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G20, the OECD and Banking Secrecy
By admin | April 6, 2009
It’s been a while since I have had time to update the Offshore Banking blog. Just before the G20 meeting I was busy at our Strategies for Success in the Recession conference in Ireland, which I am pleased to say went even better than expected. The Irish climate even treated us to some beautiful sunshine!
The other thing I’ve been busy on is talking (i) to clients – who are besieging me asking me about the impact of the publication of the OECD’s new tax haven blacklist; and (ii) bankers – I spent all last week flying around Europe talking in person to private banking contacts… because as you know, sometimes what they say person-to-person, off the record, is where the real information is. Here, then is my definitive statement on tax havens, OECD blacklists, bank secrecy et al.
First of all, don’t panic! You need to analyze the situation as it applies to you. There is no one-size-fits-all answer. Offshore secrecy and tax havens are not dead. Remember the French expression plus ca change? It means the more things change, the more things stay the same. This comes to mind here.
Secondly, do not simply start moving your money around willy-nilly. You need to be in control – your moves should be pro-active, not reactive. Remember that with each transaction, withdrawal or transfer you risk your privacy. So any radical changes need to be well thought out. You still have time, but if yhou believe your arrangements need reviewing then now is the time to do it. Nothing is going to change overnight, and nothing is going to be retroactive. But you don’t want to put off action and be rushing through changes six months from now either.
Offshore Banking Secrecy: Call me cynical…
My view (which I would say is seriously considered and researched – hence my flying tour of Europe last week) is that 99% of this is political scaremongering. Gordon Brown and Obama are trying to distract voters from the dire mess they and their predecessors created at home by looking for a scapegoat – in this case tax havens. Nicolas Sarkozy has seen an opportunity to jump on the bandwagon and gain positive media exposure and publicity not just in his home market, but on the world stage, which in turn French voters love (their President playing an active international role.)
Call me cynical but I don’t think any of these three could really give a damn about tax havens. They want publicity and distractions from problems at home. Anonymous foreign bankers are a very easy target. It was the bankers in the USA and the UK who caused the recession we are now in, not the offshore bankers. But bankers generally are a hated race at the moment so they are an easy target for mass hype.
Secondary to this thirst for publicity, there is another benefit to governments. They are scaring people off tax havens, and encouraging people to repatriate offshore assets. If you have assets offshore in one of the countries where bank secrecy remains intact, they hope to scare you into action. Don’t fall for it!
What has actually happened so far…
What we have is a list of commitments to establish bilateral agreements. Not the actual agreements, please note. Belgium, for example, has previously had a fiscal information exchange agreement with the USA, but has committed to sign another 48 agreements with other countries. 48 international agreements will keep bureaucrats busy for some time. And Belgium is not really known as a banking or tax haven.
Also worth considering are the words of OECD President Angel Gurria, quoted in El Pais on 4th April: “There’s a big difference between words and actions.”
So in terms of these commitments, there’s potentially a big difference between what they say and what they will actually do. In order to figure out “what happens next” we need to drill down to the individual country level. Andorra, for example, will definitely sign information exchange agreements with France, Spain and Portugal. Liechtenstein has signed agreements with Germany and the UK, and is seeking an agreement with France. Expanding tax information exchange networks beyond these countries will take some considerable time.
What Happens Next in Tax Havens? An emerging pattern…
Do you see a pattern beginning to emerge here? Each country will first begin exchanging information with those countries where most of its depositors come from. On this basis, for example, I predict that Panama’s promised first information exchange agreement (when they get around to it – manana) will be with the USA… then maybe Colombia or Venezuela.
There’s nothing new at all here. I wrote in my Practical Offshore Banking Guide that the first rule of being discreet in offshore banking terms is not to put your money in obvious places. If your fellow countrymen seek to hide their money somewhere that is the WRONG place.
What do Individual Banking Secrecy Countries want?
There’s also something else to consider: what individual countries really want. Countries, like people, have hopes and aspirations – very important to consider when trying to predict their next moves.
To people who know, as opposed to the popular press, for example – there are big differences between the three European principalities Andorra, Liechtenstein and Monaco. Liechtenstein is the only one with a really strong interest in protecting banking secrecy. I suspect the political current in Andorra and Monaco is more towards joining the European mainstream, for completely different reasons that have nothing to do with banking, that I could expand upon at length but won’t in this forum. We’ll save that for a future Q Wealth Event.
Does the Tax Evasion Problem Really Exist?
I really seriously doubt that bank secrecy laws are causing as much tax evasion as G20 leaders make out. Most countries with sophisticated financial services are not really interested in providing banking services to clearly unsophisticated individuals who simply want to hide money and rely on bank secrecy provisions. That is why they are increasingly happy to sign these letters of intent.
There are much more attractive markets for tax havens, that are going to cause them much fewer hassles – whether it be insurance, online brokerage, mutual or hedge funds, etc etc. These businesses are the ones that are really costing onshore governments money in lost revenue, and creating wealth and economic growth in offshore centres – but they will not be affected in the least by the G20 grandstanding. These businesses are 100% legal and are advised by the best lawyers money can buy.
- This is 2009, my friends, and maintaining an account in your own name where you keep untaxed income just isn’t the way to go. It hasn’t been for years. There are so many better solutions for those seeking to achieve financial privacy.
I have never advocated tax evasion. I advocate financial privacy and bank secrecy because I believe in the forgotten concept of “innocent until proven guilty.” The entire focus of my writings and advice to clients is:
- Use international corporate structures to reduce taxes legally. A good set-up can be had for just a few thousand dollars that will draw a firm dividing line between your name and your assets, without you having to give up control. To this I would add that insurance wraps are looking like an increasingly good solution for achieving privacy. I’ll be writing more about the practicalities of this topic in The Q Wealth Report.
- Move offshore yourself. Become non-resident. It is just so easy these days with wide availability of flights, working over the internet and so on. Besides tax benefits there are a lot of other benefits to moving offshore, like lower cost of living, higher quality of life, and better security. Your personal residence can be flexible. It is of the utmost importance in an overall tax plan.
Countries Not Blacklisted
The smart bankers I was talking to in Europe last week have seen the writing on the wall for years, and have been busy establishing banking subsidiaries in a wide range of other jurisdictions. The banks we recommend all have contingency plans in place.
Leaving aside the interesting topic of insurance wraps that I will save for a future article (that become worthwhile with larger amounts of money, let’s say seven figures) … there are simple, easy, watertight solutions available.
Right now, for example, I could set you up a Panama corporation, with nominee directors and bearer shares, with absolutely no information held in Panama about ownership or control, with a bank account with a European owned and regulated bank but the account domiciled in a non-European branch that is not on any OECD list and does not have any information exchange agreements with any country. Of course I won’t name it here, but you are welcome to contact me for a consultation on this matter. That way you have multiple layers of protection, and you can sit back and relax and watch all this political grandstanding from afar. The cost of this structure is just US$ 2995.
So don’t panic! Watch what happens, be on the lookout for alternatives, and feel free to contact me for a consultation. A note with all due respect: I am snowed under with people asking questions right now, and simply don’t have the time to give advice for free. Kindly review my page about Consulting Services and Fees before contacting me. Thank you. If you contact me for a consultation and pay the fee, the subsequently decide to purchase the above-mentioned service, I will refund the consultation fee to you. Also a reminder that if you would like a free copy of the Practical Offshore Banking Guide, a free copy of How to Buy and Hide Gold Bullion Offshore, and a free consultation with yours truly, all you need to do is sign up for a subscription to The Q Wealth Report quarterly newsletter for just $87 per year…
Sphere: Related ContentRelated posts:
- Offshore Banking: Andorra, Liechtenstein, Luxembourg, Monaco, Vatican…
- Enhanced Banking Privacy in the UK
Topics: Banks and banking offshore | 1 Comment »
One Response to “G20, the OECD and Banking Secrecy”
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April 6th, 2009 at 4:59 pm
[...] Tax evasion through offshore personal bank accounts really is a thing of the past. It’s been passe for years. It’s not a particularly attractive business for any tax haven bank because it has the potential to cause lots of problems for relatively little reward. There are so many ways you can legally protect your privacy without having to rely on bank secrecy. For those who are interested, I’ve written a more in-depth article on the subject of the G20, the OECD and Banking Secrecy here. [...]