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Mitt Romney's Tax World, part 3 of 3

Swiss Bank Account

Romney's 2010 tax return disclosed ownership (or control) of a Swiss bank account, held in UBS, that was omitted from his federal financial disclosure documents.

When asked about the UBS account, Brad Malt, the trustee of Ann Romney's blind trust (and Mitt Romney's personal attorney), explained that it was:

(i) held in Swiss francs (worth $3.0 million US);

(ii) opened in 2003 and closed late in 2010;

(iii) opened for "diversification"; and

(iv) "closed to remove any possible source of embarrassment."

In 2010, the account earned just $1,747 in interest (0.006%).

Note: In February, 2009, a criminal complaint was filed by the U.S. government against UBS for involvement in a massive tax evasion scheme. UBS agreed to a $780 million fine and to provide the names of U.S. depositors.

Mr. Malt's explanation makes no sense. The beneficiary of a blind trust cannot have any control over the trust or its assets.

Why did Mitt and/or Ann Romney have ownership over an account that was held by a blind trust? Why did Romney list an asset on his personal tax returns that supposedly belonged to a blind trust, unless they retained control over that asset? If the Swiss account belonged to the blind trust, it should have listed it. Why was the account not closed when UBS agreed to criminal sanctions and instructed U.S. depositors to close their accounts?

Marriott

Romney served on Marriott International Inc.'s Board of Directors for 11 of the past 16 years since 1993 and six times he served as chairman of its audit committee, placing him in charge of reviewing the company's financial reporting.

As a director, he oversaw the company's tax planning. During the time Romney served on Marriott's board, the percentage of taxable income paid by the company fell to 6.7% federal, compared to the usual corporate tax rate of 35%

Bogus Tax Shelter

Under Romney's watch, Marriott engaged in the notorious "Son-of-Boss" abusive tax shelter generating $71 million in bogus tax deductions, which were subsequently disallowed by the Court of Claims and, on appeal, by the Federal Circuit Court of Appeals.

Luxembourg Tax Ploy

Also during Romney's tenure as a director and chairman of the audit committee, Marriott used a Luxembourg company to divert taxable income ($229 million in 2009) to an offshore account, a maneuver that dramatically lowered its corporate income tax.

The offshore entity charged royalty, licensing and franchise fees for allowing hotel owners and operators to use Marriott's various trademarks and intellectual property, including the Ritz Carlton brand. Through the end of 2011, Marriott parked closed to $500 million in untaxed income in the Luxembourg tax haven.

Note: Facebook, Apple and Google, as well as many other international corporations, use a variation of Luxembourg tax scheme resulting in billions, if not trillions, in untaxed corporate profits siting offshore.

Conclusion:

Romney's tax return offers a peek into the tax savings and financial transactions utilized by the super-rich to avoid paying taxes on much of their wealth. The use of the carried interest and charitable deduction rules, along with offshore IRAs and defective grantor trusts grow tax-free, illustrate how the affluent circumvent the tax code.

Use of these loopholes affirms Warren Buffet's famous quip, "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."

End of Part 3 of 3.