Monday, 7 January 2013


Al Capone was jailed for tax fraud,
not for smuggling alcohol, extortion and murder.
What have these persons in common? Depardieu, The Lagarde-Greek List, HSBC Zurich, Wegelin, HNWIs, David Cameron, Margaret Thatcher, Arthur Andersen, Jimmy Carr, Dave Hartnett, BBC Presenters, Barclays, and a few million other honourable global citizens. They all play a part in the global tax war. Some will come to a sorry and expensive end.

From 1960 my accountancy firms carefully and cautiously advised clients on reducing tax by detailed, legitimate and proper use of regional tax-laws and incentives.  I have worked in Switzerland; advised several thousand SME Start-Ups, factoring tax into their cash-flows; and have advised major employers with executives in Europe and America. I have personally wrestled with tax collectors in many back-duty-tax-settlements. For the past ten years I have generally advised clients to “move to higher ground” and to “move your money on-shore”.

Today, the merry media, many younger lawyers and accountants, most CFO’s of multi-nationals and many small business owners have been misled, by the government led global tax-rates race-to-the-bottom and consequent incredible official relaxation on taxing defaulters, into treating tax fraud as a game. It is not. It gets very serious.

Long professional observation and the past few years of listening to cocktail hour gossip leads me to conclude that globally just about everybody who is anybody in business has been dangerously lulled into keeping two sets of books – and believing, or hoping, it is legal.  Starbucks is now a public example: the US Head Office books allegedly show fat profits from the UK while the UK tax returns show almost no taxable profits on robust turnover. Spot the money siphons!

Many businesses, of all sizes, making large commercial profits in high tax-rate regions, pretend to have commercial operations in tax-havens, which if real would require large staffs and overheads; and they “create” false invoices and agreements that strip out the taxable profits.

Leona Hemsley
Hotel owner, New York.
"Only little people pay tax".
Jailed for tax fraud.
The commercial books, recording the actual profits are distorted by such “Enron Accounting” invoices, which are approved by the internal and external auditors, board and lawyers. This complicity turns false-accounting into fraudulent-conspiracy; both are crimes.  Because there are many rich executive hands and heads engaged in creating the false-accounts, the perpetrators puff up a complex great storm of pompous self-referential “legality” and spread their disinformation within their companies and to the global media. “We are stealing all the cakes …but we are doing it legally”.

Q - Why will this change after 30 years of habitual unchallenged tax fraud? A - Because, there is now an estimated $21 trillion buried in tax havens. This is wrecking the global economy.

The $21 trillion is all the liquidity of the world’s gross product, our daily work, since 1980, at about 1% of the total we have produced. It is the loss of the $21 trillion that has plunged most countries into debt; has shut down new capital for infrastructure and small businesses; and necessitated the current budget cuts in many developed countries; all bringing higher unemployment. The secretive “owners” of the $21 trillion clearly don’t need it – and they are too timid to invest it back into the communities it came from. Capital has gone on strike.

Of the $21 trillion, I guess that about $2 trillion is British, about $10 trillion is American, about $2 trillion is organised crime and $7 trillion has been gouged from the other main economies. Identifying the off-shore assets, raising “protective tax assessments” (i.e. prove that these assets have been properly taxed – or pay up) and wresting the assets from unwilling “owners” by confiscation, is now in process, worldwide.

The sleeping giant – not China but the world’s supine tax collectors – is awakening. Tax collectors have all the legal powers required to slap in protective assessments for, say, the past 30 years. These will include the original tax, compound interest on unpaid tax, tax on the yearly off-shore income from the capital, plus compound interest on that element, tax evasion penalties that are usually the original tax again – and possible prison sentences for fraudulent accounting (keeping two sets of books).  If the “owners” cannot be traced, the assets will be impounded by one or more national treasuries; on a first come first served basis.

Whatever The British Prime Minister, The American President, Billionaire Leaders of Multinational Corporations, Ex-Pats in Monte Carlo, Liechtenstein, Malta, Bermuda, Isle of Man, Channel Islands, The Caribbean, Panama, Andorra, Switzerland (various Cantons), Delaware, The Far East, the Middle East, Dublin Tax Free Zone and, of course, Central London – all say or might say; the 100 year old laws giving power to tax collectors have not been rescinded in the past 30 years, or even the past 100 years, and irrespective of “special deals” offered after free vacations in Monte Carlo, pretend  Main Board Meetings of listed companies on Rockall, and “Tax Amnesty’s” for declaring tax-haven income, those unexplained assets will be taxed – and all those “funny money” tax-deductible invoices, previously nodded through by somnolent tax collectors, will be retrospectively denied.

The World cannot afford to not repatriate the tax-haven $21 trillion, which is growing by $1 trillion a year. 2013 will be a bumper year for back-duty-tax-cases.

Best advice: 20 years after WW2, UK traders who had made fortunes on the black market were still being pursued by narrow eyed tax investigators; the famous, huge White £5 notes were cancelled as legal tender, obliging hoarders to exchange them, and explain them.  A tired old rogue client locked his doors, bought an excellent bottle of scotch, sat by his fireplace and fed a suitcase full of White Fivers into the flames. That is one way to dispose of the problem and threat of prison in old age.  Not quite as wasteful, is to bring your assets back onshore, pay the taxes and quit dodging. Bureaucracy never tires; we humans do.

If you do go to prison for false accounting or fraudulent conspiracy after failing to convince a jury that a one man office in Brussels, open half a day a week, really does have legal “arms-length” rights to charge $3 Royalty on every cup of full-fat coffee served – or that a brass-plaque pinned on 3 square metres of office in Jersey (which you, honestly, have no control over) really does commercially justify a 200% mark up on shoes made in Korea, or that a wicker chair under a Cayman Island palm tree really is the location of a Global Mergers and Acquisition agency that can commercially, with no prime intention of tax-reduction, bung a $1.5 billion, tax deductible invoice to your camera making empire; then at least earn the deep satisfaction of dragging your sloppy, lazy, frivolous tax-advisers with you into jail.

And remember – seriously, that all good tax-planners and auditors do guarantee their schemes and are covered by their Professional Indemnity Insurance.

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