Some time back I wrote an article entitled ‘Offshore is dead – long live onshore’. The article was written taking into consideration the raft of legislation that has been implemented, like the US Foreign Account Tax Compliance Act (FATCA) and, more recently, the Common Reporting Standards (CRS). CRS being the Organisation for Economic Co-Operation and Development’s (OECD) attempt to further place a ‘nail in the coffin’ of people attempting to conceal their wealth.
Governments, tax authorities, journalists and experts on tax evasion and avoidance on Monday were digesting news of a major leak of confidential information via a Panamanian law firm. In fact, some are calling it the biggest leak of confidential information ever to hit the global financial services industry.
The news is expected to make uncomfortable reading for those who have been arguing that new regulations and disclosure laws have been at last putting an end to the use of so-called tax havens by wealthy people and companies keen to hide their assets from authorities.
The BBC says the leaked documents “revealed how the rich and powerful use tax havens to hide their wealth”, as well as to help its clients to “launder money, dodge sanctions and evade tax”. Included in the report are politicians, current heads of governments from across the world, dictators, celebrities and the super-rich.
That said, all the information that has been ‘leaked’ would seem to indicate ‘historic’ set-ups, some (if not most) of which have now been wound up.
The financial services industry will argue that it is not illegal to put together these types of structures; it is down to the individuals themselves (owners) to appropriately declare their assets in their own country of residence. These types of structures have been available within legislation for many, many years.
Also exposed within the papers are numerous global banks, these organisations seeking the assistance of the Panamanian law firm to set-up these structures to assist clients of theirs meet their aims and objectives.
The banking sector has suffered greatly since the credit crunch of 2008; this, along with multiple fines and failings, have seen this sector pay ‘millions’ in fines to regulators across the world.
So news like this may further complicate an already delicate sector.
The way forward
It has been my opinion for some time that ‘Offshore is dead – long live onshore’. Individuals should be looking to plan their affairs in an open and transparent manner and in line with the country they reside in.
There are a multitude of ‘onshore’ products/solutions available to help individuals manage their wealth and potentially reduce the amount of income and/or capital gains tax that would normally be applicable.
No need for additional costs/expenses in setting up Company or Trust structures. Although I would caveat this as there still remains some important ‘tax planning’ benefits in these structures, especially those looking at leaving assets to their loved ones – this being very dependent on residency and domicile.
The information received from the Panama Papers will rumble on for some time. Tax investigation authorities from around the globe are already rubbing their hands at this additional insight – allowing them to dig deeper into people’s tax affairs.
As always, it is imperative to seek tax opinion and independent financial advice from regulated advisers in the country you reside in. These professionals will assist you to find the most appropriate solution to help you manage your wealth in an ‘onshore’ tax compliant manner.
By Robert Mancera
Robert Mancera is Director and GM at Blacktower Financial Management (International) Ltd with offices in Quinta do Lago and Cascais. 289 355 685
Blacktower Financial Management (International) Ltd is licensed by the Gibraltar Financial Services Commission Licence 00805B. Blacktower Financial Management Ltd is authorised and regulated in the UK by the Financial Conduct Authority.