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July 6, 2013
Thousands of art lovers in Paris are staring at themselves in Anish Kapoor's distorting mirrors. What do they see?
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During the Lebanon war of 1982, an Israeli pilot refused to bomb a building when he suspected - correctly - that it was a school.
- Gun to the head
June 29, 2013
For Pakistan, it's time to harp on 'the Kashmir issue' again, this time with clear linkages to the mess in Afghanistan.
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It's shockingly easy to hide money offshore.
Earlier this month, I decided to see how hard it would be to set up my own offshore bank account. I figured it would be pretty difficult, because I'm not rich and don't have a team of tax lawyers to oversee my money and because the EU and US governments have been cracking down on tax havens by imposing stricter tax-sharing requirements. So I proceeded with some caution.
First, I googled "company registration tax haven" and randomly picked three firms that set up accounts in offshore jurisdictions. Then I called each and explained that I was hoping to minimise my tax exposure and didn't want anyone to know anything about my finances. Each company noted that I should consult a lawyer to make sure that I wasn't breaking the law. Then they calmly explained how to create an account that, it seemed to me, was unlikely to be discovered by the IRS or any other authority.
I ended up working with A&P Intertrust, a Canadian company that I chose largely because I liked its website the best. A&P works with the governments of Panama, the British Virgin Islands and Belize. (Other companies that I contacted prefer the Seychelles, Cyprus or the Cayman Islands. ) I decided to start my shell company in Belize because it would be exempt from all Belizean taxes and, as A&P's site explained, "information about beneficial owners, shareholders, directors and officers is not filed with the Belize government and not available to the public. " And I've been to Belize and like the place.
Setting up the company was a lot cheaper than I expected. A&P charged $900 for a basic Belizean incorporation and another $85 for a corporate seal to emboss legal documents. For $650 more, A&P offered to open a bank account to stash my fledgling operation's money in Singapore - a country, the website also noted, that "cannot gather information on foreigners' bank accounts, bank-deposit interest and investment gains under domestic tax law. " And for another $690, it offered to assign a "nominee" who would be listed as the official manager and owner of my business but would report to me under a secret power-of-attorney contract. Then an A&P associate asked me to fill out the incorporation information online, just so she wouldn't type in anything incorrectly. The whole thing took about 10 minutes.
Amazingly neither A&P nor I broke any law in Canada, Belize, Singapore or the United States. The company required, in compliance with international legal standards, that I email it a notarised copy of my passport, driver's license and some other identity documents. But a company representative also reassured me that these would not be visible to any tax authority. Just before they processed the paperwork, I explained that I was a journalist working on an article about offshore tax havens, and I haven't heard from them since.
Setting up an account may be easy, but managing one is expensive. Following the law requires a team of lawyers and accountants to carefully monitor tax laws in dozens of countries and maintain accounts that stay on the safe side of confusing rules. It's not really worth the cost for anyone other than wealthy investors looking to put aside money, tax-free, for future generations. Or for large multinationals who prefer to centralise their global cash-flow stream in a place that doesn't tax corporations or require a lot of financial reporting. Why would a huge company like GE want to pay US taxes every time its Spanish subsidiary sells parts to a company in Belarus when it could avoid them by incorporating offshore?
It's easy to imagine that most other kinds of offshore activity are shady, but there is no definitive way to know, because we don't even know how much money is in these centres. The estimates, however, are striking. The Bank for International Settlements, which collects voluntary reports from banks in 44 countries, counts around $31 trillion of foreign-owned assets in the world's banks and estimates that about $4 trillion is in offshore financial centres. An estimated $1. 5 trillion is in the Cayman Islands alone. The country of 52, 000 has more foreign-owned deposits than Japan or the Netherlands.
Lately the United States and the European Union have expressed deep frustration with the international system of sharing tax information. In order to investigate my Belizean company's bank account in Singapore, for instance, the IRS would need to identify my bank and bank account number, prove I had broken the law and then petition judges in Belize and Singapore to issue court orders forcing the release of my information. It's a nearly impossible standard. It can also be easily undermined by enlarging the web of new accounts.
One often-overlooked lesson of the financial crisis is that shenanigans don't happen in the absence of regulation;they happen when regulations are exceedingly complex and involve confusing, overlapping regulatory authorities. Economists generally agree that the best tax system would be simple and strict, offering little incentive to lobby for loopholes. The big problem, of course, is that many of the people and corporations with the most influence over Congress don't want it that way.
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