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I always wondered if there might be some way to write a law that essentially bans clever financial tricks.

by ginko 8y ago

dalbasal 8y ago
Clever? no. Clever is how you get to where we are now. The law(s) that would need to re-written are the core laws that define what a company is, how ownership, liability and such work. These are all clever-complicated. They cross jurisdictions, and enable cascading ownership (companies, owning companies, owning trusts, etc.), each with different (incompatible) rules: tax, reporting & transparency obligations, definitions of terms like profit. They've been complicated constantly for hundreds of years, trying to encourage one things and discourage another, usually for a small picture reason. Most of the "tricks" involve using multiple types of legal "persons" registered in multiple jurisdictions with multiple ownership structures. New laws try to plug certain loopholes, open other ones, or achieve a political or policy goal. This complexity is why it's so hard to do anything with company law.
EliRivers 8y ago
There is, but the trend in US (and UK) law has unfortunately gone down a path that makes this very difficult. The letter of the law is given great weight, no matter the intention of the law. For example, in tax law, the game is to find ways to not actually violate the exact letter of the law. The idea of the spirit of the law has no force; everything has to be precisely outlawed. This, of course, is an infinite game that will never end, and leads to the endless games of shell companies and foreign domiciling and so on and so on; everyone knows that this is not what was intended, but it's what we have. The alternative is to write into law the intentions of the law, and allow subsequent assessment and judgement. Some places do this, and in this way the game of finding ways to ever so slightly dodge the exact wording of the law is a much less fruitful game.
- dexen 8y ago
  >The letter of the law is given great weight, no matter the intention of the law. You are assigning the responsibility the wrong way around. The letter, and the intent, of the law have two points of interfacing: the point of execution (interpretation by the taxpayers or by the courts of law), and the point of redaction (the lawmakers distilling the intent into actual letter of the law). In case of the letter of the law not representing the intent, we would be much better off assigning the blame to the lawmakers. It is both their primary duty, and also what they have the best tools for. Putting the onus on anybody else than the lawmakers creates perverse incentive to get bribed for sake of writing loopholes into the law. When the lawmakers fail at properly writing the laws, punish the lawmakers: both vote them out, and also have the media launch investigation into possible corruption - the slip-up could very well be intentional.
hjk05 8y ago
There are plenty of laws that are specified in such a way that no matter how you structure your shell companies they still apply. The only way to truely get around that is to start having strawmen owners or unregistered ownership relationships, all of which will get you in trouble with the law.

I always wondered if there might be some way to write a law that essentially bans clever financial tricks.

by ginko 8y ago

I always wondered if there might be some way to write a law that essentially bans clever financial tricks.

Clever? no. Clever is how you get to where we are now. The law(s) that would need to re-written are the core laws that define what a company is, how ownership, liability and such work. These are all clever-complicated. They cross jurisdictions, and enable cascading ownership (companies, owning companies, owning trusts, etc.), each with different (incompatible) rules: tax, reporting & transparency obligations, definitions of terms like profit. They've been complicated constantly for hundreds of years, trying to encourage one things and discourage another, usually for a small picture reason. Most of the "tricks" involve using multiple types of legal "persons" registered in multiple jurisdictions with multiple ownership structures. New laws try to plug certain loopholes, open other ones, or achieve a political or policy goal. This complexity is why it's so hard to do anything with company law.

EliRivers 8y ago

There is, but the trend in US (and UK) law has unfortunately gone down a path that makes this very difficult. The letter of the law is given great weight, no matter the intention of the law. For example, in tax law, the game is to find ways to not actually violate the exact letter of the law. The idea of the spirit of the law has no force; everything has to be precisely outlawed. This, of course, is an infinite game that will never end, and leads to the endless games of shell companies and foreign domiciling and so on and so on; everyone knows that this is not what was intended, but it's what we have. The alternative is to write into law the intentions of the law, and allow subsequent assessment and judgement. Some places do this, and in this way the game of finding ways to ever so slightly dodge the exact wording of the law is a much less fruitful game.

dexen 8y ago
>The letter of the law is given great weight, no matter the intention of the law. You are assigning the responsibility the wrong way around. The letter, and the intent, of the law have two points of interfacing: the point of execution (interpretation by the taxpayers or by the courts of law), and the point of redaction (the lawmakers distilling the intent into actual letter of the law). In case of the letter of the law not representing the intent, we would be much better off assigning the blame to the lawmakers. It is both their primary duty, and also what they have the best tools for. Putting the onus on anybody else than the lawmakers creates perverse incentive to get bribed for sake of writing loopholes into the law. When the lawmakers fail at properly writing the laws, punish the lawmakers: both vote them out, and also have the media launch investigation into possible corruption - the slip-up could very well be intentional.

hjk05 8y ago

There are plenty of laws that are specified in such a way that no matter how you structure your shell companies they still apply. The only way to truely get around that is to start having strawmen owners or unregistered ownership relationships, all of which will get you in trouble with the law.