Looking For A Tax Haven? You Can Still Find One.

Anonymous offshore bank accounts are nearly as old as banking itself. While pressure in Europe may be mounting to crack down on tax evaders, there are still plenty of options -- from Asia to some familiar European havens.

In Germany, tax evaders who turn themselves in usually get to keep 70%-80% of their funds (
In Germany, tax evaders who turn themselves in usually get to keep 70%-80% of their funds (
Midia Nuri

BERLIN - The big wave started in 1993, set in motion by Germany's Federal Constitutional Court. Less than two years earlier, Karlsruhe's judges had ordered the German state to stop tolerating investors who were not declaring capital income in order to avoid paying tax on it. So the then coalition government introduced a 30-35% tax on interest payments, which sent undeclared German money rolling in the direction of Switzerland, Austria, Liechtenstein, Luxembourg and Monaco.

In and of itself, the phenomenon was not new. "There were always families who kept money in foreign accounts," says Peter Lüdemann, a lawyer and tax adviser.

Since the early days of industrialization, it has been customary for portions of large fortunes to be deposited abroad. A partner in the consulting firm Ecovis, Lüdemann explains that traditionally the reasons for sending money abroad were "fear of currency reforms, political change, unforeseeable changes in the law, or general caution."

Swiss Federal Councilor Willy Ritschard, a Social Democrat, once quipped that banking secrets were as "untouchable as a nun." During the 1990s, banks began openly advertising the practice to new customers with slogans like "Luxembourg, your money's second home." The sums transferred were huge.

In Swiss accounts alone, there is an estimated 131 billion euros in undeclared German money. BBW Marketing Dr. Vossen und Partner, a management consulting firm, estimated the amount in 2008 was closer to 175 billion, with 80 billion euros in Luxembourg and 70 billion euros in Austria.

As finances began to tighten in Western industrialized countries and concerns increased about funding of terrorism, tax havens increasingly came under pressure, with banking secrecy jeopardized after finance ministers launched a worldwide hunt for tax evaders.

In light of the threat by the Organization for Economic Co-operation and Development (OECD) to blacklist countries that do not cooperate in the fight against tax evasion, Liechtenstein, Andorra, Switzerland, Austria, Luxemburg, Belgium and Monaco declared in 2009 that they were ready to loosen their strict banking secrecy laws.

But this has inevitably set off the next wave: money deposited in more distant and obscure locations -- in the Cayman or Cook Islands, Hong Kong or Singapore. "The press of a button – and the money in Switzerland is in Singapore or Hong Kong," says one top German government official.

In the first eight months of 2010 alone, 62 billion Swiss francs are thought to have made their way from Switzerland to Asia. In Singapore, there are dozens of business and investment banks competing to lure investors. Swiss banks like Crédit Suisse and UBS have branches there, and there are hundreds of smaller financial service providers. Singapore's unbeatable selling point: 0% tax on capital gains. There is a double taxation agreement with Germany, but it only pertains to declared capital.

Dividend payments from Hong Kong firms and capital gains are tax free. The Cayman Islands are great favorites of the pros: company creation is relatively easy and a large part of the hedge fund industry is located there. Banking secrecy laws are so strict that any one breaking them can count on 15 years in jail.

So far, Western fiscal authorities haven't had much of a handle on tax evaders with funds in tax oases further afield. There are no agreements, so banks don't have to give investigators any information. Accounts and deposits stay secret, and investors anonymous.

Still, in light of a growing crackdown in Europe on tax evaders, the risk of getting caught seems to increasingly outweigh the benefits. "From a tax standpoint, smuggling capital abroad is actually idiotic," says Lüdemann. "For a tax advantage of maybe 1,000 euros per year, they block 100,000 euros of capital that they can't use to buy a car, a home or other purchases."

As of May 2011, German tax evaders have to come completely clean about funds held illegally in tax oases if they want to avoid prosecution under a law aimed at fighting money laundering and tax evasion. "What the law does is to encourage a return to tax honesty and parallel to that make the punishment for tax evasion more severe," explains Oliver Biernat, an auditor and tax advisor at Benefitax in Frankfurt am Main.

"One big advantage to turning yourself in, is that for the money that's now legal you can use all the legal tax saving options," says Anton Rudolf Götzenberger, a tax advisor in Halfing, Bavaria, specialized in the legalization of undeclared money. "I recently had a case of a client who turned himself in and then got a reimbursement from fiscal authorities." On average, Götzenberger estimates, a tax evader gets to keep 70% to 80% of their funds.

The rush of lonstanding German tax evaders now turning themselves in has less to do with a wish to behave correctly than with fear that if they don't investigators will dig up their details and they may face the embarrassment of a very public arrest, which is what happened to former Deutsche Post boss Klaus Zumwinkel.

In 2010, 26,392 people turned themselves in across Germany, which meant some 2 billion euros in state coffers.

Although a new tax agreement with Switzerland increases the pressure on would-be evaders, tax oases will certainly not run dry. On the contrary. Lüdemann expects that "the agreement should actually help the Liechtenstein foundations." They offer investors not only the possibility of hiding money from tax authorities, but also from creditors, heirs, and ex-husbands or wives. These institutions, says Lüdemann, are open to "anybody, really, who wants to hide money, for whatever reason."

Read the original article in German

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Iran-Saudi Arabia Rivalry May Be Set To Ease, Or Get Much Worse

The Saudis may be awaiting the outcome of Iran's nuclear talks with the West, to see whether Tehran will moderate its regional policies, or lash out like never before.

Military parade in Tehran, Iran, on Oct. 3


LONDON — The Iranian Foreign Ministry spokesman Saeed Khatibzadeh said earlier this month that Iranian and Saudi negotiators had so far had four rounds of "continuous" talks, though both sides had agreed to keep them private. The talks are to ease fraught relations between Iran's radical Shia regime and the Saudi kingdom, a key Western ally in the Middle East.

Iran's Foreign Minister Hossein Amirabdollahian has said that the talks were going in the right direction, while an Iranian trade official was recently hopeful these might even allow trade opportunities for Iranian businessmen in Saudi Arabia. As the broadcaster France 24 observed separately, it will take more than positive signals to heal a five-year-rift and decades of mutual suspicions.

Agence France-Presse news agency, meanwhile, has cited an unnamed French diplomat as saying that Saudi Arabia wants to end its costly discord with Tehran. The sides may already have agreed to reopen consular offices. For Saudi Arabia, the costs include its war on Iran-backed Houthis rebels fighting an UN-recognized government in next-door Yemen.

The role of the nuclear pact

Bilateral relations were severed in January 2016, after regime militiamen stormed the Saudi embassy in Tehran. Amirabdollahian was then the deputy foreign minister for Arab affairs. In 2019, he told the website Iranian Diplomacy that Saudi Arabia had taken measures vis-a-vis Iran's nuclear pact with the world powers.

It's unlikely Ali Khamenei will tolerate the Saudi kingdom's rising power in the region.

He said "the Saudis' insane conduct toward [the pact] led them to conclude that they must prevent [its implementation] in a peaceful environment ... I think the Saudis are quite deluded, and their delusion consists in thinking that Trump is an opportunity for them to place themselves on the path of conflict with the Islamic Republic while relying on Trump." He meant the administration led by the U.S. President Donald J.Trump, which was hostile to Iran's regime. This, he said, "is not how we view Saudi Arabia. I think Yemen should have been a big lesson for the Saudis."

The minister was effectively admitting the Houthis were the Islamic Republic's tool for getting back at Saudi Arabia.

Yet in the past two years, both sides have taken steps to improve relations, without firm results as yet. Nor is the situation likely to change this time.

Photo of Iranian Supreme Leader Ali Khamenei in 2020

Iranian Supreme Leader Ali Khamenei in 2020

Riyadh's warming relations with Israel

Iran's former ambassador in Lebanon, Ahmad Dastmalchian, told the ILNA news agency in Tehran that Saudi Arabia is doing Israel's bidding in the region, and has "entrusted its national security, and life and death to Tel Aviv." Riyadh, he said, had been financing a good many "security and political projects in the region," or acting as a "logistical supplier."

The United States, said Dastmalchian, has "in turn tried to provide intelligence and security backing, while Israel has simply followed its own interests in all this."

Furthermore, it seems unlikely Iran's Supreme Leader Ali Khamenei will tolerate, even in this weak period of his leadership, the kingdom's rising power in the region and beyond, and especially its financial clout. He is usually disparaging when he speaks of Riyadh's princely rulers. In 2017, he compared them to "dairy cows," saying, "the idiots think that by giving money and aid, they can attract the goodwill of Islam's enemies."

Iranian regime officials are hopeful of moving toward better diplomatic ties and a reopening of embassies. Yet the balance of power between the sides began to change in Riyadh's favor years ago. For the kingdom's power has shifted from relying mostly on arms, to economic and political clout. The countries might have had peaceful relations before in considerably quieter, and more equitable, conditions than today's acute clash of interests.

If nuclear talks break down, Iran's regime may become more aggressive.

Beyond this, the Abraham Accord or reconciliation of Arab states and Israel has been possible thanks to the green light that the Saudis gave their regional partners, and it is a considerable political and ideological defeat for the Islamic Republic.

Assuming all Houthis follow Tehran's instructions — and they may not — improved ties may curb attacks on Saudi interests and aid its economy. Tehran will also benefit from no longer having to support them. Unlike Iran's regime, the Saudis are not pressed for cash or resources and could even offer the Houthis a better deal. Presently, they may consider it more convenient to keep the softer approach toward Tehran.

For if nuclear talks with the West break down, Iran's regime may become more aggressive, and as experience has shown, tensions often prompt a renewal of missile or drone attacks on the Saudis, on tankers and on foreign shipping. Riyadh must have a way of keeping the Tehran regime quiet, in a distinctly unquiet time.

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