Offshore

The April issue of Vanity Fair has an in-depth article on the network of offshore tax havens that support the corporate shell holdings in Hyde Park in London. It's one of many articles and studies that have appeared recently because of the scale of this problem. Other publications have examined this issue in broader scope, such as Financial Services Technology

and our very own U.S. Government Accountability Office

The discussion of this issue has come to the forefront because tax evasion by multinationals and corrupt leaders has emerged as a key issue ahead of the third substantive meeting of a UN high-level panel this week to discuss a framework for global development after 2015. It's basically follow the money, and the developing countries are trying to structure their tax bases rather than relying upon foreign aid, and this requires transparency in global capital flows. Paul Krugman speaks out on it with respect to Cyprus, whose banks are on the brink of failure due to the capital parked in their accounts from expat Russian money: "But the truth, hard as it may be for ideologues to accept, is that unrestricted movement of capital is looking more and more like a failed experiment".

These capital flows are critical for support of not only the emerging global economies, but also as a means to fund the essential changes in all countries for providing carbon-free energy and conserving remaining natural resources and watersheds.The transfer from the old carbon-based energy sources will necessarily happen quickly, and so the capital must be made available. But how should this capital be captured and allocated?

As it stands right now, governments are legally taxing vibrant small-scale capital, while the old capital that resulted from the earlier industrial development and later corporate growth flees into tax havens. The capital generated from the developed countries, especially the USA and Canada, were generated from the old railroad industries that started with coal, and employed the railroads to develop land that was essentially given to them for free by the government during the expansion phase of the 13 colonies as they evolved into the 50 states. This shifted later on into the oil industry that again used government subsidies to develop roads and highways, and the auto industry came into prominence. During this time, the oil resources claimed by the oil industry were nationalized by various governments in the Middle East (OPEC) and South America. As industries evolved through WWII, their growth came from global industry and government military contracts which funneled money to other governments and countries throughout the world. Technology emerged in the 1970's that basically drove a massive expansion into the digital and electronic information industry, much of which was outsourced to third world economies. Not only that, as the corporate sector bloated in the 1980's and beyond, the banking sector became way outsized in the global economy in the late 1990's, driving speculation into a bubble which the world economy has yet to recover from. These hot spots of banking have coalesced in illegal tax-free havens that are very small countries unto themselves and don't support a large local population. They're entities that basically bleed the money system and exist as private corporate vaults, and the scale of this top tier money, especially in the last decade, has become unprecedented, particularly the expat money from Russia. Meanwhile this top tier money (legal and illegal - drug trade and arms) consumes the resources that belong to global citizens and the natural ecosystem of the planet.

Because of this situation, it now appears that international capital flow restrictions are going to become the only rational way to balance global capital flows and put them to use effectively, whether for ecological restoration, carbon emissions reduction or rebuilding industry and human habitats. These capital flows, as one can see, are funneled through scattered tax havens in quantities that dwarf even the large economies of North America and Europe, and China's economy (its government) has yet to shed its veil. It's a wicked problem.

One method which could address this problem is to establish currency zones that capture these tax havens as well as countries that have large populations and balance out the capital flows with a "regional" approach. It could work in tandem with a regionalized trading system that supports local resource preservation rather than immense supply chains fueled by cheap oil. The scale of these systems must be brought into congruency in order to support the necessary shift in human activities that await us in the future.

Update 4/2/16: Huge New Global Corporate Bribery Scandal, Explained

Update 4/3/16:  Trans-Pacific Partnership pact would fuel climate chaos and empower corporate polluters to challenge environmental laws across the globe.

Update 4/4/16:  Huge document leak exposes shell companies
and this shows how it's done 

Update 5/5/16: Shell corporations are effectively located in the US in these states, which are then used to hide the offshore accounts.

Update 5/13/16: The western banking system has assisted the world’s kleptocrats and tax dodgers.

Update 6/6/16:  Panama Papers - US clients hid millions abroad

Update 10/23/16: UN expert urges next UN chief to focus on ending tax havens

Update 12/24/16: How it's done: How to Hide $400 Million

Update 12/31/16: The Panama Papers

Update 1/29/17:  Black Hole for Assets: Mossack Fonseca exposed by the Panama Papers

Update 6/1/17: The ultra-rich are hiding way more money overseas than anyone realized

Update 6/2/17: Companies That Just Don't Pay

Update 6/5/17: Study: The ultra-rich hide 25 percent of their wealth in tax havens

Update 11/6/17:  Paradise Papers Shine Light on Where the Elite Hide Their Money

Update 11/7/17: Trouble in Offshore Paradise (source - Tax Evasion and Inequality)

Update 11/11/17: How Corporations and the Wealthy Avoid Taxes (and How to Stop Them)

Update 12/24/17: Whitewashing evil

Update 2/7/18: Apple paying a record tax because of its last two decades of global tax avoidance

Update 5/7/18:  IMF’s Board of Directors has approved an anti-corruption “framework” policy.

Update 5/11/18: Supreme Court is lax on overseas corporations.

Update 7/1/18: The real beginning of the end for tax havens has begun

Update 8/30/18: The unholy nexus between tax havens & deforestation.

Update 9/9/18: Moneyland ratchet: Money flows across frontiers, but laws do not

 Update 9/25/18: Up to half of global offshore wealth is hidden in British jurisdictions.

Update 10/11/18: The UK Criminal Tax-Havens that drain money from human & environmental needs

Update 10/13/18: How the citizen schemes stack up, by global region

Update 10/16/18:  A blacklist of 21 countries that threaten international efforts to combat tax evasion

Update 10/31/18:  The vast wealth and power of corporations is at the heart of inequality and climate change.

Update 11/1/18: How corporate dark money is taking power on both sides of the Atlantic

Update 1/21/19: U.S. individuals, by Zucman’s estimate, “are evading $30 billion a year [in taxes] through unreported offshore assets,” while U.S. multinational companies are avoiding $120 billion “by artificially shifting profits to Bermuda and similar places.”

Update 1/29/19: Billionaires Called Out for Tax Evasion at Davos 2019

Update 2/10/19: In 1991 the collapsing USSR shoveled billions from the state treasury into private accounts across Europe and the U.S. in one of history’s greatest heists.

Update 6/16/17: Anonymous companies are getaway cars for the world’s criminal and corrupt

Update 6/17/19: Tax havens: Super-rich 'hiding' at least $21tn (2012)

Update 7/30/19: Money is hoarded at the top. The super rich decimated polity and then turned to extremists to protect them.

Update 9/14/19: Shell Companies Hide $15 Trillion From Taxes, Study Reports

Update 9/30/19: Secrecy World: Inside the Panama Papers Investigation (The Movie "The Laundromat")

Update 10/28/19: Tax Justice Network now ranks U.S. 2nd in the world for global financial secrecy

Update 7/17/21: Shut down the Tax Havens

Update 8/10/21:  In the 21st century, Fascism cannot exist without an offshore system.

Update 10/11/21: Lawmakers seek crackdown on financial 'enablers'

Update 4/6/22: Why Tracking Putin’s Wealth Is So Difficult

 

Update 4/24/22:  He knew that the leverage we had over him was his foreign money. Per the Panama Papers.

Update 7/14/22: Offshore structure for Russia's Gazprom, the source of Putin's wealth.

Update 7/18/22: Oligarchs' shell companies, tax shelters, offshore trusts

 

Update 8/30/24:  In 2001, the United States became one of the money-laundering capitals of the world, with hundreds of billions of dollars laundered in the U.S. every year.

It's Time

There's a conversation emerging among the climate modelers, and it's about how these models have not only accurately presaged the climate changes we're seeing now, but that things are moving very quickly to a much worse scenario than these models predicted. Why? There's no feedback from natural processes accounted for in the relatively straightline projections contained in these models. The permafrost melt in the arctic, as well as other changes in the ocean, will compound an effect that human activity has set off in the ecosphere. A record Greenland ice melt occurred in June of last year, creating global concern around this issue because of the methane emitted from this process, an extreme positive feedback mechanism, which has not yet been factored into the models.

The warnings from the science community ramped up last year after Superstorm Sandy hit New York city, and the International Energy Agency has warned that on current emissions trends the world would be in for 6C of warming – a level scientists warn would lead to chaos. Scientists have put the safety limit at 2C, beyond which warming is likely to become a runaway change. Increasingly, there are models and numbers that show that we're quickly approaching that limit. The popular press has started to publish the even more alarming predictions that are based on this last years' climate events, and warning of the coming impacts of these changes.

Recently, Secretary of State John Kerry has taken an official position in Washington on the urgency of climate change. Kerry called climate change an economic and national security issue — as well as an environmental one — because it affects oceans, aquatic ecosystems and the food they produce. This is a very strong call to action by the USA. It's critically important for the decision to be made on specific actions and goals in response to climate change.The decisiveness of this particular historical moment is highlighted by an important new paper in Nature - the International Weekly Journal of Science, which finds first, that when we start serious change is the most important factor in limiting the damage from climate change, and second, that we have to start serious change now, with policy shifts comparable to an international carbon price of $60 a ton by 2015 in order to mitigate climate change in time to stop irreversible warming.

At this point in time, lawyers and lobbyists are waiting for the White House’s Council on Environmental Quality to issue the long bottled-up standards for how agencies should address climate change under the National Environmental Policy Act, signed into law by President Richard Nixon in 1970. Evidently Washington has decided to take this very belated action and establish standards for approving all manner of projects and initiatives that affect the amount of carbon emissions allowed in the atmosphere. This will have major impacts on the economy and businesses, but as the increasing global public outcry shows, the time has arrived to deal with the issue.

We hardly have any time left.

Changing the Game

Although their development and implementation can be costly, techniques to artificially remove and store carbon dioxide from the atmosphere may become increasingly important as the planet potentially shifts into a permanently warmer state of dangerous climate change. As it stands, removing carbon dioxide directly from the atmosphere has been going on for decades on a small scale to maintain air quality in submarines and spaceships. Commercial processes currently used to liquefy air also require the removal of both water and CO2. Emerging techniques to pull carbon dioxide from the air will be a necessity, say researchers from Columbia University’s Earth Institute. The concern with this approach is the unknown cost impact of these technologies, however, these costs can also drive profitable industries. The research paper from PNAS dated June 28, 2012 is here (Proceedings of the National Academy of Sciences of the USA).

Abstract: CO2 capture and storage (CCS) has the potential to develop into an important tool to address climate change. Given society’s present reliance on fossil fuels, widespread adoption of CCS appears indispensable for meeting stringent climate targets. We argue that for conventional CCS to become a successful climate mitigation technology—which by necessity has to operate on a large scale—it may need to be complemented with air capture, removing CO2 directly from the atmosphere. Air capture of CO2 could act as insurance against CO2 leaking from storage and furthermore may provide an option for dealing with emissions from mobile dispersed sources such as automobiles and airplanes.

As I've discussed before, this is approach is only one part of a multivalent set of ways to actually reduce the CO2 in the atmosphere. It must be done in concert with a shift to non-carbon fuel sources, as well as the actual regeneration of natural systems. It's a carbon reduction framework that can incorporate many strategies.

Some examples of experimental approaches (i.e., Geoengineering) that are developing in the industry:

Sucking CO2 from the skies with artificial trees

A Canadian company has developed a cleansing technology that may one day capture and remove some of this heat-trapping gas directly from the sky. And it is even possible that the gas could then be sold for industrial use.

Revolutionary new technology that produces “petrol from air” is being engineered by a British firm

And in a different approach, Holistic Land Management:  Grazing animals are the path to restoration of the world's grasslands, which has the potential to pull all of the legacy carbon out of the atmosphere and put it back into the ground where it belongs.  There are roughly 12 billion acres worldwide, mostly ruined by human misuse, which we can restore.  At a modest one ton per acre we can pull twelve billion tons of carbon out of the atmosphere every year.  That's 6 parts per million (ppm) - and even if we foolishly continue to add 2 ppm annually, it's still less than a 30-year trip back to a stable pre-industrial 280 ppm, down from today's perilous 393.

These few example processes not only relocate the CO2, but the technological processes can recycle it as a fuel, which is what got us into trouble to begin with. But, it makes it possible to leave the existing oil, coal and gas reserves in the ground instead of extracting it with very expensive processes and transport, as well as put a stop to the environmental damage it does. The urgency in addressing climate change is well-founded, and could be the instigator of a new kind of industry that complements the current renewable and non-carbon energy sources.

Could it even be possible to mitigate climate change faster than we created it? Anything is possible once the old fossil fuel industries get out of the way, encouraged by a global agreement on climate change and a commitment to restorative processes.

Structures

The structure shown above is a tensegrity icosahedron, developed by Bucky Fuller, which demonstrates the dynamic of tension and rigidity that produces a system far stronger than its individual elements. Everything in this universe has different kinds of dynamic structure, even chaos, which is an evolving state. Proportional harmonies, the structures of Phi and the underlying quantum mechanics are the inherent patterns of the universe that interact with all systems.

These structures are systems that emerge and shift, responding to a changing environment, sometimes from the instigation of human societies. A view of these systems is fundamental to understanding the evolution of physical, ecological, cultural, economic and social systems in human culture. Structures are not static, and the interrelated patterns create new possibilities. An article on economics, by Sara Robinson, is part of a series in Alternet's "New Economic Visions" that discusses the emergence of new economic and social structures from the currently failing economic system.

How is the emergent new economy different? Her points are as follows:

Small Is Beautiful - it's local
Marx 2.0 - shared profits are smaller
Systems Theory - interrelated systems
A World Like the Web - matrices and connected frameworks
Reform, Revolution, and Evolution - evolution of the new within the old

This kind of flexible, smaller and nexus-linked structure is the necessary framework for a new economy that is responsive to a sustainable scale of human existence on this planet. It has to emerge, since the existing structures are producing destructive and corrosive situations throughout human society that are detrimental to the entire ecosystem. This is as outlined by Share The World’s Resources (STWR), a privately funded NGO:

Another fundamental concern is how a deregulated and globalised economy has locked large swathes of humanity into unsustainable patterns of overproduction and overconsumption. This irresponsible economic model is the real cause of our environmental problems, which include the rapid depletion of the world's natural resources and surging carbon emissions that governments seem unable - or unwilling - to contain. We are also confronted by an ever-widening gap between rich and poor, the excessive influence of corporate power, on-going financial instability and economic uncertainty.

A commentator in Future of Hope identified one of the root causes of their financial collapse as the domination of aggressively masculine business practices sanctioned by their government. These, he went on to explain, would still be considered successful strategies if they hadn't ultimately precipitated the country's collapse. The same blinkered approach to commerce applies across the world. The inherent flaws in the 'business as usual' model remain largely unacknowledged despite the grave financial and environmental crises it has exacerbated, and policymakers continue to blindly pursue their intimate relationship with the corporate sector.

California's Climate Challenge

Ellen Hanak, senior fellow at the Public Policy Institute of California says that the state has taken a leadership role in global efforts to reduce greenhouse gas emissions, but much remains to be done to reduce the state's vulnerability to climate change. It's building on its previous efforts to develop momentum on climate change issues and carbon reduction standards in concert with UN goals, a policy that is currently missing at the Federal level.

The state is taking this issue very, very seriously, and many resources are emerging that are supported by state and private efforts to forge the way forward in addressing this problem. The Public Policy Institute of California outlines resources and events on climate change policy. The California Energy Commission has resources for climate tools that deal specifically with the impacts of climate change on the state, its geography, its weather and its water supply. Calfornia is also setting up its system for GHG emissons tracking in its emerging Cap-and-Trade model, and this page covers the local regulatory environment that has emerged from years of prior legislation.

It links to California's Climate Change Portal that has the 7-part video series from the NRC. The National Research Council has developed a series of videos that explain how scientists have arrived at the state of knowledge about current climate change and its causes.This information supports the climate change thesis that we've seen playing out over the last 100 years, based upon science and data gathering.

So there's a very strong, emerging effort to focus on ways to deal with this by the state, which is also moving to the Federal level via California Senator Barbara Boxer's joint effort with Senator Bernie Sanders of Vermont to get bills passed at the Federal level which fully addresses this issue, called the Climate Protection Act and the Sustainable Energy Act. They hope to get the bills on the floor of the Senate in the summer, hopefully with backing from the Obama administration. So it should be an interesting summer on The Hill.

The kicker in all this, as the Grist article linked above points out, is that the bill contains a version of the “fee and dividend” idea that is a favorite of NASA climate scientist James Hansen and climate activist Bill McKibben, founder of 350.org. Unfortunately this structure allows the carbon-fuel industries to keep on polluting because the cap-and-trade structure presumes levels of carbon allowances that will not stop the climate change impact. The reason? The funding behind McKibben, that of the Rockefellers and other interests that need to preserve their global investment structures in fossil fuels. That then becomes the deal brought to the table by the USA during global climate negotiations in the future.

That, unfortunately, doesn't reflect science, but rather corporate profits, which will complicate climate negotiations with the rest of the countries on this planet, depending upon how the consensus evolves around the actual science of reducing carbon emissions. There's many ways to achieve consensus on emissions entitlements, but time is of the essence because of the level of atmospheric carbon dioxide that the planet has now.

The Inevitable?

The climate rally in Washington, DC on Feb. 17 was moderately successful, with thousands showing up to protest the Keystone Pipeline project which is increasingly backed by governments that initially opposed it on environmental grounds. High-profile arrests were made, particularly Sierra Club executive director Michael Brune – the first time in the group's 120-year history that a club leader was arrested in an act of civil disobedience. The club's board of directors approved the action as a sign of its opposition to the $7 billion pipeline, which would carry oil derived from tar sands in western Canada to refineries along the Texas Gulf Coast. Tarsands Action has a summary of the coverage of this protest.

The energy industry payback is difficult to fight. With the US as a major producer of climate change due to carbon fuels it's imperative to put public policy measures into place that deal with this. The Keystone project has become the focus in the battle between the public and the oil industry profits. There is no free enterprise in oil, the US doesn't benefit; it is traded on the international market. All the world's oil and gas are tied up by multi-national corporations. The embedded profit in oil and gas distribution and refining mean that no matter how much is extracted, the price of oil would not go down, it's controlled by a market structure. This market structure will direct income whichever way it is necessary to get its projects put through, hence the influence in government approvals. This is playing out now in the US, with the ratcheting up of domestic oil and gas production as has been touted by the Obama administration.

The realities of this market have been pointed out by Bill McKibben's "do the math" approach that talks about the profits embedded in oil and gas that have not yet been extracted. If you look at how the market is structured and how the industrial players are mapping out their oil development strategies, it's apparent that the industry profit formulas and the way that royalties are distributed are key to the financial health of many governments and companies in North America.

Take a look at how oil and gas exploration and extraction are analyzed for production in the US. The map here (pdf file) is very interesting, it shows key onshore crude oil production basins and their potential for producing oil starting in 2014. It makes note of the maturing existing fields, and the new extraction from areas that have not been under energy production yet:

EIA estimates that total U.S. oil production will increase from 6.89 million bbl/d in November 2012 to 8.15 million bbl/d in December 2014 (Figure 2). In the Lower 48 states, excluding the Gulf of Mexico Federal Offshore region (Federal GOM), production is forecast to rise from 4.97 million bbl/d to 6.10 million bbl/d over the same period, representing most of the increase in U.S. oil production. Oil production from offshore fields is expected to resume an upward trajectory as operators intensify exploration and development efforts in the deepwater portions of the Federal GOM. Federal GOM production increases from 1.37 million bbl/d in November 2012 to 1.55 million bbl/d in December 2014. At the same time, EIA expects that the contribution from Alaska and other mature onshore areas in the Lower 48 states will continue to wane over the next two years.

So, as it has already been pointed out, the emissions from the US will only increase due to oil and gas production, yet the financial benefit will go to the multinational companies that are doing the extraction and refining. Once again, privatize the profits, push the damage into the public sector. Somehow this industry cycle must be broken through public policy and financial tax disincentives, which the US has not yet had the resolve to do. Even the "peak oil" phenomenon has not encouraged a shift to renewable energy sources yet, exploration and expensive extraction still create profit in this market. It's time to support an aggressive market restructuring that favors renewable and non-carbon sources that will do far more to change the game than all the political protests could achieve, which is the Al Gore approach.

It remains to be seen whether this will make a difference in the world's energy picture, and thus the salvaging of planetary resources and natural processes.

A Win for the Team

 I can only imagine the feelings of key environmental players last night during President obama's State of the Union speech:

"But for the sake of our children and our future, we must do more to combat climate change. Yes, it's true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it's too late.

The good news is, we can make meaningful progress on this issue while driving strong economic growth. I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. But if Congress won't act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy."

While it states a clear position on addressing the issue - taking executive action if Congress does not - it left unsaid some of the key moves that have been made by this administration with respect to addressing climate change globally, a call which has been made by many countries, organizations and people across the globe and in the USA. As I've noted, a Bicameral Climate Change Task Force has been established, immediately after Obama's Inauguration in January as a domestic response. Kerry's appointment as Secretary of State bodes well, due to his background in promoting environmental awareness and his deep experience with world governments, as well as the nod to the McCain Lieberman Climate Stewardship Acts.

Al Gore, the Chairman of the Board of The Climate Reality Project and former US Vice President, remains heavily involved behind the scenes in a movement to bring more factors to bear in the climate change argument, with another book tour in the wings. Public activism in the USA is very much focused on the oil and coal industries, with a major nationwide public protest scheduled for Feb. 17, including the Sierra Club, the NRDC, 350.org (Bill McKibben), League of Conservation Voters and a networked public group through Change.org, the White House mechanism for public engagement. The Climate Action Partnership has been active among the corporations as a means to take climate change seriously, and adapt their business models to sustainable activities and restoration of natural processes.

The science press, as well as NASA, are clearly calling for global response around the substantial reduction of carbon emissions (GHG's) because of the critical nature of current weather events and deteriorating ecosystems and oceans. If anything, the impacts of climate change have been underestimated. Europe's observations on climate change have added to the dataset on climate change due to carbon emissions, most recently from the Cryosat satellite mission, based in University College, London.

All of this is central to a global climate change agreement negotiation, which has possibly passed the critical point of preventing drastic climate change due to the success of the fossil fuel lobby in delaying international agreement on Climate Change, which is without doubt the single most successful campaign in the history of public affairs. To the victor go the spoils - of a devastated planet? Perhaps now some accountability is in order.

It's now time for the necessary course of action to be taken, and a recognition is taking place that all of us are part of this global crisis and its solution.