Romney ‘Likely Used Tax Shelters’

January 18, 2012

A former US Treasury deputy international tax counsel said today [Jan.18] Republican Presidential front-runner Mitt Romney’s reluctance to disclose his US tax returns probably owes to the fact he sheltered income in Bermuda and other offshore financial centres.

Daniel Berman, who is now director of tax at Boston University’s graduate tax programme, told the Reuter news agency that Mr. Romney’s work with a Boston-based private equity firm in the ’80s and ’90s made it likely some of his money had been sheltered in offshore funds.
Reuter reported: “His vast fortune is invested in dozens of funds linked to Bain Capital LLC, the powerhouse private equity firm he co-founded and led for 15 years. Several Bain funds have offshore connections and take advantage of tax breaks used only by the US financial elite. ‘His tax returns could shed light on how Romney and Bain use offshore strategies to avoid taxes’, said Daniel Berman …

“Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings. ‘Certain interests in foreign investment structures would have to be reported on attachments to his return,’ Berman said.”

Just one of these offshore-linked funds — Bain Capital Fund VIII, based in the Cayman Islands — generated $1 million for the former Massachusetts Governor in 2010.

Yesterday [Jan.17] Mr. Romney said his income tax rate is “probably closer to 15 percent than anything,” suggesting that one of the wealthiest people to ever run for US president pays a much lower rate than most Americans.

His comment, a day after Mr. Romney agreed for the first time to release his tax returns — but not until April when they are generally filed — added fuel to his Republican rivals’ calls for him to be more transparent about his finances.

It also drew fire from the Democratic White House and other critics, who said it reflected how Mr. Romney, whose estimated net worth is $270 million, is out of touch with the experiences and concerns of typical Americans. He is the first major party candidate in more than 40 years who has failed to make his tax returns public.

Mr. Romney’s estimate of his income tax rate suggested that like many of the wealthiest Americans, he could earn a large chunk of his income from investments — much of it in capital gains.

Because capital gains generally are taxed at 15 percent compared with the top income tax rate of 35 percent on ordinary wages, those with significant income from capital gains often pay lower tax rates than many Americans.

Mr. Romney had come under fire earlier this month from fellow GOP Presidential contender Newt Gingrich, the former Speaker of the US House of Representatives, for helping investors in Bain Capitol avoid American taxes by operating offshore funds in Bermuda and Cayman.

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