Praetorian Trust

Source: Ulrika Lomas, Tax-News.com,

The Italian Revenue Agency has disclosed that it is investigating those yacht charter companies it considers to have been set up solely for tax avoidance reasons.

The leasing companies being checked are those established for the chartering of seagoing yachts or riverboats along the coasts of Liguria, Campania or the Adriatic, but which are allegedly set up to hide their actual objective – the personal use of the luxurious vessel concerned by their true owner.

More precisely, the Agency says, one is talking of boats of longer than 20m with a value of more than EUR1.5m (USD1.9m). More than 100 investigators from the Agency are, at present, touring Italy to uncover these sole-purpose companies which, as it says, “leak water”.

The companies being checked usually have only one shareholder, or very few taken from the same family, with the minimum of share capital (EUR10,000). They normally have only one vessel to be leased, which is not available on the general market but is actually exclusively reserved for use by its real owner. In fact, the boat is leased only to the shareholder(s), or even to another company with the same shareholder(s).

Full article here

The Italian Ministry of the Economy has issued amendments to the relevant legislation, by which Malta and Cyprus have been removed from the country’s ‘blacklist’ of tax havens.

The Ministry has made the appropriate changes to all three lists of countries considered to have tax systems which favour the avoidance of taxation - that concerning the residence of individual taxpayers; the list valid within the tax legislation concerning controlled foreign companies (CFCs); and that regarding the non-deductibility of corporate costs and expenses.

Cyprus and Latvia have also been eliminated from the blacklist of countries with which Italy does not have a sufficient level of tax information exchange, while South Korea has been taken off the CFC and corporate cost lists.

Malta and Cyprus, which are also full member states of the European Union, will now have fully ordinary fiscal status as far as the Italian tax system is concerned. In particular, with effect from this tax year, those Italian individuals who have attempted to transfer their residence to one of those countries will not have a continued presumed residence in Italy, while there will be no additional tax consequences for those Italian businesses with subsidiaries or associated companies in Malta or Cyprus.

The changes to the lists are also significant with regard to the new Italian value-added tax (VAT) reporting requirements that were announced in April, for all ‘risky’ import and export transactions above EUR50,000 (USD65,400), particularly those transacted with countries considered not to have a sufficient level of tax information exchange.

Under the new rules, the details of transactions in goods and services from companies or individuals having an establishment, residence or domicile in those countries will have to be forwarded electronically to the Italian Revenue Agency. As it stands, therefore, transactions with Luxembourg, Liechtenstein and Switzerland in Europe will still have to be reported when the system comes into effect.

Although those VAT arrangements have now probably been delayed from August 31 until October 31, it should also be noted that San Marino remains on the blacklist, despite all of its efforts to negotiate with the Italian government on what remains to be done before it can regularize its standing with Italy.{{desc}}

Malta, Cyprus Off Italian Blacklist. source: tax-news.com

UK Offshore Tax Amnesty Flops

source: by Amanda Banks, Tax-News.com, London

According to figures released by the UK tax authority, HM Revenue and Customs, as of March 31, 2010, just 419 taxpayers had registered for the Liechtenstein Disclosure Facility.

Commenting on the findings, Phil Berwick, Director of Tax Investigations at UK-based law firm McGrigors, said: “It is surprising how few taxpayers have [so far] registered for the LDF. Many more probably would have done so, but many are unaware that they qualify, or even that the LDF exists. There has been a poor response to recent HMRC disclosure initiatives, and this is no exception.”

HMRC launched two tax disclosure facilities for UK taxpayers with undeclared income and capital gains in offshore bank accounts last year, the New Disclosure Opportunity (NDO) and the LDF.

While the NDO has now closed, the LDF remains open until March 31, 2015, and offers more favourable disclosure terms. Under the LDF taxpayers will be required to pay tax, interest and, in most cases, a fixed 10% penalty but only need to come clean just for the period from April 1999. In addition, the LDF offers immunity from prosecution, but for tax fraud only.

Taxpayers with undeclared income or gains in an offshore bank account, or offshore investment vehicle, qualify for the LDF providing that offshore account, etc was not opened through a UK branch or agency. To participate in the LDF, the taxpayer needs to open a bank account in Liechtenstein.

Commenting on the failings of the initiative thus far, Berwick added: “HMRC are to be congratulated on releasing these figures, but they have not done enough to publicise the LDF. To release the information only twice a year, as they intend to do, will not encourage those who may be wavering to come forward.”

“The lack of advertising or promotion of the LDF by HMRC has left the responsibility to do so with professional advisers. HMRC’s stance has created an atmosphere of rumour and misunderstanding about the LDF, and meant that some advisers are reluctant to involve their clients in that process.”

UK Offshore Tax Amnesty Flops.

April 7 (Bloomberg) — Swiss regulators are probing whether investors are buying life insurance to hide undeclared assets from tax authorities as the dispute over banking secrecy widens.

“We are checking selectively if there is a need for regulator action,” said Alain Bichsel, a spokesman for the Swiss Financial Market Supervisory Authority, known as Finma, in Bern. “We are warning of the risk.”

The concern is that so-called wrapper products, sold by insurers through units in Luxembourg, Liechtenstein and Singapore, are being used to conceal untaxed money. Finma’s review comes a year after Switzerland agreed to cooperate with international regulators to avoid being blacklisted by the Organization for Economic Cooperation and Development.

Swiss Life Holding AG doubled premiums from life policies that mask underlying bank deposits and client identities to about 5 billion Swiss francs ($4.7 billion) last year. Baloise Holding AG in Basel reported a similar increase in sales at its Liechtenstein life insurance unit.

An insurer that accepts premiums “without checking whether it comes from untaxed money makes itself guilty of assisting foreign tax evasion,” said Walter Frei, a partner at Zurich- based law firm Bill Isenegger Ackermann AG, referring to the insurance wrappers. “It is nothing but old wine in new bottles,” he said. Frei represents some UBS AG clients whose account data Switzerland agreed to turn over to the U.S. last August.

Wrapper Evaders

When a client buys a wrapper, the beneficial ownership of the assets is transferred to the insurer while the funds often remain on the balance sheet of private banks. Insurers invest the premiums through advisers and clients receive benefits tied to the performance of the underlying investment. Taxes are minimized or deferred because life insurance policies are classified as non-income producing assets.

Swiss Life Chief Executive Officer Bruno Pfister said the country’s biggest life insurer doesn’t want its wrapper business to be open to tax evaders.

“We take Finma’s warning seriously,” Pfister said in a March 30 interview from his Zurich headquarters. “We see it as positive to try and curb this misuse.”

Baloise says its Liechtenstein unit, which had life insurance premiums of 1.6 billion francs last year, asks foreign clients for a written declaration on the tax status of assets.

The examination of sales practices at Swiss insurers comes as France and Germany step up the search for tax cheats and tighten rules on life policies. Swiss insurers may open themselves to lawsuits when they provide wrappers to French and German citizens seeking to evade taxes, according to Finma.

Private banking clients are buying wrappers in the wake of the Swiss government’s agreement to hand over account data on UBS customers to the U.S. Internal Revenue Service to settle a dispute over suspected tax evasion. Zurich-based UBS is Switzerland’s largest bank by market value.

Swiss Life and Baloise say their cross-border businesses benefitted from the Italian tax amnesty, or scudo fiscale. The exemption, extended until April 30, allows Italians to apply for pardons in return for paying a fine of 5 percent to 7 percent of undeclared assets. Investors also may opt to take out life insurance and leave the assets at their private banks instead of repatriating them.

Demand for wrappers increased in the past year as clients search for low-tax investments, said Alfredo Gysi, chief executive officer of BSI Group, the Lugano, Switzerland-based private bank owned by Assicurazioni Generali SpA, Europe’s third-biggest insurer.

“The move toward tax compliant models has increased the attractiveness of those products,” Gysi said. “Lower taxes are a part of it.”

PRAETORIAN NOTE:

We have followed the Sale and Marketing of these wrappers for the last 4-5 years, and always wondered how Promoters, could sell this product as an end all product to make undeclared assets, declared! Surely pitching ‘heat’ would have something to do with it, since the fees were so high, making it very attractive to the promoters selling wrappers.

There is no Silver bullet in international tax planning, but there are some sound strategies that can be applied, if planned carefully.

Exert from the FT on the 22.nd March

Alistair Darling will on Wednesday announce punitive fines for taxpayers who hide money offshore in a Budget crackdown designed to protect at least £1bn of revenue under threat from evasion schemes, according to government officials.

The chancellor is expected to unveil plans to double the maximum penalty for offshore evaders to 200 per cent of the tax owed, under a series of measures that extends further a £5bn assault on tax evasion and avoidance announced in December’s pre-Budget report.

“These people with large bank balances who are hiding money offshore should be running scared of this announcement,” one Whitehall official said. “HMRC is becoming incredibly good at finding out who these people are and it’s going to cost [the evaders] a hell of a lot.”

Read the whole article here

PRAETORIAN NOTE:

These constant attacks on our fundamental right to choose where we decided to be taxed will as it has shown over and over again historically, drive industrialists and the Brain power to places like Jersey , Monaco, Malta, Switzerland and similar fine places to relocate to.

OECD Reviews Tax Transparency.

OECD Reviews Tax Transparency, by Tax-News.com, Brussels

18 countries participating in the Global Forum on Transparency and Exchange of Information have been included in the first phase of a peer review process.

The first 18 jurisdictions are Australia, Barbados, Bermuda, Botswana, Canada, Cayman Islands, Denmark, Germany, India, Ireland, Jamaica, Jersey, Mauritius, Monaco, Norway, Panama, Qatar, Trinidad & Tobago.

The reviews are a first step in a three-year process approved in February by the Global Forum. In addition to a complete schedule of forthcoming reviews, the Global Forum has published three other key documents:

• The Terms of Reference explaining the information exchange standard countries must meet;
• The Methodology for the conduct of the reviews; and
• The Assessment criteria explaining how countries will be rated.

OECD Secretary-General Angel Gurría welcomed this new step forward and said: “The Global Forum has been quick to respond to the G20 call for a robust peer review mechanism aimed at ensuring rapid implementation of the OECD standard on information exchange. This is the most comprehensive peer review process in the world, and it is based on decades of experience at the OECD of conducting reviews of this kind in many other areas of policy making. I look forward to seeing the first results later this year”.

The Global Forum brings together 91 countries and territories, including both OECD and non-OECD countries. At a meeting in Mexico in September 2009, participants agreed that all members as well as identified non-members will undergo reviews on their implementation of the standard. These reviews will be carried out in two phases: assessment of the legislative and regulatory framework (phase 1) and assessment of the effective implementation in practice (phase 2).

The review reports will be published once they have been adopted by the Global Forum, whose next meeting will take place in Singapore at the end of September 2010.

Mike Rawstron, chair of the Global Forum, stated: “…. with these reviews we are putting international tax co-operation under a magnifying glass. The peer review process will identify jurisdictions that are not implementing the standards. These will be provided with guidance on the changes required and a deadline to report back on the improvements they have made”.

Germany’s new and highly controversial law against tax evasion has virtually been overridden by events: the Finance Ministry has revealed that it is simply unable to identify any jurisdiction that fulfils the conditions required for its application.

The law, containing severe sanctions for anyone with links to so-called “tax havens,” was adopted by the previous grand coalition government, and entered into force in Germany at the end of September last year.

Since then, finance officials have been unable to apply the law, as the Organization for Economic Cooperation and Development’s (OECD) “black list” of countries deemed uncooperative in tax matters simply no longer exists. The law therefore remains merely a threat – for the time being at least.

Read the full article on www.taxnews.com German Law Against Tax Evasion Proves Futile.

The UK government has confirmed that just 10,000 individuals used its latest offshore tax amnesty known as the New Disclosure Opportunity, which expired on January 4.

Tax experts had been predicting a low-take up by offshore account holders of the new scheme, but considering that Chancellor of the Exchequer Alistair Darling was hoping that the NDO would raise GBP1bn in additional tax revenues, the government must be disappointed by the response.

PricewaterhouseCoopers predicted recently that HM Revenue and Customs would collect about GBP135m in back taxes, interest and penalties from the scheme, which capped penalties at 10% for most disclosures, based on 13,000 voluntary declarations.

Blasting offshore tax evasion as “morally unacceptable”, Treasury Minister Stephen Timms warned those who insist on hiding assets offshore that HMRC has data on customers of more than 300 banks, and those found not to have made a disclosure will face penalties of up to 100% in future if collared by the tax man.

“Hiding money in offshore accounts to evade tax is economically and morally unacceptable. It robs public services of funding and places an unfair burden on the honest majority of taxpayers,” Timms remarked.

“Some people will still be tempted, and that is why the government will bring forward measures during 2010 to build on the significant progress made both in the UK and globally during 2009 in closing down offshore tax evasion for good,” he added.

Read the full article on taxnews.com UK Declares War On Offshore Tax Evasion.

Nov. 25 (FT) - Fiscal stimulus was the economic tool, so long disparaged by the policymaking community, that came into its own during the economic crisis, playing its part alongside monetary easing and bank bail-outs in warding off a depression.

But the result of fiscal stimulus in almost every Group of 20 economy has been the rise of deficits to levels never seen in peacetime, debt so high there is not the ammunition to fight another economic war and a bill to clean up the mess that will be felt by taxpayers for a generation to come.

The latest estimates from the International Monetary Fund show that advanced countries’ deficits averaged 1.9 per cent of national income before the financial crisis started in 2007. This year they are expected to hit 9.7 per cent, followed by 8.7 per cent in 2010.

Public sector gross debt is expected to explode from an average across advanced economies of 78 per cent of national income in 2007 to 118 per cent in 2014.
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The problem for advanced economies is that plans for a great fiscal consolidation are needed at the same time as they are expected to cope with the retirement of the postwar “baby boomer” generation.
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The UK has records on government borrowing and debt stretching back to 1691. The expected 50 percentage point rise in the debt-to-national-income ratio is similar in proportion to that experienced during the many wars Britain fought in the 18th century and is the biggest peacetime explosion of government liabilities.

In cash terms, the government expects to borrow more in 2009 and 2010 than the entire borrowing of centuries of British governments between 1692 and 1997.

The pressure mounted this week when Mervyn King, the Bank of England governor, reiterated his view that official plans to reduce the deficit by half over the next four years were insufficient and not credible.

Instead, he called for “something where a really significant reduction in deficits to eliminate a large part of the structural deficit should take place over the lifetime of a parliament”.
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Whatever happens, people in Britain will have to get used to paying much more for their public services and receiving much less.

Read full story here.