Easy Tax Evasion

“We don’t pay taxes. Only the little people pay taxes.”

Real Estate Tycoon Leona Helmsly to her maid

This is the first in a series on how the super-rich can evade paying taxes altogether.

● There is sufficient money in offshore tax evasion by the US superich to pay the country’s annual deficit if that tax was collected.

In 2012, the Tax Justice Network estimated that between $21 trillion and $32 trillion — the size of the U.S. and Japanese economies combined — was hidden in secrecy jurisdictions. If the tax evaded by wealthy individuals was collected, it would likely cover most of the annual deficit in each of the G7 countries, including the US. As the chart below shows, the U.S. has the largest share of these tax cheats.

If tax evasion, using secrecy jurisdictions, is so big it could cover the government’s annual deficit, then why isn’t it at the top of every politician’s agenda to stop it? And considering that criminals of all types: drug lords, human traffickers, con men, and terrorists, all use the same methods, they would also be caught by reforms.

And, why aren’t journalists in the media screaming in outrage at the politicians’ lack of concern in this area? Perhaps it is because the owners of the media outlets either benefit from the system themselves or are members of a class of society that believes the rich have the right to elude taxes; taxes are tyranny.

This series on tax evasion will show how:

• easy it is to understand the methods of tax evasion

• the few hard-fought reforms always contained freight train sized loopholes

• easy it would be to stop it effectively

Easy Tax Evasion Methods

Say you have a million or two in cash to hide from the tax department. No problem: it’s a one-stop-shopping process.

First off, you must find an offshore service provider. There are many websites that blatantly offer thinly disguised tax dodging. One brazenly calls itself, No More Tax. But why take a risk of a public source when there are so many local advisers operating in the shadows. Your local bank will have a wealth management division that can put you in touch with such a service. Or your lawyer or accountant could make a recommendation.

The tax dodging service provider (they like to call themselves wealth management advisors) will offer you a choice of structured packages. You will be able to customize to your liking by effectively choosing from column A, column B, and so on. You will have 80 tried and tested secrecy jurisdictions for your tax evasion plan. You will quickly have your money in a secrecy jurisdiction hidden beneath a structure of shell corporations and legal documents that resembles the rigging of an 18th century schooner. Its complexity will make it impossible for the taxman to pin down who owns what.

You won’t have to go to these places. As part of the module, your provider has the contacts already in place. You only need to pick which jurisdiction. You won’t have to leave your chair for any of this.

The New Treasure Islands

The Panama Papers (note the allusion to the famous Pentagon Papers) gave us a look at places the wealthy prefer. See chart below.

BTW: the United Kingdom — because of overseas territories like the, British Virgin Islands, Cayman Islands, and so on — is a much larger secrecy jurisdiction than Switzerland. Its many island protectorates have been dubbed The New Treasure Islands.

As the chart shows, the BVI are the wealth hiders’ jurisdiction of choice. (It was also Bernie Madoff’s.) According to an investigation by the International Consortium of Investigative Journalist (ICIJ), the BVI contains as much as 40% of all offshore corporations worldwide. The Chinese respectfully call it the “New Forbidden City.” So, let’s start at the connoisseurs’ choice, the BVI.

The BVI creed declares the islands are the true defenders of democracy. They provide the ultimate freedom of choice: the freedom not to pay taxes. Journalist Ann Michel travelled to the BVI and listened to a teacher educating her class about the BVI’s attitude to tax evasion. Here’s what she heard:

“Who collects taxes?” Scatliffe-Edwards [the teacher] asks. “Governments, isn’t that right?”

“Yes!”

“Do people like paying taxes?”

“No!”

“So don’t they have the right to choose to pay their taxes wherever they’re lowest?”

“Yes!”

“Freedom of choice is a citizen’s fundamental right,” she concludes professorially. “And they’re right to choose the Virgin Islands.”

But don’t worry about that reference to low tax rates. The BVI has no income or capital gain tax, and not a penny of your money is going to even touch the BVI. That’s part of the deception. Here you will only get your first shell corporation.

First, your BVI on site service provider will engage a frontman. These people do a high volume so their charges may be as low as $100 per year. Their name — and their name alone — will appear on any documents related to your matter. They will not reside in the same country as you to make it difficult for your country’s tax investigators to connect them to you.

Next, your frontman will apply to incorporate a BVI shell corporation. It is helpful for tax secrecy that governments, including the US, only require the name of one director on the application for incorporation, never the names of any shareholders. That one name will be the name of your frontman.

At the same time in another jurisdiction, you will establish a private trust to eventually hold the corporate shares and thoroughly disguise that you are the ultimate beneficial owner. The corporation’s shareholder ledger in your lawyer’s office in the BVI will only show the trustee of the trust as the shareholder.

Secret Documents in a Secrecy Jurisdiction

Your shell corporation’s name is on the BVI government website, even though that is a secrecy jurisdiction. These next documents are even more secret in that they never need leave your lawyer’s locked filing cabinet.

A private trust is essential because it is never publicly registered. It can be created confidentially just like a contract, even on the back of a napkin. Most trusts in tax plans are drafted by lawyers and are kept on encrypted computer files, sometimes on computers that are never connected to the internet. This is secret document within a secrecy jurisdiction number one.

(Note: There is also a trust company that is an institution and operates somewhat like a bank.)

As an example of a private trust: a mother may create a trust by putting $1 million in savings bonds in trust for her two minor children appointing her lawyer as trustee with directions to pay:

• the income to the children until they reach 25, then

* the principal (corpus) to them at 25.

The trustee is the legal owner. They have the sole right to deal with the trust asset such as receive the interest and pay it out according to the terms of the trust. The children are the beneficial owners. By these terms, the mother no longer has any formal control in law over the funds. That is the legal formality, but she may, in fact, informally have the complete control and give instructions to the lawyer trustee. However, we have two classes of people who can legally claim the title owner: trustee and beneficiaries (beneficial owners).

Back to the trust for your tax evasion scheme. In such plans, the trustee is your frontman, noted above, you are the beneficial owner (often: the ultimate beneficial owner, or UBO to avoid BO). The frontman trustee then signs a power of attorney giving sole rights over the trust back to you. The power of attorney can be kept in a locked lawyer’s cabinet. This is the second secret document within a secrecy jurisdiction.

Tax Plan Continued

To establish your trust, we recommend you choose the Seychelles Islands, way in the middle of the Indian Ocean. And, yes, experienced island lawyers are also included in your package. Another plus, the Seychelles refuses to enforce foreign court orders. They are economically self-sufficient from tourism — and by selling that most valuable of all commodities: tax relief. Your taxman cannot get a court order for disclosure enforced in the Seychelles. You have an impenetrable second firewall.

Another perk: If you are interested in a little sun & sea tax evasion tourism, the Seychelles are a favorite playground of celebrities of all types: royalty, movie, sports, what have you. They use holidaying as a cover for checking on their tax evasion schemes. No record is left of telephone calls or emails. You might get to share a beach with your favorite royal.

The Well-Hidden Bank Account

Now that the ownership of the shell corporation is effectively hidden, it’s time for it to open a bank account in another secrecy jurisdiction.

You have used only two of the 80 possible secrecy regimes. If you like to feel rich, you can have the bank account in Switzerland. But the trend now is Nevada. (Later, more on why Nevada is becoming one of the safest places for US citizens to hide money.)

Now you have a bank account under an impenetrable barrier to your ownership:

• A bank account in Switzerland or Nevada showing a BVI corporation as owner

• Government registration in the BVI shows a nominee as the only director of the corporation,

• The corporate records of the BVI corporation kept in the lawyer’s office show that nominee as the only director and shareholder

• A trust agreement in the Seychelles recording that the front man is a trustee of the shares for you.

• A power of attorney in the Seychelles from the frontman as trustee giving control of the trust to you.

You can add layers and layers of shell corporations and trust agreements, and many do.

Tax departments cannot cannot pierce this plan. Even a supreme hacker cannot do it. Only a bank employee whistleblower could. Hence the need for the Departments of Justice, in the service of the utra-rich, to pursue and fully punish bank whistleblowers. And, as led by the US, they have vigorously done this within near media blackouts. More on that coming.

Acknowledgement: Island phot by Pixabay on Pexels.