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Swiss complicit in major offshore tax scams

Malcolm Curtis · 4 Apr 2013, 10:41

Published: 04 Apr 2013 10:41 GMT+02:00

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The information stems from leaked information, containing more than two million documents on a computer disc, mailed anonymously to an address in Australia.

The data was subsequently analysed by the Washington-based International Consortium of Journalists, a group of media organizations from around the world, who assigned dozens of reporters to sift through emails and other documents.

They revealed more than 130,000 individuals from 140 countries evaded taxes through offshore havens in places such as the British Virgin Islands, as reported by The Guardian, The Washington Post and the BBC, among other media outlets contributing to the Offshore Leaks project.

Switzerland’s Le Matin and SonntagsZeitung newspapers, which also participated in the analysis of the leaks, found Swiss banks and financial intermediaries were heavily involved.

Le Matin reported online on Thursday that UBS created more than 2,900 companies in a dozen jurisdictions aimed at sheltering income from taxes.

Switzerland’s largest bank created the companies through Portcullis Trustnet, a Singapore-based firm active in the most “opaque” offshore tax haven in the world, such as the Cook Islands, the Cayman Islands and Samoa, Le Matin said.

Credit Suisse created more than 700 companies in the same way, the newspaper said.

“Internal emails show also how a subsidiary of Credit Suisse, Clariden Leu, put pressure on Portcullis Trustnet to create front companies so opaque that they would completely hide the identity of its clients,” Le Matin reported.

“According to this special agreement, only the name of the bank was known to (Portcullis) Trustnet, and not that of the client.”

Credit Suisse would not say whether it continues such practices today other than to say that “in a general manner, Credit Suisse and its subsidiaries respect all the laws currently in place in the countries where they operate,” Le Matin said.

An investigation conducted by the Swiss papers and German newspaper Süddeutsche Zeitung discovered how Gunther Sachs, the Swiss photographer who inherited the Opel car company fortune, avoided paying taxes through companies and trusts set up in the Cook Islands.

Sachs, who committed suicide in 2011, established other such companies in places such as Luxembourg and Panama, none of which were mentioned in his tax declarations, Le Matin said.

The newspaper said his fortune was managed in part by a Geneva company called Galaxar.

Sachs, who lived in Gstaad in the canton of Bern, declared his total assets to be worth 470 million francs in the last years of his life but former employees said his wealth was actually far greater, Le Matin said.

Among other revelations, documents show that front companies linked to Swiss entities were used, among others, by the son of Pakistan cabinet minister, the newspaper said.

They indicate that a Geneva financial adviser represented a company in the British Virgin Islands for a friend of Mother Teresa, the nun celebrated for establishing charity missionaries.

They point to the involvement of the director of an offshore company of an international commodity group who is a Swiss trustee under investigation for money laundering.

Le Matin also mentions Swiss “intermediaries” of a celebrated Hollywood actor with a secret account in Lausanne, without revealing names. 

Le Matin and SonntagsZeitung plan to publish more details about their findings in their editions of April 7th and 14th.

James Henry, a former chief economist at the McKinsey consultancy, last year estimated in a report that the world's super-rich had at least $21 trillion hidden ion secret tax havens by the end of 2010. 

Malcolm Curtis (news@thelocal.ch)

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Your comments about this article

2013-04-06 16:55:58 by islandman
"Sheltering" taxes is not illegal. Foreign trusts have been used for decades by the wealthy and the not so wealthy that want to protect what they created, These trusts are recognized as legal. Funds placed into foreign trusts are assets on which appropriate taxes have already been paid and are placed into a foreign trust to get the assets out of the donor's estate. Once in the trust, the donor no longer owns the assets and thus is not obligated to personally pay taxes on something they do not own. These trusts are given names (some call them companies) and are usually formed in locations that present zero tax obligations and provide privacy for the donor. It sounds as if Gunther Sachs, mentioned in the article, used foreign trusts to decrease his estate yet possibly still have some control over how the assets, placed in the trusts, might be distributed to the trusts' beneficiaries. Since Sachs no longer owned the assets, now owned by the foreign trusts, he had no tax obligations on those assets and his estate was smaller by the amount given to the trusts. These trusts would not be mentioned in his personal tax declarations since he did not own them. This article appears to want to create a fire using innuendo and playing on ignorance of legal trusts use. Using the term "evaded taxes" instead of "avoided taxes" concerning foreign trusts is incorrect and should not have been used in the article unless the trust has been proven illegal. It appears libeling a dead person (Sachs) by innuendo can be considered fair in some circles. I am not in that circle.
2013-04-07 22:15:03 by HombreE
It looks as if sb totally misunderstood the trust idea, no mater whether intentionally or not.
Yes indeed, trust as a legal "institution" has been used for a long time but it cannot be in any way the explanation for tax evasion.

I shall cite the Oxford dictionary of law ( 2003 edition ) :

trust - an arrangement in which a settlor transfers property to one or more trustees who will hold it for the benefit of one or more persons who are entitled to enforce the trust, if necessary, by action in court.
The beneficiary has rights against the trustee and may also have rights over the property in hands of others.

When a sole beneficiary comes of age ( is 18 ) and, further he/she is sane and still entitled to the property, this person is entitled to require that trustees transfer that property to him/her.

Should any trustee in such circumstance deny to transfer that property , the beneficiary, now 18, is legitimate to bring a civil case ( bring in a claim ) against such person.

So this is how trust "works". Any other interpretation of this term is illegal and fake.
So is your interpretation.
Trust as it means some property , is given to the trustee to be sure that this person will take care of that property, until the legitimate is eligible to take care of it by himself/herself. It does mean that trustee is obliged to not diminish that property and this person has no right to dispose of it in any way in favour of other person than the beneficiary.
It does mean however, that trustee holds on property given to him for some predefined period of time, predefined by date or occurrence of some event. He/she cannot be considered , as it is obvious , an owner, nor cannot under any circumstances expect to hold that property for life time. At some point in future trustee will be under the obligation to transfer that property to the beneficiary, and thus the property cannot be altered or given to sb else nor cannot it undergo any illegal activities that would result in the beneficiary loosing it.

This explanation should at least make some clarification on how trusts work. It is of certain importance and its value cannot be overwhelmed. But under no circumstances are you eligible to justify tax evasion by the use of trust. No point id doing so as it leads to nothing.
If still uncertain, just take a step to any good counsel. This person will teach you how to interpret the law. Now, don't talk rubbish any more, please.

If you need further lessons on tax evasion and its forms, just give a notice.
There's nothing so pleasant as having people understand clearly what role wisdom plays in our life.

HombreE. Law faculty student at the University of Poznań, Poland.
2013-04-08 23:53:21 by islandman

Thank you for your consideration and response, incomplete and confusing though it may be. Citing the definition of "trust" as being inclusive and final is, if you are a car buff, akin to calling a go-kart an automobile,or for the scientist, a periodic element a chemical compond. Where as the essence is accurate, the final product bears little resemblance to the base element.

To assume at least some of these wealthy people did not hire International tax specialists and International tax attorneys to set up their foreign or offshore trusts (of complex types) is naivete.They hired competent professionals to create Bugatti or Rolls Royce type trusts, not go-karts.

Even in the US, where the IRS wants every nickel it can find, it recognizes foreign trusts. It does not like it but recognizes their status if legally set up. Below is a partial cite from USC definitions.

From USC § 7701 - Definitions
(30) United States person
The term “United States person” means—
(A) a citizen or resident of the United States,
(B) a domestic partnership,
(C) a domestic corporation,
(D) any estate (other than a foreign estate, within the meaning of paragraph (31)), and
(E) any trust if—
(i) a court within the United States is able to exercise primary supervision over the administration of the trust, and
(ii) one or more United States persons have the authority to control all substantial decisions of the trust.
(31) Foreign estate or trust
(A) Foreign estate
The term “foreign estate” means an estate the income of which, from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income under subtitle A.
(B) Foreign trust
The term “foreign trust” means any trust other than a trust described in subparagraph (E) of paragraph (30).

For the readers who do not know or understand trusts and their various types, (like auto makes), here is an explanation of what the article is talking about or should I say avoided talking about since innuendo can be more exciting.

While there are many types of trusts, let's cover two. Vive la Difference. Grantor (revocable) trusts are similar in some ways to what HombreE describes in that the grantor (you) still owns the assets placed in the trust and pay personal taxes on the income generated. These assets can be retrieved by the grantor (you) if desired. I am assuming HombreE is talking about this type since he consider the subjects in the article, if not paying taxes on the trusts to be evading taxes. In this example, they would be.

A non-grantor (irrevocable) trust owns the assets placed in the trust, not the grantor (you). These assets cannot be retrieved by you. These assets are no longer considered part of the grantor's (your) estate, you do not pay taxes on income generated within the trust (you do not own it) plus the property typically is not included in your estate's value when it comes to determining if you owe death taxes (a la Gunther Sachs).
Said in another way, when the trust creator has relinquished benefits from and control over assets into a trust, it becomes a non-grantor trust. A non-grantor trust has its own tax ID number and is taxed on income earnings generated inside the trust as a separate entity. Depending upon the location of the trust (thus many are foreign trusts), say a tax free area, there may be no taxes due by the trust. Trust earnings that are distributed to a beneficiary are often taxed to that beneficiary (depending on the beneficiary's tax laws). Seting up the trust and the rules that have to be followed are quite complex but this is a simple explanation..
This is called estate planning and tax avoidance since everything is legal and follows the tax laws. Tax evasion is when something is proven to have been done illegally to not pay taxes. So far, nothing mentioned in the article has been proven illegal.

To label people, when they hire competent International tax attorneys and international tax advisors to set up their estates legally, guilty of tax evasion, when nothing has been proven illegal, is irresponsible, might I say true rubbish.

There's nothing so pleasant as having people understand clearly what role wisdom plays in our life.
2013-04-09 19:33:53 by Global Macro
islandman, a very good explanation. Furthermore, these people are not "tax evaders." They are refugees. The governments of the EU and the U.S. are engaged in a pernicious attack on the rights of privacy and individual liberty. On both sides of the Atlantic monstrously wasteful socialist governments are frantic to feed their voracious appetites with more and more of other people’s money. Refugees are trying to protect their savings from confiscation by increasingly tyrannical governments.

This is sadly reminiscent of another time when Swiss banking was under attack. It is ironical that 1934 saw the dawn of Swiss bank secrecy laws at a time when oppressive regimes were emerging in Europe, and more recently we have seen the sunset of Swiss bank secrecy laws during a period of new emergence of oppressive regimes. It is sad and regrettable that Switzerland has found it necessary to surrender to the threats of these corrupt and oppressive regimes.
2013-07-03 14:16:19 by HombreE
islandman , I admit some incoherency last time I was addressing your comment.

This time I made my lesson very well.
And honestly, even if I can distinguish almost 20 different types of trusts, all of them belong ONLY to common law system.
It might be a little surprise to you, 'america kid' but here in EU your US legislation means the same as toilet paper. nothing more.

In most Europe's countries, regarding EU members , except UK, Lichtenstein, and very few others, there is NO trust definition in force. It is all over the Europe regarded as totally illegal matter known only , for some purposes , to common law systems.

In my country no US trust could legally exist and as such it is very naive to treat this piece of legal system as universal.

Whilst there are few trust forms in common law that might be considered useful and fully acceptable ( like those having origins in ancient Roman 'fideicommissum' ) , others are not. These include e.g. :

- Offshore trust
- Protective trust in US meaning

Both are totally illegal in my country. The former is considered as tax avoidance while the latter definitely eases a person = debtor avoiding the responsibility for 'illegal assignment ' = conveyance of property with the intention to harm the creditors.

Both would easily lead to criminal cases and no judge would even argue sentencing.

Now, to that 'global marco' and his childlish reasoning of tax heavens.
Good boy, take some deep breath before coming to Europe. We are socialists and we don't appreciate such illegal activities that result in discrepancy between wealthy and a poor. That is, we approve only such business that gives the wealthy even per capita, where every person achieves the same amount from the income - no matter who actually that income generates. This means , and I mean it, you have to SHARE everything you gains, you have to give it to the poor so the discrepancy eventually diminishes and fades away.

This is how we differ from US and UK citizens. this is how trusts are illegal here as they hide almost everything from public and allow to 'verge on the law' .

Hope you understand how wrong your common law system has it.
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