Friday, July 25, 2008

Shouting Match in Tax Evasion Hearings

The Senate Homeland Security and Governmental Affairs Permanent Investigations Subcommittee continues to investigate tax evasion by U.S. residents who hid millions from U.S. tax officials using the services of the Swiss bank UBS and the Liechtenstein bank LGT. The most recent hearings ended in a shouting match between Senator Levin and Washington lawyer Robert Bennett. National Journal's Congress Daily writes that the two tried to shout each other down. Apparently the dispute involved a Bennett client who had earlier taken the fifth amendment to avoid testimony before the committee. Hopefully these hearings will be the beginning of the end of the global tax frauds perpetuated by banks around the world to hide income from legally owed taxes. As noted before, U.S. banks are clearly implicated along with the rest.

6 comments:

ZM said...

Dear Drs Richmans,

I know that this comment will not be related to this particular post of yours, but I will nevertheless write it because it is related to other comments of yours, and to an AT article of yours (which hopefully will be followed by more such articles).

I have devised some kind of a solution to China's huge trade surpluses vis-a-vis America and wanted to ask you for your opinions on this.

My solution would involve:
1) The US government helping Boeing beat Airbus. You have pointed to Airbus as Boeing's competitor on the world stage. The US government could help it by 1) awarding it tanker contracts 2) buying Boeing's planes as replacements for C-22s and VC-25s 3) using these jets to conduct advertising flights to prove these planes' range, e.g. flights from Vancouver to Paris, from Anchorage to London, and from Anchorage to Lima by B-737s. The goal would be to boost Boeing's sales.
2) China should be sued by America and all allies that she can marshal in the WTO for undervaluing its currency, subsidising its manufacturers, and penalising foreign exporters with tariffs.
3) Unless the WTO punishes both China and the EU for cheating on trade, America should withdraw from the WTO.
4) The FairTax should be instituted to free American producers from a number of taxes including the CIT.
5) Defective Chinese imports, like Chinese toys, Chinese computer mice and Chinese food, should be banned in America and beyond.

Zbigniew Mazurak

Howard Richman said...

Zbigniew,

Your suggestions are indeed good ones. I'll discuss them point by point:

1. I agree that the US government should award defense contracts to American manufacturers. It is a shame that Airbus is getting the tanker contract.

2. I don't think that suing China in the WTO would help since there would be little basis for such a suit. However, the WTO agreement would let any country running a trade deficit restrict its imports from a country with which it is running that trade deficit.

3. I agree with you that the United States would be better off withdrawing from the WTO.

4. I also agree with you that the FairTax should be instituted, partly as a way to help American producers, but also as a way to increase American saving.

5. Effective action against defective Chinese imports would be a good idea.

Howard

ZM said...

Dear Howard,

Thank you for your reply.

I didn't know that suing China in the WTO would help since there would be little basis for such a suit. One would think that an 80% currency devaluation coupled with a 17% subsidy and a 17% tariff is a good basis for such a lawsuit. But if the US can limit imports from China, it should.

The US can also reduce its trade deficit with China by helping its nuclear industry and negotiating contracts with the Chinese. That is, the USDOE should fund several nuclear projects like a naval reactor for frigates, nuclear surface combatants, and a naval fusion reactor for all types of big ships. The NRC, for its part, should licence a huge number of civilian reactors. Meanwhile the USDOE should ensure that the American nuclear industry wins all contracts for reactors now offered in the world, including contracts from China as well as other countries where reactors are needed (e.g. Poland, Britain, Slovakia, Italy and Ukraine, which, despite being the country of Chernobyl, nevertheless plans to build 11 more reactors). America needs to defeat Areva of France and Atomstrojexexport of Russia. These contracts will be worth dozens (if not hundreds) of billions of dollars. The field is very competitive though.
And that's an example of how America can rebuild its industries. Would you agree?

As for the tanker contract, the DOD has, as you may know, restarted the procedure. The contract won't be awarded until December. Boeing may win. To prevent future outsourcing, though, the Congress should radically change the Buy American Act to include any weapons and any weapon components (e.g. wings for planes). Would you agree?

I've seen you comment on the WTO Doha round, but don't worry, Sarkozy has (for his own parochial reasons) just vetoed that round's result, and no WTO agreements whatsoever will be passed as long as Sarkozy occupies the Elysee Palace. That is, until 2012. The WTO Doha round will conclude without any results whatsoever. Even if any agreement was produced, it would still need to be ratified by the Congress, which is currently dominated by protectionists, so luckily, no FTA will be ratified by the US in the near future, with or without Sarkozy.

If I was the USTR, though, I'd state the following demand as America's condition of ratification of any WTO agreement:
No member state should be allowed to devalue his currency, subsidise his producers, or impose punitive tariffs.
Would you agree?

Zbigniew

Howard Richman said...

Zbigniew,

I agree with your solutions.

1. Indeed, the US can limit the value of imports from China so they are tied to the value of their imports from us. In that way, we could insure that our trade with China balances over 5 years.

2. I also agree that The US can reduce its trade deficit with China by helping its nuclear industry and negotiating contracts with the Chinese.

3. I also agree that the DOD should be required to buy American!

4. I didn't realize that Sarkozy sunk the Doha Round. The New York Times didn't mention his role. Sarkozy understands mercantilism and realizes that this round is worthless if it doesn't prevent it.

5. I agree with your sentiment behind the provision for the WTO agreement that "No member state should be allowed to devalue his currency, subsidise his producers, or impose punitive tariffs." However, I don't have much faith in regulations to prevent unfair competitive practices. Countries always find loopholes that they use to get around regulations. The only way to insure free trade is to insist on balanced trade.

If trade is in balance, then if a country subsidizes one industry or prevents imports to protect an industry, it just hurts its other industries.

If I were USTR I would insist that the following provision be added to the next WTO agreement: "Any member state that is experiencing an overall trade deficit such that imports of goods and services exceed exports by over 5% may impose import restrictions upon the overall value of goods and services that it is importing from any member state with which it is experiencing a trade deficit of over 5%."

Howard

sex shop said...

sex shop

I caught the Return to Forever show at the House of Blues in Orlando this past weekend. The musicianship is other-worldly, I was floored by the sound and vibe of these incredible artists

sexshop said...

sex shop

I caught the Return to Forever show at the House of Blues in Orlando this past weekend. The musicianship is other-worldly, I was floored by the sound and vibe of these incredible artists