6 ms·

The British Virgin Islands’ Struggle to Protect Its Dark Offshore Economy

87 points by ucha 7y ago

darawk 7y ago
> Not surprisingly, many people in Road Town argue there are perfectly legitimate reasons to use a jurisdiction such as the BVI. The Panama Papers leak revealed, for example, that British actress Emma Watson bought her London house with a BVI company to prevent stalkers from tracing where she lives. > But transparency threatens none of that. It sure seems like transparency threatens Emma Watson's use case...
- dgacmu 7y ago
  But we can and should have onshore mechanisms - convince a judge you need it, get an onshore anonymous trust whose details are sealed except to law/tax. Seems like a darn good idea, in fact. (This is where a lawyer steps in and points out that something like this already exists, right? I know nothing about British law...)
  - darawk 7y ago
    Ya, totally. I just thought it was weird that the Bloomberg article contradicted itself about two sentences apart.
  - malandrew 7y ago
    > get an onshore anonymous trust whose details are sealed except to law/tax So you want to give government the unilateral right to determine who merits anonymity. What could possibly go wrong?
    - dgacmu 7y ago
      Well, it might be preferable to protecting only the super-rich. :) but, just as seriously, it's not clear that we actually value anonymous property ownership when it has serious repercussions for our tax base and things like holding properties vacant. (See Vancouver). It's just another place that we have to walk a careful line between individual rights and not causing huge social problems.
  - yourapostasy 7y ago
    In the US, in most if not all states, a stalking victim must present either court papers or a police report showing actual bodily harm before the victim may participate in the state's anonymity program. These programs also only cover the state's information systems, not commercial systems. On the commercial side, if you finance anything at all, it will show up in your credit report, and your street address will as well. It is a quick Net search from there to find you through the aggregators. To stay off the aggregators' radar, you need a willing volunteer who will let you use their residence address, own your home outright through a trust, put your utility bills in their name, and a few other tactics. Note that private mailbox addresses are now identifiable, and many financial institutions under KYC regulations tap those databases and will recognize and refuse to let you use such an address to sign up for services, demanding a real street address. Source: I'm handling a female relative's stalking situation for them before it escalated to physical harm, and it was much harder than I thought it would be.
  - pudo 7y ago
    This usually exists. In the UK, there's a registry of persons with significant control over companies and individuals in it can be marked "super secure" if there is a sufficient reason to do it. https://developer.companieshouse.gov.uk/api/docs/company/company_number/persons-with-significant-control/superSecure-resource.html https://developer.companieshouse.gov.uk/api/docs/company/com...
- aussiegreenie 7y ago
  It is trivial to hide your identity in the UK / US / Australia etc. You must understand that the "City" (London's financial district) has different rules than the rest of the country. It is an off-shore jurisdiction in the centre of London.
motohagiography 7y ago
I'd argue any article about "tax havens," that does not include a section on SPVs for insurance and other securities is un-serious agitprop. The "trillions" of dollars of assets registered in these countries is mainly collateral that secures agreements and contracts that yield income that gets taxed in the country where it is ultimately realized. Writing about these countries without addressing how mainstream financial instruments work should be treated as very revealing.
- justincormack 7y ago
  There is no reason SPVs shouldn’t be supported onshore.
  - motohagiography 7y ago
    I'd say they cannot work onshore because it just substitutes a transparency problem with a much more complex harmonization problem for rules across borders, which creates new arbitrages and political leverage points. The offshore situation we've had for a couple hundred years now is a case of better the devil you know. The rules in haven countries are established, clear, and provide a foundation for all the value in international trade. The only problem is it limits the total dominion of one group via surveillance, which I think is a feature, not a bug. For Special Purpose Vehicles to work onshore, you need something like income trusts, which barely exist anymore because of people who write articles like the one above. It is a custodian with limited liability that does not pay tax, so that you can hold assets in it and invest them to preserve the availability of the principle after a trigger event. Governments hated them because they diverted money out of income tax flows, and it is more politically expedient to solve revenue problems instead of spending ones. I think this aspect of the system works, and this sort of lazy propaganda needs to be recognized for what it is. I respect there are other views on this, but they should be held to a standard of financial literacy this article did not meet.
    - pudo 7y ago
      To say that the current system works (its current form is a few decades old at best) is to ignore the massive impact that secrecy jurisdictions have on virtually all developing countries. Offshores are used there to facilitate the extraction of trillions in wealth that often is directly stolen from public resource (such as direct tax revenue, procurement contracts, and, natural resource concessions). Of course you can argue that any financial problem the public sector has is always a spending problem and never one with the tax base, but that strikes me as a fringe political opinion, and particularly as not a decision that the people of Ghana, Russia, or Ukraine got to make for themselves. Perhaps they're not small government ideologues and would actually prefer to have health care and schools. Justifying all this by saying that very wealthy and powerful people and corporations need privacy to protect them is pretty cynical. (Disclaimer: I'm an enthusiastic contributor to "lazy propaganda" like this)
spork12 7y ago
Wow, describing an economy you don't like as "dark"
ptah 7y ago
strange that the locals don't benefit at all
- c256 7y ago
  The piece suggests that the (relative to taxes) small fees they charge make up a very large part of the government’s income.

87 points by ucha 7y ago

> Not surprisingly, many people in Road Town argue there are perfectly legitimate reasons to use a jurisdiction such as the BVI. The Panama Papers leak revealed, for example, that British actress Emma Watson bought her London house with a BVI company to prevent stalkers from tracing where she lives. > But transparency threatens none of that. It sure seems like transparency threatens Emma Watson's use case...

dgacmu 7y ago
But we can and should have onshore mechanisms - convince a judge you need it, get an onshore anonymous trust whose details are sealed except to law/tax. Seems like a darn good idea, in fact. (This is where a lawyer steps in and points out that something like this already exists, right? I know nothing about British law...)
- darawk 7y ago
  Ya, totally. I just thought it was weird that the Bloomberg article contradicted itself about two sentences apart.
- malandrew 7y ago
  > get an onshore anonymous trust whose details are sealed except to law/tax So you want to give government the unilateral right to determine who merits anonymity. What could possibly go wrong?
  - dgacmu 7y ago
    Well, it might be preferable to protecting only the super-rich. :) but, just as seriously, it's not clear that we actually value anonymous property ownership when it has serious repercussions for our tax base and things like holding properties vacant. (See Vancouver). It's just another place that we have to walk a careful line between individual rights and not causing huge social problems.
- yourapostasy 7y ago
  In the US, in most if not all states, a stalking victim must present either court papers or a police report showing actual bodily harm before the victim may participate in the state's anonymity program. These programs also only cover the state's information systems, not commercial systems. On the commercial side, if you finance anything at all, it will show up in your credit report, and your street address will as well. It is a quick Net search from there to find you through the aggregators. To stay off the aggregators' radar, you need a willing volunteer who will let you use their residence address, own your home outright through a trust, put your utility bills in their name, and a few other tactics. Note that private mailbox addresses are now identifiable, and many financial institutions under KYC regulations tap those databases and will recognize and refuse to let you use such an address to sign up for services, demanding a real street address. Source: I'm handling a female relative's stalking situation for them before it escalated to physical harm, and it was much harder than I thought it would be.
- pudo 7y ago
  This usually exists. In the UK, there's a registry of persons with significant control over companies and individuals in it can be marked "super secure" if there is a sufficient reason to do it. https://developer.companieshouse.gov.uk/api/docs/company/company_number/persons-with-significant-control/superSecure-resource.html https://developer.companieshouse.gov.uk/api/docs/company/com...
aussiegreenie 7y ago
It is trivial to hide your identity in the UK / US / Australia etc. You must understand that the "City" (London's financial district) has different rules than the rest of the country. It is an off-shore jurisdiction in the centre of London.

motohagiography 7y ago

I'd argue any article about "tax havens," that does not include a section on SPVs for insurance and other securities is un-serious agitprop. The "trillions" of dollars of assets registered in these countries is mainly collateral that secures agreements and contracts that yield income that gets taxed in the country where it is ultimately realized. Writing about these countries without addressing how mainstream financial instruments work should be treated as very revealing.

justincormack 7y ago
There is no reason SPVs shouldn’t be supported onshore.
- motohagiography 7y ago
  I'd say they cannot work onshore because it just substitutes a transparency problem with a much more complex harmonization problem for rules across borders, which creates new arbitrages and political leverage points. The offshore situation we've had for a couple hundred years now is a case of better the devil you know. The rules in haven countries are established, clear, and provide a foundation for all the value in international trade. The only problem is it limits the total dominion of one group via surveillance, which I think is a feature, not a bug. For Special Purpose Vehicles to work onshore, you need something like income trusts, which barely exist anymore because of people who write articles like the one above. It is a custodian with limited liability that does not pay tax, so that you can hold assets in it and invest them to preserve the availability of the principle after a trigger event. Governments hated them because they diverted money out of income tax flows, and it is more politically expedient to solve revenue problems instead of spending ones. I think this aspect of the system works, and this sort of lazy propaganda needs to be recognized for what it is. I respect there are other views on this, but they should be held to a standard of financial literacy this article did not meet.
  - pudo 7y ago
    To say that the current system works (its current form is a few decades old at best) is to ignore the massive impact that secrecy jurisdictions have on virtually all developing countries. Offshores are used there to facilitate the extraction of trillions in wealth that often is directly stolen from public resource (such as direct tax revenue, procurement contracts, and, natural resource concessions). Of course you can argue that any financial problem the public sector has is always a spending problem and never one with the tax base, but that strikes me as a fringe political opinion, and particularly as not a decision that the people of Ghana, Russia, or Ukraine got to make for themselves. Perhaps they're not small government ideologues and would actually prefer to have health care and schools. Justifying all this by saying that very wealthy and powerful people and corporations need privacy to protect them is pretty cynical. (Disclaimer: I'm an enthusiastic contributor to "lazy propaganda" like this)

spork12 7y ago

Wow, describing an economy you don't like as "dark"

ptah 7y ago

strange that the locals don't benefit at all

c256 7y ago
The piece suggests that the (relative to taxes) small fees they charge make up a very large part of the government’s income.