CAPITALISM'S ACHILLES HEEL Dirty Money and How to

194 CAPITALISM’S ACHILLES HEEL
• Leasing through tax havens is an area of quasi-legal double dealing.
Special purpose entities established in some tax havens can facilitate
full depreciation on leased assets for both lessor and lessee.
In short, tax havens and secrecy jurisdictions permit operations outside
the rule of law and outside the process of regulation. This benefits the generators
and facilitators of criminal, corrupt, and commercial dirty money far
more than it benefits the legitimate capitalist system.
Banking communities in the United States and Europe strongly support
the dirty-money structure, most especially the operation of tax havens and
secrecy jurisdictions. 43 For them, this system serves to feed a good part of the
estimated half-trillion illegal dollars a year coming out of nonwestern countries
into western coffers. And it provides a cover story for this inflow, that
is, much of the dirty money arrives through this semi-legitimizing intermediary
beyond western borders, allowing western banks to claim ignorance of
its origins. And, as a banker said to me concerning his Cayman Islands unit,
it enables his institution to “accommodate corporate clients for staff payments,
tax evasion, transfer pricing, etc.” 44
No one should think for a moment that the West is an innocent victim of
vile machinations by drug kingpins, crooks, and tax evaders from other countries.
No; this system was developed in the West and advanced by the West,
and it serves what some people think are purposes beneficial to the West.
FALSIFIED PRICING STRUCTURE
The second major piece of the edifice supporting cross-border dirty money
is falsified pricing and the extent to which this practice has become so widespread
and out of control. It is a complex subject that engages the attention
of thousands of officials, lawyers, and executives. Broadly speaking, individual—particularly
western—nations attempt to protect their own revenues
while avoiding protection of other nations’ revenues. By eschewing the second
responsibility, the United States and Europe make it much more difficult
to achieve the first responsibility. I boil it down to its essentials.
“No country ever takes notice of the revenue laws of another.” 45 So said
Lord Mansfield in 1775 in England. This was at a time of growing competition
between England and continental Europe and coincided with Adam
Smith’s completion of Wealth of Nations, which appeared the following year.