Sexy Structures to 'minimise' tax !

From: Waverly Bay

For those of you who use or are thinking of using tax havens as part of sexy structures to minimise your tax.... the following may be of interest to you.

The agreement applies to the US/Caymans for the time being. The scope of the exchange of information relates to "criminal tax evasion", civil and administrative matters. Pretty wide scope...for IRS to check out the dealings of taxpayers using tax havens - legit or non legit.

The bigger issue this setting a precedent for other countries like australia to negotiate similiar exchange of information agreements with tax haven countries?



Law-Now Asia - CMS Cameron McKenna's electronic information service for Asia

The United States have signed a new agreement with the
United Kingdom regarding the Cayman Islands on 27 November
2001, that allows for exchange of information on tax matters
between the United States and the Cayman Islands (the "Agreement").

The Agreement provides for exchange of information,
upon request, for criminal tax evasion, civil and
administrative matters relating to U.S. federal income tax.
The parties to the Agreement have the authority to obtain
information held by banks, other financial institutions,
and any person including nominees and trustees acting in any
agency or fiduciary capacity. They also have the authority
to request information regarding the beneficial ownership
of companies, partnerships and other persons, including
in the case of collective investment funds, information on
shares, units and other interests; and in the case of trusts,
information on settlers, trustees and beneficiaries. All
information provided and received by the competent
authorities of the parties is required to be kept confidential
and may not be disclosed to any third party.

The Agreement applies to criminal tax evasion and will
commence on 1st January 2004, and will take effect two years
later for other tax investigations.
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Reply: 1
From: Michael G


There's a big difference between "tax evasion" and "tax minimisation".

People who shelter money so it can't be traced and are not paying the correct amount, then well and good they are caught.

But for those who operate within the law and structure themselves properly, then there should be nothing to worry about.

I once read News Corp alone has over 700 entities to manage its tax situation.

I'm sure the ATO doesnt like it, but it all probably within the law.

Michael G
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Reply: 1.1
From: Waverly Bay

Yes, thats right - there is a big difference between tax minimisation and tax avoidance. That latter of course can result in a structure being struck out and penalised under anti avoidance provisions

But wouldn't it be better for a taxpayer to plan and operate their sexy structures to in an environment of anonymity...out and away from the nose of the ATO and other such tax regulators? There maybe a high onus of proof on the part of the tax regulator to collect information on the basis of criminal evasion but - one should bear in mind that the exhange of information agreement negotiated between the US/caymans is not confined simply to criminal tax evasion. For instance, information could be exchanged on matters relating to a taxpayers' administration or compliance.

In any event, you may have what you think are legitimate and clean offshore tax affairs - but that won't stop tax regulators from using the such agreements to collect information on taxpayers and their offshore tax structures. I could think of a number of instances where information could be obtained by a regulator under these types of agreements without in anyway constituting an abuse of power.

A taxpayer may disagree with such snooping....and could well be right... but one would typically need hefty resources (and time) to defend and take on tax authorities. And if upon collecting such information, they think the taxpayer's structure suxs.... get ready for more arguing, submissions, explanations...and dare i say it, litigation.

Exchange of information agreements are definitely a powerful addition to the tax regulator's armoury...for even though their snooping may not bring about a prosecution for criminal evasion.... at the very least it brings to light a taxpayers affairs/structures. That can't be good !

As always (and presumably more important should say oz enter into similiar agreements with tax havens) the key issue with sexy structures the potential tax savings justify the penalties/costs of a legitimate and successful challenge by the tax authorities?


P.S Newscorps and the like no doubt have their complex structures....and so they they are multinationals with various international income streams. Even didnot stop Consolidate Press (Packers) from being taken to the cleaners under Part IVA by the ATO recently - on offshore structure using CFCs, which ConsPress thought was legitimate for many years. What a taxpayer perceives as legitimate may often be proven wrong after the expensive course of litigation !
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Reply: 1.1.1
From: Jeremy Laws

TWICE after such a long absence! I miss good posts! Caymans have been dead for ages. The IRS have essentially had gentlemans agreements with a lot of their major banks since the insider trading thing that inspired 'Wall Street' movie. You shouldn't have too much problem in HKG, but as you know you do need to be careful! Interesting strategies are required! I hasten to point out I don't yet deal in the sums that make it worthwhile, but it is interesting none the less!
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From: Anony Mouse

I haven't gone offshore myself YET, but a good site for Australians wanting to learn more is:

"A government that robs Peter to pay Paul can always count on the support of Paul."
Of course, Paul's support is obvious, but it is equally obvious that to rob from Peter to pay Paul will make Peter
very, very angry.
My question is this: "How can you run a good government with a sore Peter?"
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