Tax havens: where are the warm bodies?

Jurisdictions around the world have put in place all sorts of fine-looking laws that allow them to claim silly things such as "we are not a tax haven" or, a particular favourite, "we are a transparent, co-operative and well regulated financial centre with rigorous anti money laundering." The reality is that these places put in a law which ticks a regulator's box, then they simply fail to police it. Local trust administration companies and other facilitators of corruption can carry on freely, safe in the knowledge that nobody is going to crack down on them.

So it is useful, as a reminder of this, to read the latest from the Tax Research blog, which is worth reproducing in full:

I had a discussion recently with a regulator from a major jurisdiction: a person who has had reason to use Tax Information Exchange Agreements and who knows their pitfalls from the inside.

I asked him a simple question:

Do secrecy jurisdictions really know who are the beneficial owners of the structures that exist in their domains?

He laughed in response:

Look, I deal with the places that are cooperative – who have signed these deals, and where we think we might make some progress. And candidly they just don’t know. They ask the administrator who is meant to have the data and all they know is that the beneficial owner is a structure in another secrecy jurisdiction.

And in a sense it’s not that they’re lying: it may be that discretionary trust has been layered on discretionary trust, upon company and foundation until no one knows.

Was this chance, I asked?

No of course not. But it does frustrate our purpose.

We can tweak them forever, but that’s the wrong direction of travel. Only mandatory identification of the warm bodies behind structures and the automatic exchange of information in accordance with that data can resolve this issue. Whilst the assumption of a right to privacy remains then we’ll get nowhere.

And does it prove that these places really don’t know who owns the structures that operate within them, I asked? He just laughed. And then added:

And remember I’m talking about enquiries made of the more willingly cooperative jurisdictions and we get nowhere.

I can’t name names. I’d like to but can’t. But let’s be clear we’re talking best case scenarios here. And candidly Tax Information Exchange Agreements aren’t working. And nor are beneficial ownership rules.