A summary of the Stop Tax Haven Abuse Act is available here:
03-02-2009 - Summary of the Stop Tax Haven Abuse Act : Senator Carl Levin: News Release.
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Richard
I have reviewed this and I cannot see anything at all in there which should remotely worry or affect the vast majority of financial services businesses in the Channel Islands or the Isle of Man unless they happen to be doing lots of US business (and very few are). For those of us who undertake no US business whatsoever, the proposed provisions of the Act can be totally ignored.
In fact the only real surprise is that Dubai and Mauritius are not on the list. Not hard to predict where any illegitimate offshore US business is going to head for.
Obviously Switzerland and the Caribbean jurisdictions will be directly and materially affected by the Act’s proposals because of the level of US-connected work that they undertake, while the Cayman and BVI hedge fund and private equity industries will be affected as I don’t believe thatb their current AML regulations don’t come up to the level of what is proposed.
Rupert
Do you live with your head in the sand?
What if the UK replicated this?
Then what?
Richard
Richard
No I don’t live with my head in the sand. I and others on this blog have repeatedly said that the Crown Dependencies really don’t do much US business.
Personally, I know of many CI businesses who would be similarly unaffected if the UK replicated this because, as previously stated by me, lots of us run businesses which are fully tax-compliant and so our clients have absolutely nothing to hide. My business does not have a single client who opted for withholding tax under the EUSTD. I am not naive enough to think that everybody in the CI runs the same type of tax-compliant business, but I certainly would lose no sleep over it. For many of us it is simply not an issue to be concerned about. Others may well require extra sleeping tablets to deal with their sleepness nights.
I know that you will be sceptical about these comments because you always are, but I can categorically assure you that, speaking from first-hand experience, I would have no qualms whatsoever if the UK replicated what the Stop Tax Haven Abuse Act seeks to achieve. Actually the clue is in the name of the Act. The US is seeking to curb abuse and that’s fair enough in my book.
Richard
I know that logic doesn’t naturally or automatically come into this whole anti-offshore initiative, but here’s a thought.
We know that there are huge sums offshore. We know that some is legally held and tax-compliant and we know that a lot more is illegal. We know that by far the biggest majority of illegal funds are held in Switzerland (the Chairman of Pictet estimates that 50% of Swiss bank deposits would be lost if Swiss banking secrecy was lost).
Surely the logical thing to do is to wage all-out “war” on tax evasion by a combination of severe sanctions and large-scale amnesties (with suitable penalties) to somehow get the illegal funds back onshore, from wherever they happen to be at present. Give all jurisdictions a suitable window of opportunity to comply, and after that window has passed, absolutely hammer them and their clients for failing to comply. Self-preservation should rule the day if that jurisdiction doesn’t want to be completely ostracised for failing to comply. Make clear the future severe penalties for non-compliance after the window that they have been given has closed (say end of 2010). Such an initiative should catch perhaps 90% of existing offshore illegal funds (no doubt some will try to be clever and get around it but they would be taking a massive risk).
Then, start looking at the far less clear-cut tax avoidance industry, which is predominantly legal even though there are views of some like yourself which suggest that some of it shouldn’t be. Putting that argument to one side, surely its got to be easier to first focus on the universally-accepted-to-be illicit offshore funds ? Who is going to dare defend the indefensible ? Even the Swiss now seem to be accepting that tax evasion needs to become a criminal offence in Switzerland.
It is going to take the world a lot longer to get to grips with business which is currently held offshore legitimately and in a tax-compliant manner as it would be first necessary to somehow change global legislation to deem legitimate planning to be unlawful. That is simply not going to happen overnight and indeed it may never quite happen, at least universally.
It seems to me that the efforts to repatriate and tax unlawful offshore money could well be diluted by attempts to catch all offshore monies, even the fully lawful stuff, whereas if 70% of all offshore monies were repatriated within the next 2 years because they are held illegally and cannot be retained offshore, then this would surely be deemed to be a major success all round.
Phase 2 could well then become a review of other offshore business, and during Phase 1 the mechanisms could be put in place to implement automatic exchange of information with those still left in the game. By the end of say 2012 the entire offshore world could be limited only to monies which have passed whatever tests are deemed appropriate to allow them to remain offshore. This could well end up limiting the offshore world to no more than half a dozen fully-compliant and totally transparent jurisdictions, all accepted in terms of their modus operandi with G20 and others. I struggle to see too much to argue against such an outcome if it means that legitimate offshore business can still exist in an acceptable manner and if the illegal offshore sector is completely eradicated.
Rupert
Illegality is one thing
Opacity is the other
When there is full automatic information exchange and all accounts and ownership on public record, then offshore will be legitimate
Until then there is no such think as legitimate offshore business conducted from secrecy jurisdictions like yours
Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
Richard
Richard
Sorry but I can’t agree. Until and unless it becomes illegal for a jurisdiction not to have public beneficial ownership details, there is no illegitimacy. You state that until there is full transparency there Iia no legitimate offshore business. That is simply incorrect. If something is not illegal then it is legal. You cannot unilaterally deem something to be illegal. That is a decision for the lawmakers. You may want it to be illegal and you may deem it immoral but you don’t make the laws. Fact.
The offshore world will not be transparent in terms of beneficial ownership on public record until the onshore world is. To think it should be is unrealistic and inequitable. Global standards are one thing. Hypocracy is something else altogether.
Your last paragraph seems to be a fictional definition of your own. Correct ? What is a “deliberate legally backed veil of secrecy”? If a jurisdiction has never had public beneficial ownership disclosure since its very first company law was enacted, or any public disclosure of trust parties since its first trusts were established (and we are talking of around 150 years ago) and so has not deliberately abolished such public disclosure, then clearly your definition is not satisfied.
Until the G20 countries themselves have public beneficial ownership disclosure then offshore transparency is heading nowhere, and nor should it. Global standards yes, double standards no.
Rupert
Wrong
G20 is looking at outlawing you
Your law won’t count then
I assure you: you can say it’s legal and we’ll ignore you
That’s our right. You’re a secrecy jurisidiction. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so. We’re acting in self defence as a result, not interfering in your sovereignty.
Game over.
You may call this definition by own fiction. Trouble for you is people on Treasuries all over the world are buying it. That makes this your problem.
Richard
Richard
We shall see. Don’t get carried away with your own euphoria too soon. I don’t think you will get everything you want. You’ll get some of it, and I don’t have a problem with that. Yes, some offshore jurisdictions will not recover. Others will survive, albeit with new rules.
I won’t get everything I want yet
I know that
I will in the end though
Of that I am sure
Richard