Tuesday, 19 February 2013


The Economist magazine this week highlights the renewed war on tax-havens. In an excellently researched article they argue for a wide focus by tax-collectors – to include the famous, or infamous, global multinationals who indulge in ENRON accounting and Andersen tax-planning; and more importantly, the tens of thousands of small companies and individuals, who make up the bulk of the $21 trillion (OECD 2010) tax-evasion-capital-flight.

…Not all these havens are in sunny climes; indeed not all are technically offshore. Mr Obama likes to cite Ugland House, a building in the Cayman Islands that is officially home to 18,000 companies, as the epitome of a rigged system. But Ugland House is not a patch on Delaware (population 917,092), which is home to 945,000 companies, many of which are dodgy shells. Miami is a massive offshore banking centre, offering depositors from emerging markets the sort of protection from prying eyes that their home countries can no longer get away with. The City of London, which pioneered offshore currency trading in the 1950s, still specialises in helping non-residents get around the rules. British shell companies and limited-liability partnerships regularly crop up in criminal cases. London is no better than the Cayman Islands when it comes to controls against money laundering. Other European Union countries are global hubs for a different sort of tax avoidance: companies divert profits to brass-plate subsidiaries in low-tax Luxembourg, Ireland and the Netherlands...


We have been advising bold, adventurous clients for the past twelve years to pre-empt tax-investigations, which can be cripplingly expensive, and to safely move their assets back on-shore. Now would be a good time – and we can help. Email noel@noelhodson.com or Tel 00 44 (0) 1865 760994. 

You say Evaders – And I say Avoiders: - What The Economist article goes into far too lightly are the frightening consequences of being identified as a tax-evader. How do you tell if you are evading (criminal) rather than avoiding (anti-social)?

(1) Ask your tax-planners and get their written guarantee that your scheme is legal. And check that their Professional Indemnity Insurance is valid and in date for the period of your scheme. The fact that you have acted on top professional advice may mitigate against you being arrested by the tax-collectors as knowingly using false-accounting or being in a fraudulent conspiracy. Retain all the advice, letters and plans they sold to you.

(2) One of our rules-of-thumb is that hiding your identity or off-shore company control, almost certainly crosses the line into criminal evasion. Be aware that with modern IT, there really is no hiding place. Trying to hide behind numbered accounts and dummy companies no longer fools the Intelligence Services. Even Swiss banks are sharing their secrets with source nations. 

 (3) Another almost certain sign of evasion is the fanciful creation of “funny money” invoices, transfer prices, contracts, dividends, interest charges, royalties, off-shore bonuses, and other imaginative accounting for tax deductions which any honest man woman or child can see are simply made up.  Ask your fifteen year old child if they believe you buy $5 components for $65 each from a Bearer-Bond company, with no employees, on Cayman, - which you purportedly have no control over. If your children are too embarrassed to comment – ask your friendly neighbourhood judge. While considering and rehearsing your story – remember that even the most skilled, most experienced, most creative and the world’s largest tax-planners, Arthur Andersen, were banned and shut down by the USA in 2002. The firm has resurrected as Accenture – but …would you buy a used tax-plan from those guys?  These paperwork manoeuvres are simply classed as keeping two sets of books – which was, is and will remain illegal.

(4) Another common, massive risk for offshore assets is that when source nations crack-down and demand repatriation, the nominee officers, directors, tax-haven lawyers, treasurers, bankers and Old Uncle Tom Cobley and All – who are in the firing line, hiding your identity – sometimes seize the opportunity to claim real ownership of all the assets. You, as a tax-evader, facing costs, fines and maybe prison, are not in a strong position to complain.  Such problems are not new – there really is nothing new under the Sun. In 1968 con-man Bernie Cornfeld, IOS, Fund of Funds, targeted US and UK illicit off-shore account holders and made off (Madoff’ed) with all their money - hundreds of millions of dollars. Most “owners” dared not even lodge a claim or they would have risked both confiscation of their funds and a tax-evaders cell. 

It is however possible to move your money on-shore, settle with the tax-collectors and rest easy in your bed. As I have said above – NOW would be a good time, because 2013 will be the Year of Repatriation.

Logically the OECD treasuries cannot ignore a hoard of, mostly illegally tax-free funds, amounting to $21 trillion. [$21,000,000,000,000 / a $30,000 a year job for 10 years = 70 million jobs]. All the source nations will demand to get their money back from tax-havens to re-boot their economies and to avoid The Greek Debt Chaos.  And, they do know where you live! 

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