Mitt Romney's Bain Capital Dodged $102 Million In Taxes By Using Dutch Tax Loophole, Newspaper Writes
Bain
Capital evaded about €80 million (or $102 million) in taxes by
using a financial loophole in the Netherlands, according to a
HuffPost translation of an article in the Dutch newspaper De
Volkskrant Monday.
5
November, 2012
De
Volkskrant and the website Follow the Money claim that by routing its
2004 investments in the Irish pharmaceutical company Warner Chilcott
through the Netherlands, Bain was able to dodge dividends and capital
gains taxes. Financial adviser Jos Peters estimates that the loophole
allowed Bain to save about $102 million.
In
2009, 4 years after investing in Warner Chilcott, Bain moved the
company's seat from Bermuda to the Netherlands to evade possible
stricter tax laws on the island, De
Volkskrant explains.
Radio
Netherlands Worldwide summarized what happened next:
Then
two years ago, Bain registered its interest in Warner Chilcott with
the private Dutch company Alter Domus, which provides administrative
services for multinational corporations and investment funds. If a
Dutch company owns more than five percent of the shares in another
company, then that other company is exempt from paying taxes on all
capital gains.
Through
exemptions like that and a host of other complicated tax treaties,
the Netherlands offers huge tax breaks to companies like Bain, which
is reported to have evaded 80 million euros in dividend taxes by
running through the Netherlands.
"We
are world champion in participants exemptions," Dutch financial
adviser Jos Peters told De Volkskrant.
Follow
The Money explained that Mitt Romney had left Bain in 1999 to run the
Olympics in Salt Lake City, but his retirement package allowed him to
participate in Bain deals and thus share in the profits. (It's also
not clear that he did, in fact, leave in 1999.)
Jesse
Frederik, who wrote the article in De Volkskrant, clarified in a
comment to the
The Political Wire:
Just
to be clear: Romney didn't avoid $80 million in Irish dividend
withholding taxes, but a Bain fund he invests in. The Bain fund also
avoided an unknown amount (probably tens of millions) of Irish
capital gains tax. Romney received $2,1 million in dividends from the
fund in 2010/2011 and $5,5 million in capital gains.
Bain's
tax move is widely enough used in the corporate world, noted one
Reddit user, that it's been given a name: "Double Irish With
A Dutch Sandwich." The Redditer flagged a New
York Times infographic that explains how the tax avoidance
strategy is implemented.
The trouble with Romney recipe for growth is his friends get biggest slice
Outlook: The US is close to fulfilling its energy requirements, further boosting growth
5
November, 2012
Today's
presidential election will principally be decided on the United
States economy, and which of the two candidates the all-important
independent voters who will decide the result feel will be the best
steward of it.
Of
course, when it comes to the economy the USA is doing rather well,
certainly if you look at its GDP numbers and compare them with what
we've been seeing in this country, not to mention the eurozone.
Annual growth of between 1.5 and 2 per cent is pretty good, all
things considered.
The
Centre for Economics and Business Research today hands much of the
credit to the monetary stimulus provided by the US Federal Reserve
which, it argues, is working rather better than the Bank of England's
equivalent.
This
can be seen in the way bank lending, stalled on this side of the
pond, is growing for business and households over there. Even
mortgages have started to pick up.
The
US is also benefiting from getting close to being able to fulfil its
own energy requirements. As a result energy is relatively cheap,
further boosting growth.
The
fly in the ointment is the country's enormous budget deficit, which
will have to be addressed after the election. A second-term President
Barack Obama may rely on a mix of tax rises and spending cuts, if a
deal can be reached with an extreme and resentful Republican House of
Representatives.
Mitt
Romney, by contrast, has at least said he will try something
altogether more radical: savage cuts in Government spending together
with tax cuts that will likely be of most benefit to the wealthiest.
Oh, and he'll ask the Fed's chairman Ben Bernanke to quit, which
could mean an end to the monetary stimulus many on the US right
dislike.
Other
than a short-term boost to the Dow (on account of Wall Street having
one of its own in the White House) Douglas McWilliams, the CEBR's
chief executive, argues that it will take time for these sort of
measures to have an impact on America's economic performance.
But,
he says "the option of low spending and low taxation applied in
a major Western economy" would be "an exciting experiment".
That
is the sort of thing you might expect an economist who won't be on
the receiving end of the downside of such an experiment to say. The
bonfire of America's already very limited social safety net will have
a brutal impact on the country's oft-forgotten poor. As for the extra
growth that may — may — be generated, who will benefit from it?
Those
independent voters might very well find that it won't be them unless
they are, along with Mr Romney, part of the 1 per cent at the top of
American society. After all, during the Republican-dominated
Noughties US GDP grew every year but one until 2008, sometimes by as
much as 4 per cent. But median household incomes did not. By 2008,
middle-income households were making less, adjusted for inflation,
than they did in 1999. The same cannot be said for those at the top.
Even
now the US economy is growing, ordinary Americans aren't really
feeling it, which partly explains the battle President Obama has
faced.
This
is something that ought to be borne in mind on this side of the
Atlantic, where there is much debate on how to boost GDP growth.
Growth is only really worth having if it percolates throughout
society and benefits everyone.
Just
look at South Africa: what growth the country has enjoyed has not
been widely shared. The consequences have been bloody, as the
families of dead miners, striking as a result of being left out of
it, can testify.
Governance
rules no use if directors are weak
Britain's
corporate governance code today celebrates its 20th anniversary and
the Financial Reporting Council, which polices it, has published a
series of essays to mark the occasion.
Not
much of a pressie, you might think, but the consensus (as you might
expect) is that the code's core principle of "comply or explain"
has held up well and is a better way for things to be conducted than
an inflexible rules-based approach.
In
the code's favour, it has generally improved governance, and pointed
the way for many similar arrangements overseas.
However,
it is facing challenges like never before. For a start there are the
natural resources companies that have come to London and thumbed
their noses at the code while pouring investors' money down a deeper
pit than many of their mines.
Some
of that money has come from tracker funds, favoured by big pension
schemes and small investors alike because they are cheap and easy to
understand.
They
have been forced to invest in these mining companies by dint of their
inclusion in Britain's stock-market indices. This could be said to be
a failing of the funds. But it could just as easily be a failing of
London's regulatory set-up, the code included. Would these companies
have come if the code demanded their compliance?
On
the other hand, even had the code's provisions been made statutory it
wouldn't have done anything to prevent some of the really nasty
failures we have seen in recent years. Royal Bank of Scotland had an
independent chairman and a majority of independent directors. They
didn't do their jobs and allowed an over-mighty chief executive to
drive the business off a cliff.
It's
not much good complying with the letter of corporate governance best
practice when the independent directors you appoint either can't or
won't exercise their responsibilities. Time and again non-executive
directors have failed when asked to step up to the plate, most
recently in some of the absurd pay packages they have waved through
in the teeth of resistance from their shareholders.
Perhaps
they need a code to govern their conduct?
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