16 ms·

A recent piece in The Guardian argues that South Dakota and other US states are actually becoming the go-to place to store anonymously your illicit cash and mak

by gxqoz 7y ago

A recent piece in The Guardian argues that South Dakota and other US states are actually becoming the go-to place to store anonymously your illicit cash and make sure that your heirs can inherit it without taxes forever: https://www.theguardian.com/world/2019/nov/14/the-great-american-tax-haven-why-the-super-rich-love-south-dakota-trust-laws https://www.theguardian.com/world/2019/nov/14/the-great-amer... Partly because the US has compelled other countries to provide more transparency without joining that transparency organization itself. "Congress responded with the Financial Assets Tax Compliance Act (Fatca), forcing foreign financial institutions to tell the US government about any American-owned assets on their books. Department of Justice investigations were savage: UBS paid a $780m fine, and its rival Credit Suisse paid $2.6bn, while Wegelin, Switzerland’s oldest bank, collapsed altogether under the strain. The amount of US-owned money in the country plunged, with Credit Suisse losing 85% of its American customers. The rest of the world, inspired by this example, created a global agreement called the Common Reporting Standard (CRS). Under CRS, countries agreed to exchange information on the assets of each other’s citizens kept in each other’s banks. The tax-evading appeal of places like Jersey, the Bahamas and Liechtenstein evaporated almost immediately, since you could no longer hide your wealth there. How was a rich person to protect his wealth from the government in this scary new transparent world? Fortunately, there was a loophole. CRS had been created by lots of countries together, and they all committed to telling each other their financial secrets. But the US was not part of CRS, and its own system – Fatca – only gathers information from foreign countries; it does not send information back to them. This loophole was unintentional, but vast: keep your money in Switzerland, and the world knows about it; put it in the US and, if you were clever about it, no one need ever find out. The US was on its way to becoming a truly world-class tax haven."

mcphage 7y ago
> This loophole was unintentional That seems a pretty hard pill to swallow.
- edoceo 7y ago
  Laws can have bugs too
  - 52-6F-62 7y ago
    Well put. Software is largely built of contracts; so are laws and any other interfacing agreements (as cold as that sounds).
    - corodra 7y ago
      Agreed. It's also human nature to game systems for their own advantage. The same evolutionary triggers that had us develop tools to reap rewards from the physical environment... well, we develop mental/abstract tools to reap rewards from the "intellectual" environment. There will never be a well intentioned law with enough "lock tight" wording that won't be gamed by someone out there at some point. The same, there will never be security that won't be eventually overcome at some point.
      - 52-6F-62 7y ago
        Sure. That's fair. But I don't think that proves the above comment incorrect.
  - turtlecloud 7y ago
    its a feature not a bug
  - freeflight 7y ago
    And just like with software, often they are considered "features" not bugs.
hogFeast 7y ago
This is right. But tax avoidance has also been dramatically reduced. If you want to avoid tax, pretty much the only way to do it is to either move to one of these places or find someone at a bank who will move your money for you illegally (this is pretty hard to do because the upside is often quite limited relative to the huge downside). So money is definitely moving back within home countries, and that is far easier to control. One point you missed is the importance of US financial control over institutions. The other plank of FATCA was the threat that the US would essentially block a bank/country out of the global financial system if they failed to cooperate. This kind of extra-territorial monitoring of the financial sector deeply annoyed everyone but..it was effective, and is a good example of a gain from US leadership of the international community (even Russia informally complies afaik).
thinkloop 7y ago
> forcing foreign financial institutions to tell the US government about any American-owned assets on their books This is another interesting part. How can the US "force" a sophisticated wealthy sovereign nation that culturally and morally values banking privacy (not only for the profits), like Switzerland? It cannot be understated how much power, control and ownership the US has of the world financial system. If Switzerland did not comply, they would have been fully cut-off, unable to participate in any finance at all. It happened swiftly (no pun intended [1]), there was no discussion, only power. Most of the west is mostly aligned with what the US is doing, so it's not a big deal. Every government wants more visibility, control and power over finances. It is akin to how the US military handles matters of physical force on behalf of the rest of the west. Just a quick note that the US is equally powerful in the financial arena as they are militaristically, if not more so. [1] SWIFT is one of the systems Switzerland could have been cut off from
- throwaway_tech 7y ago
  >Just a quick note that the US is equally powerful in the financial arena as they are militaristically, if not more so. This was the trade off Churchill was forced to agree to, as London was being bombed by the Nazis, if he wanted the US to join the war. Before the War the UK ran the World's finance, after the War it was the US. In short the US financial power was birth directly from its military power.
  - mlazos 7y ago
    I don’t think it was a deliberate agreement per se, I feel like it was just the natural outcome after the US helped rebuild a lot of Europe. The previous world order had been ripped apart by the war, and the US was the world’s largest economy by the end.
    - mars4rp 7y ago
      It was deliberate, on one of the financial summits over the future of financial system after WWII a US changed all the word of GOLD to USD. there was a planet money episode about it.
bouncycastle 7y ago
> place to store anonymously your illicit cash What if I just want a place to anonymously store my legally gained cash? Unfortunately, it seems the normal people lost their privacy nowadays at the expense of the criminals and the "If you've got nothing to hide, you've got nothing to fear" argument has taken a stronghold in the financial sector.
- buboard 7y ago
  ideally, governments only need to know how much each person spent/earned. Not where and how. But , it seems there is no way to make even tiny amounts of purchases without a bunch of people sharing your full details with each other. On the other hand, there's crypto
  - unreal37 7y ago
    Which is not anonymous.
    - DuskStar 7y ago
      Some of it is - ZCash for example. But most of it isn't.
      - ta999999171 7y ago
        What about the last thread I read that concluded Monero was the answer here? Which one's been audited?
        jki275 7y ago
        Zcash is more likely to be secure than Monero. Both have their issues, but the Monero system is significantly easier to de-anonymize.
- karambahh 7y ago
  Because the social contract of most countries is that your legally gained cash is to be taxed in one form or another and thus has to be known by the tax authorities? You can argue that your assets are to be private to the general public but some countries do not have that assumption (Norway comes to mind).
Covzire 7y ago
That article is so one-sided it hurts. It gives few and silly examples of what trusts are actually used for, like it characterizes one by a rich woman leaving millions in care for her dog after the woman died, in order to convince the reader that trusts must be often wasteful and frivolous. For one (among other issues) it completely ignores the destruction of family farms and businesses, no longer able to operate due to heavy tax burdens put on them by the state, simply because one of the owners has passed away and they didn't have enough cash in reserve to pay what the government deemed they owe. Mine and your politicians forced the creation of these havens because of their wanton disregard for people's hard work and effort, and I'm not going to shed any tears of there being a way for some of them to protect it. I know, the writer alludes to a one-world dictatorship that might one day have been able to prevent this 'horrible evil' from taking hold, but we're not there yet, thankfully.
chiefalchemist 7y ago
> This loophole was unintentional, Yet it's a known. And it remains in place. Let's stop being so naive.
29athrowaway 7y ago
FATCA + foreign jurisdiction = 0
tunesmith 7y ago
That Guardian article is weird because it doesn't even mention federal taxes. How does a south dakota state trust help someone legally evade federal taxes?
- mayama 7y ago
  No income, wealth or estate tax for trusts. And you don't even have to live in south dakota.
  - ChrisLomont 7y ago
    Beneficiaries of trusts pay income tax on distributions.
ainiriand 7y ago
Delaware was never the most transparent place on Earth either.
victor106 7y ago
The article says "Money in trusts grows tax free". Not sure that is true. I think and I could be wrong (someone please correct me) but the trust would still have to pay federal taxes at the highest rate after the first $5000.00 it makes for the tax year.
Keverw 7y ago
South Dakota is also popular with full time RVers and digital nomads. Many other states you have to rent or own a house to get a license etc. But South Dakota recognizes full time travelers, so you can rent a PMB and spend 1 night at a hotel and campground to be considered a resident. Which is pretty neat. So some states like Michigan or Ohio are strict along with many others, so if you sell your house to retire to travel the nation in your RV they won't accept a mail forwarder so your only option is to burden a friend or family member to handle your mail pretending you live with them when you don't. So you are stuck having to become a resident of a new state. Texas is also friendly to RVing, then some counties in Florida too recognize this but different counties had different views. Clay County in FL said that full time RVers aren't allowed to vote, yet a homeless person can claim they live at a park bench per federal laws. So they are making millions from RVers who barely even put ware and tear on the roads, so sounds like they found a perfect little niche from themselves in that area too, plus a valuable service when your former state you spent your entire life living in ditches you because you decided to live an alternative lifestyle. Homeless people have the same problem, but homeless shelters can help people without any ID get one... Some argue people with $250,000 Diesel Pushers are homeless too, but it seems wasteful to get assistant from a homeless shelter when you are "homeless" by choice since other people those resources would be better spent helping, plus pretty sure you have to pick up your mail instead of them sending you a package with all your mail when you are across the country or even opening items and scanning them for you if you need access to a letter faster. I know people in RV groups prefer to call themselves "houseless" not "homeless" Some guy works remotely for a medical marketing firm, traveling full time with his family living the life people dream of checking out all the different national parks all the way to the theme parks. While you are freezing your butt off in Ohio, they are camping at Fort Wilderness (the RV park at Disney world) but technically in the eyes of different agencies they're homeless. Some banks can give you trouble too. Didn't know homeless people could afford Disney! So kinda interesting people who own property are treated differently than people who decide to travel full time. You could own property and never even go there and you'd be treated better than someone with no property at all for some reason. Seems very backwards, I guess society never considered people could work remotely and travel full time exploring, you are supposed to live in a house you are indebted to all your life, then maybe when you are in your 60s you can explore while you can barely walk or living off the tiny bit of social security you get, if it's even still around by time you reach that age.

by gxqoz 7y ago

mcphage 7y ago

> This loophole was unintentional That seems a pretty hard pill to swallow.

edoceo 7y ago
Laws can have bugs too
- 52-6F-62 7y ago
  Well put. Software is largely built of contracts; so are laws and any other interfacing agreements (as cold as that sounds).
  - corodra 7y ago
    Agreed. It's also human nature to game systems for their own advantage. The same evolutionary triggers that had us develop tools to reap rewards from the physical environment... well, we develop mental/abstract tools to reap rewards from the "intellectual" environment. There will never be a well intentioned law with enough "lock tight" wording that won't be gamed by someone out there at some point. The same, there will never be security that won't be eventually overcome at some point.
    - 52-6F-62 7y ago
      Sure. That's fair. But I don't think that proves the above comment incorrect.
- turtlecloud 7y ago
  its a feature not a bug
- freeflight 7y ago
  And just like with software, often they are considered "features" not bugs.

hogFeast 7y ago

This is right. But tax avoidance has also been dramatically reduced. If you want to avoid tax, pretty much the only way to do it is to either move to one of these places or find someone at a bank who will move your money for you illegally (this is pretty hard to do because the upside is often quite limited relative to the huge downside). So money is definitely moving back within home countries, and that is far easier to control. One point you missed is the importance of US financial control over institutions. The other plank of FATCA was the threat that the US would essentially block a bank/country out of the global financial system if they failed to cooperate. This kind of extra-territorial monitoring of the financial sector deeply annoyed everyone but..it was effective, and is a good example of a gain from US leadership of the international community (even Russia informally complies afaik).

thinkloop 7y ago

> forcing foreign financial institutions to tell the US government about any American-owned assets on their books This is another interesting part. How can the US "force" a sophisticated wealthy sovereign nation that culturally and morally values banking privacy (not only for the profits), like Switzerland? It cannot be understated how much power, control and ownership the US has of the world financial system. If Switzerland did not comply, they would have been fully cut-off, unable to participate in any finance at all. It happened swiftly (no pun intended [1]), there was no discussion, only power. Most of the west is mostly aligned with what the US is doing, so it's not a big deal. Every government wants more visibility, control and power over finances. It is akin to how the US military handles matters of physical force on behalf of the rest of the west. Just a quick note that the US is equally powerful in the financial arena as they are militaristically, if not more so. [1] SWIFT is one of the systems Switzerland could have been cut off from

throwaway_tech 7y ago
>Just a quick note that the US is equally powerful in the financial arena as they are militaristically, if not more so. This was the trade off Churchill was forced to agree to, as London was being bombed by the Nazis, if he wanted the US to join the war. Before the War the UK ran the World's finance, after the War it was the US. In short the US financial power was birth directly from its military power.
- mlazos 7y ago
  I don’t think it was a deliberate agreement per se, I feel like it was just the natural outcome after the US helped rebuild a lot of Europe. The previous world order had been ripped apart by the war, and the US was the world’s largest economy by the end.
  - mars4rp 7y ago
    It was deliberate, on one of the financial summits over the future of financial system after WWII a US changed all the word of GOLD to USD. there was a planet money episode about it.

bouncycastle 7y ago

> place to store anonymously your illicit cash What if I just want a place to anonymously store my legally gained cash? Unfortunately, it seems the normal people lost their privacy nowadays at the expense of the criminals and the "If you've got nothing to hide, you've got nothing to fear" argument has taken a stronghold in the financial sector.

buboard 7y ago
ideally, governments only need to know how much each person spent/earned. Not where and how. But , it seems there is no way to make even tiny amounts of purchases without a bunch of people sharing your full details with each other. On the other hand, there's crypto
- unreal37 7y ago
  Which is not anonymous.
  - DuskStar 7y ago
    Some of it is - ZCash for example. But most of it isn't.
    - ta999999171 7y ago
      What about the last thread I read that concluded Monero was the answer here? Which one's been audited?
      - jki275 7y ago
        Zcash is more likely to be secure than Monero. Both have their issues, but the Monero system is significantly easier to de-anonymize.
karambahh 7y ago
Because the social contract of most countries is that your legally gained cash is to be taxed in one form or another and thus has to be known by the tax authorities? You can argue that your assets are to be private to the general public but some countries do not have that assumption (Norway comes to mind).

Covzire 7y ago

That article is so one-sided it hurts. It gives few and silly examples of what trusts are actually used for, like it characterizes one by a rich woman leaving millions in care for her dog after the woman died, in order to convince the reader that trusts must be often wasteful and frivolous. For one (among other issues) it completely ignores the destruction of family farms and businesses, no longer able to operate due to heavy tax burdens put on them by the state, simply because one of the owners has passed away and they didn't have enough cash in reserve to pay what the government deemed they owe. Mine and your politicians forced the creation of these havens because of their wanton disregard for people's hard work and effort, and I'm not going to shed any tears of there being a way for some of them to protect it. I know, the writer alludes to a one-world dictatorship that might one day have been able to prevent this 'horrible evil' from taking hold, but we're not there yet, thankfully.

chiefalchemist 7y ago

> This loophole was unintentional, Yet it's a known. And it remains in place. Let's stop being so naive.

29athrowaway 7y ago

FATCA + foreign jurisdiction = 0

tunesmith 7y ago

That Guardian article is weird because it doesn't even mention federal taxes. How does a south dakota state trust help someone legally evade federal taxes?

mayama 7y ago
No income, wealth or estate tax for trusts. And you don't even have to live in south dakota.
- ChrisLomont 7y ago
  Beneficiaries of trusts pay income tax on distributions.

ainiriand 7y ago

Delaware was never the most transparent place on Earth either.

victor106 7y ago

The article says "Money in trusts grows tax free". Not sure that is true. I think and I could be wrong (someone please correct me) but the trust would still have to pay federal taxes at the highest rate after the first $5000.00 it makes for the tax year.

Keverw 7y ago

South Dakota is also popular with full time RVers and digital nomads. Many other states you have to rent or own a house to get a license etc. But South Dakota recognizes full time travelers, so you can rent a PMB and spend 1 night at a hotel and campground to be considered a resident. Which is pretty neat. So some states like Michigan or Ohio are strict along with many others, so if you sell your house to retire to travel the nation in your RV they won't accept a mail forwarder so your only option is to burden a friend or family member to handle your mail pretending you live with them when you don't. So you are stuck having to become a resident of a new state. Texas is also friendly to RVing, then some counties in Florida too recognize this but different counties had different views. Clay County in FL said that full time RVers aren't allowed to vote, yet a homeless person can claim they live at a park bench per federal laws. So they are making millions from RVers who barely even put ware and tear on the roads, so sounds like they found a perfect little niche from themselves in that area too, plus a valuable service when your former state you spent your entire life living in ditches you because you decided to live an alternative lifestyle. Homeless people have the same problem, but homeless shelters can help people without any ID get one... Some argue people with $250,000 Diesel Pushers are homeless too, but it seems wasteful to get assistant from a homeless shelter when you are "homeless" by choice since other people those resources would be better spent helping, plus pretty sure you have to pick up your mail instead of them sending you a package with all your mail when you are across the country or even opening items and scanning them for you if you need access to a letter faster. I know people in RV groups prefer to call themselves "houseless" not "homeless" Some guy works remotely for a medical marketing firm, traveling full time with his family living the life people dream of checking out all the different national parks all the way to the theme parks. While you are freezing your butt off in Ohio, they are camping at Fort Wilderness (the RV park at Disney world) but technically in the eyes of different agencies they're homeless. Some banks can give you trouble too. Didn't know homeless people could afford Disney! So kinda interesting people who own property are treated differently than people who decide to travel full time. You could own property and never even go there and you'd be treated better than someone with no property at all for some reason. Seems very backwards, I guess society never considered people could work remotely and travel full time exploring, you are supposed to live in a house you are indebted to all your life, then maybe when you are in your 60s you can explore while you can barely walk or living off the tiny bit of social security you get, if it's even still around by time you reach that age.