There's more from Austria's finance minister, Maria Fekter, on what she wants from the EU in exchange for Austria agreeing to tax information exchange in the Guardian.
Now, let me start by saying I think that countries trading the right to hide crime is always an unedifying spectacle, and that's what is going on here, but it has to be conceded that whilst she does not make a fair point when saying that the European Union cannot force Austria to reform its controversial banking secrecy laws without also forcing the UK to crack down on tax havens in its jurisdiction, she could say it could and should do both.
She's said:
"We want a trust registry for the Channel Islands, but also for countries where British law applies such as the Cayman Islands, Virgin Islands or Gibraltar," she said in an interview with Austria's Kurier newspaper. "These are all areas that are havens for tax refugees."
And I wholeheartedly agree.
As the Guardian also notes:
In another interview with Austria's Die Presse she said the UK should be forced to ban anonymous directorships of companies and trusts. "What we demand of Cyprus, a small island, we also demand of the UK," she said referring to the EU's ban of anonymous directorships in Cyprus as a condition of the island's bailout.
And again, she's right.
It almost looks as if she's been reading my material and that of the Tax Justice Network.
She should remember we also call for full, automatic, multilateral information exchange.
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I’m tempted to say who cares by what means change comes. What people, business and governments are waking up to all over the place it seems is the desire and need from real people for a level playing field that has JUSTICE emblazoned across it. That means no tax and secrecy competition.
Maybe that should read “no tax or secrecy competition”!!!
could be read as:
No Tax
Secrecy competition
Won’t there always be competition on taxation? Even tiny changes can make massive differences to the big multi-national companies. What if the US decides it doesn’t want to play – of for that matter – China?
Evidence please?
IF (big if) it happened this would be wonderful.
Every year far more money goes from the 3rd world to the 1st world than v/v, mostly by way of offshore jurisdiction companies & trusts since, after all, foreign aid doesn’t usually get paid in cash.
“If the doors of perception were wiped clean all things would be infinite” Blake
“If the accounts of offshore jurisdictions were wiped clean all things would be taxable” me.
Time for a “lobby your MP” campaign.
I can totally appreciate the Austrian’s point. Why lobby to make the ownership of accounts open while shifty people in the CoL can arrange for you to have all your gelt in a Company in the BVI whose shares are settled in a trust in the Bahamas whose Trustees are in Jersey ???
William
If the trust was a Bahamian trust then a register of trusts in the Crown Dependencies wouldn’t catch it, even if there were Jersey trustees. The inevitability is that that with such a register, independent jurisdictions outside the influence of the EU would see a surge of business. Hong Kong, Singapore, Mauritius, Dubai, Bahamas, Panama, Barbados, the US (Delaware, South Dakota etc)…..the list goes on.
That is just wrong: of course they can be caught if the registration process is correct
Richard
Sorry, my answer was incomplete. What I should have added is that either the trusteeship and administration of the trust would simply transfer to one of those non-EU linked jurisdictions, or the trusteeship would move and the back-office administration (bookkeeping, accounting, minutes etc) could be carried out from just about anywhere, including in the Channel Islands.
All of this has been considered in the revised EU STD
And can be beaten
Peter,
Pray tell… How you going to avoid the 2nd revision of the savings tax directive where if there are multiple managers of a trust, say custodian in Jersey but portfolio management in Bahamas, then the management in the territory will be deemed the effective manager responsible for acting as paying agent upon receipt. An donce you are paying agent upon receipt there is NO escaping.
The 2nd revision also goes after foreign branches of any bank head quartered in the 44 territories.
Also, any inflow into the EU from an unwilling state, will be deemed as interest, unless commercial purpose is justified.
Ohh, I know, you’ll move your customers trust and assets lock stock and barrel to Cook Islands and put the money in the royal bank of North Korea. Good luck with that.. Maybe 5% of your clients will agree.
I don’t think you’ve cottoned on, that the time for hiding clients using 1980’s type structures is history. Stick to watching Wall street, great movie from that time but your solutions remind me of the brick cell phone Michael Douglas uses. Cute but outdated.
What….a Bahamas law trust with trustees in Singapore? Caught by the EUSD? Impossible when neither Bahamas or Singapore are subject to the EUSD.
If there are no directors, officers or account signatories in the Channel Islands, just genuine back office bookkeepers and minutes preparers re decisions made in Singapore, then how can the EUSD possibly apply?
What about settlors and beneficiaries?
And paying agents
You forget the revised ESTD takes them into account
Peter…
1. Where is bank account held?
2. Which bank is account held with?
3. How will settlor or EU-resident beneficiary ever get their sticky hands on the lolly? (Spend it on a villa on Thailand, eh?.. and loans are distribution of the assets that produced the interest)
4. Why bother to do backoffice admin, minutes in Jersey! To save your stinking job? LoL.. All this is indication of abuse.
5. Who does the customer have a relationship with? The backoffice guys in Jersey?
Mate, suggest you go get a new career… Fishing or hotel management.
Peter
Sorry, but I forgot to brief you that a future revision of the directive, is that if there are multiple trustees (custodian, investment, admin) then if the out of territory effective manager is related to any of the other managers in territory (and they name the assocaitions e.g. same holding company, subsidiary, branch) then one of the managers in the territory will be the paying agent upon receipt. This was initially aimed at Liechtenstein who have one junior foundation member (I only do the books type guy) in LI but rest in Singapore.
But unfortunately catches your abusive scheme.
As paying agent upon receipt all you’ll have to do is fork over information on interest payments. Withholding will be phased out sooner than you can imagine.
Only solution is for you to move lock stock and barrel, including all your admin staff to some forsaken hell hole… and hope clients fly 24 hours to meet you.
Peter
No-one could possibly act as trustee without knowing the true identity of the settlors & beneficiaries of the trust.
You seem to be saying (please correct me if I’m wrong) that the trustees, who would know all those details, would be in (say) Bahamas or Singapore but the trust would be administered in Jersey.
So, you would do all the paperwork for huge sums of gelt & have NO IDEA WHATSOEVER of its provenance ?
It could be Al Quaeda, or a paedophile ring, or a drug cartel, or a 3rd world dictator stripping out his country’s foreign aid ? You’d have to be a very evil person, seriously a sociopath, to do that. It would also be unbelievably high-risk. If terrorists blow up a plane over (say) Minneapolis & it transpires the killers moved their funds through your accounts you are gonna have lawyers that are like wild wolves slavering at your door.
like tha man said, try hotel-keeping, fishing & making black butter. Don’t go down this road ! You’d be mad !
William
Where can I buy some Jersey black butter online? Especially made by previous trustees.
Mark
making black butter is ridiculously labour-intensive & involves about 48 hours of squashing steaming & stirring the unwanted crop at the end of the year’s apple harvest. As such, it would seem an excellent employment for former “finance professionals” who could burn off their anger with the EU for closing down their previous money-laundering “enterprises”. I’m not aware that “Black butter produced by former employees of leading investment funds” is yet available but there clearly is a window. In fact I might put some gelt in there myself !
It is, incidentally excellent spread on scones or crumpets (the black butter not the money-laundering, that is distasteful in all circumstances)
William
What on earth are you talking about? Of course the trustees would know absolutely everything about their clients, as indeed they do now. The only difference would be that the senior directors of the trust company would be sat in Singapore rather than in Jersey, and instead of having a team further down the corridor doing the back office administration, they would be sat in Jersey. I’m not sure why you are struggling to get your head around that.
I live in Jersey and I manage around 100 trust relationships, most of which are for clients from India, the Middle East and the Far East. Instead of managing those trust structures from Jersey, I would relocate to Singapore and manage the relationships from there. It doesn’t in any way change what information I or my group know and hold about my clients. There is no additional risk whatsoever.
Read Mark Morris’ website. The Paying Agent legislation is all about where the trust is managed, ie where the decisions are made, not where the outsourced back office bookkeeping and minutes of those decisions are prepared. That is crystal clear. The website is very clear and very helpful.
The only thing on Mark’s website that I fundamentally disagree with is his suggestion that a structure is likely to be “managed” from where the client is resident. That is absolute nonsense, as anybody who runs a properly managed fiduciary business will attest. That is simply “old school thinking”, and perhaps with the odd exception with “old school fiduciaries and yes, there are still one or two of those about, it’s about 10-15 years out of date.
Peter,
Some of my website is years old and I havent updated it. You are correct that it was a mistake to deem place of management as being where majority shareholder resides.
1. Why move to Singapore if most of your clients are non-EU resident
2. Why you so keen to save jobs in Jersey? Do your admin in Singapore. You are risking the setup as a sham.
3. How you going to get around the inflow into EU from Singapore being deemed an interest payment
4. “Finally, any loans or distributions to beneficiaries from the Singapore-resident and Singapore-managed Bahamian law trust are fully declared and reported to the beneficiary’s home tax authorities”. So why bother moving to Singapore / Bahamas in first place.
5. BTW, Singapore is probably worst place for you to relocate. It will be the number one spot next under pressure to join the EUSD initaitive.
Peter
I appreciate I may seem very thick but please bear with me. There are after all only 2 positions;
1) The Jersey office knows the true identities of the settlor(s) & beneficiaries of the trust or
2) It doesn’t.
If it doesn’t then I don’t see how you or anyone in Jersey can claim the money thay are administering is “clean”.
If it does then it will have to enter those details on the Register won’t it ?
Mark
Thank you for acknowledging that mistake on your otherwise excellent website.
1) Because my many non-EU clients want nothing to do with the EU or EUSD and the resulting inevitable loss of ordinary privacy.
2) I have outstanding staff in Jersey. Many of them have families and would struggle to relocate to Singapore. There is absolutely no risk of a “sham” if management is properly carried out from Singapore and if pure administration, not management, is carried out from Jersey.
3) What inflow? There would be none. All banking and investment would be carried out from outside the EUSD zone and there is no need for any inflow. (You seem to be at odds with Richard on this point as his view is that for a non-EU and fully tax compliant client there would be no effect).
4) As per 1 above. My clients value privacy. Tax is far less of a motivation when (a) they live in a tax-free country in the Middle East, or (b) live in a Far East country which only taxes on a territorial basis.
5. Give me one good reason why Singapore would agree to join the EUSD. There is absolutely no incentive for it to do so. Brussels holds no sway in Singapore.
William
In answer to your question, all of that information is of course known in Jersey but that will be irrelevant as no management will be carried out from Jersey and no banking or investment management will be carried out there. The distinction between management and administration is hugely important.
Mark
First of all, I’m talking about clients who are tax compliant, have nothing to hide from tax authorities, but do not want their trust appearing on public record. In other words, simple privacy, but tax compliant. If they have a trust currently administered in the Channel Islands (a) the proper law can very simply be changed to the Bahamas, and (b) the trustees can very easily be changed to Singapore.
Secondly, bank account in Singapore, custodianship in Singapore, all management carried out in Singapore. Neither bank nor custodian is from a group headquartered in an EUSD jurisdiction. Are you familiar with the likes of Bank of Singapore, DBS Bank? Very strong balance sheets, indeed stronger than the vast majority of European banks.
Thirdly, have you not heard of email and telephone? Very easy for trustees to communicate with Settlor and Beneficiaries anywhere in the world. There is no need whatsoever for the clients to have any direct relationship with any staff in Jersey. The time difference just means working late into the evenings in Singapore.
Fourthly, have you not heard of planes? Directors of Singapre corporate trustee travel regularly to meet with clients. Its 13-14 hours by the way, not 24 hours. I do it twice a month.
Fifthly, why not use back office administration in the Channel Islands? A good supply of very experienced trust administrators to do back office administration with no trust management required whatsoever. All trustee decisions and all authorised bank signatories sit in Singapore. There is no need whatsoever to have a payment-agent party in the EUSD territory.
Sixthly, a core of the senior management of the trust company relocate fully to Singapore and become fully tax resident there.
Finally, any loans or distributions to beneficiaries from the Singapore-resident and Singapore-managed Bahamian law trust are fully declared and reported to the beneficiary’s home tax authorities.
Have you actually been to Singapore or Hong Kong? “Forsaken hell holes?” Absolutely not. They are streets ahead of Europe in just about every respect. Very attractive jurisdictions to reside, with 16% income tax, no CGT, no IHT, minimal crime.
There are numerous other options as well. For non-US clients, numerous US states have fantastic trust laws (Delaware, South Dakota). New Zealand likewise, also Mauritius. The EU is only a small part of the world, capital is entirely mobile, and modern communications enable business to be run from many places in the world. Substantial private wealth can very easily be held in many safe places of the world, places which are far safer than the bankrupt, corrupt EU.
The EU has a highly over-inflated view of its own importance and global reach. The people of the UK are in any event likely to have voted to get out within 3-4 years, and its only a matter of tie before Spain, Portugal, Italy or even France becomes the next Cyprus. The next phase of the EUSD will have become irrelevant.
Peter
Tax compliant, eh? Privacy, eh? Old worn out excuses. LoL
And all for naught! When the settlor / beneficiary eventually tries to get his sticky EU-resident hands on the lolly, he’ll fall into scope, even 50 years in the future. What a expensive onerous rigmarole you put your clients through, and for nothing.
Mark
I don’t think there is any need for you to take that attitude.
For the fully tax compliant client who simply wants privacy and legitimate tax deferral, why would he be remotely worried about paying tax when the tax becomes due? His objectives are very different from what you assume.
You also overlooked my statement that I was referring to clients from the Middle East, the Far East and India who to date have no connection with the EU and want nothing to do with the EU or the EUSD. That’s about 90% of my client base and is typical of many other Jersey trust companies who also wish to retain their clients within their Group. All they need to do is transfer the management and the bank account and any investment account to Singapore, as very helpfully pointed out by your own website.
Peter
Your claim is utterly absurd
The fully compliant client has made disclosure to government
There is therefore no reason on earth why they would object to automatic information exchange. Privacy is not an issue: they have disclosed
Your opposition to automatic information exchange can only be of benefit to the non-compliant client
Richard
Peter
not being, I hope, funny but there is something very odd & TBBH distasteful about;
“Have you actually been to Singapore or Hong Kong? “Forsaken hell holes?” Absolutely not. They are streets ahead of Europe in just about every respect. Very attractive jurisdictions to reside, with 16% income tax, no CGT, no IHT, minimal crime.”
Are tax rates really the first thing you think about ? I’d think about climate open spaces, culture, health care, transport, tolerance, crime rates (yes), in that sort of order. It seems frankly peculiar to say “Oh you’d love to live in (say) Somalia, there is no direct tax”.
Richard
I have absolutely no objection to automatic exchange. My objections are to (a) the threat of a register of trusts, (b) the increasing risk to loss of privacy (as opposed to tax confidentiality, and (c) the unnecessary drawing in of clients from outside of the EUSD zone to EUSD reporting rules. Clients from the Middle East, the Far East and India want Jersey fiduciary services, but they want nothing to do with the EU or to the EUSD.
William
The reason why I referred first to tax is because this is a tax blog! You are right, it should not be the first factor mentioned. Standard of living, quality of life, no crime, a first-class education system, total racial harmony, a fantastic public transport system, a very attractive tax system would be a better order. If it wasn’t for the high humidity, Singapore would be absolutely the perfect place to live and work.
No one has to use a trust
If they do they can be registered
If they don’t want to be – don’t use one
That’s fair
Your option is to defend abuse
Mark, I can’t speak for Jersey but here in Guernsey the amount of settlors/beneficiaries who are EU resident is tiny. That’s why there is very little interest in the revised EUSD, because it will have very little impact. If Russia, India and large parts of the middle east ever joined the EU then things would be very different.
And do you know what?
We don’t believe you
Because we have no way of knowing whether you’re telling the truth
And until we do we’re right to say we don’t believe you
JJ Lehto is correct. There is negligible continental European business in either island. That’s why Guernsey was prepared to sign up to automatic exchange of information in 2011. Jersey should have done so at the same time instead of playing silly games.
I completely disagree with you re trusts. There are many reasons to form trusts which have no tax or other “abuses” linked to them. We see many trusts where trusts are used to keep family businesses intact after the death of the patriarch, instead of ownership being fragemented between children. We see Middle Eastern clients who want their foreign-situs assets to pass in accordance with Sharia law, instead of passing to their heirs in a different manner as provided for in the country where they have invested. We see other Islamic clients wanting to use trusts to ensure that their daughters can inherit. Sorry, but that is NOT abuse – it is non-tax motivated inheritance planning, for which a trust is an ideal mechanism.
There is absolutely nothing wrong with general privacy afforded by using trusts, as long as users are tax compliant. The UK, the US, Canada, Australia, India – all use and recognise trusts as cornerstones of their domestic law, and NONE of them require registry on public record. And rightly so.
JJ Lehto
Oops. Are you aware of this clause in the directive?
Art 4(2) Sub par 4
Any economic operator established in a Member State who makes an interest payment to, or secures such a payment for, an entity or a legal arrangement referred to in this paragraph and which has its place of effective management in a Member State other than the State where the economic operator is established, shall inform the competent authority of its Member State of establishment of the following:
(i) the name, if any, of the entity or legal arrangement;
(ii) its legal form;
(iii) its place of effective management;
(iv) the total amount of the interest payment;
(v) the date of the latest interest payment.
This means bank reporting to their competent tax authority on payments to trusts managed in the Channel Islands, but bank accounts elsehere, irrespective of where the beneficial owner resides (eg all your Indian, Asian residents)
The inter Government transfer ofthsi info is confirmed in Art 9(1)(a) 1a. The competent authority of the Member State where the economic operator is
established shall communicate the information referred to in the fourth subparagraph of Article 4(2) to the competent authority of another Member State where the entity or legal arrangement has its place of effective management.
The revised EUSD has far more extra territorial reach than you appreciate. With even more coming in EUSD 3.. EUSD 4 etc.
Richard, I don’t think we’d expect you to believe us. And we wouldn’t expect the authorities to take our word so you’ll all see how much extra revenue the revised EUSD will raise in due course (when it finally comes in…it’s been a long, long time coming). Much the same as when the UK version of FACTA comes in. And much the same as when the original version of the EUSD was introduced.
JJ Lehto
There won’t be a big increase in tax revenue withheld, as the EUSD will be AEI except maybe for CH / LI.
Mark, I didn’t mention “witheld revenue”. We don’t even have the option in Guernsey. But I presume the whole idea of EUSD Version 2 is to raise tax revenues within the EU?
Mark Morris @12.30pm
You are right and that was precisely my point. It’s exactly why there will be a big move to transfer “effective place of management” of trusts and companies, together with their bank accounts and other assets, from any Member State (sic) by clients from outside of the EUSD territorial scope who value their privacy, and I dare say by residents of Member States as well, who really don’t like the way that the EU is heading, especially after Cyprus, and with Spain and Portugal inveitably next to fall.
The process is already happening, and has been for the past year or so.
Financial centres in Asia will be the big beneficiaries, likewise the US. Europe will not benefit one bit as a result.
Mr Peter,
You are absolutely spot when you say that the EU (and especially the Commission) has a highly over-inflated view of its own importance and global reach. This was demonstrated by the recent FATCA negotiations.
While negotiating, the European governments pushed the USA for reciprocal treatment regarding assets deposited in the USA by their respective residents. The USA agreed, but made clear that any disclosure would be subject to applicable US laws.
This is critical, because while US laws give the Federal government the flexibility to collect and transmit data about accounts held by individuals, they prevent the US Federal government from collecting and transmitting data about the owners or beneficiaries of entities in States such as Delaware, Wyoming or South Dakota. This would constitute a breach of the Sates’ constitutional prerogatives.
Germany made a big fuss about this issue, and for a while threatened to reject a FATCA treaty unless it would get access to all information about German beneficiaries of US entities. It was however firmly rebuffed by the US authorities and told to get on with the program, which it obviously did, as did the UK.