Tax Havens for Dummies: Ten Places to Park Your Dough
Because Mitt Romney shouldn't have all the fun!
Photo: Nina Raingold and Ethan Miller/Getty Images and FABRICE COFFRINI/AFP/Getty Images
There are certain perks of the ultrawealthy, such as earning carried interest and eating the Douche Burger. that are probably not all that interesting to those Americans not fortunate enough to make the Forbes list.
But one of the benefits of being rich — parking your investments and/or registering your corporation in an offshore tax haven — is so lucrative, so enduring as a money-saving technique, that it shouldn't remain a secret known only to Mitt Romney and other financial sophisticates.
So, in the interest of public service, Daily Intel presents the benefits and drawbacks of ten widely used tax havens, culled from a list that includes many more. May the list help you keep your fortune away from the clutches of government.
PRO. Switzerland is one of the most well-established tax havens in the world, with laws prohibiting bankers from releasing details about their clients dating back to the eighteenth century. The country's long-standing tradition of neutrality, political stability, and strict bank secrecy laws have made the Swiss bank account a favorite accessory of elite tax evaders and Bond villains alike.
CON. Being the poster child for tax havens makes the country a bigger target, and the Hollywood stereotype of the ultradiscreet Swiss bank is becoming less true every year. Today, according to Swiss financial consulting firm Micheloud & Cie. the safe deposit boxes at Swiss banks aren't even retrieved by a robotic arm activated by a triangular key. What fun is that?
PRO. Austria has no inheritance tax, and it gives tax breaks to citizens who live abroad at least half of the year, which is likely why American songwriter/socialite Denise Rich, who had dual citizenship in Austria, recently renounced her ties to the United States. (Although she's moving to London, somehow dumping her U.S. passport was necessary to "be closer to her family.")
CON. In 2009 Austria managed to get itself removed from the Organization for Economic Co-operation and Development's "grey list" of tax havens by signing agreements to share banking information with other countries when requested, so this may not be the place for those who place a high value on financial discretion.
PRO. Apple routes all of its iTunes sales through a subsidiary in Luxembourg, reportedly because the small European nation has promised it and other giant tech companies a tax break if it does so.
CON. Probably won't work if you're not Apple.
PRO. Facebook cofounder Eduardo Saverin recently moved to Singapore, which is quickly becoming a popular location for stashing cash, reportedly because it has no capital gains tax. It also has close ties to Swiss banks, according to the Tax Justice Network. an anti-tax-haven pressure group. Your personal information is safe in Singapore, as it's made infringing on banking secrecy punishable by three years in jail.
CON. Eduardo Saverin lives there. Also, their monkeys attack .
BRITISH VIRGIN ISLANDS
PRO. Chinese companies are reportedly fond of using the British Virgin Islands as an offshore base for their profits. Why? Oh, you know, just because it has no capital gains tax. gift tax. sales tax. or inheritance tax. and because its effective income tax rate is zero.
CON. The BVI (as the cognoscenti call it) have been a known tax haven for so long that governments are starting to crack down on it. India, the U.K. and the U.S. are among the many countries that have signed tax
information-exchange treaties with the Islands in an effort to stop money laundering. Meaning: Watch your back.
PRO. The French-speaking group of islands looks like a screensaver. and doesn't require companies registered there to report much at all about their finances or ownership structures. It also has no corporate income tax for businesses operated by non-residents.
CON. According to the law firm Offshore Legal Associates (which doesn't sound sketchy at all ), Seychelles is " no longer the tax and privacy haven that it was. " Due to changes in local law, corporations based in Seychelles now have to file ownership documents, which can be uncovered in even a basic legal proceeding. And without guaranteed anonymity, Seychelles is just another tropical paradise.
PRO. Monaco, the city-state on the French Riviera, is a tax avoider's dream. Not only does Monaco have no individual income tax, but it has myriad places where rich Americans can spend their hard-earned dollars on better things than social services and infrastructure. Like casinos. And racetracks. You think GoldenEye was filmed here for nothing?
CON. Contrary to stereotype, Monaco's laws are actually quite strict when it comes to run-of-the-mill tax evasion. In a 2010 op-ed, Evelyne Genta, Monaco's ambassador to the U.K. wrote that Monaco was "ready to increase its co-operation in the fight against tax fraud in accordance with international criteria. " (How do you say "killjoy" in French?)
PRO. A favorite of hedge-funders everywhere, there is no better place to find a rubber-stamp board for your hedge fund than this tropical island. (The Times reported several weeks ago that a few Cayman Islands heroes have even offered to serve on hundreds of hedge fund boards.) Mitt Romney likes it, too. According to The Wall Street Journal . the Cayman Islands is "a favorite destination for private-equity managers to locate new partnerships, mostly because foreign investors can participate while avoiding some U.S. tax entanglements."
CONS. The Cayman Islands has become such a cliché of a tax-avoidance hotspot that just saying the words "Cayman Islands" has scored points for the Obama campaign. If flying under the radar is your goal, pick somewhere less politically pungent.
PRO. Delaware isn't technically an offshore destination, but it has become a popular corporate tax haven. with more than half of all public corporations in the U.S. being incorporated in the state, as well as many shell companies, according to the Times. Major companies including Apple, Bank of America, General Electric, and Walmart have mailing addresses in Delaware that allow them to pay lower taxes than they would if they were incorporated in the states in which they actually do business.
CON. Lawmakers are working to close the "Delaware loophole" as we speak. Also, have you ever been to Delaware?
PRO. If Delaware doesn't float your boat, but you want to stay domestic, Nevada might be more your speed. Tax-dodging companies like Cisco, Harley-Davidson and Microsoft have reportedly used Nevada as a parking spot for subsidiaries, since the Silver State has a corporate income tax rate of, wait for it. zero percent. It also has no personal income taxes.
CON: Proximity to Sheldon Adelson. having to explain to your significant other why you're always jetting off to Vegas.
In conclusion: Have fun pulling one over Uncle Sam, but be sure to watch yourself out there. Eduardo Saverin's new, relatively tax-free life in Singapore caught the attention of U.S. lawmakers and now they're pushing legislation that would crack down on all other would-be tax evaders.
If anyone ever needed to be poked, it's that guy.Source: nymag.com