Archive for the ‘Tax Evasion’ Category

Anti-tax Evasion Agreement reached by HK and US

Sunday, May 11th, 2014

On May 9, 2014, the U.S. Treasury Department announced that Hong Kong has reached an information-sharing agreement with the United States under a new law meant to combat offshore tax dodging by Americans.

Set to take effect on July 1, the Foreign Account Tax Compliance Act of 2010 (FATCA) will require foreign banks, investment funds and insurers to hand over information to the U.S. Internal Revenue Service about accounts with more than USD 50 000 held by Americans.

Foreign firms that do not comply face a 30% withholding tax on their U.S. investment income and could effectively be frozen out of U.S. capital markets.

This Hong Kong’s inter-governmental agreement (IGA) must be finalized by the end of the year.

Cayman joins OECD Convention on fighting Tax Evasion

Tuesday, December 10th, 2013

The Organization for Economic Cooperation and Development (OECD) /Council of Europe Convention on Mutual Assistance in Tax Matters has been extended to the Cayman Islands. This will be effective as of January 1, 2014.

The convention on tax assistance provides for all possible forms of administrative co-operation between jurisdictions in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. This co-operation ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims.

Currently, more than 50 jurisdictions adhere to this convention.

Offshore company registrations number decreases

Wednesday, August 7th, 2013

According to legal services consultancy the Applebly Group, the majority of offshore jurisdictions showed a decrease in offshore company incorporation activity in the 2nd half of 2012 as compared with the 1st half.

However, company registrations in some jurisdictions seem optimistic. The report, which looks primarily at the data for the last 6 months of 2012, revealed that despite tough economic conditions, levels of new company registration activity in one major offshore jurisdiction continued to increase – Bermuda reported a 7% increase in activity as compared with the 1st half of 2012.

Nevertheless, the on-going weakened economic conditions continued to influence the overall market in the 2nd half of 2012. There were 37,881 new offshore company formations in the jurisdictions covered by the report, a decline of 3.6% from the 2nd half of 2011, and a deeper decrease of 11% on the preceding 6 months in 2012.

Taking into consideration the entire year, the overall number of new company registrations for the majority of jurisdictions stayed flat in 2012. This proved to be a year of consolidation following large increases in annual new incorporations between 2009 and 2011.

As to the total number of active companies, most jurisdictions showed little movement from the previous year as new company formations cancelled out the numbers leaving the registries. Hong Kong saw a 9% increase in the total number of active registered companies, with the local register there breaking through the one million mark for the 1st time. The Mauritius and Cayman registries are steadily returning to their pre-recession peaks, experiencing a 3% and 1% rise respectively.

After a busy 1st half of the year, jurisdictions including the Cayman Islands, the Isle of Man, Mauritius and the British Virgin Islands were approximately 10% down in the latter half.

Also, according to the report, the British Virgin Islands is the jurisdiction that continues to dominate offshore new company registration activity by volume. It has consistently maintained a 6-fold lead ahead of its nearest comparator, the Cayman Islands.

The United Kingdom and Hong Kong continue to show signs of recovery. Hong Kong in particular showed significant growth between H1 and H2 2012 with a 7% increase in registrations. Both Hong Kong and the UK registrations are above those recorded in 2009.

US Congress introduces Anti-Offshore Bill

Wednesday, July 13th, 2011

The new legislation, entitled the Stop Tax Haven Abuse Act, has been introduced by Carl Levin, the Democrat Chairman of the US Senate Permanent Subcommittee on Investigations. The Act is aimed to fight so-called offshore tax loopholes.

When introducing the legislation, Levin stated that the United States cannot afford offshore tax abuses that are robbing the Treasury of USD 100 billion in lost revenue yearly and increasing the tax burden on Americans. It should be noted that this is the 5th Congress in which Levin has introduced a comprehensive bill to fight offshore and tax shelter abuses.

A number of provisions from past bills have made it into law. Levin’s efforts also helped spur enactment of the Foreign Account Tax Compliance Act (FATCA) that is designed to obtain information on overseas investments by US residents. It is worth noting that, when Levin was a member of the Senate, he co-sponsored Levin’s offshore tax bills in 2005 and 2007.

A provision of the bill would close an existing tax loophole that allows credit default swap payments to escape taxation if sent from the US to persons offshore, such as an offshore hedge fund or foreign bank. The bill would treat credit default swap (CDS) payments sent offshore from the US as taxable US-source income.

More Money Laundering reported in Sweden

Saturday, April 30th, 2011

In accordance with police statistics, a 30% increase in the number of cases of money laundering was reported in Sweden for 2010. Such result is the reason to establish a new agency with a view to combat money laundering in this country.

The figures that were released by the financial crimes police (Finanspolisen) reveal that the number of reported money laundering cases in Sweden increased by 3 000 to a total of 12 000 reported cases in 2010.

Sweden has been criticised for not doing enough to fight the problem. Now, the Swedish National Council for Crime Prevention considers the possibility to set up a national financial intelligence centre to be shared by Swedish Police, Customs, Tax agency and Economic Crime Authority. Daniel Vesterhav, researcher at the crime prevention council, said that this way it would be possible to free up resources, make use of each of the authorities’ expertise and increase the quality of operative intelligence.

According to the report, out of the 14,500 companies in Sweden obliged to report possible money laundering crimes within their own organisation, 90% of reports come from banks, foreign exchange companies and other money handling businesses.

It should be noted that no single tax adviser out of Sweden’s 159 obliged to report potential money laundering crimes to police filed any report in 2010.

New Offshore-Related Penalties announced by UK

Sunday, February 6th, 2011

New penalties for offshore non-compliance have been announced by UK’s HM Revenue & Customs (HMRC). The new penalties come into effect on April 6, 2011 and apply to Income Tax and Capital Gains Tax.

The first Self-Assessment returns affected will be for the 2011-2012 tax year, with paper returns due to be filed by October 31, 2012, and electronic returns by January 31, 2013.

The new legislation can be found in Schedule 10 of Finance Act 2010. Under the new rule, the penalties will be linked to the tax transparency of the jurisdiction in which the income or gain arises. Penalties for failing to declare income or gains arising in another country will be higher where it is harder for HMRC to get information from that jurisdiction.

Three new levels of penalty will be introduced:
–    where the income or gain arises in a territory in ‘Category 1’, the penalty rate will be the same as under existing legislation;
–    where the income or gain arises in a territory in ‘Category 2’, the penalty rate will be 1.5 times that in existing legislation – up to 150% of tax;
–    where the income or gain arises in a territory in ‘Category 3’, the penalty rate will be double that in existing legislation – up to 200% of tax.

Cayman Finance Chair criticizes a new book on tax havens

Tuesday, February 1st, 2011

In an interview with Cayman’s local television news channel, the chair of Cayman Finance Anthony Travers has called Nicholas Shaxson, the author of a new book on tax havens, an imbecile.

Travers criticized the book called Treasure Islands: Tax Havens and the Men Who Stole the World as well as its author. Shaxson says that his work demonstrates no more than an 11-year-old’s understanding of offshore finance, while Travers suggested that Shaxson’s position came from the politics of envy. He added: “Now the politics of envy are exacerbated by imbeciles who don’t actually understand what’s going on in the Cayman Islands”.

Travers said the opinion that Cayman is a tax haven or a magnet for illicit transactions is no more than fiction. There are places where money laundering or tax evasion are easier, but the Cayman Islands is not such a jurisdiction. He noted: “There are simply jurisdictions where it would be more sensible to perpetuate your fraud or money laundering than the Cayman Islands”.

To respond, Shaxson said that Travers had refused to talk to him when he came to the Cayman Islands and challenged Travers to explain in detail what he does not like about the book.

Crocodile Dundee to sue Australian Government over Money Laundering probe

Tuesday, January 25th, 2011

It was widely discussed in 2006 that a famous Australian actor Paul Hogan had been under investigation for money laundering.

The Australian Crime Commission became suspicious that the star of one of the most successful Australian movies ever was using offshore tax havens in order to conceal his wealth. As a result, the actor was subjected to a 5-year tax investigation which was dropped in November 2010.

Recently, it has been announced that the world-famous Crocodile Dundee is planning to sue the Australian government for more than GBP 50 million (up to USD 80 million) for damaging his reputation in this tax probe.

According to Hogan’s lawyer Andrew Robinson, his client is to sue the Australian government for loss of earnings as ‘his earning potential and reputation has been decimated in the international community and it has had that level of effect on his position”.

Australian businessman sentenced to 8.5 years for Money Laundering

Tuesday, December 21st, 2010

An Australian businessman has been sentenced to 8 years and 6 months in jail in the New South Wales Supreme Court. This decision was made after the businessman was convicted of money laundering and tax fraud.

After a 5-week trial which followed investigations into the use of offshore tax structures under Project Wickenby, Michael Milne was found guilty on November 19. He was found guilty of offences related to money laundering and tax evasion. The crime involved the use of an offshore tax haven structure.

The offshore tax haven structure hid assets and income in a complicated series of transactions that involved Swiss and Dutch entities. So, it allowed evading tax payable on a capital gain of more than AUD 7.5 million.

According to Tax Commissioner Michael D’Ascenzo, tax evasion through the use of illegal offshore tax haven schemes is unfair to businessmen and the community who do the right thing. So, the sentencing showed the seriousness of tax evasion. He said that “this result serves as a clear warning to people who use offshore structures to defraud the tax system that they face significant consequences for their actions”.

Mr D’Ascenzo said: “Every defrauded tax dollar means less funding for community services including health, education and other government funded programs. This result serves as a clear warning to participants and promoters of illegal offshore schemes that they face significant and very serious consequences for their actions.”

Project Wickenby is a cooperative partnership between the ATO, Australian Federal Police, Australian Crime Commission, Australian Securities and Investments Commission and the Commonwealth Director of Public Prosecutions, with support from the Australian Transaction Reports and Analysis Centre, the Australian Government Solicitor and the Attorney-General’s Department.

Mexico to pass new anti-money laundering legislation

Tuesday, August 31st, 2010

President of Mexico Felipe Calderon proposed new legislation aimed at fighting money laundering and cash smuggling and at preventing Mexican cartels from using billions in U.S. drug profits to finance their criminal organizations. Legislation introduced by  the Mexican president administration and named “unprecedented” by Calderon includes the following measures:

– It would be illegal to purchase real estate in cash;
– The purchase of vehicles, boats, airplanes and luxury goods would be limited to 100,000 pesos (about US$7,700) in cash. Violation of this rule would lead to being sentenced in prison up to 15 years.

If passed, new anti-money laundering law by Calderon would counter the common practice in Mexico, when even in legitimate transactions people prefer cash to avoid being taxed.

Senior Mexican official who investigates financial crimes, states that criminals in this country are increasingly using cash transactions to launder their vast profits. This official, as well as his U.S.  counterparts say that the criminals use billions of dollars in cash to buy airplanes, ranches and businesses to circumvent new Mexican laws that require banks to report large cash movements.

According to the National Drug Intelligence Center, each year Mexican drug cartels and their suppliers from Colombia generate, launder and remove from the U.S. US$18 billion to US$39 billion, largest part of it is transported in cash. It is stated in the recent report by Douglas Farah, a consultant for the Woodrow Wilson International Center for Scholars, that “very little is effectively being done to either impede the movement of drug money into the formal economy or significantly reduce the flow of bulk cash across the U.S.-Mexico border.” No more than 1 percent of this cash is seized by U.S. and Mexican agents.