How foreign investors launder their money in New York real estate

One of the signature features of the modern age is the bottomless greed of the global economic elite. The richest people in the world — business tycoons, political elites, and wealthy heirs — spend half their time attempting to rake in more cash, and the other half protecting what they already have from as much taxation as possible. The key tool in this latter process is the tax haven: using legal chicanery (and, rather frequently, straight-up fraud) to move income and wealth into jurisdictions where it will be subject to little or no tax.

Tax havens have been an obvious problem for decades. But they’ve gotten special attention from the publication of leaked corporate documents in the Panama Papers, and most recently, the Paradise Papers.

Tax avoiders use all sorts of techniques. But I’d like to focus on one: real estate. It’s a technique that is both growing in importance, and could be addressed relatively easily.

First, it’s important to be clear about what sort of behavior tax avoidance is. All corporations and businesses rely absolutely on states to exist at all. No entrepreneur could ever get going without a state-created legal system, state-enforced property rights, and the state monopoly on violence. Using a tax shelter is therefore sheerest economic parasitism — rolling up a big pile of wealth under the umbrella of state protection, and then squirming out of as much responsibility as possible to maintain that state.

Real estate — especially in red-hot, ultra-expensive markets like Manhattan — has become a favored investment vehicle for the global elite. As this New York investigation demonstrates, between 2008 and 2014, roughly 30 percent of condos in big Manhattan developments were sold either to foreign investors or LLCs (which are usually hiding some foreign investor).

Foreign investors do generally have to pay some American tax (in property and sales), for the privilege of avoiding domestic taxation in Russia or wherever. But they are clearly getting a good deal out of it — there are only so many places to sock away millions, especially in ways which camouflage one’s identity.

Indeed, U.S. real estate especially has certain advantages over small tax havens. Places like Bermuda or Seychelles are tiny and would be defenseless if they ever came under U.N. sanctions or even serious pressure from a major world power. New York real estate, in addition to being a handy wealth storage mechanism that provides a …read more

Source:: The Week – Politics


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