Yes, according to reports in the Copenhagen Post:
The number of people using this country to funnel tax-free earnings to the US from the more obvious tax havens is growing, according to several leading accountants and consultants.
Tax consultant Christen Amby said the swindling had grown exponentially in recent years and was typically done through setting up a ‘shell’ company.
‘It’s my impression that Denmark has become a popular way station for tax evasion — partly because it’s easy to set up a business and also because we don’t have a practice of controlling who the final receiver of funds is,’ Amby told Berlingske Tidende newspaper.
Funds kept in a Caribbean tax haven, for example, were typically transferred to The Netherlands, where earnings from abroad were not taxed. That money could then be moved to Denmark tax-free, where it sat before a final transfer to the US.
Several politicians are pushing the tax minister, Kristian Jensen, to set up an enquiry that would serve as the basis for implementing tighter rules regarding the establishment of businesses and the movement of funds in and out of Denmark.
I’m not surprised. I drew attention to the activities of the Danish Jyske Banks in 2006 saying:
The result is that a major European bank is offering on its web site to use its “Company Manager” to set up an offshore trust and company for people resident in the EU which will enable them to hide behind that structure to avoid their obligations to pay tax. Nowhere does it mention that in some countries, at least, this might be a tax offence constituting evasion. Nor is it made clear that if the trust and its assets remain under the control of the settlor the trust is a bare trust and therefore void for tax planning in most countries. Such doubts are not even hinted at. Such blatant promotion of aggressive tax avoidance brings the entire banking sector into disrepute. I do hope that someone is giving serious attention to this bank’s activities. They deserve it.
The story transferred to Danish national television at the time. If someone is at last doing something about it then that is long overdue, but welcome none the less.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
This problem as I am sure you are aware is utterly endemic in London. I audit a number of UK companies which hold loans and equity in private companies in other parts of europe. For as little as a few thousand pounds a off-the shelf structure can be set up and run by fiduciary agents to:
-Form a UK company with shares held by a parent company in a tax haven
-Buy controlling shares in a trading company in a ‘high’ tax area.
-Load up the company with loans from the UK company, which thanks to our treaties usually attract no withholding taxes in the source country
-Mop up any excess profits of the subsidaury with ‘management charges’
-Wipe out the whole UK profit by loading up the UK company with loans from a third party country which we have a treaty with(e.g Switzerland)
-Remit the cash back to the parent in a tax haven (thanks to the lack of witholding taxes from Switzerland).
In a typical EU or russian trading company, you only need profits chargable to local taxes in excess of £25k – 30k to make this structure pay for itself.
The use of the UK as a ‘shop window’ for extraction of profits from our neighbors and abuse of our tax treaties is rife. And what is worse, is that the goverment wont act for fear of cutting off the megre economic benefits to London. Is it really worth screwing over our neibours for the sake of what little benefit we get? I think not.
Lets get the EU finance ministers to sit down togther and symultaniously tear up our respective tax treaties with Switzerland and Cyprus. The boost to the tax takes of Italy, France, the UK, Germany and many eastern european countries and Russia would be immediate.
@Tom
Yours was a very interesting comment. Do you have evidence that what you describe is going on in the Isle of Man? The FSC there says it has no evidence that it fdes!
sorry Tom…typo! fdes = does !
Jim,
The FSC wouldn’t know as the whole structure is completely legal.
You can’t import meat into the IOM though.
But then meat isn’t money.
The sooner the world wakes up the better. You can eat meat but not money.
@Jim for Justice
Jim,
The reason that London is used, is that money can flow through London to a country which does not withold tax to a tax heaven. This is key, as a Manx company cannot directly invest as these countries as the island is regarded as a tax heaven by many countries (hence no treaties).
My point however rambling was that the UK government is complicit in allowing a myriad of artificial structures to be set up in London. While not being a tax heaven, London is a key facilitator in the process. Is there a moral distiction? I think this is the Danish debate.
@Tom
…but the Isle of Man is now on the OECD white list along with the UK. The IoM government states categorically that the IoM is NOT a tax haven & the FSC has no evidence of shell accounts being used to evade/avoid tax. IF any such evidence comes to light (eg: through a whistleblower) they will plead “well, we didn’t know, we don’t approve and we are investigating”. I strongly suspect that the IoM compliance with OECD requirements on tax exchange is just another official bit of ‘smoke & mirrors’ to make it look as though the IoM is transparent & squeeky clean. I also suspect that it is not being done because the IoM has any deep sense of moral integrity but because it’s economy depends on what goes on in secret corners of its financial centres. The KSFIoM fiasco demonstrates that ‘morality’ is not the touchstone by which the IoM operates. Its FSC chief says that deposits carry risk like investments on the IoM, and a failing bank that has no onshore ‘parent’ should be allowed to close its doors.
Jim,
Rather than criticising the IoM why don’t you give them praise? They are a small Island in the middle of the Irish Sea. There is very limited scope for tourism or agriculture and they have no natural resources.
Have you ever wondered why places like Ireland, Iceland, Jersey and IoM carry out financial servcies? Its because they are the only viable businesses that can be carried out from their shores. Any export of physical produce would be uncompetitive because of the transport costs.
Historically, smuggling has been big business. Now its financial services. It will always be something at the margins. The alternative is giving up and having a much smaller population living in absolute poverty. The millions who left Ireland during the 19th and 20th centuries did so to evade the grinding poverty.
Those on the side of tax justice may like to think they have “right” on their side. But there is a counterargument, which is that you believe in oppressing small jurisdictions so that large jurisdictions can profit. Effectively, you are like the fishermen with vast nets that believe in killing seals because your catches are declining. If your tax revenues are dropping, perhaps you should look at your husbandry before attacking those third parties that are simply scratching a living at the margins like they have always done.
So you may think you have “justice” on your side. I happen to think you are a bully, trying to force places like the Isle of Man into poverty because you are too scared to face the fact that the UK has destroyed its own finances.
The Isle of Man is not a jurisdiction
It is a Crown Dependency
Shall we stop the pretence here and now?
Shall we also stop pretending the Isle of Man did anything bar invite the City to open an offshore branch? That’s the reality
Please stop using rose tinted specs
Richard
@Paul
The income that financial services generates for the IoM economy might be significant to the IoM, but it is small potatoes compared with the tax losses to European countries that result from the funneling of profits and the hiding of assets using such places.
To use your fishy analogy, you have ripped a big hole in our nets and are inviting the fish to swim away – for a small comission!
And I don’t think its fair to say that people are not aware of the damage that tax reform would do to the economies of tax heavens. I think we have to be ready to help out financially with transitioning such island economies to other less damaging industries.
Richard,
The whole “Crown Dependency” point you make is irrelevant. Monaco, Liechtenstein, Panama, Nauru, Iceland, Eire, Singapore: all proper sovereign states.
It is not using rose tinted specs to say that island economies have always either collapsed (like Eire up to 1980) or relied on either exploiting natural resources (mainly fish) that are no longer available or smuggling. What else can they be expected to do? And can you blame the governments of Iceland and Eire for trying to do something – anything – to stop the young people from leaving?
You don’t like small states that try to improve their standard of living in the only way that is open to them. Fine, that’s your prerogative. But that’s not justice: it’s bullying.
Tom: there are no less damaging industries for Island economies. And Islanders are inherently proud and don’t want to live off the charity of others. Never have done.
If anyone wants to offer a sensible suggestion of what an Island economy can do to give its young career opportunities please weigh in. Tourism? Agriculture? Offshore power? Being an administrative centre for managing mobile assets (ships, capital, intellectual property)?
If the Isle of Man choses to provide a financial services industry as a mainstay to its economy then it should have the financial infrastructure to support such an induustry. The Isle of Man does not have an infrastructure to do so as it has no bank of last resort and its compensation scheme is unfunded. It was only introduced on the statute book in the unlikely event that a bank might go bellyup, and has been used hitherto as a carrot to entice depositors to bank offshore in the IoM.
The director of the Financial Supervision Commission is on record of saying that deposits on the IoM are just as at risk as investments: ‘I would reaffirm that it is not the role of the Commission to prevent failure.’
The FSC is clear that if things go wrong, they are not to blame: blame the directors of the bank and yourself because you did not first ‘consider carefully the risks involved’. (ref: http://www.law-man.com/library/news-01.pdf ) Who would put their life savings in the IoM knowing that this was the attitude of its FSC ?
People no longer trust banks that offer no security of deposits. What is the point of a bank if it can not be trusted with your money? Gordon Brown recognises that but Tony Brown, IoM Chief Minister clearly doesn’t. The answer is clear: DONT BANK ON THE ISLE OF MAN http://www.youtube.com/results?search_query=don%27t+bank+on+the+isle+of+man&search_type=&aq=f