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(CNS Business): The news team of one of the major US network television stations has focused on presidential hopeful Mitt Romney’s offshore accounts in the Cayman Islands, which they say has enabled him to pay a low 15% on his earnings. The front runner for the Republican candidacy, Romney’s personal wealth, estimated at around $250 million, has come under increasing scrutiny as his GOP rivals, looking for attack material to lessen his lead in the nomination race, have made this a campaign issue. Homing in on this new point of contention between the candidates, ABC News has run a feature on Romney’s low taxes, sending a TV crew to Cayman, which they call “a notorious Caribbean tax haven”.
Romney’s financial success would seem to make him a poster child for the Republican party, which stands for low taxes for the rich, less government and trickle-down economics. However, his wealth and how he got it is now under the intense spotlight of US politics with his admission that he pays around 15% in taxes, far less than most Americans. Romney claims that over the last 10 years, his income has come overwhelmingly from investments made in the past, rather than ordinary income.
"I can tell you we follow the tax laws," he said recently. "And if there's an opportunity to save taxes, we like anybody else in this country will follow that opportunity."
ABC News, one of the three big network news broadcasts in the US, reported that Romney has used a “variety of techniques to help minimize the taxes” on his vast fortune. “He also 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.”
The news report said that Bain Capital, the private equity partnership Romney once ran, had set up "some 138 secretive offshore funds" in the Cayman Islands. “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 US taxes on income derived from those investments.”
"His personal finances are a poster child of what's wrong with the American tax system," Washington lawyer Jack Blum told ABC News.
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. She said in the report that 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."
"It helps US investors avoid US tax," said Wilkins, "it helps foreign investors avoid taxes in their home country, so it's not illegal or improper to set those funds up in a foreign jurisdiction, but it makes it more attractive to investors because it helps them avoid paying taxes on that income."
In response to the ABC report, Romney Press Secretary Andrea Saul had issued a statement saying: “ABC is flat wrong. The Romney’s investments in funds established in the Cayman Islands are taxed in the very same way they would be if those funds were established in the United States. These are not tax havens and it is false to say so.”
This is not the first time the Cayman Islands has come up on the presidential campaign trail. During a debate in the last presidential race in 2008, then presidential candidate Barack Obama singled out Ugland House in the Cayman Islands, reportedly home to some 12,000 offshore corporations, as "either the biggest building or the biggest tax scam on record."
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