8 ms·

British Virgin Islands corruption scandal threatens its tax haven reputation

47 points by lucioperca 5y ago

vmception 5y ago
The ICIJ relies on drawing sensational conclusions and headlines for benign activity, and suggests outcomes that have no relation to anything. The content of their article balances out all of this by pointing out how prevalent that compliant and legal non controversial uses of the BVI are to multinational corporations, to the point of basically admitting that their headlines are apocryphal. In this case, there is just zero relation to public officials misappropriating funds and seized drugs to incorporating shell or active companies in the BVI. Bye.
sideshowb 5y ago
Tax havens have a reputation to preserve?
- smcl 5y ago
  Well yeah they have a reputation as a place that can be reliably used as a tax haven.
- socks 5y ago
  I live in an offshore jurisdiction. They have reputations - but 'tax efficiency' is just one factor of many. Others would be how stable the legal system is / how often do laws change / what regulations are optimised for your particular company finances / how reliable the government is etc. You wouldn't want to move your very wealthy multinational company structure somewhere that could collapse or be somewhere where your company could not get financing etc.
  - jeofken 5y ago
    Very curious about Georgia for this
    - smcl 5y ago
      As in Georgia the US State or Georgia the republic in the caucausus? Or I guess it could be South Georgia, given the original post is also about a British Overseas Territory
      - jeofken 5y ago
        I mean the country in the Caucasus, sorry I didn’t think about the American state
- deepstack 5y ago
  Wonder what happens if there are no more tax haven period. Just wonder what they going to do with that 50 plus trillion dollars. Be good to invest in education and infrastructures.
nob0dyasked 5y ago
I can't wait to have enough assets to move them to a tax haven. I have paid more than enough taxes, I don't owe anything to anybody.
unparagoned 5y ago
I wanted to get in before the cliché comment about "legal tax avoidance" or loopholes. Pretty much anything that let's a person/company avoid paying large amounts of tax and involves complex arrangements isn't legal and isn't exploiting a loophole. What they are doing is exploiting is the limited resources of tax authorities to hold them to account. If tax authorities were properly funded you'd see a completely different story.
- lifty 5y ago
  Closing the loopholes is more a political issue than a lack of resources issue. Companies like Apple won’t do illegal stuff but they will take advantage of loopholes. For example, the double Dutch Irish sandwich, which was recently closed, was one of the favorite ways for companies to avoid paying tax in the EU. Do you think it was a lack of resources impeding closing that loophole?
  - derriz 5y ago
    Actually it was a way to avoid paying US corporation taxes, not EU ones. It allowed US corporations to park their profits "offshore" indefinitely which is why only US corporations used this set-up. The US - uniquely in the world as far as I know - only collects corporation tax when the profits are repatriated. All others force companies to recognize and account for profits made in overseas subsidiaries regardless of where the profits are being held.
    - matkoniecz 5y ago
      Please correct me if I am wrong, but AFAIK Apple and other corporations do (did?) following steps: - shift income to US company - use double Irish with a Dutch sandwich or similar to shift income to tax heaven - pay effectively no taxes - ask for funding, grants, bringing effective taxation rate below zero
      - derriz 5y ago
        Mostly what you say is correct but there are a few points which make the story less outrage-provoking. First of all "shifting income to a US company" has nothing to do with the set-up. Apple and everyone are obliged by decades of international pricing-transfer rules to book "profits" the the jurisdiction where the "value" was created. This is why most of the 30% or so margin Apple makes on an IPhone sale in Germany (for example) is booked as US profit. There's nothing nefarious going on here - the invention, engineering, design, etc. was all done in the US so it's perfectly correct that most of the profit is booked in the US. The rest of the profit will be booked in places like China (manufacturing), Ireland (packaging, localization) and Germany (distribution, logistics, sales) but the profit shares for these activities is understandably low. The exact same thing happens in reversion when BMW sells a car in the US for example - most of the profit is booked in Germany. Yes they used the Irish/Dutch sandwich to allow them to "park" these US profits in Bermuda (I believe). And yes, while these profits are sitting in bank account in Bermuda, Apple pays no taxes on them. But the point people miss is that the tax liability doesn't go away - it's just been deferred. Under political pressure, year or the year before (I think?) Apple repatriated a huge amount of profits parked in Bermuda going back years and paid US corporation tax on these profits. So the existence of the Irish/Dutch sandwich didn't allow them to evade paying taxes - it allowed Apple to defer paying them. The advantage to Apple of course is the like the advantage to individuals of deferring tax payments - you get "use" of the money until you pay the tax. You can also wait for favorable to changes in tax rates before repatriation. But ultimately the tax is payable. I think this idea (globally unique to the US) of allowing your corporations to expand globally without immediately booking foreign profits to the US corporation was designed as a sort of subsidy to help US companies compete abroad. If the US just got rid of this rule, then nearly all of the outrage over corporate tax evasion would go away I think. And this is why only US corporations used to have set-ups like the Irish-Dutch sandwich - it doesn't help companies domiciled anywhere else.
Gys 5y ago
The scandal has no direct relation to being a tax haven. > outgoing BVI Governor Augustus Jaspert announced a commission of inquiry to investigate allegations of corruption and the misuse of millions of dollars in public funds.
- garmaine 5y ago
  “Whoa, they actually investigate corruption? Not a place I want to rely on being able to bribe corrupt officials!”
- vmception 5y ago
  ICIJ is the Caribbean town crier
- anovikov 5y ago
  It absolutely DOES have a relation. If in some place corruption cases are really investigated - this is not an appropriate place to hide money anymore.
  - eru 5y ago
    Not sure. Singapore has a reputation as a tax haven, but also a reputation for being squeaky clean. (But that's perhaps a different kind of tax haven than the British Virgin Islands are?)
  - readflaggedcomm 5y ago
    It's the opposite. Unimpeachable officials enforcing favorable tax law protects depositors. Just because one thinks "hiding money" and "corruption" are both bad doesn't mean that both are and that both go together.
  - ObserverNeutral 5y ago
    Public affairs are separated from business. This was about whatever money had to be spent on X and were directed to Y via corruption

47 points by lucioperca 5y ago

The ICIJ relies on drawing sensational conclusions and headlines for benign activity, and suggests outcomes that have no relation to anything. The content of their article balances out all of this by pointing out how prevalent that compliant and legal non controversial uses of the BVI are to multinational corporations, to the point of basically admitting that their headlines are apocryphal. In this case, there is just zero relation to public officials misappropriating funds and seized drugs to incorporating shell or active companies in the BVI. Bye.

sideshowb 5y ago

Tax havens have a reputation to preserve?

smcl 5y ago
Well yeah they have a reputation as a place that can be reliably used as a tax haven.
socks 5y ago
I live in an offshore jurisdiction. They have reputations - but 'tax efficiency' is just one factor of many. Others would be how stable the legal system is / how often do laws change / what regulations are optimised for your particular company finances / how reliable the government is etc. You wouldn't want to move your very wealthy multinational company structure somewhere that could collapse or be somewhere where your company could not get financing etc.
- jeofken 5y ago
  Very curious about Georgia for this
  - smcl 5y ago
    As in Georgia the US State or Georgia the republic in the caucausus? Or I guess it could be South Georgia, given the original post is also about a British Overseas Territory
    - jeofken 5y ago
      I mean the country in the Caucasus, sorry I didn’t think about the American state
deepstack 5y ago
Wonder what happens if there are no more tax haven period. Just wonder what they going to do with that 50 plus trillion dollars. Be good to invest in education and infrastructures.

nob0dyasked 5y ago

I can't wait to have enough assets to move them to a tax haven. I have paid more than enough taxes, I don't owe anything to anybody.

unparagoned 5y ago

I wanted to get in before the cliché comment about "legal tax avoidance" or loopholes. Pretty much anything that let's a person/company avoid paying large amounts of tax and involves complex arrangements isn't legal and isn't exploiting a loophole. What they are doing is exploiting is the limited resources of tax authorities to hold them to account. If tax authorities were properly funded you'd see a completely different story.

lifty 5y ago
Closing the loopholes is more a political issue than a lack of resources issue. Companies like Apple won’t do illegal stuff but they will take advantage of loopholes. For example, the double Dutch Irish sandwich, which was recently closed, was one of the favorite ways for companies to avoid paying tax in the EU. Do you think it was a lack of resources impeding closing that loophole?
- derriz 5y ago
  Actually it was a way to avoid paying US corporation taxes, not EU ones. It allowed US corporations to park their profits "offshore" indefinitely which is why only US corporations used this set-up. The US - uniquely in the world as far as I know - only collects corporation tax when the profits are repatriated. All others force companies to recognize and account for profits made in overseas subsidiaries regardless of where the profits are being held.
  - matkoniecz 5y ago
    Please correct me if I am wrong, but AFAIK Apple and other corporations do (did?) following steps: - shift income to US company - use double Irish with a Dutch sandwich or similar to shift income to tax heaven - pay effectively no taxes - ask for funding, grants, bringing effective taxation rate below zero
    - derriz 5y ago
      Mostly what you say is correct but there are a few points which make the story less outrage-provoking. First of all "shifting income to a US company" has nothing to do with the set-up. Apple and everyone are obliged by decades of international pricing-transfer rules to book "profits" the the jurisdiction where the "value" was created. This is why most of the 30% or so margin Apple makes on an IPhone sale in Germany (for example) is booked as US profit. There's nothing nefarious going on here - the invention, engineering, design, etc. was all done in the US so it's perfectly correct that most of the profit is booked in the US. The rest of the profit will be booked in places like China (manufacturing), Ireland (packaging, localization) and Germany (distribution, logistics, sales) but the profit shares for these activities is understandably low. The exact same thing happens in reversion when BMW sells a car in the US for example - most of the profit is booked in Germany. Yes they used the Irish/Dutch sandwich to allow them to "park" these US profits in Bermuda (I believe). And yes, while these profits are sitting in bank account in Bermuda, Apple pays no taxes on them. But the point people miss is that the tax liability doesn't go away - it's just been deferred. Under political pressure, year or the year before (I think?) Apple repatriated a huge amount of profits parked in Bermuda going back years and paid US corporation tax on these profits. So the existence of the Irish/Dutch sandwich didn't allow them to evade paying taxes - it allowed Apple to defer paying them. The advantage to Apple of course is the like the advantage to individuals of deferring tax payments - you get "use" of the money until you pay the tax. You can also wait for favorable to changes in tax rates before repatriation. But ultimately the tax is payable. I think this idea (globally unique to the US) of allowing your corporations to expand globally without immediately booking foreign profits to the US corporation was designed as a sort of subsidy to help US companies compete abroad. If the US just got rid of this rule, then nearly all of the outrage over corporate tax evasion would go away I think. And this is why only US corporations used to have set-ups like the Irish-Dutch sandwich - it doesn't help companies domiciled anywhere else.

Gys 5y ago

The scandal has no direct relation to being a tax haven. > outgoing BVI Governor Augustus Jaspert announced a commission of inquiry to investigate allegations of corruption and the misuse of millions of dollars in public funds.

garmaine 5y ago
“Whoa, they actually investigate corruption? Not a place I want to rely on being able to bribe corrupt officials!”
vmception 5y ago
ICIJ is the Caribbean town crier
anovikov 5y ago
It absolutely DOES have a relation. If in some place corruption cases are really investigated - this is not an appropriate place to hide money anymore.
- eru 5y ago
  Not sure. Singapore has a reputation as a tax haven, but also a reputation for being squeaky clean. (But that's perhaps a different kind of tax haven than the British Virgin Islands are?)
- readflaggedcomm 5y ago
  It's the opposite. Unimpeachable officials enforcing favorable tax law protects depositors. Just because one thinks "hiding money" and "corruption" are both bad doesn't mean that both are and that both go together.
- ObserverNeutral 5y ago
  Public affairs are separated from business. This was about whatever money had to be spent on X and were directed to Y via corruption