Transcript Bild 1 - World Services Group

The Doom of Offshore Tax
Planning?
Moderators:
Diego Salto & Peter Utterström
Panel:
Michael Burns, Thijs Clement, Stephan
Neidhardt, Michael Silva
AGENDA
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6.
7.
Introduction - Diego Salto/Peter Utterström
Model use historically - the practioner’s
view! Thijs Clement
The Obama Tax Bill and transparency Michael A. Silva
The OECD/G20 view on transparency Stephan Neidhardt
The Offshore Perspective - Michael Burns
Future outlook – restrictions, tools etc.
Discussion
Some statistics
 In 1996 money laundering was estimated to be
between USD 590Bn to 1,5 Trillion
 World Bank estimates the value of criminal
activities, corruption and tax evasion to be
between $1 trillion and $1.6 trillion per year
 OECD estimates that 50% of all cross border
trade is made via tax havens
 In 2004 US MNE’s paid 2,3 % in tax (16 bn on 700
bn of foreign active earnings)
 In 2006 UK established that 3,5 % of tax payers
provide information re offshore accounts.
Some statistics (cont.)
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BVI has 19,000 inhabitants but 830 000
companies registered
One address alone in the Cayman Islands
serves as the registered office for > 18 000
companies
Assets equal 1,3 times GDP in Norwegian
banks, 2,5 times GDP for the Euro zone. In
Cayman Islands the assets total > 700 times the
GDP
Convenient knowledge:
CFC – Controlled Foreign Corporation
DTT – Double Tax Treaty
FBAR – Foreign Bank Account Report (US)
LOB – Limitation of Benefits
QI – Qualified Intermediary
Tax Haven - ?
TIEA – Tax Information Exchange Agreements
White, Grey, Black List – CFC-related lists
Tax Havens - The top five secrecy jurisdictions
 Delaware, US: The world's top secrecy jurisdiction. Register a
company here and no one will ever know. If you have overseas
income, it will be tax exempt.
 Luxembourg: Europe's most powerful investment management
centre. It does require company accounts to be publicly available.
But in virtually every other category secrecy rules.
 Switzerland: The traditional home of the opaque bank. For years, it
resisted international requests for tax information exchange.
 Cayman Islands: The Caribbean island has a serious budget
crisis. Its leaders take a dim view of having the "good name" of the
most powerful hedge fund centre tarnished by accusations.
 City of London, UK: The International Narcotics Control Strategy
Report said last year: "Illicit cash is consolidated in the UK and then
moved overseas where it can readily enter the legitimate financial
system." It adds: "Drug traffickers and other criminals are able to
launder substantial amounts of money in the UK despite improved
anti-money laundering measures.“
guardian.co.uk
With this – will tax havens have a future?
Having said all this ---
…. The historical model transaction and its use
- the practioner’s view!
Thijs Clement, Van Doorne
Example 1
Use of (high tax) jurisdictions to establish
conduit entities:
Loan
Loan
NL
INVESTORS
Interest
ITALY
Interest
Discussion
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Transfer pricing
Treaty application
Limitation on Benefits ?
Concept of Beneficial Ownership
Example 2
Use of “Hybrid” corporate structures to optimise taxation of
interest
Equity
Loan
Discussion
 Qualification legal entities in multiple
jurisdictions
Example 3
Use of Special Tax regimes
TOP CO
FIN CO
OP CO
Loan
OP CO
Discussion
 Jurisdiction of establishment of FinCo
 Tax Haven/Non Tax Haven
What Threats do U.S. and OECD Reforms
Pose to Global Foreign Direct Investments?
Michael A. Silva
International Tax Partner
Hunton & Williams LLP
U.S. Proposals
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Stop Tax Haven Abuse Act
IRS attempts to improve withholding
Override “Check the Box” Rules
Expansion of U.S. Treat and TIEA Network
Foreign Account Tax Compliance Act of 2009
Stop Tax Haven Abuse Act
 Domesticate foreign companies if “managed and
controlled” from the U.S.
 Obama Speech – Ireland, Bermuda and Netherlands
identified as corporate tax havens
 Cayman Island IBCs featured in tax deferral debate
 QI issues for offshore banks
Should U.S. Adopt a Managed and Controlled
Test for Offshore Corporations?
 Section 103 of Stop Tax Haven Abuse Act:
– “. . . Substantially all of the executive officers and
senior management of the corporation who
exercise day-to-day responsibility for making
decisions involving strategic, financial and
operational policies of the corporation are located
primarily within the United States.”
2009 Tax Treaty Network Expansion
 France-U.S. Protocol
 New Zealand – U.S. Income Tax Treaty
 Malta-U.S. Income Tax Treaty
The OECD / G20 view
Stephan Neidhardt
Walder Wyss & Partners Ltd. Zurich
History
 2000: OECD identified a large number of Tax Havens
 October 2008: UN Committee of Experts on
International Tax Matters → Model Tax Convention on
Internationally agreed standards for exchange of
information and transparency in tax matters
 November 2008: G20 Meeting
 April 2, 2009: OECD Progress Report on the
implementation of these standards for 84 jurisdictions
 October 6, 2009: OECD Issues Background
Information Brief
The OECD Standards of Transparany and Exchange of
Information
 By OECD and non-OECD countries working together in the OECD
Global Forum on Transparency and Exchange of Information
coming out of:
 G20 Ministers of Finance Berlin 2004 Meeting
 Xinghe (China) 2005
 UN Committee of Experts on International Cooperation in Tax
Matters October 2008
 Standards Require:
 Exchange of information on request where it is „foreseeably
relevant“ to the administration and enforcement of the domestic
laws of the treaty partner.
 No restrictions on exchange caused by bank secrecy or domestic
tax interest requirements.
 Availability of reliable information and powers to obtain it.
 Respect for taxpayers‘ rights.
 Strict confidentiality of information exchanged.
III. The List
How to get on the „White List“?
 Countries have to sign 12 agreements on exchange of
information that meet the OECD standards
Jurisdictions with which the agreements have been
signed (tax havens do not count)
The willingness to continue to sign agreements
The effectiveness of implementation
What is a Tax Haven?
Criteria
 No or nominal tax on the relevant income
 Lack of effective exchange of information
 Lack of transparency
 No substantial activities
Numbers
 2000: Over 40
 2002: Andorra
Monaco
Lichtenstein
 2009: none
Reservations to Art 26 of the OECD Model
Treaty (until recently)
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Austria
Belgium
Luxembourg
Switzerland
 Now: none
Proposed Measures against non complying
countries:
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Increased disclosure requirements on the part of taxpayers
and financial institutions to report transactions involving noncooperative jurisdictions
Withholding taxes in respect of a wide variety of payments
Denying deductions in respect of expense payments to payees
resident in a non-cooperative jurisdiction
Reviewing tax treaty policy
Asking international institutions and regional development
banks to review their investment policies and
Giving extra weight to the principals of tax transparency and
information exchange when designing bilateral aid programs
Summary
 OECD was very successful in the last
nine years.
 Most success just recently, when Art. 26
of the OECD Model Treaty was accepted
by all countries, but now the
implementation of the standards has to
be supervised by the OECD.
The Offshore Perspective
Michael Burns
Appelby
Introduction
The Offshore Perspective:
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Separating spin from reality
All is not lost
Opportunity – not threat
Helps make the world go around
An unstoppable force
Fact: Tax neutrality, not tax evasion or
avoidance
 Investors and their advisors choose offshore
financial centres (“OFCs”) for tax neutrality, not
tax evasion or avoidance
 OFC entities provide a tax-neutral platform so
that investors from several jurisdictions are not
subject to additional layers of foreign taxation
to those imposed by their home country.
 Investors remain subject to tax in accordance
with the codes of their own jurisdictions
Fact: OFC entities required for
international business
 Global financial system needs legal
entities to be formed in a stable
jurisdiction on a tax-neutral basis
 Multinational companies, investment
banks and fund managers are often
required to accommodate investors from
all over the world
Fact: OFCs to play key role in global
economic recovery
 Investment funds allow international
institutional investors to invest in
government and sovereign debt
 Provide microfinance loan facilities to
small businesses in developing countries
often with the help of institutions like the
World Bank or other national
development aid organizations and
agencies
Fact: OFCs to play key role in global
economic recovery
 Enable syndicates of international banks to
make secured loans to finance power and
other infrastructure projects in developing
countries
 Take part in the U.S. government's TARP and
related schemes designed to encourage
private investors to buy "toxic assets" from
banks to help free up their balance sheets to
allow them to recommence lending
Summary
 OFC’s will continue to survive and will continue
to serve the purpose of promoting the efficient
deployment of international capital
 Continuing future for OFC’s, as long as they
comply with internationally accepted standards
of transparency
 Appleby’s jurisdictions are all on the White list
 Choice of jurisdiction largely dependent on the
nature of the business to be transacted
With all this …
… what is really the future for tax havens?
 The toolbox availabke
 Accepted use of tax havens
 Future outlook
DISCUSSION!!
Or?