Biden attacks Switzerland as a tax haven, which is the fault of the United States of America
President Biden describes Switzerland as a tax haven, and Federal Chancellor Ueli Maurer responds very casually – there is one argument.
Joe Biden wants to drain tax havens – and by that the new US president clearly means Switzerland. In his speech to Congress he said: Many companies are evading taxes in tax havens – “in Switzerland, in Bermuda and the Cayman Islands”. In Switzerland, everything is rejected. Finance Minister Ueli Maurer speculated on Swiss TV that Biden had written an old letter, and he had read it, but the facts were quite out of date. Mason indifferently about the strongest man in the world:
“I think things like that happen. President Biden is new.”
Hardly any president in American history has more experience than Biden. He served as vice president for eight years, and prior to that in the Senate for 30 years. And Biden’s facts are by no means old. In a new study by the Tax Justice Network, Switzerland ranked four countries in the group of worst tax havens. They formed the “hub for tax evasion”.
World champion in the use of tax havens
But Maurer could justifiably have argued otherwise: The United States should take its nose. Because it is true. Americans have personally written the rules enabling their multinational corporations to transfer large-scale profits to tax havens in the first place. Your multinational corporations have become the world’s most persevering users of tax havens, and the world’s tax savers.
In a study, tax economist Gabriel Zucman described how this world tournament originated. Until 1996, the United States was like other rich countries: it had rules to combat abuse. Shifting profits was tough. From 1996 it was very easy. The Treasury has issued new rules. Now it is enough to adhere to the “check-box” rules: check some boxes on the form, done. Once in effect, the new rules had a miraculous effect. Soon after, US multinationals reported three times more profits in tax-efficient Ireland.
It was then that US multinationals discovered their love of tax havens. Nobody is using it more consistently today. In no other country does multinational corporations book their foreign profits more in tax havens than in the United States. Most recently, for every $ 10 in foreign earnings, it was $ 6 in tax havens. Multinational corporations from Europe are behind the Americans. They’re using tax havens as seriously as half of their American competitors. The European Union has kept stricter rules to combat abuse. America, on the other hand, has “square-check” rules.
An idea that wasn’t completely crazy, at least
Why has the United States allowed its multinational corporations to go global in their tax havens? Zucman has to speculate on this question. Perhaps the Treasury Department meant something different than it did when it introduced “check the box” rules in 1996. It wanted to increase revenue. In hindsight, it was a huge mistake, but the idea wasn’t crazy.
The United States imposes a tax that its multinational corporations pay on all of their foreign earnings. This tax is payable once the foreign profits are returned to the United States. Before that, taxes that have already been paid in foreign countries may be deducted. So, for example, if Apple actually pays a lot of taxes in Germany, then there’s little left for the United States. But if Apple pays less taxes in Ireland, more will remain. That was an idea that in 1996 would seem reasonable.
In practice, Apple had stored huge sums of money in Ireland and it never seemed to want a refund. Other American multinationals have done the same. Last but not least, Donald Trump came out and cut it all short. Drastically cut taxes. Multinational corporations have now paid much less when they bring back the foreign profits. Trump thinks there will be a massive influx of funds. Multinational companies will invest unexpected amounts in their home country. But Trump failed. The investment boom did not materialize.
Now Biden wants to end America’s love affair with tax havens – with consequences for Switzerland. “Of course, the blame is partly on the United States,” says Gabriel Zucman. The tax economist is one of the students of the star French economist Thomas Piketty. Zucman says:
“Allowing multinational companies to transfer their profits to low-tax countries is a political decision of the United States.”