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The tax schemes of the rich and powerful revealed in the “Pandora Papers” were only the latest revelation regarding how elites preserve and grow their own wealth at the expense of the rest of us.
The policies of the COVID pandemic, often backed and even developed by elites like Bill Gates, Mark Zuckerberg and Klaus Schwab, also notoriously shifted wealth and power from small businesses and average citizens, into the hands of pharmaceutical and tech billionaires, media moguls and political leaders.
The Biden administration, unfortunately, misfired with its plan to tax the unrealized gains of the wealthy.
The idea is patently unfair, of course. Unrealized “gains” and “losses” change from moment to moment, as one holds an investment. All those paper gains only become actual when cashed out or spent.
But the unfairness might be perfectly fine if confined to the truly mega rich. Any idea that these elites gained the bulk of their wealth by acting fairly themselves, is, to be charitable, naive.
The wealthy virtually always leverage their power and wealth to accrue more power and wealth, manipulating systems and policies, and often breaking laws to do so.
The Trends Journal has chronicled many examples. A few include:
- “TOP 10 BILLIONAIRES IN U.S. WEALTH GREW $1 BILLION A DAY DURING COVID WAR” (25 Jan 2022)
- “LOOKING FOR COLLUSION? TRY GOOGLE AND FACEBOOK” (18 Jan 2022)
- “ZUCKERBERG BOUGHT 2020 ELECTION WITH HALF A BILLION” (19 Oct 2021)
- “AMAZON CAUGHT ILLEGALLY UNDERCUTTING COMPETITION” (19 Oct 2021)
- “RICHEST AMERICANS ARE BIGGEST TAX CHEATS TREASURY REPORT FINDS” (14 Sep 2021)
- “HOW BIG TECH MAINTAINS ITS MONOPOLY” (17 Aug 2021)
- “BILLIONAIRE TAX SCOFFLAWS PLOW SAVINGS INTO WEBS OF CONTROL” (15 Jun 2021)
The biggest problem with Biden’s plan isn’t its unfairness. It’s in the definition of “wealthy.”
The initial definition might encompass only the uber rich. But like any government law, once in place, it will no doubt be revised down to cast a wider and wider net, until the middle and working classes bear the brunt of the burden, while the rich devise clever loopholes only high paid lawyers can navigate, to minimize their compliance.
GMDR Might Mitigate Tax Haven Evasion
One tax-related proposal that may hold some promise is the idea of Global Mandatory Disclosure Rules (GMDR).
Currently, elites often use tax advisors, lawyers, financial institutions, and other intermediaries to hold their wealth through corporations and trusts organized in tax havens.
And many of those advisors exist in regions other than residence of the elite (largely non)tax payer, where regulations and reporting are much more lax, and out of the reach of the countries losing out on tax revenues.
GMDR would be a new international reporting standard, imposing reporting obligations on intermediaries assisting taxpayers with designing and implementing cross-border tax schemes.
That’s according to Noam Noked and Zachary Marcone, two tax law specialists who first proposed the standard.
Noked, a Harvard Law graduate, is currently an Assistant Professor of Law at the Chinese University of Hong Kong. Marcone is also a Professor of Law there.
Their February 2022 research article on the subject of countering Tax Avoidance noted that mandatory disclosure rules (MDRs), which require that intermediaries report their clients’ tax schemes, were introduced in the United States in the 1980s.
An international GMDR would build out that framework.
The authors argue that “GMDR is a missing piece in the global tax transparency framework which could close gaps in other international tax reporting standards.”
They say GMDR could be an indispensable tool in the international effort to curb cross-border tax abuse.
The paper cites several ways in which current MDRs discourage or prevent tax avoidance schemes.
Perhaps the most important way is by forcing the schemes into the open:
“The first reason why MDRs are effective is straightforward: more tax schemes are detected by governments that employ MDRs. MDRs require reporting transactions that contain specific characteristics associated with tax avoidance or suspected tax evasion schemes. Thus, MDRs provide tax authorities with a valuable tool to identify such schemes…”
Their full proposal can be reviewed here.