Patrice Riemens on Fri, 1 Apr 2016 17:56:06 +0200 (CEST)

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<nettime> Tax Havens Blues ...

I have read quite a lot on the whole issue of the hunt after tax 
avoidance and the curbing of tax havens, so I am not easily surprised, 
let alone shocked (or is it the other way round? ;-). Yet this Financial 
Times article (in last Monday's Fund Management supplement)  triggered 
both sentiments, and not in a small measure. A little bit like the 
Snowden revelations, this triggers feelings of 'we always suspected 
something like that, but now we know'. A friend of mine with whom I 
discussed the article yesterday took a leaf from Klaas Knot, the arch 
conservative, no to say reactionary, boss of the Dutch central bank: 
"it's not pretty, but it's the reality we have to live with". I think 
this is a typical reaction, but not very helpful if you think in terms 
of 'Another World is possible' (but then he's a die-hard social 
democrat, so he doesn't ;-)


Original to:

FTfm Opinion
Fear and regulatory loathing makes America the top tax haven
March 24, 2016
by: John Dizard

Fear and regulatory pressure is pushing the globalised rich to bring
tens or even hundreds of billions of portfolio investments out of
Europe and into the US, and to do so within the next year and a half.

The fear is not just created by Isis, the Islamist militant group,
targeting Europe, but by the unintended consequences of the
accelerating schedules European institutions face for complying with
“Gatca”, an acronym for the international sharing of data among
tax authorities — rules that US authorities believe bind others, but
not themselves. Swiss-based investment managers will tell you that
this is another example of American hypocrisy, and they are correct.

As Christian Kalin, chairman of Henley & Partners, an
ultra-multinational residency and citizenship advisory firm, says:
“The US is a black hole of information for other countries now.
Financial information goes in to the US, but does not come out.”

This is true. The 2010 Foreign Account Tax Compliance Act requires
international financial institutions to report details of their US
clients’ accounts. The American drive to force compliance with Fatca
led, in turn, to the OECD’s Common Reporting Standard (CRS). So
far, more than 96 countries have agreed to reply, with one notable
exception: the US itself.

While the US administration and the Treasury declared themselves
all in favour of adopting the CRS, they do not have the budget
authorisation or appropriation from Congress to spend anything to do
so. Therefore, while Switzerland set a deadline of January 1 2017
as the “effective date” for starting CRS-based tax information
sharing with the other 95 signatories, the US Internal Revenue Service
will not give its “reciprocal” partners any information about the
foreign beneficiaries of any “entities”, such as Nevada or South
Dakota trusts.

The Swiss lawyers and asset managers are right. The US government is
being hypocritical. Coincidentally, asset managers in places such
as Miami, New York, Boston and Nevada stand to benefit from that

Contested avoidance debts could be enforced by the tax authority’s
EU counterparts

Tax justice activists say the US failure to reciprocate the
information sharing it demands from others is turning the US into
the largest tax haven in the world. But there is more to it than
that. Developed-world financial institutions and lawyers are putting
themselves at grave risk if they openly encourage tax evasion.

Having said that, as Mr Kalin points out: “If a Swiss bank shares
information about an Indonesian national’s assets with the
Indonesian government, that information can readily be sold by corrupt
Indonesian officials. Then the Indonesian national and his family are
at risk of kidnapping and extortion.”

Peter Cotorceanu, a lawyer at Anaford, a Zurich-based law firm, says:
“The move to put money in the US [out of the reach of the CRS] does
not have to be tied to personal security issues. There is also this
inchoate concern about having financial data unnecessarily flowing
around the world. The superwealthy are just very concerned about

This all requires some fine legal parsing and carefully built
financial structuring. After all, if you are a non-US resident, you
are governed by the “anti-avoidance” rules of the CRS. Those rules
invalidate anything done to avoid CRS reporting, as distinct from
maintaining privacy. The anti-avoidance laws and their implementation
dates vary from country to country.

Except in one country. As Mr Cotorceanu says: “No such
anti-avoidance measures have been implemented by the US, even
under Fatca, for foreigners. And none are likely in the current

So if a foreigner wants to set up a CRS or Gatca-safe structure in
the US, that is his government’s problem, not the problem of the US
government. Not surprisingly, Mr Cotorceanu says: “If I were a US
portfolio manager, I would be telling as many people as possible about
the benefits of putting their money in the US and in a US entity.”

The effect of CRS and Gatca strong-arming global money into the
US is another example of the broad consequences of the return of

Pat Buchanan, the outspoken nationalist Republican politician, says
on the US signing on to the CRS: “I don’t think Congress will do
anything like that. On the contrary, on both the left and the right,
the whole movement is against the Trans-Pacific Partnership treaty,
the TTIP [Transatlantic Trade and Investment Partnership] with Europe,
all of that.”

Even Mr Buchanan agrees that what he calls “the micro biz of very
rich dual nationals with lots of money will continue”, but that will
become a much more intricate activity.

I would recommend Cosmopolites, a book by Atossa Abrahamian about the
economics of nationality acquisition. Rich globals can whisper through
EU passport controls with a Maltese passport and their money can be
shielded by US portfolio managers. Most people will be waiting in line
eternally, holding their wads of rupiahs and shillings.

Globalism has come and gone before. Consider those rich cosmopolites
who lived in the Silk Road cities of central Asia. Their houses and
wealth left only sand-filled lines of brick in the sand.

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