It's called the Ugland House, and it's a favorite tax haven of major corporations, not to mention wealthy individuals who want to avoid paying billions in taxes and work on their tans at the same time. According to the U.S. Treasury, this costs the government about $100 billion each year in lost tax revenues, including $40-$70 billion from individuals and $30-$60 billion from corporations.
It's not a new tax scam. In fact, it's been around for years. In 2004, David Evans of Bloomberg Markets wrote an excellent article describing the growing problem:
"In 2001, almost half of the money U.S. companies earned outside the U.S. - 47 percent - was accounted for in offshore tax havens, such as the Cayman Islands, which has no corporate income tax..."
Every few years, the issue would make the front page and a few politicians would promise to tackle the problem. In 2001, a few Congressmen kicked up a fuss when the General Accounting Office (GAO) reported that 24 government contractors were receiving $35 billion in government payments at their address in the Caymans. Apparently, government contractors are supposed to pay taxes like everyone else.
A few years later, John Kerry made offshore tax havens an issue in his bid for the Presidency. But the American public wasn't buying. Apparently we were mesmerized by the latest version of voodoo economics: "allowing businesses to pay no tax on profits they make overseas will create jobs in America...don't worry, be happy."
In June, 2007, Senate Finance Committee chairman Max Baucus specifically requested a study of Ugland House: “I want the GAO (Government Accountability Office) to go looking in one of the most likely places shady tax transactions could be sheltered, and that’s this building in the Caymans.”
After a year of trips back and forth to the Caymans, the GAO completed their work, and released a study intended "to help Congress better understand the nature of U.S. persons' business activities in the Cayman Islands." The only real conclusion was that the problem had grown (there were now 18,857 companies in this little 5 story building) and, sure enough, it was a tax scam. Still no action.
In today's announcement of plans to crack down on overseas tax havens, President Obama, referred to Ugland House as "either this is the largest building in the world or the largest tax scam in the world."
Funny, it doesn't look that big from the outside. My guess is that it's about to get a lot smaller.
