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Romney and tax havens: Why it matters

Vanity Fair’s detailed investigation of Mitt Romney’s offshore holdings in foreign tax havens has raised serious questions. But foreign capital and the shadowy world of offshore investments can be complicated. Here is a detailed FAQ to use as a guide for wrapping your head around the issues:

What is a tax haven, and why does Mitt Romney have financial interests in a place like the Cayman Islands?

A tax haven is a country, like the Cayman Islands, with low tax rates and a lack of transparency. These tax havens are estimated to cost the United States $100 billion a year as the result of wealthy Americans like Romney who invest money through offshore entities. Romney’s continued association with his former private equity firm is part of the reason some of his money is held there:

“The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers. Again, the Romney campaign insists he saves no tax by using them, but there is no way to check this.” —Vanity Fair

What’s this about a company he owned in Bermuda?

For many years Mitt Romney has kept secret a Bermuda-based corporation he owns, even shifting it to a trust the day before becoming governor of Massachusetts—then keeping it off disclosure forms he was required to file in Massachusetts. But when he released one full year of tax returns—under pressure from fellow Republicans—it was discovered that he and his wife have full ownership of this corporation. Shell corporations like this one are sometimes established in tax havens to avoid U.S. taxes. Romney continues to omit the Bermuda company from financial disclosure statements he’s been required to file when running for office.

“While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in ‘jurisdictions where there is virtually no tax and virtually no compliance,’ as one Miami-based offshore lawyer put it.” —Vanity Fair

How much money was in his Swiss bank account?

In addition to millions of dollars kept in foreign tax havens, Romney had $3 million in a Swiss bank account. This revelation appears in the only tax return Romney has released, but no one knows whether he’s paid all the appropriate taxes on it. On his many foreign accounts:

“These, plus the mandatory financial disclosures filed with the Office of Government Ethics and released last August, raise many questions. A full 55 pages in his 2010 return are devoted to reporting his transactions with foreign entities ... The media soon noticed Romney’s familiarity with foreign tax havens. A $3 million Swiss bank account appeared in the 2010 returns, then winked out of existence in 2011 after the trustee closed it.” —Vanity Fair

What’s so secretive about all this and how is Panama involved?

Mitt Romney has consistently refused to explain why he doesn’t keep more of his money here at home, and digging further into his past only reveals more mystery. When Romney was raising money for his corporate buyout firm, Vanity Fair says he relied on “secrecy-shrouded foreign money,” turning to places like El Salvador, the Bahamas, and Panama for help:

“The filings also show a Geneva-based trustee overseeing a trust that invested $2.5 million, a Bahamas corporation that put in $3 million, and three corporations in the tax haven of Panama, historically a favored destination for Latin-American dirty money—‘one of the filthiest money-laundering sinks in the world,’ as a U.S. Customs official once put it. Bain Capital has said it did everything required by the U.S. government to check that the investors were not associated with unsavory interests. U.S. law doesn’t require Bain to enforce the tax laws of its investors’ home countries, but the presence of Swiss trustees, Bahamas trusts, and Panama corporations would raise red flags with any tax authority.” —Vanity Fair

Is any of this actually illegal?

It appears not, but it’s impossible to know for sure because Romney refuses to release enough information to let people make their own judgments:

“The assertion that he broke no laws is widely accepted. But it is worth asking if it is actually true. The answer, in fact, isn’t straightforward. Romney, like the superhero who whirls and backflips unscathed through a web of laser beams while everyone else gets zapped, is certainly a remarkable financial acrobat. But careful analysis of his financial and business affairs also reveals a man who, like some other Wall Street titans, seems comfortable striding into some fuzzy gray zones.” —Vanity Fair

Why does it matter?

If Romney continues to keep this information hidden, voters can’t make judgments about his perspective or motivations on critical policy matters. Unless he releases more tax returns, we won’t know if he made these decisions to avoid paying U.S. taxes. Americans fail to pay $450 billion in taxes each year, and voters deserve to know whether or not Romney is one of them:

“Come August, Romney, with an estimated net worth as high as $250 million (he won’t reveal the exact amount), will be one of the richest people ever to be nominated for president. Given his reticence to discuss his wealth, it’s only natural to wonder how he got it, how he invests it, and if he pays all his taxes on it.” —Vanity Fair

If you’re still curious, check out this video about the questions raised by Mitt Romney’s failure to release more than a single full year of tax returns.

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