Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

    On the way offshore. Photo ET

Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

A Tax Justice Network compilation, from a Latin American angle. The numbers are staggering, and though G20 gets a reputation of doing nothing, I beg to differ a bit. G20 will act more and more, because governments spend more than they take in. They need the money! However it will take a long time.

Remember how slowly they acted on global financial crimes, such as money laundering, or corruption? FATF standards, (the Financial Action Task Force of OECD), find broad acceptance today, and international pressures on tax havens have accelerated their implementation. The US Foreign Corrupt Practices Act, FCPA, and its cousin, the UK Bribery Act 2010 set standards too, that many international corporations elect to follow and comply with. It eventually will evolve into a commonly accepted standard.

The tax matters are way more complicated. The battle lines are drawn between the concepts of tax evasion and tax avoidance, between thousands of tax agents and even more tax advisers, and many ambiguities will persist and be fought out in Courts. Jurisdictions will clash, as we have seen with Dolce and Gabbana.

Eventually, everyone should have a closer look at FATCA, the US Foreign Account Tax Compliance Act, the quasi obligation for every foreign bank to comply with a long arm US regulation. Its basic unspoken premise is that a US resident, citizen and corporation are taxed on worldwide income. There is no escape. Of course any bank active internationally has to sign up through one or the other model of reporting. But here is the news: some countries elect to report for all its banks through an "Inter Governmental Agreement" with the US. Logically they should also negotiate reciprocity, unless for some reason they forgo the opportunity. However, more and more of the European countries adhere to the idea to develop mutual FATCA type agreements between themselves. The train is rolling... towards a worldwide mutual reporting world, 192 countries reporting 2 by 2!

Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

WSJ: Dolce and Gabbana Convicted of Tax Evasion

    My Orchids. Phalaneopsis "Tax Shelter". Photo ET

WSJ: Dolce and Gabbana Convicted of Tax Evasion

Domenico Dolce and Stefano Gabbana were sentenced to 20 months in prison for tax evasion by an Italian court. 20 months in the cabana is no dolce vita. The good news: there will be appeals, and even if that fails, it will be mostly a sentence of "house arrest". However it has been a nightmare for both designers.

It is also a dubious public relations event for Luxembourg. Indeed the tax evasion, or was it "optimization", occurred through a Luxembourg structure, "Gado" holding the company's brands. In the present times of efforts to dismantle tax havens, it is just a prominent example for those who say: see! At first sight you may also wonder, who advised those gentleman? Obviously, they didn't set up the Luxembourg structure by themselves. In which case all those consultants have to worry: how to maintain trust in their expertise? Or, do they have any kind of liability?

And very bluntly comes up the question: are those financial engineering adventures still worth the risks, mostly in view of a universal FATCA, that is bound to be enforced in a matter of years.

There goes the possibility for companies like Dolce and Gabbana to be creative outside fashion. There goes a huge market for the Big Four and other local players. Five years left, but financial engineering and tax rulings clients will desert before that. Proof are the Amazon hearings in the UK and the Apple hearings in the US. And there goes the windfall for tax havens, that will have to struggle to replace an easy source of budgetary revenue.