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For some reason edit is not working here's with the format fixed: Throwaway for obvious reasons Since the world is lacking in the department of opinion of wea

For some reason edit is not working here's with the format fixed: Throwaway for obvious reasons Since the world is lacking in the department of opinion of wealthy men[1], let me add something to this discussion: I'm currently in the situation of becoming rich (from a global standpoint, unicorn early employees would laugh at my near future net worth) due to selling my company. I'm having conversations with both tax lawyers and private bankers who are interested in helping me manage my future money. It's very clear for both sides that: a) I never want not to be rich again b) Paying less taxes is better than paying more taxes Even so, all the professionals I talked to were very straightforward with saying that trying to avoid taxes would bring more headaches than it was worth it. Deferring taxes is considered kosher even for tax authorities as long as I declare everything I have correctly and it wouldn't be that bad after the first uh, let's say bite after the liquidation event. Still, they insisted that an offshore structure would be useful to me for the rest of my life. I'm not American, I'm a citizen of a developing country that isn't a total mess, but it's... developing. And let's leave it at that. A few cases that convinced me: 1) Tax officers have no downside to suing even completely transparent transactions. It's completely possible to get a tax bill with a heavy fine on top years after the fact because suddenly someone thought something was off. One of the tax lawyers I talked to mentioned[2] how he nullified a ~hundreds of millions fine/reassessment, but only after a long (+expensive) legal battle and a lot of stress for the sellers. Totally unfounded, and he mentioned it happened more than once. 2) I almost lost my exit because the government bureaucracy was not working due to covid and the buyer had a hard deadline for Q1. Said bureaucratic procedure would be a single docusign in a business-friendly jurisdiction (aka tax heaven) 3) American private bankers find it a hassle to deal with developing country clients directly, handling their money through offshore accounts (as a business client, that is, the shell corp is the private banking client) is a lot easier. 4) This is not a case, but: I don't love paying taxes, but I understand that I live in a poor country and of course taking a tax dollar from me is a lot fairer than taking a tax dollar from my poor neighbor. Still, it is not beyond the realm of possibility that my government, or at least a few unsavory parties that could be in charge one day, decides that it wants to set a high wealth tax or outright confiscate investments and I don't plan on making that easy (see point a above). So, there's that. No need to feel sympathies for the (future) millionaire here, just want to share that avoiding taxes is not my primary concern, and could not be for others, too. [1] Yes, this is a joke [2] Later I confirmed with said client, he was still angry at it

TeMPOraL 5y ago
That's a very important perspective, thanks for sharing. Your comment is actually the most interesting one I've read in this entire thread - it challenges my currently held beliefs. My current assumption was that, "all that offshoring and tax optimization stuff costs a lot of money and requires specialized skills, surely the rich would only do that to pay less taxes and keep more for themselves". But I see some very important additional factors in your comment, which I'll itemize: > all the professionals I talked to were very straightforward with saying that trying to avoid taxes would bring more headaches than it was worth it Good to know that the difficulty curve of tax avoidance is steep in the millionaire region, and that it's not obvious there's even a point in trying hard. > Tax officers have no downside to suing even completely transparent transactions. Minimizing risk of tax officers making mistakes or acting in bad faith. > Said bureaucratic procedure would be a single docusign in a business-friendly jurisdiction (aka tax heaven) Streamlining of legal/tax procedures. > American private bankers find it a hassle to deal with developing country clients directly Outsourcing the hassle to someone better suited to handling it. > it is not beyond the realm of possibility that my government, or at least a few unsavory parties that could be in charge one day, decides that it wants to set a high wealth tax or outright confiscate investments and I don't plan on making that easy Mitigating risk of unfriendly governance, similar to point 1. I find points 2 and 3 particularly convincing - I can see "outsourcing hassle" to be a reason enough to create "an offshore structure". After all, quite a lot of things in a business is just finding way to outsource some hassle (and associated liability) onto someone better equipped for handling it. Taking all your points together, I can imagine a millionaire wanting to do this even if it would be a net loss of money for them. Time, peace of mind, lowered personal risk and less bureaucratic inertia in business activities are all worth a lot too (even if it's hard to estimate their dollar value). You gave me something to think about.

TeMPOraL 5y ago

That's a very important perspective, thanks for sharing. Your comment is actually the most interesting one I've read in this entire thread - it challenges my currently held beliefs. My current assumption was that, "all that offshoring and tax optimization stuff costs a lot of money and requires specialized skills, surely the rich would only do that to pay less taxes and keep more for themselves". But I see some very important additional factors in your comment, which I'll itemize: > all the professionals I talked to were very straightforward with saying that trying to avoid taxes would bring more headaches than it was worth it Good to know that the difficulty curve of tax avoidance is steep in the millionaire region, and that it's not obvious there's even a point in trying hard. > Tax officers have no downside to suing even completely transparent transactions. Minimizing risk of tax officers making mistakes or acting in bad faith. > Said bureaucratic procedure would be a single docusign in a business-friendly jurisdiction (aka tax heaven) Streamlining of legal/tax procedures. > American private bankers find it a hassle to deal with developing country clients directly Outsourcing the hassle to someone better suited to handling it. > it is not beyond the realm of possibility that my government, or at least a few unsavory parties that could be in charge one day, decides that it wants to set a high wealth tax or outright confiscate investments and I don't plan on making that easy Mitigating risk of unfriendly governance, similar to point 1. I find points 2 and 3 particularly convincing - I can see "outsourcing hassle" to be a reason enough to create "an offshore structure". After all, quite a lot of things in a business is just finding way to outsource some hassle (and associated liability) onto someone better equipped for handling it. Taking all your points together, I can imagine a millionaire wanting to do this even if it would be a net loss of money for them. Time, peace of mind, lowered personal risk and less bureaucratic inertia in business activities are all worth a lot too (even if it's hard to estimate their dollar value). You gave me something to think about.