How-tos of offshore accounts: first, get a million

[American Patriot]

How-tos of offshore accounts: first, get a million







Robert F. Bukaty / AP Republican presidential candidate Mitt Romney greets a supporter at an election caucus in Portland, Maine, Saturday, Feb. 11, 2012. (AP Photo/Robert F. Bukaty)

By CONNIE CASS



updated 1 hour 50 minutes ago


WASHINGTON — Movie super spies James Bond and Jason Bourne use them. So do real-life presidential candidate Mitt Romney, who says he pays his taxes, and untold numbers of Americans who don't. Swiss banks and their secretive counterparts around the globe may sound like the exclusive province of the wealthy, the mysterious or the shady, but anybody can legally open an offshore account.



Wouldn't it be swell to have a cool million stashed away on a sunny Caribbean island?


Here's how to do it:
Step 1: Get a million dollars.
How? There are essentially two ways — legally or illegally. For those with dirty cash to launder — drug traffickers, mobsters, smugglers, swindlers and such — offshore accounts hidden from the law are the obvious choice (skip to Step 5).
For honest money, there's more to consider.
Step 2: Decide whether to tell the IRS.
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U.S. citizens are supposed to pay taxes no matter where their money is. But the IRS can't tax what it doesn't know about, and the odds of getting caught offshore have been slim. But beware — that's changing.
The government has landed some big fish — notably the largest Swiss bank, UBS AG — and tax cheats are getting scooped up in the net.
In an unprecedented break from Swiss legal tradition, UBS turned over the names of more than 4,000 suspected U.S. tax evaders in 2010 as part of a deal to settle conspiracy charges. Since then, the United States has been going after those people, charging more Swiss bankers with conspiracy, and leaning on Switzerland to name more names.
Other names came from a bank employee-turned-informant at the LGT Bank in Liechtenstein. And the IRS has been tracking down holders of credit cards issued from Caribbean hideaways, because the cards are a popular way to tap secret funds.

1. Other political news of note
   
   
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"The noose is tightening on those who want to hide money overseas," said J. Richard Harvey, a former senior adviser to the IRS commissioner.
Pressure to report Americans' holdings will increase substantially next year under a new U.S. law that imposes financial penalties on foreign banks and investment funds that don't comply. Some tax haven banks may skirt it completely, however. If they don't make any U.S. investments they can avoid the penalties.
When the IRS offered amnesty in 2009 and 2011, more than 33,000 tax dodgers came in from the cold, yielding $4.4 billion. A new round in the program opened in January.
Step 3: Look for legal ways to pare taxes.
Here it gets complicated.
For corporations, foundations, pension funds and others, controversial offshore maneuvers can help defer or avoid some taxes. For example, a corporation transfers a lucrative chunk of its business to a foreign subsidiary in a low-tax country. Or a nonprofit group puts otherwise taxable investments offshore.
"There's a thin line between tax avoidance and evasion," said Rebecca Wilkins, a senior counsel at Citizens for Tax Justice, which opposes corporate loopholes. "A lot of these transactions might not stand up in court if the IRS had the resources to pursue them."
Private equity and hedge funds flock to the Cayman Islands, which offer tax advantages for fund managers and some of their foreign and nonprofit investors. Setting up shop — usually nothing more than a mail drop — in these freewheeling environs also allows them to escape the tighter financial regulations of the U.S. and other nations. Some critics say that contributed to the global financial crisis.
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Romney, the multimillionaire front-runner for the Republican presidential nomination, has disclosed numerous offshore investments.
His financial filings included at least six Cayman-based funds, worth between $7 million and $32 million, run by Bain Capital, the private equity powerhouse he once led. More than a dozen other funds based in the Caymans and Bermuda showed up on his 2010 federal tax returns. His campaign says he pays the same taxes he would if they were based in the United States.
Romney also had a UBS bank account in Switzerland, but it was closed in 2010 as he prepared to run for president.
Step 4: Consider other motives.
Some people want to hide wealth from spouses or business partners; doctors worry about malpractice suits; others think creditors or the government might try to seize their assets.
Wealthy residents of oppressive countries may feel safer with their savings elsewhere. Dictators, fearing revolt, often do, too.

Step 5: Choose a country.
Switzerland's famous "numbered accounts" aren't as clandestine as they're portrayed in spy movies but do cater to the rich and ensure only a few bank executives know a client's name. Hong Kong has its own version — "chop accounts," identified by a symbol. Congressional investigators counted 50 places that can be considered tax havens or financial hideaways.
Tax havens usually boast:
—Little or no income tax;
—Laws that make it a crime for banks to reveal account holders' names;
—A history of failing to cooperate with other nations' tax collectors.
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Step 6: Open an account.
Law-abiding customers who can't travel to an offshore bank can usually set up an account by mail with little or no minimum deposit.
For tax evaders and those playing the angles, a network of accountants, lawyers and bankers is ready to set up shell companies and phony trusts to hide behind.
They can get creative. Former UBS banker Bradley Birkenfeld told investigators he helped a billionaire client withdraw his funds in the form of diamonds. Birkenfeld flew to America with the diamonds hidden in his luggage, inside a tube of toothpaste.

[Luke]

That 1st step gets me every damn time!

[American Patriot]

/chuckles

Me too

[American Patriot]

It’s the Economy

My Big Fat Belizean, Singaporean Bank Account

Marilynn K. Yee/The New York Times
San Pedro, Belize.

By ADAM DAVIDSON

Published: July 24, 2012 72 Comments

First, I Googled “company registration tax haven” and randomly picked three firms that set up accounts in offshore jurisdictions. Then I called each and explained that I was hoping to minimize my tax exposure and didn’t want anyone to know anything about my finances. Each company quickly noted that I should consult a lawyer to make sure that I wasn’t breaking the law. Then they calmly explained how to create an account that, it seemed to me, was unlikely to be discovered by the I.R.S. or any other authority.


I ended up working with A&P Intertrust, a Canadian company that I chose largely because I liked its Web site the best. (The other two companies’ sites appeared stuck in a late-’90s style with lots of flashing boxes.) A&P works with the governments of Panama, the British Virgin Islands and Belize. (Other companies that I contacted prefer the Seychelles, Cyprus or the Cayman Islands, where Mitt Romney has been reported to have money.) I decided to start my shell company in Belize because it would be exempt from all Belizean taxes and, as A&P’s site explained, “information about beneficial owners, shareholders, directors and officers is not filed with the Belize government and not available to the public.” And I’ve been to Belize and like the place.


Setting up the company was a lot cheaper than I expected. A&P charged $900 for a basic Belizean incorporation and another $85 for a corporate seal to emboss legal documents. For $650 more, A&P offered to open a bank account to stash my fledgling operation’s money in Singapore — a country, the Web site also noted, that “cannot gather information on foreigners’ bank accounts, bank-deposit interest and investment gains under domestic tax law.” And for another $690, it offered to assign a “nominee” who would be listed as the official manager and owner of my business but would report to me under a secret power-of-attorney contract. Then an A&P associate asked me to fill out the incorporation information online, just so she wouldn’t type in anything incorrectly. The whole thing took about 10 minutes.


Amazingly neither A&P nor I broke any law in Canada, Belize, Singapore or the United States. The company required, in compliance with international legal standards, that I e-mail it a notarized copy of my passport, driver’s license and some other identity documents. But a company representative also reassured me that these would not be visible to any tax authority. Just before they processed the paperwork, I explained that I was a journalist working on an article about offshore tax havens, and I haven’t heard from them since. (A representative from A&P declined to comment for this article, but he did note in an e-mail that the company was still “happy to serve [me] as a client.”)


Setting up an account may be easy, but managing one is expensive. Following the law requires a team of lawyers and accountants to carefully monitor tax laws in dozens of countries and maintain accounts that stay on the safe side of confusing rules. It’s not really worth the cost for anyone other than wealthy investors looking to put aside money, tax-free, for future generations. Or for large multinationals who prefer to centralize their global cash-flow stream in a place that doesn’t tax corporations or require a lot of financial reporting. Why would a huge company like G.E. want to pay U.S. taxes every time its Spanish subsidiary sells parts to a company in Belarus when it could avoid them by incorporating offshore?

It’s easy to imagine that most other kinds of offshore activity are shady, but there is no definitive way to know, because we don’t even know how much money is in these centers. The estimates, however, are striking. The Bank for International Settlements, which collects voluntary reports from banks in 44 countries, offers the best single source of data. It counts around $31 trillion of foreign-owned assets in the world’s banks and estimates that about $4 trillion is in offshore financial centers. An estimated $1.5 trillion is in the Cayman Islands alone. The country of 52,000, which is about the size of Blaine, Minn., has more foreign-owned deposits than Japan or the Netherlands.
Deep thoughts this week:



1. It takes 10 minutes to open an offshore account.
2. But keeping it legal is expensive.
3. It would be better if the rules were simpler.
4. Then companies might spend more on innovation and less on tax lawyers.



By the B.I.S.’s own estimation, the data — which do not include reports from Belize, the Seychelles and other offshore havens — are quite incomplete. The Tax Justice Network, a global research firm that advocates against such havens, suggests that the amount hidden offshore is between $21 trillion and $32 trillion. If properly taxed, that could yield more than $200 billion in revenue around the world. Furthermore, because a 2010 McKinsey & Company report estimated the world’s financial assets at about $200 trillion, somewhere around 10 percent or more of the world’s wealth is effectively invisible. And it’s also almost certainly in the hands of the people and institutions that most actively influence major investment decisions.


Lately the United States and the European Union have expressed deep frustration with the international system of sharing tax information. In order to investigate my Belizean company’s bank account in Singapore, for instance, the I.R.S. would need to identify my bank and bank-account number, prove I had broken the law and then petition judges in Belize and Singapore to issue court orders forcing the release of my information. It’s a nearly impossible standard. It can also be easily undermined by enlarging the web of new accounts.


Next year, Washington will enact the most ambitious tax-recovery plan in history, the Foreign Account Tax Compliance Act. Under Fatca, foreign financial firms will have to proactively identify every American account holder with assets of more than $50,000 and report details about their financial activity or face a significant penalty. The move is very unpopular among foreign banks, governments and Americans living abroad, but the more complex rules could actually mean more business for offshore centers. By the time Fatca is in full force, in 2017, truly wealthy individuals and corporations will almost certainly have used their resources to find more intricate loopholes.


One often-overlooked lesson of the financial crisis is that shenanigans don’t happen in the absence of regulation; they happen when regulations are exceedingly complex and involve confusing, overlapping regulatory authorities. Collateralized debt obligations and credit-default swaps were designed to squeeze through a labyrinth of laws, rules and taxes. And most of these toxic assets were formed in offshore jurisdictions, far from prying eyes and stricter reporting requirements. When Lehman Brothers collapsed, it took regulators and creditors more than a year to find out that the company comprised nearly 3,000 legal entities spread across 50 countries.


My colleagues at NPR’s “Planet Money” recently polled several economists of all political stripes and found that while they disagreed on the right level of taxation, they generally agreed that the overly complex taxation of rich people and corporations was disastrous. It all but guarantees that those people and companies will spend an inordinate amount of money figuring out how to game the system rather than come up with new ideas that improve the economy. Economists generally agree that the best tax system would be simple and strict, offering little incentive to lobby for loopholes. The big problem, of course, is that many of the people and corporations with the most influence over Congress don’t want it that way.

[American Patriot]

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