Presumptive Republican presidential nominee Mitt Romney insists that he didn’t shut down his tax shelters in the Cayman Islands, Bermuda and Switzerland because it would “avoid the truth” and he wasn’t going to “manipulate my life” just to become president.
“First of all, there was no reduction — not one dollar reduction — in taxes by virtue of having an account in Switzerland or a Cayman Islands investment,” Romney explained. “The dollars of taxes remained exactly the same. There was no tax savings at all. And the conduct of the trustee and making investments was entirely consistent with U.S. law and all the taxes paid were those legally owed and there was no tax saving by virtue of those entities.”
Well, yeah, because swiss banks don’t report interest to your country, and they don’t charge taxes in Switzerland unless you meet certain precise criteria.
We’re talking two tiers of banks here; public banks for the hoi poloi, and private, “invitation only” affairs that require a minimum of a cool million in liquid assets – and yes, somebody already in the bank has to give you an invitation.
First, the whole privacy thing. It started with French kings, and was bumped up more when, before WWII, wealthy Germans suffered the death penalty for stashing money outside the country. The profound security procedures worked against German Jews, who lost proof of deposits while they were in death camps.
Second, high rate of capitalization, making money in Swiss banks very safe. There are national laws protecting assets in Swiss banks and insuring prompt pay-out in case of bank troubles (FDIC on steroids). And the Swiss banks hold a good chunk of gold. (Have you been paying attention to the nearly-inaudible chatter on going back to the gold standard? Paul Krugman’s been talking about it, but I am a cheap piker who won’t pay the $2/month to get his glory delivered to me – here’s a link to his blog-scroll down.)
And third, they invest wisely and have a very good rate of return on their investments.
Finally, if you are neither a Swiss nor an EU citizen, and you don’t have any holdings in Swiss companies, you don’t pay income tax on your investment earnings. Your heirs receive your accounts, and it’s up to them to report it to their government; the Swiss banks won’t.
All this swiss bank stuff is off the internet, believe as much as you want. If you know better, let me know.