Israel’s three largest banks have all been ordered to pay fines collectively totaling over $1 billion for US tax evasion scheme.
WASHINGTON — Israel’s three largest banks — Hapoalim Bank, Leumi Bank and Mizrahi Tefahot Bank — have all been ordered to pay record fines, which collectively are set to total over $1 billion, to the U.S. government after the banks were found to have actively colluded with thousands of wealthy Americans in massive tax-evasion schemes.
The scandal, though it has been reported on in Israeli media, has garnered little attention in the United States. The media black-out has been so surprising it was even directly mentioned by the Times of Israel, given that similar revelations about other banks and offshore tax-evasion schemes — such as those contained within the Panama Papers — led to global protests and even the resignations of some world leaders.
The settlements are the end result of a series of Department of Justice (DOJ) probes that were related to the DOJ’s 2007 investigation targeting UBS AG, Switzerland’s largest bank. The focus of the probe turned to Israel a few years later in 2011, when it was determined that the Swiss subsidiaries of several of Israel’s largest banks had actively aided Americans seeking to launder their money.
As the probes advanced, the DOJ found that the three banks — Israel’s largest when ranked by net income and total assets — had a history of collaborating with wealthy Americans in tax evasion schemes, not just in their Swiss subsidiaries but in Israel as well. Most of those wealthy Americans were Jewish Americans or dual U.S.-Israeli citizens who hid their U.S. citizenship from the Israeli banks.
A year after the probes into Leumi, Hapoalim and Mizrahi Tefahot were made public, the U.S. State Department notably listed Israel as a “major money laundering country… whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking … or other serious crime.”
Bank Leumi was the first to admit to wrongdoing and reached a deferred prosecution agreement with the DOJ in 2014 that eventually resulted in the bank paying $400 million in fines to the U.S. government and the State of New York in order to avoid prosecution. According to the DOJ, the agreement marked “the first time an Israeli bank has admitted to such criminal conduct, which spanned over a 10 year period.”
The investigations into the other two banks, Mizrahi Tefahot and Hapoalim, continued until just last Wednesday, when Mizrahi Tefahot agreed to pay $195 million in fines for “conspiring” with U.S. clients to avoid taxes. Like Leumi Bank, Mizrahi Tefahot admitted its guilt.
A settlement with Hapoalim Bank, Israel’s largest bank, has yet to be reached. The bank had set aside $343 million for a potential settlement as of last February, though that figure has since ballooned to $616 million as of this week. Hapoalim CEO Arik Pinto told reporters on Monday that he “really hopes” that the DOJ probe will be resolved by the end of the year, a sentiment likely motivated by the fact that the probe has weighed on the bank’s profit performance.
Whitney Webb is a MintPress News journalist based in Chile. She has contributed to several independent media outlets including Global Research, EcoWatch, the Ron Paul Institute and 21st Century Wire, among others. She has made several radio and television appearances and is the 2019 winner of the Serena Shim Award for Uncompromised Integrity in Journalism.
To all politicians: Listen to the people, as this is what they want.
A strong majority of people in wealthy countries, including Canada, want to tax the rich more and get better services from government, a survey by the OECD released Tuesday suggests.
A majority of people in wealthy countries — including Canada — want to tax the rich more and get better services from government, a survey by the OECD released Tuesday suggests.
In Canada, 69 per cent of respondents said the government should tax the rich more than it currently does to support the poor.
That’s a slightly higher figure than the 68 per cent average for the nations surveyed by Organization for Economic Co-operation and Development.
The OECD surveyed 22,000 people in 21 countries, about 1,000 in a representative sample from each country. The online survey by Respondi Ltd., was performed in the spring and autumn of 2018.
People in these countries are living safer, healthier, and longer lives, and are better educated than ever before, but many fear they are falling behind and are worried about their futures, the OECD said in its commentary.
Higher taxation of the rich has emerged as a political lightning rod in many wealthy countries, with U.S Democrats proposing hikes and “yellow vest” protesters in France demanding the wealthy bear a bigger tax burden.
In Canada, there have been calls to do more to tax money stashed in offshore accounts by wealthy investors.
About 57 per cent of Canadian respondents said they wanted government to do more to safeguard their economic and social security. Only five per cent wanted government to do less.
There was broad support for building the welfare state in most OECD countries, with the exception of France and Denmark, whose welfare systems are among the most generous in the world.
In Canada, many expressed worry about their financial security in retirement, and 45 per cent said they wanted increased spending on pensions, even if it means taxes rise.
Beginning this January, the premiums for Canada Pension Plan rose, meaning those who retire a generation from now will have higher pensions. The federal government and provinces agreed to raise CPP contributions, because there are fewer employers offering private pensions.
In the short term, half of Canadian respondents said they struggled to meet daily expenses, with 48 per cent saying they worried about becoming ill or disabled, and 36 per cent saying they feared losing their job.
Canadians were more likely than people in other OECD countries to say their government listened to them and they could get public benefits if they needed them, but 45 per cent of respondents said the government doesn’t incorporate their views.
More than half of respondents across the OECD say they do not receive their fair share of benefits given the taxes they pay, a perception that rises to three-quarters or more of respondents in more unequal countries such as Chile, Greece and Mexico.
The sense of injustice that many feel in developed nations is a “wakeup call” for policy makers, says OECD Secretary-General Angel Gurría.
“OECD countries have some of the most advanced and generous social protection systems in the world. They spend, on average, more than one-fifth of their GDP on social policies. Yet, too many people feel they cannot count fully on their government when they need help,” he said.
He said if governments want to restore trust and confidence in government, they must tackle this perception that the system is unfair and promote equality of opportunity.
With files from Reuters
The so-called Paradise Papers may sound familiar – leaked documents from a law firm that specialises in offshore services reveal how the global elite avoids paying taxes. Even the name has the same ring to it as last year’s Panama Papers expose. But the Paradise Papers are different, reflecting the complexity of the global offshore tax system.
Panama is generally considered among tax haven experts as one of the least reformed corners of the offshore world. International rules regarding tax evasion and avoidance are intended to help national governments to pursue their own offenders, but the Panama Papers revealed that the country was being used primarily by the business and political elites of countries like Russia, China and many more in Latin America and Asia; countries where the governments are closely linked to business and which are less likely to use tools provided by new international rules to pursue offenders. Hence, relatively few Americans or Europeans were caught in the Panama story. And Mossack Fonseca, the law firm at the centre of the leak has since been discredited.
The Paradise Papers reveal the goings on of the elites of the offshore world – this time in the supposedly highly-regulated havens of the Cayman Islands, Bermuda, Singapore and the like. All places that received a fairly clean bill of health during the OECD peer review process only a few years ago. The law firm at the centre of this new leak, Appleby, insists there is “no evidence of wrongdoing” in any of the revelations.
Nonetheless, the Paradise Papers will tell us a lot about the activities of business and political elites of well-regulated countries like the US and UK – implicating big multinationals such as Nike and Apple, and individuals including the British Queen.
Clearly, jurisdictions such as the Caymans Islands and Bermuda that levy no income tax, capital gains tax, VAT, sales, wealth or corporate tax, still attract a great deal of businesses. Why, for instance, has the Duchy of Lancaster, the Queen’s private portfolio, invested in two offshore funds, in Cayman and Bermuda? After all, the Queen pays tax only voluntarily.
A more charitable interpretation is that any big investor who is seeking to diversify their portfolio would inevitably end up using offshore funds. The papers show that about £10m (US$13m) of the Queen’s private money was invested offshore – a very small percentage of her wealth. There is nothing illegal about this but the ethics of it have been questioned.
Practically, the entire wealth investment industry – the industry that invests for the rich and the wealthy of our world – operates through the offshore world. And the reason why is simple. Each fund or transaction, or aeroplane or yacht, or whatever that one cares to register in the Caymans or Bermuda, is not subject to tax. And it’s hidden from public view.
Despite a spate of new regulations, the Paradise Papers show that anyone who wishes to conceal their affairs from competitors, allies, governments or the public can still do so with great ease. And they can do so through the facilities of a “trust”, an archaic Anglo-Saxon instrument that serves as a foolproof shield from scrutiny.
We have learned, for instance, that Wilbur Ross, the US secretary of commerce, had commercial links to Vladimir Putin’s family, which operated through a system of linked trusts located in various offshore jurisdictions. I do not think that even the Mueller inquiry in the US into the Trump administration’s links with Russia could have pierced the veil of secrecy offered by offshore trusts.
But the leaked documents from law firm Appleby reveal that any complex business deals that would involve concealment and subterfuge would work their way through trusts. It is high time we do something about these trusts.
The Paradise Papers show how complex financial innovations such as the use of derivatives and financial swaps arrangements, can be used for tax avoidance. This is an area of avoidance that is normally not well understood and scantily studied.
New research colleagues and I are conducting, however, has found that cross-currency interest rate swaps are used pervasively in tax minimisation mechanisms. It is difficult to detect and involves a parent and subsidiary companies swapping a loan in one currency to another. This swaps the risks and the interest rate of the original currency for the subsidiary’s – a legitimate risk minimisation instrument. At the same time, this facilitates moving funds offshore to low tax jurisdictions.
Many professional service firms operate through offshore jurisdictions. They all claim to be highly professional, following not only the letter, but also the spirit of the law.
But if these firms are not directly liable for the activities of their clients, the offshore world will continue to thrive. These firms take advantage of regulatory loopholes to arbitrate between different rules and jurisdictions in order to minimise taxation. The question is for how long such practices are going to be considered legitimate.
The Paradise Papers reveal how little the world really knows about the level of tax avoidance that takes place. UK citizens, for instance, can legally invest in offshore funds and set up companies in those havens. But they must reveal these holdings to the tax man. We do not know whether those named in the papers did, and we do not know whether the tax authorities will do something about those who did not. We only know that a lot is going through offshore. The Paradise Papers show that, despite promises of the opposite, opacity is still pervasive in the offshore world.
Ready to gag? “The new study discovered that, in total, America’s most profitable corporations in 2016 had $2.6 trillion stashed overseas in over 9,000 subsidiaries in various locations, including notorious tax havens like Bermuda and the Cayman Islands.”
As President Donald Trump and the Republican-controlled Congress intensify their push for massive corporate tax cuts that critics have said would encourage businesses to offshore profits and jobs, a new report published Tuesday by U.S. PIRG and the Institute on Taxation and Economic Policy (ITEP) found that 73 percent of companies on the Fortune 500 list are already taking advantage of overseas tax havens—costing the United States $752 billion in federal tax revenue last year alone.
“Lawmakers shouldn’t be discussing how to sweeten the pot and give corporations a huge tax break that amounts to a huge financial reward for engaging in bad corporate behavior.”
—Richard Phillips, Institute on Taxation and Economic Policy
The new study discovered that, in total, America’s most profitable corporations in 2016 had $2.6 trillion stashed overseas in over 9,000 subsidiaries in various locations, including notorious tax havens like Bermuda and the Cayman Islands.
Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency (FACT) Coalition, cautioned in a statement on Tuesday that the Trump-GOP tax proposals would, if passed, make this bad situation even worse.
“As Congress considers proposals to institute a near zero percent tax rate on profits booked offshore by multinational corporations, the findings in this report should give policymakers pause,” Gascoigne said. “The study shows that today’s flawed tax system allows for gaming on a grand scale.”
The PIRG-ITEP analysis makes clear that corporate tax avoidance is both an unnecessary problem—”Congress created the loopholes in our tax code that allow offshore tax avoidance and force ordinary Americans to make up the difference”—and a pervasive one.
At least 366 of the 500 companies on Fortune’s list “operate one or more subsidiaries in tax haven countries.” Furthermore, “30 companies with the most money officially booked offshore for tax purposes collectively operate 2,213 tax haven subsidiaries.”
But the report also highlights the fact that there are several “particularly egregious examples”:
Richard Phillips, a senior policy analyst at ITEP, argued that in the face of these numbers, Congress should be looking to close loopholes that allow businesses to offshore profits on an enormous scale, not open them even further, as Trump and the GOP have proposed.
“Lawmakers shouldn’t be discussing how to sweeten the pot and give corporations a huge tax break that amounts to a huge financial reward for engaging in bad corporate behavior,” Phillips said.
The PIRG-ITEP analysis outlined several steps that could be undertaken by lawmakers in the place of their attempts to slash taxes, gut the safety net, and further incentivize offshoring.
“To end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore loopholes, strengthen tax enforcement, and increase transparency,” the study concluded.
“If history is any indicator, the American empire will continue to expand and as a result so will domestic tyranny and taxation. This mass exodus of people out of the US is the canary in the coal mine for what’s to come.”
In the last 7 years, the number of Americans renouncing their citizenship has increased 18-fold.
“If you don’t like America, you can’t get out!” Okay.
As the US government continues to spread war across the globe and pass legislation granting tax breaks to mega-corporations while squeezing small businesses for every last dime, people are saying ‘enough is enough.’
According to CNNMoney, unlike most other countries, the U.S. taxes its citizens on all income, no matter where it’s earned or where they live. For Americans living abroad, that results in a mountain of paperwork so complex that they are often forced to seek professional help, forking out high fees for accountants and lawyers.
This excessive burden of handing over 30-40% of one’s income is unsustainable, and we are now seeing its effect.
However, those who are renouncing their citizenship do so because they can afford to flee to another country. As they leave, the tax burden will continue to be passed on to the middle class as the state attempts to squeeze more blood from a turnip.
The irony here is that those who are fleeing are not the super rich elite as they could care less about the tax laws — that they wrote. Just last week, the Free Thought Project reported on the newly established tax haven for the super-rich — located inside the US.
The words of Andrew Penney, managing director of Rothschild & Co., are extremely clear to the elite, who need not flee; the U.S. is now the world’s biggest tax haven. In a draft for a presentation in San Francisco, Penny wrote that the U.S. “is effectively the biggest tax haven in the world.”
In the meantime, that same skewed tax code is forcing small business owners out of the country just so they can make ends meet.
Small business owners and the upper middle class aren’t the only ones fleeing at record rates either. According to a report by the Pew Research Center, more Mexican immigrants are leaving the United States than are coming into the country.
This negative shift in border flow is happening for the first time in over four decades. It seems the Land of the Free, is quickly becoming the land to escape from.
If history is any indicator, the American empire will continue to expand and as a result so will domestic tyranny and taxation. This mass exodus of people out of the US is the canary in the coal mine for what’s to come.
As politicians and their supporters push to close the borders, remember one thing. A wall big enough to keep them out, is also big enough to keep you in.
Matt Agorist is an honorably discharged veteran of the USMC and former intelligence operator directly tasked by the NSA. This prior experience gives him unique insight into the world of government corruption and the American police state. Agorist has been an independent journalist for over a decade and has been featured on mainstream networks around the world.