[FoRK] Busting the "offshore tax havens" myth

[zuzu]

On 5/5/08, Jeff Bone <jbone at place.org> wrote:
>
>  Okay, let's not repatriate the money;  instead, let's do a distribution to
> an individual account that Russell holds somewhere else offshore.  That's
> taxable in the US, no benefit to offshoring, plus likely to get you a nice
> audit even if it's all above board.  Let's have the HC buy Russell a house
> in Provence instead;  ticket to Club Fed for Russell, I believe the
> operative theory is called "beneficial control" and they *will* bust you for
> that kind of shit if they catch on.
>
>  Let's try to expatriate Russell's domestic income stream;  instead of
> hiring out to his clients directly, they hire the offshore entity, who
> Russell both controls and ostensibly works for.  As soon as Russell's
> effectively received or got control of the income stream, he's going to get
> taxed --- just like you would.  If he fails to pay the taxes, he's going to
> jail --- just like you would, offshore or no.
>
>  Let's make it more complicated for the IRS.  Set up a web of holding
> companies, and keep all the money and all the acquired assets offshore.  Big
> trouble now, long vacation in Club Fed.  The IRS makes the *presumption*
> that most attempts to put capital or wealth offshore are dodgy, and you've
> made your case for them  --- if you get caught.  You might not, but then,
> you're just a garden-variety tax dodger;  and we're disputing the existence
> of *legal* offshore tax strategies that actually have any substantial
> benefit for the person who doesn't feel like totally getting the hell out of
> Dodge.
>
>  You can make money offshore.  You can keep money offshore.  You can even
> move money offshore.  None of that's in question.  You just aren't going to
> get anywhere but jail by trying to make (and spend) money here w/o paying
> the Tax Man.


thoughts on the following?

http://en.wikipedia.org/wiki/Tax_exile#U.S._rules

The US tax law, at the state and federal level -- broadly speaking --
only tolerates Americans taking money outside the US. As long as money
taken outside the US is never brought back into the US there is no
violation of the law. It is broadly understood that Americans can use
corporations or trusts to cover moving money outside the US, providing
that said corporations or trusts are not based in nations that would
raise suspicion.

Broadly speaking, the US taxation rules encourage people to move their
assets offshore -- and to retire offshore. This creates a permanent
outflow of USD into other currency zones.


http://en.wikipedia.org/wiki/Perpetual_traveler#Five_Flag_Theory

Perpetual travelers may attempt to organize their affairs around the
"Five Flags" theory, arranging for different facets of their lives to
fall under the jurisdiction of separate countries, or flags. This is
an extension of W.G. Hill's original "Three Flags" approach.

Whether to minimize governmental interference (via taxes or
otherwise), or to maximize privacy, the theory proposes that you
arrange for each of the following to be in a separate country:

   1. Passport and Citizenship - in a country that does not tax money
earned outside the country
   2. Legal Residence - in a tax haven
   3. Business Base - where you earn your money, ideally somewhere
with low Corporate tax rates
   4. Asset Haven - where you keep your money, ideally somewhere with
low taxation of savings interest and capital gains
   5. Playgrounds - where you spend your money, ideally somewhere with
low consumption tax and VAT