There's an article on Mondaq from Withers LLP- a firm of lawyers well known for its support for offshore - which discusses this issue. It concludes:
Obama has shown little interest in backing away from plans to crack down on tax havens, despite the economic downturn. It appears that Obama will proceed with his proposed middle-class tax cuts as part of an economic stimulus package, and a bill similar to the STHAA could be seen as a useful revenue raiser to offset this cost. In the week after his historic election, Obama did admit that tax increases on the nation's top earners could be delayed. However, it is not clear whether a crackdown on offshore financial centers will be delayed as well. A key period to monitor will be the first 100 days of the presidency, as Obama may try to make significant and visible policy decisions, which could include tax cuts for the middle class funded a proposal like the STHAA.
At the time of this writing, there are still two Senate races yet to be decided, but it is certain that Democrats will have comfortable margins in both Houses of Congress. The STHAA had bipartisan support in the Senate (although Republican co-sponsor Norm Coleman is currently facing a recount in his Senate re-election bid). Threats against offshore financial centers have been made in the past by both Democrats and Republicans, but have not amounted to concrete action. However, as was seen this summer with the enactment of the exit tax aimed at individuals who expatriate, it is entirely possible that Congress will take action on this potential source of revenue. Accordingly, it would be prudent for intermediaries to consider what effect these proposals could have if enacted.
Of course, along the way the authors argue that the list of havens is wrong - apparently signing a tax information exchange agreement now means you are fully committed to information exchange (which is absurd - as I've shown, Cayman expects to exchange no more than 120 time this year). But all that shows is that these people are running out of arguments.
Read the message - the offshore game is over.
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Richard
I hope what you write is true. And we can see the net closing in on Cayman etc. The speed with which Obama acted on Guantamo (another kind of off-shore!) gives us hope that his other commitments will be seen through also. Days in the sunny islands appear to be numbered
But what about jurisdictions like Singapore that actually have a real economy (and more political influence). Some of us worry that it’ll be harder to persuade these regimes to play ball. The UK itself is in this category also. I’m not sure the STHAA deals with these.
Colman
You’re right: Singapore is an issue
But we’ll need to pick them off in turn.
Richard
Richard
Singapore (and Dubai and Hong Kong) are indeed crucial. Its obvious that any attack on certain offshore jurisdictions (controlled to an extent by Britain and Holland, for example, or closer to the EU) could very easily see massive outflows of reasonably well-regulated capital flowing to Singapore, Dubai and Hong Kong who will be much tougher nuts to crack. They haven’t been persuaded to sign the EUSD – why do you think that is ?
There is a decent argument for having offshore wealth held in jurisdictions which the US, EU and UK can have some degree of influence over (albeit more influence than at present), than having that wealth disappear altogether from those jurisdictions.
David
No – we just beat them
1) No tax relief for any payments made there
2) Tax withholding on all transfers made there
3) Tax charge at highest available tax rate on all cash received from there
It’s not hard
Germany has drafted the legislation to do it
This is not fantasy – this is for real
Richard
Richard
I see where you are coming from but:
1) If existing money in Switzerland or from other offshore jurisdictions moves to Singapore, Dubai or Hong Kong, there is nothing for anybody else to tax. In any event, how relevant is tax relief ? Individuals transferring wealth offshore from onshore wouldn’t be getting tax relief anyway on such transfers. If you are referring to payments by corporations, how prevalent is this anyway ?
2) Again, transfers from Switzerland and other offshore jurisdictions to Singapore/Hong Kong/Dubai are hardly likely to raise any withholding tax revenue for onshore jurisdictions.
3) This is hardly relevant to wealth which is retained in Singapore/Hong Kong/Dubai rather than being repatriated onshore, which I suggest by the very nature of such wealth is likely to be the bulk of it. How many US individuals with undeclared illegal wealth in Switzerland would ever be repatriating it ?
Seems to be fairly toothless “legislation” as far as I can tell. I can see it being a deterrent to those jurisdictions attracting further moneys from onshore jurisdictions, but can’t see it making any difference re. the $7 trillion or so already offshore, which was my very point.
Also, what’s to stop somebody sending money from the US to, say, France or Germany and then to Singapore when the owner of the wealth is not a French or German taxpayer ?
David
I agree the last is an issue: cooperation will be required
The rest I don’t agree – the disincentive in this will be enormous
Eventually people like to feel they can access their money – this stops it
Richard
Richard
I hear what you say but I’m not sure that the reality bears this out. I can’t imagine that many people repatriate funds from their offshore undeclared funds at the moment. How would they get them back into the country from Singapore and utilise them ? If they merely spend funds from those offshore accounts outside their country of residence, i.e. on holidays and overseas properties, at what point would the funds leaving Singapore get taxed by their country of residence. I just cannot see how this would work.
David
It doesn’t work perfectly – of course it does not
I know that
But then I also know I will never eliminate tax evasion
I’m trying to make it as hard as possible
And put as many obstacles in the way as I can
That’s what these are
They need to be assessed in that light
Richard
Richard
Fair enough but I think some of your solutions will drive semi-controlled offshore wealth in the better-regulated jurisdictions firmly underground into deep black holes like Singapore, Dubai and Hong Kong and actually makes things far worse.