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Source: http://abcnews.go.com/Blotter/romney-parks-millions-offshore-tax-haven/story?id=15378566#.Txp_BJiaBzi
"Romney Parks Millions in Cayman Islands"
By MATTHEW MOSK, BRIAN ROSS and MEGAN CHUCHMACH
for ABC News, Jan. 18, 2012
Although it is not apparent on his financial disclosure form, Mitt Romney has millions of dollars of his personal wealth in investment funds set up in the Cayman Islands, a notorious Caribbean tax haven.
A spokesperson for the Romney campaign says Romney follows all tax laws and he would pay the same in taxes regardless of where the funds are based.
As the race for the Republican nomination heats up, Mitt Romney is finding it increasingly difficult to maintain a shroud of secrecy around the details about his vast personal wealth, including, as ABC News has discovered, his investment in funds located offshore and his ability to pay a lower tax rate.
"His personal finances are a poster child of what's wrong with the American tax system," said Jack Blum, a Washington lawyer who is an authority on tax enforcement and offshore banking.
On Tuesday, Romney disclosed that he has been paying a far lower percentage in taxes than most Americans, around 15 percent of his annual earnings. It has been Romney's Republican rivals who have driven the tax issue onto center stage. For weeks, Romney has cited a desire for privacy as his reason for not sharing his tax returns -- a gesture of transparency that is now expected from presidential contenders.
"I can tell you we follow the tax laws," he said recently while on the campaign trail in New Hampshire. "And if there's an opportunity to save taxes, we like anybody else in this country will follow that opportunity."
But tax experts tell ABC News there are other reasons Romney may not want the public viewing his returns. As one of the wealthiest candidates to run for president in recent times, Romney has used a variety of techniques to help minimize the taxes on his estimated $250 million fortune. In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.
Official documents reviewed by ABC News show that Bain Capital, the private equity partnership Romney once ran, has set up some 138 secretive offshore funds in the Caymans.
Romney campaign officials and those at Bain Capital tell ABC News that the purpose of setting up those accounts in the Cayman Islands is to help attract money from foreign investors, and that the accounts provide no tax advantage to American investors like Romney. Romney, the campaign said, has paid all U.S. taxes on income derived from those investments.
"The tax consequences to the Romneys are the very same whether the fund is domiciled here or another country," a campaign official said in response to questions. "Gov. and Mrs. Romney have money invested in funds that the trustee has determined to be attractive investment opportunities, and those funds are domiciled wherever the fund sponsors happen to organize the funds."
Bain officials called the decision to locate some funds offshore routine, and a benefit only to foreign investors who do not want to be subjected to U.S. taxes.
Tax experts agree that Romney remains subject to American taxes. But they say the offshore accounts have provided him -- and Bain -- with other potential financial benefits, such as higher management fees and greater foreign interest, all at the expense of the U.S. Treasury. Rebecca J. Wilkins, a tax policy expert with Citizens for Tax Justice, said the federal government loses an estimated $100 billion a year because of tax havens.
Blum, the D.C. tax lawyer, said working through an offshore investment vehicle allows the investor to "avoid a whole series of small traps in the tax code that ordinary people would face if they paid tax on an onshore basis."
Wilkins agreed, saying the "primary advantage to setting those funds up in an offshore jurisdiction like the Cayman Islands or Bermuda is it helps the investors avoid tax."... [Article continued here.]
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Source: http://www.alternet.org/story/153808/mitt_romney_wouldn't_know_a_free_market_if_it_bit_him_on_the_ass
"Mitt Romney Wouldn't Know a Free Market If It Bit Him on the Ass"
At Bain Capital, Romney used the tax code to redistribute wealth from taxpayers to his investors and partners.
AlterNet / By Joshua Holland, January 18, 2012
The lion's share of the wealth Mitt Romney accumulated during his years at Bain Capital was extracted not only by laying off workers and raiding their pensions, but by using what conservatives call “big government” to redistribute wealth from taxpayers to Bain's investors and partners.
Bain Capital was not in the business of creating jobs, or even saving companies over the long-term. Its model had a relatively low rate of success; a study by Deutche Bank found that 33 out of 68 major deals cut on Romney's watch lost money for the firm's investors. Its richest deals made up for the flops, however, and Bain's partners were guaranteed hefty fees regardless of how the businesses they “restructured” ultimately performed.
Romney and his partners then exploited a loophole in the tax code that allowed them to pay just 15 percent of their growing fortunes in taxes – a rate less than what many of their companies' employees forked over to Uncle Sam.
“By and large, [government] gets in the way of creating jobs," Romney said during a GOP debate last year. But, as the Los Angeles Times noted, “during his business career Romney made avid use of public-private partnerships, something that many conservatives consider to be 'corporate welfare.'"
On the campaign trail, Romney often touts a successful investment in an Indiana steel company called Steel Dynamics, but he doesn't mention that the firm had taken advantage of “generous tax breaks and other subsidies provided by the state of Indiana and the residents of DeKalb County, where the company's first mill was built.”
But that's a small part of the public largesse Bain enjoyed. Most of the big money the firm brought in during those years was extracted through “leveraged buy-outs,” a reality that Romney doesn't like to talk about on the campaign trail. Instead, he wants to talk about Staples, which was one of a small handful of Bain's venture capital deals. The 89,000 people employed at the office supply chain go a long way toward the campaign's dubious and unsourced claim that Bain “created 100,000 jobs” under Romney's tutelage. But venture capital represented a small share of Romney's deals, and it's important to understand the distinction between venture capital and leveraged buy-outs.
You won't hear much criticism of venture capital deals like Bain's investment in Staples. It's a very basic free-market transaction – investors put money into a company at its early stages in exchange for a share of the company. If the start-up doesn't pan out, the investors lose their stake; if it grows and matures, they make healthy profit, usually when the company goes public or is sold off. In venture capital deals, investors only make a profit when the company that receives their cash does well.
Leveraged buy-outs are a different creature entirely. Leveraged buy-out firms became so closely associated with the most rapacious and unsustainable form of capitalism in the 1980s, that the entire industry rebranded itself as “private equity” to escape the stigma.
Leveraged buy-out artists also deal with risky companies – usually those struggling to stay afloat – but they don't actually take on much risk themselves as they structure the deals so they profit whether the target company becomes healthy and grows or collapses, often under the weight of debt piled onto it by the private equity firm itself.
Here's how the deal works. The leveraged buy-out firm will put down a fraction of the cost of buying an ailing company. The balance of the transaction is borrowed, but the debt goes onto the books of the target company, not the private equity firm – the struggling company basically finances the lion's share of its own sale. ... [Article continued here.]
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