THE CARIBBEAN, THE OECD                AND THE EMPTY BLACK LISTAfter all the hype about tax havens          In 2000, an OE...
The full tax trilogy"Offshore Taxation Demystified"         is available atwww.scribd.com/doc/54819986
Offshore Taxation Demystified, 2009/2010   THE POSITIVE EFFECTS OF CARIBBEAN TAX    INFORMATION EXCHANGE AGREEMENTSThis col...
The full tax trilogy"Offshore Taxation Demystified"         is available atwww.scribd.com/doc/54819986
Offshore Taxation Demystified, 2009/2010            TAX SANCTIONS FROM GERMANY              - AND HOW TO ESCAPE THEM“Basica...
The full tax trilogy"Offshore Taxation Demystified"         is available atwww.scribd.com/doc/54819986
PPUGNATORIUS Ltd.                              Company Profile29th Floor, Central World Tower               PUGNATORIUS is...
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Offshore taxation demystified

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Transcript of "Offshore taxation demystified"

  1. 1. THE CARIBBEAN, THE OECD AND THE EMPTY BLACK LISTAfter all the hype about tax havens In 2000, an OECD report named andand offshore banking secrecy, the shamed 47 “preferential tax regimes“black list is no more. Gone forever or and 35 tax havens. These listed coun-just the calm before the Caribbean tries have been threatened by thestorm? OECD with “defensive measures" if they fail to “eliminate harmful featuresThe infamous black list of un- of their regimes." In the followingcooperative tax havens, maintained by years, most of the listed countries didthe Organisation for Economic Co- make commitments to transparencyoperation and Development (OECD) and exchange of information. Amongand dominated by Caribbean jurisdic- these are Barbados and the US Virgintions, is empty now. In an increasingly Islands.borderless world, there seems to be norogue tax regimes any more. But this is Seven jurisdictions (Andorra, Liech-just a temporary silence and definitely tenstein, Liberia, Monaco, Marshallnot forever. Islands, Nauru and Vanuatu) resisted all requests and threats - this did notTherefore, it is interesting to know include any Caribbean jurisdiction. Inwhich Caribbean countries will find April 2002, these Seven Samurai werethemselves on this list shortly and formally identified by the OECD aswhat effect it has if you live and invest uncooperative, and as a result, the listin a blacklisted country. Practical as- of seven went black.pects of the past, the present, and thefuture are discussed in the following. This was called the high-water mark of the anti-offshore initiative. How- ever, things were going to get worseA Short History of the Black before they got better, if they even getList better at all.Founded in the post-second world war All of these jurisdictions have subse-era, it took the OECD more than 50 quently been involved in negotiationsyears before it listed 15 jurisdictions as to make some or full commitments.tax havens according to criteria it had Costa Rica has been one of the lastestablished by itself. This first list, jurisdictions that escaped the list.dated from the year 2000, covered Based on these statements, the OECDcountries from Bermudas over to the decided in May 2009 to remove allCayman Islands, and on to Saint Vin- seven from the black list.cent and the Grenadines. OECD saidit had investigated 31 countries beforedrawing up the list.
  2. 2. The full tax trilogy"Offshore Taxation Demystified" is available atwww.scribd.com/doc/54819986
  3. 3. Offshore Taxation Demystified, 2009/2010 THE POSITIVE EFFECTS OF CARIBBEAN TAX INFORMATION EXCHANGE AGREEMENTSThis column tries to bridge the gap the direction. A tax information ex-between the hardship of tax informa- change clause without the doubletion exchanges and the chances of an taxation avoidance clause does notadjusted legal environment. The aim is meet the economic interests of bothto preserve the traditional benefits parties. from Caribbean financial centers, evenin an era in which banking secrecy is An unbalanced information-only taxequalized with tax banditry.  a greement results in a win-lose- situation. It provides tax informationThe Rationale for Tax Informa- which is beneficial only for high tax countries and denies the benefitstion Exchange which would result in benefits for theAgreements for the avoidanceof double taxation have ad-vantages, but also downsides.The positive effect is thatthey assure that profits aretaxed only once and not inboth countries involved. Thisavoids a subsequent taxationof offshore profits in high taxcountries and, therefore, isb e n e f i c i a l f o r Ca r i b b e a ncountries with tax rates downto 0%. The country with the highertax rate grants this benefit not for low tax country. In other words, in afree. In return it expects the exchange fair negotiation no one would expect aof tax related information to assure jurisdiction in the Caribbean to signthat the tax payer does not act fraudu- such a stripped tax treaty. It would belently and hides income which is tax- similar to turkeys voting for Christ-able in the high tax jurisdiction. It is mas.obvious that the low tax country hasno economic interest to obtain tax in- The motivation for signing can be ex-formation from the high tax country. plained very easily. The rich OECDIt accepts such clauses to get the countries announced to the world’s taxbenefit from the avoidance of double havens that they will be treated as taxtaxation only. pariahs if they are not willing to sign. This made an offer the CaribbeanNeedless to say that such an explana- countries can’t refuse. tion is highly simplified and makes noclaim to describe the peculiarities of Convinced by strong economic pres-double taxation. However, it shows sure of the high tax countries and a 4/14
  4. 4. The full tax trilogy"Offshore Taxation Demystified" is available atwww.scribd.com/doc/54819986
  5. 5. Offshore Taxation Demystified, 2009/2010 TAX SANCTIONS FROM GERMANY - AND HOW TO ESCAPE THEM“Basically, if fewer smart thirty- The OECD itself has no power to im-something’s, educated in business and plement sanctions against any black-law schools and fluent in five lan- listed country. However, its memberguages, were engaged to pour over states have already opened and shownGerman tax legislation and amend- their toolbox of countermeasures.ments with a fine-tooth comb in orderto find ways of avoiding tax, if this did Typically, they have three options:not happen, then I could reduce tax First, the tax environment for black-rates.“ (Germany‘s Minister of Fi- listed countries can be damaged bynance, Peer Steinbrueck, in a speech changes in the domestic tax laws ofon a tax conference in September OECD member states. Second, a re-2009). view, repeal and/or refusal of bilateral tax treaties may occur. As a thirdA Friendly Word measure, aggressive tax audits and non-tax measures like an embargo, theConvinced by strong economic pres- cancellation of free trade agreementssure from the G8-countries and a or punitive tariffs and customs mightclever exploitation of the recent finan- frighten and discipline offshore juris-cial, political and religious disruptions, dictions.the Caribbean offshore countriescould not resist to "be committed to The future of the Caribbean offshoreinternational standards of anti-money business depends on the abilities oflaundering legislation and practice, revaluation, adjustment and assimila-counter terrorist financing legislation tion. The coming years will see win-and financial regulation and interna- ners and losers in the Caribbean off-tional efforts to combat financial shore arena. Therefore, it is essentialcrimes.” to be prepared for the next moves.As a result, the black list of uncoop- Case study: The German Anti-erative tax havens is currently empty. offshore LegislationAll 84 Caribbean and non-Caribbeanjurisdictions on the radar screen of the Although the black list is empty, Ger-OECD agreed to implement the stan- many continues to combat offshoredard. jurisdictions by tough new legislations and new black list mechanisms. TaxHowever, the OECD regularly updates experts and oppositional politicianswhich tax havens and other jurisdic- pointed out that this new legislation istions implemented them and which therefore untimely, redundant, andare in delay, although they agreed to unnecessary.the standards. The later ones will begood candidates for a new black list. In spite of massive criticism, the gov-The OECD‘s viewpoint is obvious: A ernment made it clear that from theirfriendly word and a gun will get you a viewpoint, there is a need for suchlot further than a friendly word alone. regulations until the promises of the 9/14
  6. 6. The full tax trilogy"Offshore Taxation Demystified" is available atwww.scribd.com/doc/54819986
  7. 7. PPUGNATORIUS Ltd. Company Profile29th Floor, Central World Tower PUGNATORIUS is an independent law office based in Bangkok,999/9 Rama I Road, Pathumwan Thailand. We provide international corporations, investorsBangkok 10330, Thailand and law firms with premium legal and tax services relatingTel: 0066 22072647 to Thailand, Southeast Asia and offshore jurisdictions. WeFax: 0066 22072657 are specialized to guide foreign clients through the red-tapeE-mail: lawyers@pugnatorius.com requirements, legal hurdles and international tax structuringWebsite: www.pugnatorius.com of their foreign investments, trade operations, real estate developments or other business in Thailand and Southeast Asia. EABC Representative Products & Services Dr. Ulrich Eder Expert advice in foreign direct investments in Thai manufacturing Rechtsanwalt, Steuerberater, and service sectors and real estate developments. Gateway Managing Director to investments in Myanmar and utilization of Thailand as lawyers@pugnatorius.com investment hub for the ASEAN region. Implementation of cross- border tax planning strategies for overall tax mitigation and risk management. International tax advice and individually tailored tax planning solutions for corporate and private clients with the inclusion of offshore jurisdictions. Corporate asset protection and advanced financing solutions. Senior Management 1. Dr. Ulrich Eder, German lawyer and tax counsel, Managing Director European ASEAN Business Centre (EABC) 69

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