tax havens galore

We may soon expect to see more posturing and grandstanding about tax havens from St Vincent Cable, the UK Business Minister, and the White House Anointed One. Unsurprisingly, there is no evidence so far that they have any idea what they are talking about.

So here’s a brief tutorial for these two gents, especially Vince, who seems to have a thing about the Isle of Man. Perhaps he hates kippers.

Offshore banks attract two main categories of customer – individuals who want to put their stash in a low or no-tax country, and companies that are based in same so as to minimise their tax liabilities, such as the firm that has a debt-collection contract with the UK Tax authorities.

The UK government says that it is reviewing all 'tax havens', but they have been concentrating their fire on Lichtenstein. There, a former employee stole all the clients’ computer records. He was paid $5 million for their return, but, having trousered his bung, he then sold copies of the disks to UK, USA, Germany etc and was consequently convicted in absentia of theft.

We thus have a situation where governments have bought stolen property from a convicted felon - an interesting exercise in public morality. The thief has been given a new identity and a safe house somewhere in Europe. Unfortunately for him, there is a $10 million 'hit' out for him.

IOM is not a tax haven, whatever Cable says. The money laundering rules are very tight and have only recently been made even more so. Banks don’t take cash deposits without proof of the cash withdrawal, and all transactions must be in writing or e-mail. Depositors must give their home country tax details and income is declared to the home tax authority by the bank or a witholding tax is levied. Details are also supplied to the IOM revenue.

Cash purchases by anyone are limited to €15,000 so you can’t even by a new car out of the wedge in your back pocket. Depositors must have a permanent address, produce ID, and give details of the sources of the money.

In short, IOM is not a tax haven because you cannot escape tax when you either have to pay a withholding tax or be taxed on your off-shore deposits where you are tax-resident. What pisses off the nomenklatura in UK is that we have a top tax of 20% and no inheritance tax. Just envy, maties.

The UK Government is between the upper and the nether millstone with companies. The Treasury proposals to clamp down on British multinationals avoiding tax by using tax havens were quietly withdrawn when companies such as WPP (the world’s leading PR and advertising company) smartly decamped to Dublin.

But the Government is in another bind; over the years most public buildings have been financed through PFIs – public/private finance initiatives which are really lease-back arrangements where the money is provided by the private sector and the Government is effectively a tenant (it keeps it off the balance sheet, you see, but don’t try this at home – you could end up in the Jurby Hilton).

The £450 million Ministry of Defence offices are owned by a PFI outfit that is incorporated in Jersey and has a Dublin tax residency (Irish corporation tax is much lower). Even more embarrassing, the Home Office is owned by a consortium of financiers through a Luxembourg holding company and a parent registered in Guernsey. And the Trade Minister was Chairman of an off-shore bank which has been investigated for laundering money from Pakistan, Qatar and Zimbabwe.

Oh, and the Minister in the last Government in charge of beating up tax havens had £250,000 stashed in an offshore blind trust. Allegedly.

Oh dear!

The notion of fat cats hiding their money in tax havens is largely a myth as far as the Isle of Man is concerned.

When the Icelandic bank KSF failed the Isle of Man government gave immediate compensation of £10,000 per account for victims. This fully repaid 78% of customers. QED most depositors are small savers; many of them, in fact, are expats who cannot open a home bank account without a residential address in the UK under money laundering regulations.

The OECD and other meddlers having been pressing the offshore governments for some time over the issue of ‘transparency’ i.e. disclosing confidential customer information to thieving politicians The big tax evaders will go to the no-transparency jurisdictions like Panama, Singapore etc. And do these nitwits seriously believe that Switzerland and Lichtenstein are going to kill the golden goose to satisfy political windbags in Europe and the US?.

If Obama is looking for a place to start, how about the State of Delaware? Does he know that, according to a piece in The Economist, several US States have large tax-haven business? In Nevada, for example, there is one off-shore bank for every six people. No accounts or details are either sought or published. There is no tax on interest earned by non-state residents. So there you have it; complete secrecy and no tax. Perfect!

And would it surprise you, Vince, that the UK is the second largest tax haven after the US? Here is how to do it. Open the Internet. Create a company in about 20 minutes. Register nominee directors and shareholders. Issue bearer-shares. That’s all there is to it.

What kind of sanctions will be imposed on Panama where blind trusts abound and where (like Switzerland and Lichtenstein) disclosure of banking information is a criminal offence?

The reality is that Switzerland et al will jerk everyone around until the politicians find some other diversion from the real issues of how to put the Humpty Dumpty economy back together again, since they clearly have no ideas. Meanwhile, billions will be flowing out to Dubai, Hong Kong, Singapore. One of our banks here made it very clear to us that in the event of UK interference with the financial services industry, deposits would transfer at the press of a computer key to another jurisdiction beyond the writ of Vince.

Why the authorities have so little understanding of how you avoid their unpleasant attentions is beyond my ken. When you discover oil under the back garden and have gazillions to shift, the procedure is quite simple.

You form a limited company in the Seychelles. The amiable regime there does not require a company to reveal its directors or shareholders or to submit any accounts, merely to re-register annually. You then open a numbered bank account in Switzerland at modest cost in the name of the company. You transfer all your well-deserved moolah to the account. There is now no paper trail between you and your money is safe from Westminster benefit cheats.

Job done and trebles all round!