Wednesday, December 11, 2013
These days only fools hold dirty money in their own name. In response, campaigners are working hard to expose the extent which tax evaders are using anonymous shell companies to conceal ownership. These efforts are helping to push corporate transparency up political agendas.
G8 countries are now backing mandatory registration of real or “beneficial” owners and Britain has become the first country that will open its register to the public. However, the use of trusts is a vault-sized loophole that is drawing considerably less interest.
In many jurisdictions, trusts are not required to register their owners or even their existence. This makes trusts a tempting tool for those that want to hide money or circumvent laws. Discretionary trusts, which allow assets to sit in a sort of ownership limbo, are particularly open to abuse.
In response to trust abuse, the Foreign Account Tax Compliance Act (FATCA) will require trusts to face many of the same reporting obligations as banks. The European Commission is also proposing several amendments to its savings-tax directive in an effort to close loopholes.
See The Weak Link, The Economist, Nov. 9, 2013.
Special thanks to Adam J. Hirsch (Professor of Law, University of San Diego School of Law) for bringing this article to my attention.