Swiss Account Holder Info Leaked

THE Swiss whistleblower Rudolf Elmer has provided WikiLeaks with two CDs containing information on more than 2000 bank clients suspected of tax evasion.


The disks were handed over in London last night to the WikiLeaks founder, Julian Assange. They are said to contain secret bank details of clients, including politicians, multinationals, hedge funds and organised-crime figures.


Mr Assange, on bail before an extradition hearing in London next month over Swedish sexual assault charges, said that Mr Elmer has been fighting to have the information made public for five years.


“I am here today to support him,” Mr Assange said. “He is going through a prosecution in Switzerland and he is a whistleblower. He has more to say and give to the world to show asset-hiding, whether it be for tax evasion or to hide proceeds of criminal acts or to protect assets from people in nations who are about to fall out of political favour.


“There will be full revelation of names by WikiLeaks at a later date, assuming the data is correct and once we have had a look at it.”


Mr Assange said the information could be released in the next few weeks.


Mr Elmer, 55, is a former executive at Bank Julius Baer, one of Switzerland’s top private banks.


He said that many of those identified in the CDs have exploited bank secrecy laws to avoid taxation. However, he said he could not – and would not – reveal names contained in the CDs due to the complexity of the systems used to hide money and the difficulties in unravelling the real beneficiaries.


“If you can’t destroy the evidence, beat the witness; that is what is happening to me,” he said. “Others sold information to foreign governments. If I did that I could not stand here and feel that my conscience would allow me. I did offer the information free to [the] German Finance Minister. I got no response.


“I want to talk about the Swiss secrecy system, which is damaging our society. The short story is simple: I was in the Cayman Islands and there was a mouse tail and I started to pull on it. The tail got bigger, looked like a dragon tail. I went back to Switzerland and it became bigger, a fire-breathing dragon with several heads. One head was the banks, the other the Swiss press, to an extent, and they all came after me and my family.”


Mr Elmer faces court in Zurich tomorrow over allegations that he breached Swiss banking laws after he handed client data to WikiLeaks in 2007.


He left the bank in 2004 after eight years at its Cayman Islands trust subsidiary. During that time, he has said, he became aware of widespread tax evasion by prominent customers and that this occurred with the full knowledge of the bank’s top management.


The bank has denied the claims and accused Mr Elmer of continuing a long campaign which allegedly saw him approach bank clients and pressure them.


Mr Elmer in return has alleged he has been followed and threatened. Swiss journalists who have followed the story have called into question some of his claims.



UK Banks Face Balance Sheet Tax

The UK government has introduced a permanent levy on banks’ balance sheets, a move expected raise GBP2.5bn per year in revenue once fully implemented.


The levy, introduced on January 1, is intended to encourage banks to move to less risky funding profiles, and the revenues raised would represent, according to the government, “a fair contribution in respect of the risks the banking system poses to the wider economy, while ensuring that the industry remains competitive.”


The government also hopes that the levy will encourage the banks to make greater use of more stable sources of funding, such as long-term debt and equity.


The rate for 2011 will be 0.05%, and it will rise to 0.075% from 2012 onwards.


Financial Secretary to the Treasury, Mark Hoban said on January 1:


“The levy which comes into force today means that banks will now make a full and fair contribution in respect of the potential risks they pose to the wider economy. This measure will also encourage banks to reduce their dependence on the riskier, short term funding that was one of the main causes of the financial crisis.”


“Once fully in place the bank levy is set to raise GBP2.5 billion per annum and this will go towards helping reduce the record budget deficit that this Government inherited.”


In addition to introducing a bank levy, the UK government is also examining ways to discourage the payment of “unacceptable” bonuses to bank employees.



Management & Control & The Future

I was approached by an acquaintance recently who asked me to review the structure of his Seychelles International Business Company.


It’s something I get asked to do occasionally (and I expect will happen more frequently in future – see below) and I have to confess I do find it interesting to see how other Offshore Service providers construct and package their product.


This was your bog standard IBC nothing unusual about that… it had been set up to own a substantial web based business with a strong UK sales focus.. nevertheless I have to confess I was appalled once I saw the whole one size fits all approach of how it had been put together.


It had a nominee director based in BVI and the company owners (UK residents for tax purposes) were both shareholders and general power of attorney holders.


Would this company have withstood review by onshore revenue authorities?


Not a snowflake’s chance in hell.


All sign posts pointed in the same direction ie that it was a hastily arranged (effectively managed and controlled from onshore) factory produced IBC… put together without regard for the client’s individual situation or needs. If reviewed it would have taken the authorities all of about 5 minutes to find that the company is owned and controlled from onshore and to see that it had been set up in a thinly disguised attempt to evade onshore taxes. (Nett result: default tax assessment + penalties and possible criminal investigation of the owners).


Sadly from my 9 years + experience in International Corporate structuring the above scenario is all too common. Cowboy IBC manufacturers in poorly regulated jurisdictions have probably formed hundreds of thousands of companies like this over the years leaving an extraordinary amount of people at risk of punitive tax assessments and criminal sanctions. All of which could have been avoided had the formation agent simply taken the time to review the client’s individual situation and make appropriate “insurance” suggestions as to how such risks could be avoided.


My gut feeling is that these kind of business practices will start to disappear over the course of the next few years (as a matter of necessity) as both company owners and industry professionals (inc regulators) alike come to the realization that (with the use of offshore centers coming under increasing scrutiny) that substance now needs to rule over form. Hence any nil or low tax “offshore” company, moving forward, will want to be able to point to a substantial connection to the country in which it is incorporated to avoid being taxed onshore.


Bottom line?


Ensuring that your nil tax or low tax company is properly structured such as to ensure that it is seen to be managed and controlled from offshore is going to become of critical importance moving forward as the onshore authorities’ blow torch starts to get applied to more and more IBCs.


Think I’m wrong?


Watch this space…



High Tax Governments’ Desperation Increasing

It has been both compelling and disturbing to observe from a distance the pursuit of Wikileaks founder Julian Assange and the attempts by various under-seige governments to try and shut down his ground breaking whistle-blowing website.


Whilst much could be said about the wider issue of freedom of speech (and the importance of maintaining it) the message that this sends in no uncertain terms is that the governments who have been most heavily hit by the banking crisis are now prepared to go to hitherto unseen lengths to try and shore up their shaky positions.


Already President Obama has made it clear that in his view the “tax havens” are at least partly to blame for the current banking crisis.


The bottom line is that big government is now under huge pressure to reduce spending and increase revenue collections… which means the affairs of those using or connected to low tax or zero tax companies offshore are going to be watched closer than ever before.


This places notions of professional structuring and company management at the forefront of issues that offshore company owners need to consider closely moving forward.


It’s interesting to note that former Crocodile Dundee star Paul Hogan has just won a long standing battle against the Australian Tax Office (they elected to discontinue proceedings against him for alleged tax evasion after conceding that insufficient evidence existed to prove that he had broken the law). At the core of his success was the fact that the various structures he had set in place to legitimately try and minimize taxes payable on the success of his movie trilogy had been carefully thought out and put together by a team of tax and financial professionals.


Whilst the law governing this area differs from country to country a good starting point for many is to note that an offshore company can potentially avoid being taxed onshore if it is (and is seen to be) managed and controlled from offshore.


If you not sure what this entails, or whether your IBC meets this basic benchmark, it’s probably time speak to your professional advisers….


Liechtenstein Offshore Banking Take Another Blow

A two year long Criminal proceeding launched against Liechtenstein’s LGT banking group by German state prosecutors has reportedly ended with the bank paying a landmark fine totaling around EUR50m. (The bank had been under investigation since early 2008 on suspicion of having abetted tax evasion).


The Bank in question LGT (which had been under investigation since early 2008 on suspicion of having abetted tax evasion)’s media spokesman has said the settlement – reached without admission of guilt by either the individuals concerned or by the bank itself – was reached in order to avoid lengthy and burdensome litigation.


State prosecutors in Bochum investigating employees of the former LGT subsidiary, LGT Treuhand, agreed to suspend their tax investigations in return for payment of a global fine of EUR46.35m imposed on the banking group and for individual fines of around EUR3.65m.


The tax investigations were launched following Germany’s Federal Intelligence Service purchase (at a cost believed to have been in the region of EUR5m) of data stolen from LGT Treuhand. Hundreds of individuals worldwide with accounts held in the bank were alleged to have evaded taxes, including Klaus Zumwinkel, former head of German mail giant Deutsche Post.


Meanwhile Liechtenstein’s government has just approved tax information exchange agreements in accordance with the OECD standard with Norway, Sweden, Finland, Denmark, Iceland, the Faroe Islands, and Greenland.


The agreements with the seven Nordic partners meet the internationally applicable standards in accordance with the OECD model tax convention. Both sides of the agreement have reportedly emphasized a willingness to expand and to deepen tax cooperation beyond the TIEA. This also includes a willingness to enter into talks concerning the conclusion of a double taxation agreement.


Liechtenstein has now concluded 23 OECD-compliant tax agreements. The new agreements were due to be signed on December 17, 2010.


Whilst TIEAs having become a fact of life for those in the Offshore Incorporation world it’s a shame indeed that LGT didn’t test in court the admissibility of the illegally obtained evidence. I wouldn’t be the only legal expert to cast doubts over whether the Prosecution would have been allowed to lead such heavily tainted evidence (especially in such a huge trial) having regard to public policy considerations.


Tis a sad day indeed for justice when the Government of an economic giant can be allowed to get away with persecuting a smaller neighbor after having acted criminally itself… ( Star Chamber anybody?)


ATO Pacific Fishing Trip

The Australian Tax Office is aggressively trying to obtain details of persons holding accounts with the Vanuatu branch of Australasian banking giant ANZ Bank.


Rather than seeking details as regards a particular customer or customers (as is the norm)  the ATO is demanding  information about ANZ customers in Vanuatu who fit one or more of four criteria, including Australian nationality or domicile, a residential or business address in Australia, or an account recorded in Australian dollars.


The information sought from ANZ relates to the period July 1, 2008, to November 30 2010 and includes the account number, any identifiers of the customer, nationality and domicile, and the tax file number or Australian business number of the customer or signatory.


Under a second notice, the ATO is targeting similar information from ANZ customers with accounts kept in any currency other than the vatu, Vanuatu’s official currency. The ATO notices mention 17 different types of accounts, but are not limited to those accounts, or to accounts held in Vanuatu.


The ANZ says it would breach Vanuatu confidentiality laws if it gave up the information and its high powered legal team have lodged documents in Australia’s Federal Court essentially  arguing that the tax office is engaged in a highly dubious fishing expedition.


The bank says that compliance with two December 17 notices from the ATO, which seek open access to customer data, would breach Vanuatu criminal law and put its licence to operate in the Pacific island nation at risk. It adds that each of the notices is “uncertain and/or oppressive”.


The ANZ’s chief executive for the Pacific region, Michael Rowland, said the bank had obligations under Vanuatu law and that it was seeking court guidance on its obligation to comply with the ATO notices.


“ANZ abides by the legal and regulatory requirements of the markets in which we do business, including Vanuatu, and we treat customer information sensitively and respectfully,” Mr Rowland said.


The ANZ has hired two QCs to press its claim, with the case set down for a directions hearing on February 17.


Last April, it was reported that the ATO following Australia’s signing of a Tax Information Sharing Agreement with Vanuatu, had demanded that 57 financial institutions, including Australia’s four major banks, hand over the records of clients with offshore bank accounts held between July 2005 and June last year.


Offshore tax move could backfire

Ben Butler

January 7, 2011


A MOVE by big retailers to sidestep GST by moving their e-commerce operations offshore risks being caught up in a Tax Office crackdown.


The idea has been floated by Myer and Harvey Norman, two of the retailers spearheading a controversial advertising campaign against the exemption from GST of imported goods worth less than $1000.


The Tax Office has noted international transactions and GST as an area of concern in its most recent compliance program, saying it would work more closely with other government agencies to ensure compliance with the law.


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Myer and Harvey Norman put up the idea while lobbying against tax-free offshore shopping, but other retailers say it would be better to concentrate on working with government to get better enforcement of existing GST and import rules.


Yesterday the Fair Imports Alliance, an umbrella group, attacked the big retailers’ coalition for its attempts to ”bully government” into ditching the $1000 threshold, saying the advertising campaign would prove counterproductive.


The Tax Office is already cracking down on GST avoidance through a program that has been allocated $337.5 million over the next four years. It has pledged to step up work on GST compliance in international and cross-border transactions.


”Our use of data from third parties, such sources as Customs and AUSTRAC, will enable a better-targeted view of international transactions and ensure compliance checks, education and marketing messages reach businesses at higher risk,” the Tax Office said in its 2010-11 compliance program.


The note was issued in mid-December, a week after the Harvey Norman boss, Gerry Harvey, said he would follow Myer’s lead and set up an offshore e-tailing website.


A spokeswoman said the Tax Office was legally barred from commenting on individual cases.


”Whether or not the ATO would consider the application of the gener al anti-avoidance provisions depends on the facts and circumstances of that particular arrangement,” she said.


An alliance spokesman, Brad Kitschke, said a lack of enforcement meant the $1000 threshold was being used as a loophole, hurting retailers who played by the rules.


Alliance members include the Australian Retailers Association.


”We cite the example of someone who could sit at home and import multiple packages up to the value of $1000,” Mr Kitschke said.


”They don’t pay GST or customs duties on those goods. They then sell those goods through eBay or through markets or theTrading Post or other means and they don’t apply GST when they sell those goods.


”So GST is not being collected at two points, as well as customs duties on the way in.”


The situation was made worse because ”a lot of those people aren’t paying income tax”.


He said 7.5 per cent of government revenue came from customs duties. ”If those are undermined, those hospital beds, schools, police – payment for those, need to come from other means.”


He said the alliance was not arguing for any particular threshold and supported a Productivity Commission inquiry that will look at problems confronting the retail industry.


”We don’t believe the way Gerry Harvey, Solomon Lew and that particular group have engaged is the right way to go about things and we don’t believe that it will ensure the best outcome for the retail sector and consumers.”


It would be ”irresponsible” for the government to cave in to the ”loud voices” of the big retailers, he said.