If you were to believe popular media narratives, rich Americans would be the number 1 clients of most of these firms.
But they aren’t, and if you adjust by percentage of rich people, the US is dramatically underrepresented.
I think there’s two contributing factors to this:
1) The US has relatively low capital gains and inheritance taxes as compared to most countries in Europe and elsewhere, and since most rich people only care about capital gains and inheritance, it makes tax evasion less profitable when done successfully
2) The power of the US treasury to enforce draconian global reporting laws like FATCA and FBAR and global tax. This cannot be overstated. The US can cut off your banks ability to trade in dollars—-which is effectively a death sentence for a bank. Therefore pretty much every bank on earth is willing to comply.
In the US, the problem isn’t offshore tax evasion, it’s the actual domestic tax code itself which allows for all the loopholes!
Meanwhile, if you’re an average joe American expat living abroad, your financial life will be a nightmare since the US automatically assumes you’re some rich tax evader. Good luck opening even a basic bank account while abroad.
It’s easier for a non-American to create an anonymous shell company inside the US than it is for an American exchange student to open a bank account while abroad.
Not my expectation exactly because
> The US has relatively low capital gains taxes
This is very euphemistic. The US is a maze of tax havens and loopholes. Some states make it easier to launder art, some make it easier to zero-out income taxes and so on. Plus endless tax benefits “for the sake of the economy”.
So congratz to the US on allowing such nasty behavior inside instead of adding a few more contrived hoops to those who wish to evade taxes…
US citizens pay tax on global earnings. Almost every other country in the world you do not.
Your tax rate for say a UK citizen if you shift from onshore to offshore goes from 40% to 0%. For a US, no change. If you are spending 10k/100k per year to maintain the strucures the motivation is not there for the US.
Philosophically this is interesting as they are taxing residents as well as citizenship, which has a right to residency at any time.
"When you’re UK resident you’re normally taxed on the arising basis of taxation. This means that all your worldwide income and gains will be taxable in the UK. Therefore, even if your foreign income and gains have already been taxed in another country they will still be taxable in the UK and you must declare all of your foreign income and gains on your tax return."
https://www.gov.uk/government/publications/residence-domicil...
The difference is that a UK citizen can become 'non-resident' by moving permanently abroad and there is a 'non-domiciled' option that is wildly complex legally but allows taxation on a remittance basis.
The US tax code applies to its citizens wherever they choose to live in the world with IIRC no exceptions short of renouncing citizenship.
That's not even close to being true. As long as you're paying taxes where you're living (and most foreign jurisdictions are quite prickly about such things), if the taxes you pay to the foreign government exceed what you'd owe the US government, you generally don't have to pay any US income tax[0].
[0] https://www.americansabroad.org/us-taxes-abroad-for-dummies-...
Edit: Apparently, while the income tax situation isn't too bad for expats, the US has reporting requirements for foreign banks that are rather onerous. As such, many American expats have a hard time getting bank/investment accounts abroad, which is what OP was talking about.
Many financial institutions will block US taxable people due to the complications supporting them. Especially if you're a peasant whose support costs will exceed your value to the institution.
Additionally, you must still file taxes every year, and declare all bank accounts on which you are a signatory (under threat of seizure), or for which your spouse is a signatory.
How much of the 30% US withholding taxes on Dividends from US-equities can be claimed back?
If you can't claim back anything, then it is probably not worth it just because of that.
You'd never want to open an investment account in Panama due to these rules (and you'd have a hard time opening an account there in the first place).
You could invest in Panama through US domiciled funds (or a US company), but then of course you're still paying US taxes on everything.
The US is the only country on earth with the power to actually enforce a draconian global tax scheme on its citizens, due to the US dollar being the global currency. If you don't comply, the US treasury shuts off your access to the US dollar.
Eritrea (small African nation) is the only other country with global taxation, but they have absolutely zero power to enforce it.
My country, which isn't a tax haven, get's branded as one (with significant penalties) by the EU, while actual tax havens like those in the Pandora Papers, and USA, are given a free pass.
https://www.theguardian.com/news/2021/oct/05/eu-action-again...
Sure. Are they also forbidden to lie to congress? Or interfering with their own oversight committees?
I have little faith that the law is adequately applied to these orgs.
* It's simply Not Possible to fix the problem of widespread tax avoidance because There Will Always be Loopholes.
* In any case if you tax the wealthy too much they'll run away with their money which will be worse in the long run and the government can't stop them and Then You'll Be Really Sorry.
The public can't really be trained to believe that tax havens are ok but maybe 70% can be led to believe the lie that theres nothing that can really be done about them so they dont demand politicians fix it while a good 40% are susceptible to persistent character assassination on politicians who do try to fix it (e.g. https://www.foxnews.com/politics/aoc-ethics-complaint-met-ga...)
Trying to convince Bahamanian lawyers to charge less than a million dollars for setting up elaborate tax structures that Congress winks at because their donors like them isn't really a viable fix. A) they won't B) if they did that particular method would be shut down and theyd shify to others because the core problem of "Congress doesnt work for you" hasnt changed.
https://jonathanturley.org/2012/12/12/french-government-deno...
I saw companies leaving countries for tax reasons.
I see people working 80% instead of 100% because thanks to progressive tax their net salaries remain 85+%.
Of course tax laws also factor into life decisions.
For example by creating a multinational entity that swallows you all the small shops, while letting them be the owner as they were before. But they now use a service that consistently costs so much that it's not returning a profit. While they also start a new business through a foreign Enterprise that is stationed in any tax Haven you have your eyes set on. When on scale this will drain the tax income of most small shops and must force the government to shut down these constructs. Challenge being that in doing so the precedent crested will also force the multinationals, like Shell, Unilever, etc. To shut down their unfair tax advantages.
I don't think the idea is novel, and I think it's extremely risky, but something worth chasing I believe.
I've considered creating my own church for along the same reasoning you describe. If I can make a Mary Mag Was Actually Jesus Church with minimal effort, and the end result is I get to play the same game that corrupt ministers do, shouldn't I ethically do so? There's good and bad about it, and I leaned towards no. But maybe the problem is it's unethical if too few people do it. If I scale it up, does it become ethically different?
Say TurboTax starts providing any Joe Schmoe the chance to click a few buttons and handle all the hard things to establish his new 'church' is a legally tax-exempt financial vehicle on religious grounds. What would come of it? Would it accelerate the good or bad?
This already exists in certain places and under certain conditions. Several EU member states offer very generous tax rates provided you make under a certain sum and meet other (fairly specific) criteria.
Maybe we are getting there.
Rather surprisingly, I can't seem to find a lot of historical examples of, say, German trade unions completely blocking Liechtenstein, demanding a fairer taxation system.
I'm not rich, that meeting cost me $1200 and the outcome was a legal document incorporating my company with all the different things we discussed.
I can not imagine what is available once you hit the 3 million mark and beyond.
And you can do that (almost fully) online with Estonia, but I'm not sure they can be considered a tax haven.
If you have employees offshore, a director offshore, quarterly shareholders company meeting offshore and the income is not coming entirely (or, even better, not at all) from your country of residence, then maybe it will be just sheltering (subject to the laws in your country of residence that can change at any time).
I've been thinking of setting up a company in a low tax location (non blacklist, maybe 5-12%), receive payments for a group of contractors working with foreign companies in high tax jurisdictions (think, living in Spain for a US or UK company) and then keep a ledger of payments received, expenses and money paid out. Company shares could be granted among the contractors and the manager of the company based on how much the contractors brought into the company and invoices for work (and dividends) could be paid to the contractors who need some money to live. The money left in the company could be invested for the contractors in whatever they prefer. After a decade working and saving outside of your expensive jurisdiction you could move to some tax friendly location (Dubai, or Portugal under the NHR scheme) and extract all the profit you made over your career.
If the contractors were all shareholders and going to shareholders meeting in the offshore location, there may be enough substance to keep tax collectors at bay and having multiple people bringing income would make it hard for the authorities to claim they could tax the offshore company as a national company.
The price to pay would be trusting the managers of the company not to run away with your money and to respect the contract.
I copied that from a [BBC article][1]. It seems that election didn't go well for him.
It’s still costly, but you only need a fractional “employee” not employees plural in many cases.
2) I am sad that despite the comprehensive coverate of the subject the 'revelations' are a shock to people.
FTA:
> Note: This episode originally ran in July 2012.
