Vikram Mansharamani, an author and lecturer in Ethics, Politics and Economics at Yale University, posted an interesting article on Linkedin (10 February 2016) entitled “America Is Enabling Tax Evasion“.
The revealing conclusion is that America actively facilitates anonymised company structures used for avoiding tax liabilities, at the same time as it is trying to eliminate them everywhere else (particularly through FATCA). In the author’s own words, “it’s probably easier to set up an anonymous corporation in the US than in the Cayman Islands”.
Some of the author’s sources for this claim are even more unequivocal in their approach – for example, this recent Bloomberg piece (27 January 2016), explicitly titled “The World’s Favorite New Tax Haven Is the United States”:
Another key publication he references is a 2010 study by Professor Jason Sharman, published in the Journal of Economic Perspectives, in which the researcher approached corporate service providers in 22 different jurisdictions attempting to set up anonymous corporate vehicles without having to provide proof of identity. The result? He had major success in most of the OECD countries, while the vast majority of firms in traditional ‘tax havens’ refused his request. He suggests that “small island offshore centers may have standards for corporate transparency and disclosure that are higher than major OECD economies like the United States and the United Kingdom.” The abstract and a link to the full article can be found here:
Our little island still gets a fairly prominent mention at the beginning of Sharman’s article as he shows how opaque company structures can be used to commit financial crimes. The first example he uses is a real-life case where offshore service provider Lawrence Turpen advised clients to use Isle of Man based company and trust structures to create (effectively fictitious) separation between themselves and their assets.
Admittedly, the Turpen case was a good many years ago now, well before the advent of FATCA, and reporting standards around the world have changed considerably since then. That being said, the recent revelation that a French politician’s ex-wife hid around two million pounds in an Isle of Man account has prompted an investigation which may be looking back as far as the 1990’s for evidence of illegal activity, yet this is all only coming to light now. The island is therefore unlikely to lose its reputation as a tax haven any time soon, however good its current transparency and disclosure standards are.
Mansharamani highlights the perplexing level of hypocrisy, even downright cynicism, that characterises America’s stance on tax avoidance. The fact that funds are flowing out of the traditional tax havens into the States does not mean, however, that jurisdictions like the Isle of Man are not susceptible to similar accusations of double standards.
The advent of, erm, onshoring (or perhaps we should call it re-shoring) does not mean the end of offshoring. It simply demonstrates that this is not just an offshore issue. It further highlights the tenacity and universal availability of the services and structures that are used to facilitate tax avoidance and tax evasion.