Other recent
entries in this blog:
05 September 2008
Offshore Banking: Failure to Open a Bank Account
You decided to join the club and enjoy the benefits of offshore banking. You incorporated an offshore company as recommended by your advisor, chose a sound and reliable bank, prepared the requested documents and submitted your application, but unexpectedly the bank didn't approve it and denied to open you an account. Why would a bank that spent so much time, money and efforts to attract more customers reject some applications?
Unfortunately any bank has the right to refuse with no comments. Let's see what could be the reasons.
Generally, this might obviously happen because the bank is not interested in you as a client. You don't fit the current appetite of the bank. You are expected to become a new investor while you are looking for a current trading account for your business; or the bank is oriented to clients with a significantly bigger account turnover than you anticipate.
Another problem is that the bank may be afraid of having you as a client because you fall into the category of undesirable customers. None of the well-established banks with good international reputation would ever wish to provide service to a criminal. Every bank has its own perception of troublesome business and relevant technical procedures assisting its managers to detect potentially unreliable clients. It might happen that the country of your citizenship, residence or domicile, jurisdiction of incorporation of your company or type of your business are black-listed by that bank.
Some clients fail to provide the bank with the right image of their business in general. You may simply be inaccurate and make a typo here and there, in the telephone number or address details, and that's it, you look suspect to the bank's compliance manager. Sometimes the reason lies deeper. You overdo trying to keep your privacy. You tend to tell the bank as less as possible. The result is the bank doesn't get a sufficient picture to be sure no problems will follow you. Most banks prefer to brush aside any suspicious client rather than engage in investigation because in case of mistake they might easily get more troubles than benefits. To avoid this situation do your best to make your business reality transparent enough for the bank to make a positive decision.
All these and other issues of that type can normally be avoided should you have a quality preliminary consultation with a professional independent advisor.
20 August 2008
Blacklisted Offshore: Private Consultant's Opinion
What comes first into your mind when thinking about how much the countries with
high taxes are not happy with existence of low tax jurisdictions? What exactly
is on their agenda and how it touches you – ordinary user, investor, businessman,
individual.
An offshore company, as a standard instrument of international tax planning,
is normally a company incorporated in a low tax or tax-exempt jurisdiction.
Using such company is quite legal when it is used for legal purposes. However,
from the moment of introduction of first tax haven regimes governments of countries
with high taxes campaign against offshore jurisdictions and their clients. Their
concerns and efforts become even more intensive with the march of globalization.
Decades ago so-called anti-offshore measures were a home policy matter. Today
many international organizations are involved, such as OECD, FATF, United Nations,
EU and others.
Their concern number one is "harmful tax competition". In fact low
tax jurisdictions attract too much of mobile capital from other countries. Disadvantaged
countries claim it to be nothing but tax dumping that destroys their tax basis,
encourages tax avoidance and shifts tax burden to less mobile tax basis, i.e.
labor, real estate, consumption etc. The opponents argue that free tax competition
same as in any business is of more good for the world's economy and that there's
no reason for tax regimes to be similar all over the world.
Whatever the motives are and regardless how much hypocrisy you can observe
at both ends the fact is that low tax centers are subject to discrimination
mostly of economic character. International organizations create constantly
changing black lists, make reports and give recommendations.
The real measures, however, are being taken on the level of national legislation
of each country. Most often there exist "controlled foreign corporations"
or similar regulations. In some countries it takes a simple form of a decree
providing for a substantial withholding tax being levied from each payment in
favor of a business partner located in one of the blacklisted countries, no
matter what you pay for and/or whether you control the beneficiary company.
In other cases the burden of economic responsibility is shifted to the banks,
which get obliged to create reserves for each transaction if the counterpart
is from a blacklisted country. Not to mention requirements to each and every
involved professional to report suspicious or fraudulent activities. The aim
is to eliminate economic benefits from using tax haven regimes.
The only advice that naturally suggests itself in this case is to get familiar
with the "anti-offshore" legislation of the countries involved in
your business before you buy in an offshore scheme. Black lists can be numerous
and quite comprehensive but there are always exceptions. A number of decent
locations is still available for different businesses. Offshore service providers
located in a particular offshore jurisdiction are rarely able to consult you
on this matter. The work is for you and your local lawyer, auditor or business
consultant.
Concern number two is facilitation of criminal activities, in particular money
laundering. It results from the lack of satisfactory legislation preventing
the mentioned activities in certain jurisdictions.
You can hardly find a professional who will give you a service without asking
for a number of personal documents within the "know-your-client" policy.
However, despite recently many jurisdictions updated their legislative basis
to meet the international standards there are still loopholes. You will be offered
a number of opportunities claiming to be the legal way to protect your assets
or to avoid tax payment. Be careful. Some offshore service providers still promote
secrecy, anonymous corporations and bank accounts as the right course of business.
They build a sophisticated "form over substance" scheme involving
several legal entities and, yes, they claim it to be for the purpose of privacy
and asset protection for law-abiding citizens, but what they actually do is
teaching you to lie that you are not the beneficiary to the scheme. They want
to sell their service and forget to remind you that you are the responsible
one and that at least you have to report those funds at home revenue authorities.
The above two problems are so closely related that actually sometimes very
difficult to distinguish. We don't speak, however, about voluntary criminals
here.
Whether you wanted your offshore company to save on taxes or hide money trail
for security reasons apparently secrecy is not a merit any longer. A range of
circumstances when it comes right in place is narrowing every day. Those few
currently remaining secretive offshore centers like Panama or Singapore are
the "next in line". Evaders can reduce but hardly eliminate the risk
of being caught by transferring money from one tax haven jurisdiction to another.
If one gets caught the consequences can be grave. Tax
fraud is a criminal offense in most countries and is punished by fines and
imprisonment.
Governments want your taxes in their budgets. You want a justified tax burden.
Everyone is in his own right. Probably it's the right time for you to reconsider
the role of tax-free offshore instruments in your business structure. You can
shift it a bit to get a perfectly legal low tax scheme instead of a half-legal
secrecy-based though tax free one.
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Latest
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A Keynesian Vacancy The IMF Can't Fill
02 November 2008
You Can't Escape; Resistance is Futile
28 October 2008
Why the Financial Crisis Doesn't Really Matter
26 October 2008
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19 October 2008
Tax Harmonization Is Coming!
14 October 2008
The British Government’s ‘Ill Considered’ Use of Anti-Terrorist Financing Legislation against Iceland and the Wider Implications
12 October 2008
How To Commit Collective Financial Suicide
07 October 2008
How and Why You Should Buy Physical Gold Offshore
04 October 2008
Thank You, Mr Paulson
07 September 2008
EU Defeated By Bean-Counters
31 August 2008
A New Lord Of Taxation
29 August 2008
How to Avoid Envy by Keeping a Low Profile
21 August 2008
High Yield Offshore Investment Programs: Do They Exist?
18 August 2008
Why taking a vacation can improve your health – and wealth!
17 August 2008
Alphabet Soup
11 August 2008
Your Ships Come in Over a Calm Sea
10 August 2008
Taxpayers: 1; India 0
05 August 2008
Microchips with Everything
03 August 2008
It's All The Fault Of The Speculators
27 July 2008
Don't Play Poker With Uncle Sam
25 July 2008
How to Leverage Offshore E-Commerce in Your Existing Business
20 July 2008
'I Love Tax' - Anonymous Offshore Banker
16 July 2008
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11 July 2008
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