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AGENDA 1. Introduction - Diego Salto/Peter Utterstr m 2. Model use historically - the practioner s view! Thijs Clement 3. The Obama Tax Bill and transparency ... – PowerPoint PPT presentation

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Title: Bild 1


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2
The Doom of Offshore Tax Planning?
Moderators Diego Salto Peter
Utterström Panel Michael Burns, Thijs Clement,
Stephan Neidhardt, Michael Silva
3
AGENDA
  • 1. Introduction - Diego Salto/Peter Utterström
  • 2. Model use historically - the practioners
    view! Thijs Clement
  • 3. The Obama Tax Bill and transparency - Michael
    A. Silva
  • The OECD/G20 view on transparency - Stephan
    Neidhardt
  • The Offshore Perspective - Michael Burns
  • 6. Future outlook restrictions, tools etc.
  • 7. Discussion

4
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 MNEs 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.

5
Some statistics (cont.)
  • BVI has 19,000 inhabitants but 830 000 companies
    registered
  • One address alone in the Cayman Islands serves as
    the registered office for gt 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 gt 700 times the GDP

6
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
7
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 

8
With this will tax havens have a future?
9
Having said all this ---
  • . The historical model transaction and its use -
    the practioners view!
  • Thijs Clement, Van Doorne

10
Example 1
  • Use of (high tax) jurisdictions to establish
    conduit entities

Loan
Loan
NL
INVESTORS
ITALY
Interest
Interest
11
Discussion
  • Transfer pricing
  • Treaty application
  • Limitation on Benefits ?
  • Concept of Beneficial Ownership

12
Example 2
  • Use of Hybrid corporate structures to optimise
    taxation of interest

Equity
Loan
13
Discussion
  • Qualification legal entities in multiple
    jurisdictions

14
Example 3
  • Use of Special Tax regimes

TOP CO
OP CO
FIN CO
OP CO
Loan
15
Discussion
  • Jurisdiction of establishment of FinCo
  • Tax Haven/Non Tax Haven

16
What Threats do U.S. and OECD Reforms Pose to
Global Foreign Direct Investments?
Michael A. SilvaInternational Tax Partner
Hunton Williams LLP
17
U.S. Proposals
  • 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

18
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

19
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.

20
2009 Tax Treaty Network Expansion
  • France-U.S. Protocol
  • New Zealand U.S. Income Tax Treaty
  • Malta-U.S. Income Tax Treaty

21
The OECD / G20 view Stephan Neidhardt Walder
Wyss Partners Ltd. Zurich
22
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

23
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.

24
III. The List
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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

26
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

27
Reservations to Art 26 of the OECD Model Treaty
(until recently)
  • Austria
  • Belgium
  • Luxembourg
  • Switzerland
  • Now none

28
Proposed Measures against non complying countries
  • Increased disclosure requirements on the part of
    taxpayers and financial institutions to report
    transactions involving non-cooperative
    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

29
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.

30
The Offshore Perspective
Michael BurnsAppelby
31
Introduction
  • The Offshore Perspective
  • Separating spin from reality
  • All is not lost
  • Opportunity not threat
  • Helps make the world go around
  • An unstoppable force

32
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

33
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

34
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

35
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

36
Summary
  • OFCs will continue to survive and will continue
    to serve the purpose of promoting the efficient
    deployment of international capital
  • Continuing future for OFCs, as long as they
    comply with internationally accepted standards of
    transparency
  • Applebys jurisdictions are all on the White list
  • Choice of jurisdiction largely dependent on the
    nature of the business to be transacted

37
With all this
  • what is really the future for tax havens?
  • The toolbox availabke
  • Accepted use of tax havens
  • Future outlook
  • DISCUSSION!!
  • Or?

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