“Everyone calls us the Crook Islands now,” he said.

October 29, 2015 4:14 PM

I was lucky that he merely threatened me. A journalist from Newsweek actually was deported from a different tax-haven island (Jersey) for her reporting there, and was banned from re-entering the island, or any part of the U.K., for nearly two years. Even though her story was unrelated to the financial-services industry, it was expected to bring negative publicity to the island, threatening its reputation as a place to do business. The message was therefore quashed by banishment of the messenger. The wealth-management industry does not mess around. Inside the Secretive World of Tax-Avoidance Experts.
posted by Rustic Etruscan (23 comments total)

Article lets itself down somewhat by trotting out the misleading Oxfam wealth statistics.
posted by GallonOfAlan at 4:19 PM on October 29, 2015

Most of the people I know of who've tried to find schemes to dodge taxes have wound up being scammed and losing way more than they could've saved in interest and penalties from the IRS after losing money to high fees or theft from shady investment managers. I'm not saying there aren't people who are getting away with it, but there are probably a lot more who get away with it for a few years and then pay tenfold.
posted by BrotherCaine at 4:22 PM on October 29, 2015

These people, our wealthiest clients, are above the law...It’s potentially very dangerous.

Not "potentially".
posted by T.D. Strange at 4:24 PM on October 29, 2015 [7 favorites]

Most of the people I know of who've tried to find schemes to dodge taxes have wound up being scammed and losing way more than they could've saved in interest and penalties from the IRS after losing money to high fees or theft from shady investment managers. I'm not saying there aren't people who are getting away with it, but there are probably a lot more who get away with it for a few years and then pay tenfold.

Well, it is a truism that cons work best on the greedy and dishonest.
posted by Steely-eyed Missile Man at 4:29 PM on October 29, 2015 [9 favorites]

The general rule with asset protection is that if you can get to it, so can your creditors. Also, bankruptcy court is a court of equity, not law, and so too-cute bullshit does. not. fly. there.
posted by leotrotsky at 5:02 PM on October 29, 2015 [1 favorite]

Was it Vimes who reminded us "privilege" = "privilegium" = "private law"?
posted by maxwelton at 5:09 PM on October 29, 2015 [6 favorites]

With their fortunes secure in Cook Islands trusts—on paper, at least—there is no way for the U.S. government to force payment unless it wants to send a legal team on the 15-hour journey to Rarotonga (capital of the Cook Islands), where the case would be argued under local laws. Needless to say, those laws are not very favorable to foreigners seeking to access the assets contained in local trusts.

Funny how when it's the money of wealthy debtors on the line, the US government suddenly gets a fit of following legal protocol instead of rolling over a soft target with like, a Marine Expeditionary Unit, like they do with the usual criminals, terrorists and inconvenient leftist movements.
posted by indubitable at 5:10 PM on October 29, 2015 [29 favorites]

And anyway domestic asset protection trusts (DAPTs) and Dynasty Trusts ( rule against perpetuities, what's that?) , are the new hotness, with states falling over themselves to compete for trust dollars. Whether they hold up over the long term is another question entirely.
posted by leotrotsky at 5:29 PM on October 29, 2015

These people, our wealthiest clients, are above the law...It’s potentially very dangerous.

Well, not always above the law. The father of a friend spent 5 years in Federal Prison as part of a giant tax fraud (PDF) investigation by the IRS. He was a lawyer who knowingly setup offshore trusts and whatnot for rich people that let them (illegally) pay less taxes.

Although, I guess in this case it wasn't the clients who went to jail, but the lawyers and whatnot that helped it happen.

edit: that official IRS press release has the amusing typo, emphasis mine, of "White is the 11th defendant who promoted a trust scheme that defrauded the IRS of more than $7 in tax revenue."
posted by sideshow at 6:47 PM on October 29, 2015 [1 favorite]

Amusing typo or Goddamn! I'd had better pay attention next April when I'm taking costs against freelance income!!!
posted by notyou at 7:02 PM on October 29, 2015 [2 favorites]

$5 billion is more than $7.
posted by 1adam12 at 7:03 PM on October 29, 2015 [4 favorites]

Congress passed a law in 2010 targeting tax evasion/aggressive tax sheltering. Starting in 2011, under the Foreign Account Tax Compliance Act (FATCA), individual taxpayers had to report their offshore assets and foreign financial accounts in their annual tax return to the IRS.

The IRS isn't simply relying on individual reporting. The law also requires foreign financial institutions to report to the IRS about financial accounts held by U.S. taxpayers, or foreign entities in which U.S. taxpayers hold a substantial ownership interest.

As you might expect, it took a lot of negotiation to get other countries to sign on to this agreement. The data sharing is reciprocal among partner countries. Partner countries include Switzerland, Singapore, the UK, Bermuda, and Japan.

The law is relatively new, but I suspect this will provide more basis for the IRS to challenge tax returns. The Treasury Inspector General had a few suggestions for improvement for the IRS in an audit report released in September 2015.
posted by cynical pinnacle at 8:10 PM on October 29, 2015 [1 favorite]

Up against the wall.
posted by Pirate-Bartender-Zombie-Monkey at 11:36 PM on October 29, 2015 [3 favorites]

As indubitable said, it really goes to show how the function of the state is to enforce and protect the interests of the ruling class. "Oh, but it's in a trust, we can't get to it!" Hogwash! The United States is the most materially powerful state in the world. Take your special bodies of armed men, go to the place where the billionaire is, and toss him into prison until he pays up. Russia isn't going to grant asylum to every tech gazillionaire who doesn't want taxes cutting into the funds for their second or third megayacht factory. We have no problem spending unbelievable amounts of money tracking people down and locking them up over matters of a few hundred dollars. It's perfectly obvious why we let the rich abracadabra their crimes away in full view of everyone.
posted by Krawczak at 12:19 AM on October 30, 2015 [7 favorites]

As a *former* tax advisor in wealth management, I was looking forward to hearing what interesting tax dodges she found.

And the article wound up being about asset protection trusts.
posted by jpe at 3:54 AM on October 30, 2015 [3 favorites]

Every time I see an article like this, or about tax avoidance in general, I always find myself thinking "Man, I wish I had a multimillion dollar tax bill because then I'D BE FREAKING RICH."

I'm not saying you shouldn't take advantage of credits and other aspects of the tax code but paying your taxes is patriotic. You are literally surrendering something for the good of the country.
posted by LastOfHisKind at 5:28 AM on October 30, 2015 [3 favorites]

As indubitable said, it really goes to show how the function of the state is to enforce and protect the interests of the ruling class

At the end of the day, asset protection trusts are shielding assets from suit by one rich person against another rich person. This isn't about rich v non-rich, in other words (in most cases); it's more about rich debtors v rich creditors.

The IRS is a super creditor, on the other hand, and an asset protection trust won't protect assets from tax claims.
posted by jpe at 5:48 AM on October 30, 2015 [2 favorites]

I'm not saying you shouldn't take advantage of credits and other aspects of the tax code but paying your taxes is patriotic.

Yeah, but if the question is whether $X million should go to kids or to the government, kith and kin usually win out.
posted by jpe at 5:53 AM on October 30, 2015

Tax avoidance strategies for United States citizens are remarkably difficult, at least for the < $100M set. The US has an almost-unique extraterritorial tax code in that it taxes income for all US citizens, no matter where they live in the world nor where they make their money. And they're pretty aggressive about enforcing it. The entire global banking system is squawking bloody murder for the past few years for being forced to disclose assets to the US government, it's something of a question for Swiss sovereignty, for instance.

I don't understand the Cook Islands situation; aren't they basically a New Zealand satellite? Why does NZ tolerate them ignoring international law for asset seizure, do they somehow profit? The NYT says the trusts are 8% of the Cook Islands' economy, $24M/year. But there are only 2600 trusts. Crazy.
posted by Nelson at 9:29 AM on October 30, 2015 [1 favorite]

Onshore, in the European and North American wealth-management centers, what passed for flash might be a signet ring or a pocket watch worn instead of a wristwatch: bat signals to members of a hereditary upper crust, but easily overlooked by others.

Oh good God.
posted by rmd1023 at 1:12 PM on October 30, 2015

I'm surprised at the comments here. Facebook paid less than 5000 dollars tax in the UK. Dunno about Starbucks and Google, but they also paid insignificant amounts.

And they have gotten away with it.

And will do so next year, too.

If you think the immensely wealthy can't employ the same accountants, or even better ones ... well, to be honest, what the fuck are you doing here on the blue?

Wealth inequality is like climate change; the exact details are argued about, but are ultimately irrelevant: it is happening, it is bad and it should be stopped. It really is that simple.

Why? Hereditary wealth leads to aristocracy and a disconnect, which ultimately leads to exploutation of man. We have seen this before, we (humanity) has decided we do not think it is a good idea. We see not just that is is happening, but that it has happened again.

And instead of enacting really simple laws ('the best paid person at a company cannot make more than 30x that of the lowest paid and here are the limitions to ensure this doesn't mean you outsource every one up to and including the cleaning lady') ... politicians just say 'well, there's not much we can do!'.

Bullshit. We can. Politicians can pass these laws. We just keep electing those who elect not to do anything about it. The world over.

What should be studied is why and how we let THAT happen.

Personally, I'm starting to think failing the failing education system, the lack of classes in logic, media bias, persuasion and rhetoric, 'life finance' (things like what taxes you'll be paying, how mortages work and what else you'll be expected to pay) ... this is starting to look like it is by design. Hanlon's razor just doesn't seem to cut it anymore.
posted by MacD at 1:58 PM on October 30, 2015 [1 favorite]

Facebook paid less than 5000 dollars tax in the UK. Dunno about Starbucks and Google, but they also paid insignificant amounts.

That's because we tax corporate profit, not revenue. They paid payroll taxes, local estate taxes, sales taxes where appropriate. But they didn't make any profit.

You can argue that they should all pay their employees less to increase their profit, so they pay more corporation tax. But that's not good, and probably not what you want.

You can argue that they should shift less money to their corporate headquarters in the USA, through IP, so they pay more tax in the UK and less in the USA. Which is good for me, a Briton. Of course, our corporation tax rate is much lower, so they (or their shareholders) pay less tax. I'm not sure that's what you want either.
posted by alasdair at 2:35 PM on October 30, 2015

Personally, I'm starting to think failing the failing education system, ... 'life finance' (things like what taxes you'll be paying, how mortages work and what else you'll be expected to pay) ... this is starting to look like it is by design.

This.

I have always felt that high school should include mandatory life finance courses. So the precious dears get half a clue how those things work. Eg how much you'll probably make if you work right out of high school. How much you can expect to earn in a trade. How much university/college will cost, and how much you can expect to make with a degree in x. How much to budget for housing, food, transportation. How much debt can be safely carried. renting vs owning.

The fact that this isn't in the curriculum s far as I know... I'm not generally given to conspiracies, but this lack does seem by design. A stupid consumer is a pliable consumer. And one more likely to generate the profits that the top tier can stash away.
posted by Artful Codger at 5:10 PM on October 30, 2015 [3 favorites]