BBC Online :
Chances are by now you know all the gory details – allegations in the Panama Papers that the super-rich and politically connected, and even some of their relatives, have moved hundreds of thousands of dollars from their own countries into offshore accounts in Panama, Hong Kong and Singapore, amongst other places.
A lot of the international spotlight has been centred on the practice of offshore banking.
Some of the biggest global offshore banking centres can be found in Asia – Singapore, Macao, Dubai and Hong Kong, for example, are amongst the top spots for the global super-rich looking to open an offshore account.
The practice in itself isn’t illegal, but Asian capitals have been under pressure to share more information about who the account holders are, and where the money comes from. So will the Panama Papers force more
Unlikely, says Andy Xie, an independent economist based in China and Hong Kong. “In Asia it’s about how to hide your wealth that often hasn’t been legitimately acquired,” says Mr Xie. “Political power and ill-gotten wealth go hand in hand here. Now let’s be clear – setting up an offshore account or an offshore company is perfectly legal.
But here’s where it gets complicated. There is a difference between tax evasion and tax avoidance. And the devil is in the details. Tax evasion, according to Paul Lau, tax partner with professional services firm PricewaterhouseCoopers (PwC), is when “someone has income to report and then doesn’t report it.”
So if you have income in that offshore account, that you haven’t declared to tax authorities back in your home country, and you are required to report that income to them – then that could be illegal.
But tax avoidance is something a bit more “nebulous”, as Mr Lau puts it.
“Tax avoidance is taking advantage of certain tax provisions in a way that is not within the intent of the provision, to avoid paying tax.” So that means – if you’ve found a perfectly legal way to avoid paying taxes because of a provision in the tax system – well, then depending on the country, you may not be doing anything illegal at all. Lots of hedges and provisos here, but that’s sort of the point.
“The world is dotted with states and territories that make a speciality of providing services whose purpose is to facilitate ways to hide assets,” says anti-corruption advocacy group Transparency International.
Activists say it is time for these countries to reform the secret world of finance they operate and become more transparent. “The enablers – the accountants, the lawyers, the business formation people – they’re all involved,” says Transparency International’s Casey Kelso.
“They are all getting a great deal of money as a percentage of these profits from these transactions.”
Chances are by now you know all the gory details – allegations in the Panama Papers that the super-rich and politically connected, and even some of their relatives, have moved hundreds of thousands of dollars from their own countries into offshore accounts in Panama, Hong Kong and Singapore, amongst other places.
A lot of the international spotlight has been centred on the practice of offshore banking.
Some of the biggest global offshore banking centres can be found in Asia – Singapore, Macao, Dubai and Hong Kong, for example, are amongst the top spots for the global super-rich looking to open an offshore account.
The practice in itself isn’t illegal, but Asian capitals have been under pressure to share more information about who the account holders are, and where the money comes from. So will the Panama Papers force more
Unlikely, says Andy Xie, an independent economist based in China and Hong Kong. “In Asia it’s about how to hide your wealth that often hasn’t been legitimately acquired,” says Mr Xie. “Political power and ill-gotten wealth go hand in hand here. Now let’s be clear – setting up an offshore account or an offshore company is perfectly legal.
But here’s where it gets complicated. There is a difference between tax evasion and tax avoidance. And the devil is in the details. Tax evasion, according to Paul Lau, tax partner with professional services firm PricewaterhouseCoopers (PwC), is when “someone has income to report and then doesn’t report it.”
So if you have income in that offshore account, that you haven’t declared to tax authorities back in your home country, and you are required to report that income to them – then that could be illegal.
But tax avoidance is something a bit more “nebulous”, as Mr Lau puts it.
“Tax avoidance is taking advantage of certain tax provisions in a way that is not within the intent of the provision, to avoid paying tax.” So that means – if you’ve found a perfectly legal way to avoid paying taxes because of a provision in the tax system – well, then depending on the country, you may not be doing anything illegal at all. Lots of hedges and provisos here, but that’s sort of the point.
“The world is dotted with states and territories that make a speciality of providing services whose purpose is to facilitate ways to hide assets,” says anti-corruption advocacy group Transparency International.
Activists say it is time for these countries to reform the secret world of finance they operate and become more transparent. “The enablers – the accountants, the lawyers, the business formation people – they’re all involved,” says Transparency International’s Casey Kelso.
“They are all getting a great deal of money as a percentage of these profits from these transactions.”
