in the family Gov-mobile to investigate.


Tagged as: ugland house, tax cheats, cayman islands, off-shore, tax havens, baucus, oversight

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