Offshore Financial Planning… Approach with Caution! - A continuing attack on Privacy

By Bill Blevins, Financial Correspondent
Blevins Franks International Limited

Many people purchasing retirement homes outside of the UK often use a range of legitimate tax efficient offshore products and services, ranging from mortgages, offshore investment and trust establishment. Never before has the offshore world been under such concentrated attack… just because it’s offshore! It seems that nowadays almost anybody using offshore services is considered, in some way, to be "cooking the books". Whilst there have been some problems with certain offshore territories regarding money laundering and tax evasion, the biggest culprits in this area have been reported as being the USA and the UK. But with the normal hypocrisy emanating from politicians of both these developed nations they have decided to beat the offshore world into agreeing to effective exchange of information between the offshore centres and the major economies.

A few years ago US efforts to sort out their tax own situation might not have interested us here in Europe. These days we need to keep a close eye on what goes on across the Atlantic as ripples of their attempts to get their tax affairs in order are now reaching our shores. This is especially true when it comes to tax evasion and money laundering.

Offshore trusts came under serious attack by the IRS in the US and by the UK Inland Revenue several years ago and offshore structuring generally is now being steadily harassed by agencies of both the US and UK governments.

The US was the prime motivator in causing the Organisation for Economic Co-operation and Development (OECD), that “infamous” UN organisation of immense influence, to aggressively attack smaller countries with little or no income tax. This was done on the basis that many of these countries had an "unfair tax advantage" over the US.

The US supposedly deem competition in international business to be necessary and healthy. In the anti-trust case against Microsoft, the court ruled that Microsoft could no longer engage in tactics designed to eliminate competition. It is therefore very interesting that the OECD harmful tax initiative attempts to accomplish exactly what the US Justice Department condemned Microsoft for doing. Does anyone in the US government recall that the underlying principal regarding open competition is the basis of the free world's economies?

The OECD report entitled Harmful Tax Competition: An Emerging Global Issue, crystallised the attack on small sovereign nations that supported offshore financial services. Small Caribbean countries were uniformly denounced by high-tax nations as conduits for money laundering and tax evasion in spite of a public statement by the legal adviser to the Federal Reserve that five US cities comprised upwards of 90% of the money-laundering activity in the entire Western Hemisphere.

The UK government, in a heavy handed and initially undisclosed manner, sent an ex Treasury Mandarin to each of the UK offshore Islands to review their regulations and report on what changes would be required to improve exchange of information amongst a range of other things.

High-tax governments looking for scapegoats have mounted a carefully orchestrated media campaign against offshore centres that link tax avoidance (which is legal) with tax evasion (which is not), intentionally blurring the differences in order to garner public and media support for their mission.

The attack on tax haven and safe harbour nations is in diametric opposition to the principals of freedom and personal privacy. It is anti-competitive, and ultimately at its very core it is completely undemocratic.

What this means to you

The world has become much more complicated. This complication is driven by autocrats seeking control over citizens but will always be promoted with buzz terms like the "War on Drugs", the "War on Terrorism", or "Money-Laundering." Most of this is pure bunk but there is not much those who know and understand what is going on can really do about it. Why? Because government has expanded its hold on the media, ergo we can safely assume that public control legislation, and government rulings that have the effect of law, will continue to proliferate.

Casual estate planning and asset protection structuring is now complicated by the threat of being accused of money laundering (tax evasion is now included within the money laundering directives). This must be a low key crime (compared to the so called war on drugs and terrorism) one that simply did not exist until a few years ago. Originally a simple concept, the term has somehow morphed into meaning virtually anything the media or a prosecutor wants it to mean in order to solicit a strong reaction, intimidate and frighten.

The media now seems to equate money laundering to income tax and estate planning, giving these normal and reasonable activities a sinister cast. The term is so frequently used in so many contexts today, that it is virtually impossible to truly define any longer.

A respected US criminal defence lawyer said recently, "With the expanded powers granted prosecutors they can indict a ham sandwich." And, where US persons are involved, indictment is no longer necessary for a government agency to simply freeze or seize assets. Freezing assets seems to be the favourite wand of power for bureaucrats seeking to "get” those who challenge them.

All this does not bode well for freedom, liberty, and the sanctity of personal privacy. Normal citizens in growing numbers are now suspicious of their own government’s powers and this alone speaks volumes. Any individual is surely entitled to follow the maxim laid down by Lord Clyde that "no man is under any obligation, moral or other, to set out his financial affairs in a way which enables the Inland Revenue to place the largest possible shovel into his store". Tax avoidance IS a legitimate means of avoiding tax. However one must proceed with caution, as simple access to domestic or offshore structures is not the real issue; a careful plan developed in conjunction with trained professional is the only realistic approach in today’s see through world.

If you would like fuller details of how to save tax in France see our website at http://www.blevinsfranks.com and then contact the Partner of the Firm nearest to your French place of residence.

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