#Switzerland Votes ‘Yes’ to Staying the #Tax Home for #Commodities #Traders & #Multinationals

Geneva votes to lower its Cantonal Tax Rate to 13.99%, confirming its willingness to be a home for Multinationals and Commodities Trading Houses

Switzerland Votes 'Yes' to Staying the Tax Home for Multinationals 

https://www.bloomberg.com/news/articles/2019-05-19/switzerland-votes-yes-to-being-tax-home-for-big-business

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#Switzerland ain't what it used to be: People Power Deters Companies @BloombergNews

Referendums galore

Swiss Corporate Magic Wanes as People Power Deters Companies

Switzerland’s liberal tax and labor laws made it a magnet for companies. Now the country’s open approach to politics is making it a repellent.

In the past 15 months, Swiss voters have approved a proposal to curb the inflow of foreigners and backed an initiative to limit executive pay including severance packages. In the latest referendum, on May 18, they will decide whether to introduce the world’s highest minimum wage, paying workers at least 22 francs ($25) per hour or 4,000 francs a month.

“It’s democracy at its best, but the multiplication of initiatives after a while has created chaos and nobody knows how to manage it,” said Michel Demare, chairman of Syngenta AG (SYNN), the world’s largest maker of crop chemicals. He also leads Swiss business lobby SwissHoldings. “There are very few large companies that moved to Switzerland in the last two to three years. Some decided to move out.”

The Swiss take direct democracy seriously, holding more plebiscites than anywhere else in Europe. What’s more, they are legally binding, giving the government little or no choice but to implement the will of the people regardless of pressure from companies or other European governments.

Voters in the Alpine nation have decided on at least 60 initiatives since 2000 and at least 20 more are in the pipeline, including ballots on agricultural commodity trading and another one on even stricter immigration limits.

Moving Out

“This is the first time in Swiss history that initiatives that are business unfriendly have been accepted,” Michael Hermann, a lecturer at the University of Zurich said. “Switzerland right now is not on top of the list of companies that are thinking about moving to another location.”

Switzerland traditionally allows multinational companies to pay less tax on income from outside the country.

While the government last year announced plans to change those rules to mollify the European Union, it plans to introduce new tax exemptions to stay competitive. Its labor laws meanwhile enable companies to fire employees more easily than in neighboring Germany or France.

Demare, 57, a Belgian who came to Switzerland in the early 1990s to work at the European headquarters of Dow Chemical Co., said Switzerland’s stable politics lured investment from multinationals. Now the 123-year-old tradition of referendums is putting that at risk, he said.

Itchy Feet

“We’re seeing a decline in the number of foreign companies” Swiss State Secretary Jacques de Watteville said of the country’s negotiations with the EU on corporate taxation, speaking at a conference in Lausanne today. “There’s a real pressure to keep companies.”

Weatherford International Ltd. (WFT), an oilfield services company, said in April that it plans to move its legal domicile to Ireland from Switzerland, where it located to in 2009.

Changes to Swiss law “would limit Weatherford’s ability as a multinational company to retain and attract key executive talent and directors,” Weatherford said in the invitation to its June 16 shareholder meeting to sign off the move. “A successful business requires a supportive and stable pro-business and regulatory environment.”

Kuehne & Nagel International AG, the world’s biggest sea-freight forwarder, also may consider transferring parts of its headquarters, currently in Schindellegi near Zurich, out of Switzerland should immigration curbs limit recruitment, according to majority shareholder Klaus-Michael Kuehne.

Insecure CFOs

A study of 111 Swiss chief financial officers by Deloitte & Touche LLP showed that 88 percent of them see the February vote on curbing immigration as having a negative effect on the country as a business location.

The vote was put forward by the Swiss People’s Party, or SVP, which has tapped into rising resentment toward immigrants. SVP Vice President Christoph Blocher last week announced he was giving up his seat in parliament to focus on referendums.

There’s “a certain feeling of insecurity among CFOs,” said Michael Grampp, an economist at Deloitte in Zurich. “Especially if you consider the likelihood of voters accepting more initiatives that have a political or economic impact.”

That’s not to say voters always cast their ballots in an unfavorable way for companies.

The Swiss have almost always taken a pro-business view in ballots about taxes and in 2012 rejected a proposal for six weeks of statutory vacation. The nation also remained the most competitive economy globally in the World Economic Forum’s annual ranking published in September.

Referendum Surge

The minimum wage proposal was opposed by 64 percent of respondents in a May 7 poll by researcher gfs.bern. The survey of 1,413 people had a margin of error of plus or minus 2.7 percentage points, the company said.

“Switzerland, within Europe, is still a bit of a haven,” Adecco SA (ADEN) Chief Executive Officer Patrick De Maeseneire said. “Don’t fix it if it’s not broken and Switzerland is for sure not broken, it has never been.”

The number of national initiatives since 2000 is higher than in the 80 years after they first began in in 1891. They first started proliferating in the 1970s as a wave of political activism in Europe continued in Switzerland.

A plebiscite on almost any topic can be called by collecting 100,000 signatures from the country’s 8 million people. As well as the new minimum wage, the Swiss also will decide on May 18 whether the country buys 3.1 billion francs worth of Saab AB (SAABB) Gripen combat jets.

The advent of the Internet and social media has made that task a lot easier and one way to reduce the number of votes would be to double the threshold, said Patrick Schellenbauer, a researcher at Avenir Suisse in Zurich, a research firm sponsored by companies including Nestle SA (NESN) and Philip Morris SA.

“If the political system isn’t adjusted the attraction of Switzerland as a place for business will be affected and investments will decline,” Schellenbauer said.

To contact the reporters on this story: Jan Schwalbe in Zurich at jschwalbe6@bloomberg.net; Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Rodney Jefferson at r.jefferson@bloomberg.net Zoe Schneeweiss, Albertina Torsoli

Swiss Corporate Magic Wanes as People Power Deters Companies - Bloomberg

Geneva Mansions Sell at Discount as Tax Scares Expats - Bloomberg

Of course 'at a discount' in Geneva is all relative...

Asking prices for luxury homes in Geneva fell by an average of 9 percent to 14,829 francs per square meter since peaking in 2011

Geneva Mansions Sell at Discount as Tax Scares Expats

By Simeon Bennett and Giles Broom - Aug 26, 2013

Real estate broker Alexander Koch de Gooreynd relayed a difficult message to a client last June: the 39.5 million Swiss-franc ($43 million) asking price for his eight-bedroom lakefront villa in Geneva was too high.
The 8,600 square-foot (800 square-meter) home with yacht mooring, wine cellar and kennels in Collonge-Bellerive, where Saudi Arabia’s King Fahd built a summer palace in the 1970s, had been on the market for nine months. The seller took his advice and the house sold for 31.5 million francs in December.
“The heady days are over,” said Koch de Gooreynd, head of London-based Knight Frank LLP’s Swiss residential team, adding that the house might have fetched the higher price two years ago. “Vendors are becoming much more realistic.”
Geneva luxury-home prices, among the highest in the country, are tumbling as buyers are spooked by proposals to end tax breaks for foreign millionaires and the number of multinationals moving to the city slows. Houses in Geneva worth at least 6 million francs have declined by as much as 25 percent in the past 12 months, said Sebastien Rohner, a Geneva-based broker at Barnes International Luxury Real Estate.
“I’ve never known a slump like this before,” Rohner said. “Wealthy people are still attracted to Geneva, but they are taking their time and renting before buying.”

Market Stagnation

The slump in Geneva’s luxury market comes as the average house price in the city declined 1 percent to 2.6 million francs in the first half of 2013 from a record high in 2011, according to data compiled by Wuest & Partner AG, a real estate consulting firm with offices in Geneva and Zurich. House prices in Geneva more than doubled in the previous 13 years, while values in the rest of Switzerland rose 53 percent, Wuest & Partner’s figures show.
“In regions like Zurich and Lake Geneva, where house prices have reached a pretty high level, there is stagnation or a modest correction,” said Robert Weinert, a market analyst at Wuest & Partner in Zurich. “Prices have reached a level where not many people can afford them.”
UBS AG (UBSN)’s Swiss Real Estate Bubble Index rose in the second quarter as mortgage lending in Switzerland increased 4.3 percent from a year earlier, exceeding a gain in disposable household income of 1.4 percent, the country’s biggest bank said on Aug. 5.
To prevent a repeat of the property-market crisis of the 1990s, which hobbled economic growth for years, the Swiss National Bank sponsored the introduction in February of a capital buffer, which forces lenders to hold an extra 1 percent of risk-weighted assets tied to residential mortgages.

Cooling Market

That helped cool Geneva’s housing market by pushing up the 10-year fixed home loan rate to 2.4 percent from 1.8 percent in February, Weinert said.
Geneva, less than a two-hour drive from the ski resorts of Chamonix and Verbier, has used low taxes, political stability and quality of life to lure more than 900 multinationals, including Procter & Gamble Co. (PG), commodity traders such as Gunvor SA and hedge fund managers, Brevan Howard and BlueCrest Capital Management LLP. In 2009, Dinara Kulibayeva, second daughter of Kazakh President Nursultan Nazarbayev and the billionaire owner of Halyk Savings Bank, bought a house in the Geneva suburb of Anieres for a record 74.7 million francs.
The influx of expatriates has slowed, sapping demand, said Claudio Saputelli, an economist at UBS in Zurich and co-author of the bank’s quarterly bubble index report.
“We’re not seeing as many expats moving to Geneva,” said Saputelli. “The market has become more and more difficult for high-end apartments.”

Tax Break

Germany’s Merck KGaA last year announced plans to close the Serono unit it bought from billionaire Ernesto Bertarelli in 2007, resulting in the loss of 1,250 jobs in Geneva.
Wealthy foreigners were also drawn to Geneva by a 150-year-old tax break that enables them to avoid paying income tax via an expenditure-based levy known as a forfait. Geneva’s Socialist Party in January 2012 submitted the 10,000 signatures necessary to force a vote on abolishing the program. While the Geneva government and a majority of the canton’s lawmakers voted in June to reject that proposal, the initiative prompted the canton to consider revising the tax break by September 2014.
“This indecision, it kills the market,” Koch de Gooreynd said. “It’s any concern that things might be about to change.”
After Zurich became the first canton to abolish the forfait in 2009, with almost 53 percent voting against the system, 97 of the 201 beneficiaries of the tax left the canton. About two-thirds of them relocated to other parts of Switzerland.

Negotiating Room

Asking prices for luxury homes in Geneva fell by an average of 9 percent to 14,829 francs per square meter since peaking in 2011, according to UBS. In the suburbs of Florissant and Malagnou, east of Geneva’s old town, the drop was 24 percent.
The decline is probably even steeper because the numbers are based on advertised asking prices and weaker demand is enabling buyers to negotiate better deals, said Saputelli.
“More and more prices are under discussion,” Saputelli said in a phone interview. “That wasn’t the case two or three years ago, when demand was so high that you had no chance to bargain the price down.”
The decline will probably continue for another 12 months, said Christian Kraft, head of Swiss retail estate research at Credit Suisse Group AG. (CSGN)

Scared Buyers

The number of new buyers has fallen by half, said David Colle, managing director of Luxury Places, a Geneva-based brokerage. “People are scared a little bit, they’re just waiting,” he said. “There’s less demand, there’s less buyers coming every day to us.”
In Cologny, another of Geneva’s millionaire lakeside suburbs, there are 10 to 15 homes on the market for more than 10 million francs compared with just one or two back in 2011, Knight Frank’s Koch de Gooreynd said.
“Buyers are increasingly savvy now, especially with such a big selection out there,” he said. “Still, Switzerland remains one of the key markets for people to invest, relocate their business and bring their families due to the safe and secure environment, stable economy and the high quality of life available.”
To contact the reporters on this story: Simeon Bennett in Geneva at sbennett9@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net
To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Phil Serafino at pserafino@bloomberg.net; Rob Urban at robprag@bloomberg.net.

®2013 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Geneva Mansions Sell at Discount as Tax Scares Expats - Bloomberg


The Pangea Advisors Blog

#Falciani and his stolen data from #Swiss #Banks

From The International Herald Tribune:

Fugitive can name names of Swiss bank account holders

BY DOREEN CARVAJAL AND RAPHAEL MINDER

PARIS — Hervé Falciani is a professed whistle-blower — the Edward Snowden of banking — who has been hunted by Swiss investigators, jailed by Spaniards and claims to have been kidnapped by Israeli Mossad agents eager for a glimpse of the client data he stole while working for a major financial institution in Geneva.

‘‘I am weak and alone,’’ Mr. Falciani said, as three round-the-clock bodyguards provided by the French government looked on with hard stares. The protection was needed, he insisted, because he faces constant risk as the sole key to decipher the encrypted data — five CD-ROMs containing a list of nearly 130,000 account holders that may be the biggest leak ever in the secretive world of Swiss banking.

But as he settled into a deserted bistro for a two-hour lunch, Mr. Falciani, who has been on the run since 2008, seemed oddly relaxed for a fugitive. And why not?

The former computer technician is in high demand these days, having cast himself as a crusader against the murky world of Swiss banking and money laundering. Once dismissed by many European authorities, he and other whistle-blowers are now being courted as the region’s governments struggle to fill their coffers and to stem a populist backlash against tax evasion and corruption.

‘‘It’s an economic war,’’ said Mr. Falciani, an angular man of 41 with a dark goatee who sometimes dons disguises, though on a muggy summer afternoon favored an innocuous beige tie and short-sleeved dress shirt. ‘‘In Switzerland, the banks are so organized that they are able to circumvent new rules and laws to continue to enable tax evasion.’’

Critics, not least at his former employer HSBC, scorn and dismiss Mr. Falciani as a manipulator more dazzled by money than high ideals. The data he has leaked — some say sold — since 2008 has wreaked havoc within the banking world, as well as the moneyed and political classes of Europe.

Mr. Falciani’s information formed the basis for the now famous ‘‘Lagarde list’’ that has roiled Greek politics with its revelations of oligarchs and politicians who avoided taxes by stashing millions in Switzerland. His data is also credited with helping Spain collect 260 million euros ($345 million) in taxes and identify more than 650 tax evaders, including the president of Banco Santander.

In 2012, Mr. Falciani passed his information to American authorities. They, in turn, used the data to pursue an investigation into whether HSBC flouted controls on money laundering, eventually forcing a $1.92 billion settlement with the bank in December.

More than a few rich and powerful people await his next move. Mr. Falciani asserts that only a small portion of the data has been decrypted and used.

Since being released from jail this year after a Spanish judge denied a Swiss extradition request, Mr. Falciani, who is married and has a young daughter, has resurfaced in France. Authorities here have offered protection in exchange for Mr. Falciani giving testimony to local prosecutors who are investigating whether HSBC helped French clients dodge taxes.

‘‘My main objective is to help authorities develop a defense,’’ Mr. Falciani said.

‘‘We are under attack and losing a lot of tax money,’’ he said of the Swiss banking system. ‘‘If you have enemies who want to invade, laws are not enough and you need armies to build an economic defense.’’

A native of Monaco who was educated in the south of France, Mr. Falciani once worked in obscurity as a computer technician at HSBC. In 2005, he was promoted and transferred to Geneva. The following year, he said he raised concerns to his bosses about security flaws in the Swiss system that could violate the privacy of depositors.

Ignored by his superiors, Mr. Falciani said he started collecting the information methodically, in an effort to prove the system was vulnerable. The bank denies that he ever alerted them and believes that he amassed the information over a two-year period.

Early on, Mr. Falciani said he got the brushoff from German bureaucrats who weren’t interested in his trove of data. His information was also shunned in France by the previous administration when ‘‘authorities tried to make evidence disappear and they didn’t want to know,’’ he said.

Then the European economy slumped and governments started to take notice.

In a report from the French National Assembly issued in July, the lawmaker Christian Eckert chided authorities for being slow to use Mr. Falciani’s list. According to Mr. Eckert, the information included 127,311 clients, including 6,313 from France who were suspected of tax evasion.

HSBC dismisses Mr. Falciani’s information as flawed, insisting the small sample the bank has seen is filled with errors. At the time of his employment, the bank contends it had only 100,000 customers and that the stolen data only affected 15,000 clients.

‘‘To our knowledge it has always been Falciani’s intention to sell the data,’’ David Brügger, a bank spokesman, said in an e-mail statement. ‘‘Only faced with the prospect of extradition and extended time behind bars, Falciani decided to cooperate with the Spanish authorities. A scheme he is now repeating with France and other countries.’’

That theory is echoed by Georgina Mikhael, a former HSBC computer consultant who worked with Mr. Falciani in Geneva.

Ms. Mikhael says she helped Mr. Falciani develop a Hong Kong based company, Palorva, to sell data to other banks, initially believing he obtained the information through what he called ‘‘data mining’’ from the Internet. She said they went to Lebanon in 2008 to sell their services to four banks. She said she grew suspicious when Mr. Falciani insisted on using a false Arabic name, Ruben Al-Chidiack, for their business dealings.

‘‘He never gives something for free,’’ said Ms. Mikhael, who noted that after the Lebanon effort failed Mr. Falciani tried to approach German and French intelligence services, usually carrying a knife in his bag because he feared the risks. ‘‘Always he is asking. He is not Robin Hood.’’

Ms. Mikhael, who is currently unemployed and lives in her native Lebanon, says that she was Mr. Falciani’s mistress, believing that he planned to divorce his wife. She is now pursuing a defamation lawsuit against him in France, stemming from his contention that he was kidnapped by Mossad secret agents in Geneva who were seeking bank information about people with Hezbollah ties, including her. Ms. Mikhael says she does not have Hezbollah ties and is Christian.

Mr. Falciani disputes that he is peddling his information for cash and the claims — pressed by Ms. Mikhael — ‘‘are part of moves that people are keen to play’’ to harm his reputation. ‘‘'Never have I or anyone close to me asked or accepted money for information,’’ he said.

In 2012, Swiss authorities gave Mr. Falciani safe pass to meet in Switzerland to discuss a deal to plead guilty to data theft with a suspended sentence, provided he stopped sharing the information. Mr. Falciani said he strung them along to protect his own safety, waiting for a new government in France that might take his claims more seriously.

Now that the political tide has turned, Mr. Falciani wants to continue working with authorities.

As the investigations play out, Mr. Falciani said he was holding down a day job, working for a European Union project as a computer researcher to develop algorithms to detect abnormal behavior. But he worries about his long-term safety, wondering whether he will live another year. He notes that his house has been broken into and that his wife was recently fired from a job at a shoe store because of his notoriety

‘‘This business represents thousands of billions of euros,’’ he said. ‘‘From my side, I’m frightened.’’ ◼

A Fugitive With a Cause - NYTimes.com

#Switzerland Moves Toward #US #Tax Deal - WSJ.com

Swiss finance department indicated U.S. pressure had prompted it to act quickly

Swiss banks will be able to deal directly with the DOJ to settle past legal issues over suspected tax evasion by Americans

Switzerland Moves Toward U.S. Tax Deal

By JOHN LETZING

• MARKETS
• Updated May 29, 2013, 8:14 a.m. ET

ZURICH—Swiss banks will be able to deal directly with the Department of Justice to settle past legal issues over suspected tax evasion by Americans under a framework agreed by the Swiss cabinet, potentially lifting some of the uncertainty hanging over the country's financial sector.
The Swiss Department of Finance said the proposed plan would allow banks not already dealing directly with the DOJ in order to resolve issues to do so.
Banks, which aren't required to participate in the plan, would be allowed to share information regarding business relationships with U.S. clients and the bank employees involved. Banks that do participate will be required to provide protection to their employees, according to the statement from the finance department.

Read more

Offshore Tax Probe Picks Up

Parliament will act on the proposed deal during its summer session, it said.
The announcement Wednesday comes as pressure builds on Swiss politicians and the financial services industry to break with decades of banking secrecy. Since the onset of the financial crisis, the U.S. has ramped up efforts to track down undeclared assets in order to recover lost tax revenue.
Other countries, including Germany, France and the U.K., are also pressuring Switzerland to act on similar concerns over tax evasion.
The Swiss finance department indicated U.S. pressure had prompted it to act quickly, saying a plan is needed urgently because "the United States is unprepared to wait any longer" to resolve issues involving Swiss banks, which otherwise also would remain vulnerable to the prospect of further criminal investigations and charges.
The finance department didn't name any specific banks. Roughly a dozen banks, including Credit Suisse Group AG and Julius Baer Group AG, have been under investigation for their role in helping Americans evade taxes using Swiss accounts.
In 2009, the DOJ reached a deferred prosecution agreement with UBS AG, under which the Swiss banking paid a $780 million fine.
Credit Suisse has previously disclosed it has set aside 295 million Swiss francs ($306 million) to deal with its U.S. tax matters. Julius Baer, which is far smaller, hasn't set aside any money in relation to the issue.
Julius Baer didn't immediately respond to an emailed request seeking comment on the Swiss plan.
A spokesman at Credit Suisse wasn't immediately reachable to comment.
Next year, banks are expected to begin operating under the Foreign Account Tax Compliance Act, or FATCA, a U.S. law that requires foreign banks to report information about accounts held by U.S. taxpayers to the Internal Revenue Service. FATCA is separate from Wednesday's proposed plan.
Martin Naville, chief executive of the Swiss American Chamber of Commerce in Zurich, said depending on its details and how it is received by the Swiss public the plan for bank settlements could be a critical turning point.
"If we can finally get rid of this banking issue we can get back to normal," Mr. Naville said. "Normal is very positive."
Write to John Letzing at john.letzing@dowjones.com

Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved


Switzerland Moves Toward U.S. Tax Deal - WSJ.com

#Switzerland Shorn of Bankers Proves Industrial Juggernaut - Bloomberg

Behind the headline-grabbing job reductions at Switzerland’s biggest banks is a manufacturing boom that is keeping the economy ahead of the rest of Europe.


Switzerland Shorn of Bankers Proves Industrial Juggernaut
By Patrick Winters - Apr 29, 2013 12:00 AM GMT+0200

Behind the headline-grabbing job reductions at Switzerland’s biggest banks is a manufacturing boom that is keeping the economy ahead of the rest of Europe.

Even after 10,000 Swiss job losses at banks led by UBS AG (UBSN) (UBSN) and Credit Suisse Group AG (CSGN) in the past five years, the nation’s unemployment rate has fallen to 3.1 percent, the lowest of Europe’s 10 biggest economies and less than the rate a decade ago. The nation of 8 million is adding workers in factories that make electrical equipment, airline seating, toilets and drugs.

“People think that precision engineering, watchmaking and the medical industry are minor, but collectively added up, they are quite sizeable in Switzerland,” said Hubertus Von Gruenberg, chairman of Zurich-based ABB Ltd. (ABBN), the world’s largest maker of power transformers. Banks are “overemphasized” in the public perception as there’s a big finance industry relative to the size of the country, he said, adding that the industrial base is “powerful and important.”

Banks and insurers had 152,000 full-time employees last year, compared with 588,000 who work for industrial companies. The banking industry’s share of domestic economic output fell to 6.2 percent in 2011 from 8.7 percent in 2007, according to the most recent data from the Swiss Bankers Association.

“Switzerland is like a Silicon Valley for the manufacturing industry,” said Markus Koch, a partner at Deloitte AG in Zurich. Given the higher cost base, no Swiss manufacturer would survive if it’s not world leading or top quality, he said.
Plane Seating

The focus on high-quality engineering allows companies to compete with cheaper products from emerging markets even as the Swiss franc’s 1.6 percent advance against the euro from a 20- month low in January makes the nation’s exports more expensive.

“We always have to be better than the others, that’s the only way we can compete these days,” said Ilona Illing, director of design at Lantal Textiles, a maker of business class seats for Deutsche Lufthansa AG (LHA) planes.

Global demand for air cushions that replace foams in airplane seats allowed Lantal, which morphed into an airplane seats manufacturer from making cheese cloths more than a century ago, to add 34 jobs last year. The success of the 127-year-old company, based in the Swiss town of Langenthal, and other local manufacturers helped keep the number of jobless in the mountainous canton of Bern at 2.5 percent in February.
Bank Exits

Pressure to stay ahead has pushed Swiss companies from drugmaker Novartis AG (NOVN) to watchmaker Swatch AG to the top of the global rankings for 2012 patent applications. Universities such as Zurich’s Swiss Federal Institute of Technology and a pro- business regulatory environment have helped make Switzerland a home for research hubs for U.S. companies, including International Business Machines Corp. and Google Inc.

The growth in engineering and manufacturing helped to make up for job losses in the finance industry. In response to requests from regulators, Swiss banks have reduced their dependence on borrowed money and exited businesses that fail to deliver big enough returns. Banks employ 10,000 people fewer in Switzerland today than five years ago, the country’s association of banking employees said Jan. 28.

The number of Swiss bankers is set to shrink further after Zurich-based UBS, the country’s largest lender, said in October that it will shed 10,000 jobs globally and abandon most debt- trading operations to focus on money management. Credit Suisse has said it will cut costs by 4.4 billion francs ($4.7 billion) by the end of 2015.
Competitive Nation

With few natural resources apart from water and beautiful landscapes, Swiss companies have focused on specialized, knowledge-based industries because of competition from lower- cost countries, said Peter Chen, a professor at Zurich’s ETH university who has been a member of chemicals-maker Clariant AG (CLN)’s board since 2006.

Switzerland has the world’s highest industrial production per capita and is the most competitive nation overall, according to the World Economic Forum’s Global Competitiveness Report. Industrial production in the country has grown “sharply” since 2005, while traditional manufacturing nations such as Japan and Germany saw only a slight increase, and the U.K. saw a decline, according to a report by Deloitte.

Swiss industrial production per person rose to $12,260 in 2010 from $7,177 in 1991, according to Deloitte.

The country’s resilience is also apparent in the global equity markets.
Treaty of Paris

The Swiss Market Index, which includes the country’s largest companies, gained 28 percent during the past 12 months, outperforming the 18 percent gain of France’s CAC index, the 16 percent advance of Germany’s DAX index and the 12 percent advance of the U.K.’s FTSE 100 index. Eleven of the 20 companies in the Swiss index are industrial companies.

The Swiss success story is rooted in the country’s history as a neutral nation that hasn’t fought a foreign war since its neutrality was established by the Treaty of Paris in 1815. That stability has attracted foreign investors and entrepreneurs.

Brown Boveri & Cie, one of two companies which were merged to form ABB, had founders with foreign roots. One was the son of a British engineer and the other the son of a German doctor. Henri Nestle, a German, started Nestle SA (NESN), the world’s largest maker of food and drink.
Entrepreneurial Spirit

The country’s entrepreneurial spirit is still alive, with biotechnology company Actelion Ltd. (ATLN) being one of the country’s more recent showpiece start-ups. The Allschwil-based company makes drugs designed to treat pulmonary arterial hypertension, an incurable disease characterized by high-blood pressure in the arteries of the lungs. Actelion, founded in 1997 by a team that includes Chief Executive Officer Jean-Paul Clozel, has a market value of 6.5 billion francs.

A report from the European Commission on innovation said Switzerland is the regional “leader,” continuously outperforming all 27 countries in Europe’s political bloc.

Employer-friendly labor laws and a strong work ethic have helped keep job losses to a minimum, Deloitte’s Koch said. Switzerland has some of the longest working hours in Europe and a statutory retirement age of 65, giving companies leeway to cope with the country’s high wages.

“Some companies went to employees and said we have a poor situation with the franc,” Koch said. Workers were asked whether they would work two hours more per week for the next 1 1/2 years and “people agreed,” he said.

Chen from Zurich’s ETH University predicts Switzerland will maintain its industry-focused economy over the long term.

“When you travel around Switzerland, you see the idyllic Swiss alps, but you are never too far away from a chemical factory,” Chen said. “It would be a mistake to move to a pure service economy.”

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

Read the article online here: Switzerland Shorn of Bankers Proves Industrial Juggernaut - Bloomberg

#Billionaires Flee Havens as Trillions Pursued #Offshore - Bloomberg

“We live in a world where you only have two choices: play by the rules of the country you live in, or get out if you don’t want to play by the rules,” Or Not...

Billionaires Flee Havens as Trillions Pursued Offshore - Bloomberg

Billionaire Dmitry Rybolovlev, Russia’s 14th-richest person, and his wife, Elena Rybolovleva, have been brawling for almost five years in at least seven countries over his $9.5 billion fortune.

In a divorce complaint originated in Geneva in 2008, Rybolovleva accused her husband of using a “multitude of third- parties” to create a network of offshore holding companies and trusts to place assets -- including about $500 million in art, $36 million in jewelry and an $80 million yacht -- beyond her reach.




Some of Russian Billionaire Dmitry Rybolovlev's art -- including works by Van Gogh, Monet and Picasso -- is now held in Xitrans Finance Ltd., a British Virgin Islands-based company, and stored in Singapore. Photographer: Alexander Zemlianichenko Jr/Bloomberg

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Cheung Kong Holdings Ltd. Chairman Li Ka-Shing, one of Hong Kong's richest men, owns his 43 percent stake of Cheung Kong through namesake trusts and companies in the Cayman and British Virgin Islands, according to regulatory filings with the Hong Kong stock exchange. Photographer: Jerome Favre/Bloomberg

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Ikea Group Founder Ingvar Kamprad fled Sweden for Switzerland in the 1970s in what he said was a protest of his home country’s tax policies. He placed shares of Ikea into a Dutch foundation in the 1980s, and later put the company’s intellectual property rights into a Liechtenstein foundation. Photographer: Chris Jackson/Getty Images

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Russian billionaire Dmitry Rybolovlev. Photographer: Lionel Cironneau/AP Photo

She has brought legal action against the 48-year-old Rybolovlev in the British Virgin Islands, England, Wales, the U.S., Cyprus, Singapore and Switzerland, and is seeking $6 billion.

The suits provide a window into the offshore structures and secrecy jurisdictions the world’s richest people use to manage, preserve and conceal their assets. According to Tax Justice Network, a U.K.-based organization that campaigns for transparency in the financial system, wealthy individuals were hiding as much as $32 trillion offshore at the end of 2010. Fewer than 100,000 people own $9.8 trillion of offshore assets, according to research compiled by former McKinsey & Co. economist James Henry.

“For a lot of people, it’s not just the objective of not paying taxes,” Philip Marcovici, an independent Hong Kong-based tax lawyer and board member of Vaduz, Liechtenstein-based wealth adviser Kaiser Partner Group, said in a telephone interview. “It’s the objective of obtaining the human right to privacy and seeking confidentiality about their financial affairs.”
Van Gogh

More than 30 percent of the world’s 200 richest people, who have a $2.8 trillion collective net worth, according to the Bloomberg Billionaires Index, control part of their personal fortune through an offshore holding company or other domestic entity where the assets are held indirectly. These structures often hide assets from tax authorities or provide legal protection from government seizure and lawsuits.

Rybolovlev, who lives in Monaco, made most of his fortune from the sale of two potash fertilizer companies for a combined $8 billion in 2010 and 2011. He held both companies -- OAO Uralkali and OAO Silvinit -- through Cyprus-based Madura Holding Ltd.

Some of his art -- including works by Van Gogh, Monet and Picasso -- is now held in Xitrans Finance Ltd., a British Virgin Islands-based company, and stored in Singapore. Rybolovlev bought a New York City apartment for $88 million in 2011 using a trust associated with his daughter, Ekaterina. The penthouse was purchased from the wife of former Citigroup Inc. chairman Sandy Weill, according to divorce documents filed in New York.
Liechtenstein, Cyprus

In the suit, Rybolovleva said the billionaire moved many of his assets, including jewels, furniture and the yacht, under the control of two trusts, Aries and Virgo, that he established in Cyprus in 2005, a few weeks after she refused to sign a post- nuptial agreement he offered her.

Sergey Chernitsyn, a spokesman for Rybolovlev at his Monaco-based family holding company Rigmora Holdings Ltd., said he declined to comment. Marc Bonnant, Rybolovleva’s Geneva-based attorney, also declined to comment.

Since the onset of the global financial crisis in 2008, the laws and treaties that created and sustained the offshore tax- dodging industry and allowed for the kinds of maneuvers used by Rybolovlev have been undergoing a shift toward transparency.

Liechtenstein, once fabled for its banking secrecy laws, began in 2009 to require its financial institutions to hold -- and release when required -- details about the beneficial owners of all accounts held there. Andorra and Switzerland made their own concessions within a day of Liechtenstein.
Money Laundering

Singapore, the heart of Asia’s banking and offshore industry, will make laundering of profits from tax evasion a crime under a law taking effect on July 1. Luxembourg announced on April 10 that it would end its bank secrecy policy in 2015.

Cyprus was bailed out of its financial troubles in March by the European Union, which required the nation to impose a tax on bank deposits of more than 100,000 euros. That month, the country lost $2.4 billion in deposits, according to data from the European Central Bank.

The shift toward transparency has led many of the world’s wealthiest to reassess how and where they hold their assets, according to Goran Grosskopf, a Lausanne, Switzerland-based economist who has advised several billionaires, as well as the Russian government.
Li, Lee

Li Ka-Shing and Lee Shau Kee, Asia’s two richest men, control parts of their fortunes through offshore structures. Li owns his 43 percent stake in Hong Kong-based property developer Cheung Kong Holdings Ltd (1). through namesake trusts and companies in the Cayman and British Virgin Islands, according to regulatory filings. Lee holds his shares in Henderson Land Development (12) Co. through 10 firms set up in the two British island territories and Panama, filings show.




Bloomberg Billionaires Index

Alisher Usmanov, Russia’s richest man, earlier this year restructured the way he holds his $19.7 billion fortune, moving the majority of his assets -- including his two most valuable, Metalloinvest Holding Co. and OAO MegaFon (MFON), worth $12.7 billion combined -- under the control of British Virgin Islands-based USM Holdings.

He controls at least one asset -- a 30 percent stake in London soccer team Arsenal worth $225 million, which he shares with a partner -- through Red & White Securities. The holding company is based on the Channel island of Jersey, a Crown dependency of the U.K. that has threatened to sever ties with the country after being criticized during 2012 for its tax policies.
Koch Industries

Paolo Rocca, an Italian billionaire living in Argentina, is continuing a cat and mouse game with the Argentine government that was started by his grandfather in 1949. The family first established its San Faustin SA holding company in Uruguay that year, moving it to Panama in 1959, to Curacao and then to Luxembourg in 2011, using side entities in the British Virgin Islands and the Netherlands from which to control it.

A small part of the $15.3 billion fortune controlled by Texas billionaire Elaine T. Marshall, 70, is based in Liechtenstein, where her late husband, E. Pierce Marshall, started a foundation for their grandchildren, according to his will. The Dallas resident controls almost 15 percent of Koch Industries Inc., the second-largest closely held company in the U.S., after inheriting the stake in 2006.
‘Girlfriend, Wife’

Many of today’s wealthy remain focused on finding places to minimize their taxes and avoid double taxation, Grosskopf said. Mario Gassner, Chief Executive Officer of Liechtenstein’s Financial Market Authority, said there are other reasons the wealthy seek discretion.

“If you are married and have a girlfriend in another country, you may have a lot of assets that perhaps you don’t want your wife to know about,” he said. “Or perhaps you are looking for a solution for your children to finance university studies, or you’re not in good relations with them and you don’t know what is going to happen to your fortune in the future.”

Russian billionaires create entities in the British Virgin Islands because they find its legal system, which is based on British law, more attractive than their own, Valery Tutykhin, an attorney with John Tiner & Partners, a Geneva-based law firm that specializes in wealth management, said in a phone interview.
German gGmbh

The Cayman Islands are popular among billionaires because they don’t impose any type of income or investment taxes on funds organized in the Caribbean country, according to a 2013 taxation report by Amstelveen, the Netherlands-based tax and accounting firm KPMG International.

Delaware is the legal home to more than half of the corporate entities in the U.S. The state’s favorable tax laws cuts companies’ tax burdens by an average of 40 percent, according to a 2011 study by Jacob Thornock at the University of Washington Foster School of Business. Delaware also doesn’t require officers and directors to be U.S. citizens, and allows them to remain anonymous, according to its business code.

There are other structures, such as the Dutch stichting, the Liechtenstein foundation, and the German gGmbH, that billionaires can use to control their assets.

Ingvar Kamprad, who controls Ikea Group, the world’s biggest home-furnishings retailer, fled Sweden for Switzerland in the 1970s in what he said was a protest of his home country’s tax policies. He placed shares of Ikea into a Dutch foundation in the 1980s, and later put the company’s intellectual property rights into a Liechtenstein foundation.
Limited Liability

The transfers removed Kamprad, the world’s fifth-richest man, from any direct ownership of Ikea. He is credited with the wealth by the Bloomberg index because he controls those entities. The billionaire disputes that he controls the company.

Per Heggenes, a spokesman for Stichting INGKA Ikea, the owner of the Ikea Group, said in an interview last year that Kamprad’s goal was to protect Ikea. The multiple layers of ownership serve as a deterrent to takeover, he said. The foundations, if kept intact, will hold the ownership of Ikea in perpetuity.

Dieter Schwarz, Germany’s second-richest man, created a gemeinnuetzige Gesellschaft mit beschraenkter Haftung -- a limited liability company with a charitable purpose -- in 1999 to hold his Lidl and Kaufland discount supermarket chains, which form the largest closely held food retailer in Europe.

The 73-year-old controls a $23.6 billion fortune through the Neckarsulm, Germany-based Dieter Schwarz Stiftung gGmbH, a tax-exempt entity that had more than 30 million euros designated for charitable giving through October 2012 -- about 0.1 percent of Schwarz’s net worth -- according to Gertrud Bott, a company spokeswoman. The retail chains are overseen by his company, Schwarz Group.
Monaco Resident

In the U.K., structures that help billionaires avoid taxes are attracting increasing public scrutiny, according to Chizu Nakajima, a co-director of the Center for Research in Corporate Governance at London’s Cass Business School. Billionaire Philip Green controls Arcadia, the clothing retailer that includes the Topshop and Topman fashion chains, through London-based Taveta Investments Ltd., according to filings with the U.K.’s Companies House registry.

Taveta Investments is owned by Jersey-based holding company Taveta Ltd., the documents show. Taveta Ltd. is controlled by Green’s wife, who is a Monaco resident. The arrangement enabled a 1.2 billion-pound ($2.3 billion) dividend paid by Arcadia to Green’s wife in October 2005 to go untaxed, according to an article published in London’s Guardian newspaper.

Green, who didn’t respond to a request for comment, defended the arrangement in a November 2012 interview with the Financial Times newspaper. He said the structure was legal, and that Arcadia had paid 2.3 billion pounds in taxes since 2002.
‘Get Out’

Establishing an offshore account remains cheap and easy, according to Tutykhin. The typical structure costs about $1,500, he said, though he has seen ones marketed by Russian students for $200. Even the most-reputable firms don’t charge much more to establish an offshore structure, he said, though billionaires will often spend “tens of thousands” of dollars a year on lawyers to manage their holdings and assure discretion.

Those wealthy individuals should stop searching for new tax havens to hide their assets, said tax adviser Marcovici.

“We live in a world where you only have two choices: play by the rules of the country you live in, or get out if you don’t want to play by the rules,” he said.

To contact the reporters on this story: David De Jong in New York at ddejong3@bloomberg.net; Robert LaFranco in London at rlafranco@bloomberg.net

To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net

Read the article online here: Billionaires Flee Havens as Trillions Pursued Offshore - Bloomberg

Bank Leumi, Mizrahi Accounts Used for Back-to-Back Loans - Bloomberg

He said “everyone in their community” of Persian Jews in Los Angeles was “using back-to-back loans to access their offshore funds,”  

The tip of the iceberg.  No one is safe.

Bank Leumi, Mizrahi Accounts Used for Back-to-Back Loans - Bloomberg

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A Los Angeles businesswoman charged with conspiring to defraud the Internal Revenue Service used accounts at two Israeli banks, Bank Leumi Le-Israel Ltd. (LUMI) and Mizrahi Tefahot Bank Ltd. (MZTF), to hide assets, her attorney said.
Guity Kashfi will plead guilty in federal court in California, where prosecutors filed her plea agreement, the Justice Department said yesterday in a statement. Kashfi went to the Los Angeles branches of both banks to obtain so-called back- to-back loans secured by accounts she set up offshore and didn’t declare to the IRS, according to the Justice Department.
Kashfi first set up an undeclared account at Mizrahi and then opened one at Leumi, said her attorney, Ed Robbins. The court documents refer to Mizrahi as Bank A and Leumi as Bank B. The highest balance in Kashfi’s undeclared accounts was $2.5 million, the Justice Department said.
“These back-to-back loans were part of the bank’s service,” Robbins said. “She’s cooperating with the government in what’s obviously an investigation of the banks and its principals. She’s been cooperating for quite a while.”
Orit Reuveni, a spokesman for Leumi, didn’t immediately return an e-mail yesterday after regular business hours in Israel seeking comment on the case. A spokesman for Mizrahi couldn’t immediately be located for comment yesterday after regular business hours in Israel.

March Plea

On March 29, Zvi Sperling of Beverly Hills, California, pleaded guilty to conspiracy for using back-to-back loans obtained in Los Angeles that were secured by undeclared accounts at Israeli banks. The banks were Leumi and Mizrahi, two people familiar with the matter said.
Dozens of U.S. citizens who used offshore accounts to avoid taxes have helped the federal government in a criminal investigation of those banks, said the people, who asked not to be identified because the matter wasn’t public.
The probe, which the people said involves a U.S. grand jury, comes amid a U.S. crackdown on offshore tax evasion that has widened since UBS AG (UBSN), the largest Swiss bank, avoided prosecution in February 2009. Zurich-based UBS paid $780 million, admitted it helped clients evade taxes, and later turned over data on thousands of accounts.
Kashfi, who was born in Iran, came to the U.S. in 1980 and became a U.S. citizen about 15 years ago, according to a statement of facts filed in her case. She started a clothing business called Countess of California.

Needed Collateral

About 1982, her business had a $2.5 million line of credit with Mizrahi secured by her inventory. Her banker said she needed more collateral and asked if she had any Persian money to secure the loan. She said she had offshore funds that she wanted to keep overseas, according to the statement of facts.
The banker recommended that she open an account in Israel and transfer her funds to use as collateral for a back-to-back loan. He said “everyone in their community” of Persian Jews in Los Angeles was “using back-to-back loans to access their offshore funds,” according to the statement of facts.
While she initially opened the account in her name, she put it in a different name in 2001 “to prevent the United States government from finding the account,” according to the statement. He said the interest paid in Israel would be tax free “because it would not be reported to the IRS so no one would know about her Israeli account.”

Banker Arrested

In 2008, Kashfi was told that one of Mizrahi’s bankers had been arrested and the bank would use money in her Israeli accounts to pay off her back-to-back loans, according to Robbins and the statement. She then transferred the money to a Leumi account in Luxembourg “because she did not want to bring her money back” to the U.S., according to Robbins and the statement.
Kashfi grew concerned in 2009 and went to Luxembourg to close her account. She went to dinner with two bankers “who told her she would have issues if she closed her account and sent the funds” to the U.S., according to the statement.
“One of the bankers told Kashfi that her money was safe in Luxembourg” because “no one could get information relating to bank accounts” there, according to the statement.
The bankers “gave Kashfi a German cell phone to use with both bankers’ numbers preprogrammed in the phone, and told her to use the phone” to call them, according to the statement. “If the bankers needed to talk to Kashfi, they would call her on her personal phone and tell her to call them back on the German cell phone.”
After she closed her account in Los Angeles in 2011, “the bankers in Luxembourg told Kashfi to return the German cell phone, which she did,” according to the statement.
She failed to report interest income of $211,306 on the accounts from 2005 to 2011, according to court papers.
The case is U.S. v. Kashfi, U.S. District Court, Central District of California.

To contact the reporter on this story: David Voreacos in Newark at dvoreacos@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Read the story here: Bank Leumi, Mizrahi Accounts Used for Back-to-Back Loans - Bloomberg

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#Luxembourg announces end of #bank #secrecy

* Luxembourg PM ready to give bank account information
* New transparency regime would begin from Jan. 1, 2015

The continuation of the end of privacy laws.

Luxembourg announces end of bank secrecy with EU states | Reuters

Luxembourg PM says ready to give bank account information

* New transparency regime would begin from Jan. 1, 2015
* Move follows pressure from Germany and French scandal (Adds quotes and background)

 Wed Apr 10, 2013 6:56am EDT
By Michele Sinner
LUXEMBOURG, April 10 (Reuters) - Luxembourg plans to lift bank secrecy rules for European Union citizens who have savings based in the country, the prime minister announced on Wednesday, marking a sharp shift in policy that will take effect from 2015.
The move brings Luxembourg into line with all other EU countries bar Austria in sharing information within the European Union about bank depositors in its territory. The decision adds to pressure on Vienna to fall into line, after Austria's chancellor said on Tuesday it would join talks on the subject.
Luxembourg's decision follows lobbying by Germany and the European Commission, bolstered by the case of former French budget minister Jerome Cahuzac, who was placed under investigation for fraud after admitting lying about having a Swiss bank account.
"We can, without great damage, introduce automatic exchange of information as of January 1, 2015," Prime Minister Jean-Claude Juncker told parliament in a state-of-the-nation address.
"We are following a global movement ... we are not caving in to German pressure," he said, adding that 25 EU countries as well as the United States wanted such data-sharing.
Germany said on Tuesday that the EU's five largest economies - Germany, France, Britain, Italy and Spain - had agreed to deepen cooperation on tackling tax evasion.
Juncker's announcement ends decades of bank secrecy in Luxembourg, which helped the country establish what is now one of the biggest financial centres in Europe and to make its citizens the region's wealthiest in terms of per-capita income.
In recent weeks, however, Luxembourg, with a banking industry roughly 22 times the size of its economy and with deposits equivalent to 10 times its GDP, has come under renewed pressure to change.
The heavy losses imposed on uninsured deposit holders in the bailout of Cyprus underscored the weak bargaining position of smaller EU states should they run into difficulty. Cyprus's financial sector, swollen with foreign funds lured by low taxes and light regulation, also dwarfed the island's economy.
The European Commission said it "warmly welcomed" the announcement by Juncker and said discussions were ongoing with Austria to encourage it to fully sign up to the EU's savings directive, a piece of legislation that advocates say will help in the fight against tax evasion across the EU.
"I hope they will be able to follow the Luxembourg lead," said Emer Traynor, the Commission's spokeswoman on tax issues.
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For a ranking of countries' compliance with banking transparency standards, please click link.reuters.com/gyb37t ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FIGHT LIKE LION
Luxembourg is also set to sign a similar agreement with the United States, which has long been pushing for tighter controls on offshore centres such as Switzerland to stop tax evasion.
Pressure to shift was increased by a report by the Washington-based International Consortium of Investigative Journalists detailing how banks have worked to help wealthy clients use tax havens such as the British Virgin Islands.
"We cannot deny to the Europeans all that we will have to concede to the Americans in a bilateral treaty," said Juncker.
Once Luxembourg adopts the legislation, it would mean the automatic exchange of data about EU citizens holding bank accounts in Luxembourg, with the aim of cracking down on tax avoidance in particular on interest income from savings.
It will not apply to foreign companies based in the country, which is a popular headquarters for major corporations. Juncker said Luxembourg would not increase corporation tax.
Most developed countries share information on taxpayers and depositors "on demand". But since this requires the authorities in the requesting jurisdiction to suspect wrongdoing, it only has limited impact in uncovering unlawful behaviour.
Automatic exchange of information allows tax authorities to more easily spot tax evasion or illicit money flows.
Juncker played down the impact of the change in rules, which Luxembourg has been resisting for roughly seven years since the EU Savings Directive was launched.
"The finance sector in Luxembourg doesn't existentially depend on banking secrecy," he said. "The government is not switching off the lights in the finance sector."
Wednesday's announcement leaves Austria as the only country not fully signed up to savings directive rules. Its finance minister said this week she would "fight like a lion" to defend the country's banking secrecy regime.
But Chancellor Werder Faymann signalled an easing of Vienna's hardline stance, saying on Tuesday that Austria would join Luxembourg for talks with the EU on how to crack down on cross-border tax cheats.
The European Commission warned Austria on Monday that its banking secrecy would put it in a "lonely and unsustainable position" if it did not adopt the same rules as other countries in sharing data on foreign depositors. (Reporting By Michele Sinner; Writing by John O'Donnell; Editing by Catherine Evans)


UPDATE 2-Luxembourg announces end of bank secrecy with EU states | Reuters

François Hollande’s Campaign Treasurer’s Investments in the Cayman Islands

More on the Offshore Leaks story now breaking. This time it is François Hollande’s Campaign Treasurer’s Investments in the Cayman Islands that are in question.

This from the ICIIJ website:

The International Consortium of Investigative Journalists has just released the first stories from aglobal collaborative project into the world of offshore money. The Tax Justice Network, an advocacy group claims that a third of the world’s wealth is tied up in the secret area of offshore.For the past 15 months, journalists from over 40 countries have worked together to shed light on this issue.

More here: http://www.icij.org/blog/2013/04/highlights-offshore-leaks-so-far


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François Hollande deep in tax haven merde

François Hollande, French president, was a hero for a time last year for the gullible until his proposed growth pact was revealed to be just a political slogan. He also fired up supporters with plans to tax the rich until the pips squeak and become the scourge of tax havens. However, in the past two weeks, the already unpopular president has found himself to be deep in tax haven merde.

France24 says  Jérôme Cahuzac, who resigned as Hollande's budget minister, which included the job of countering tax cheats, once compared having a Swiss bank account with taking a pregnancy test. “It’s either there or it’s not - - there’s no in between,” he told a reporter from French daily Libération in February. “Do you think I’d still be in office if there was the slightest chance I had one?”

Two months later, Cahuzac’s carefully concealed “pregnancy”, or €600,000 offshore bank account, has come out screaming. Described by the French press as “one of the most spectacular scandals” the country has seen for decades, Cahuzac’s admission of guilt - - after four months of public denial - - has left the nation dumbfounded, and his Socialist Party colleagues devastated.

The news channel says Cahuzac was deemed a tough-talking, earnest politician who prided himself on honesty. His staggering fall from grace has got everybody in France wondering, who is the Socialist minister who duped the nation?

Then on Thursday reports of a massive leak of tax haven data identified Jean-Jacques Augier, President Hollande's campaign co-treasurer and close friend, as having an interest in a Cayman Island's company.

An anonymous source has provided the opportunity for the greatest insight into a worldwide network of tax evaders. Media in more than 30 countries are currently trawling through loads of data.

It is reported that 260 gigabytes of documents - - equivalent to 500,000 printed copies of the Bible, has been made available to the International Consortium for Investigative Journalism (ICIJ) in Washington. More than 2m emails and other confidential documents, implicate more than 130,000 people from 170 countries, who are alleged to have secreted their money in tax havens.

British Virgin Islands is the main tax haven in the trove of data - - known in shorthand as the BVI. It has a population of 28,000 and 500,000 active offshore companies. That represents about 40% of the offshore companies that exist around the globe, according to a 2011 World Bank report

An already weak President Hollande has taken a back seat in Europe to avoid brickbats.

After the second round of the National Assembly elections last June, he was offered a few EIB (European Investment Bank) funded projects to meet his demands for a growth pact and that was that. However, it would have been useful to have had a detailed plan that he could have used to rally support from other countries. He had nothing.

Angela Merkel, the German chancellor, has no countervailing power to worry about.

François Hollande deep in tax haven merde

Puerto Rico Beyond IRS Reach Woos Paulson-Sized Fortunes - Bloomberg

Now this just may work! As long as too many Americans don't come!

Puerto Rico Beyond IRS Reach Woos Paulson-Sized Fortunes - Bloomberg

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Puerto Rico occupies a space between foreign and domestic status with U.S. citizenship for residents, its own Olympic team and a tax system that allows individuals and companies the chance to elude the IRS.
The U.S. territory’s leaders are seeking to lure mainland residents such as hedge-fund billionaire John Paulson. Moving to Puerto Rico could allow Paulson and other top-earning taxpayers to shield future income from the Internal Revenue Service without giving up their passports.
Puerto Rico, eager for economic growth, is making an unusually direct pitch to wealthy Americans that risks a political backlash from Congress, said John Buckley, a former tax counsel for Democrats on the House Ways and Means Committee.
“They’re walking a fine line,” Buckley said. “This would be the first time that Puerto Rico would kind of deliberately erode the U.S. tax base for individuals.”
Already, 10 Americans have taken advantage of a year-old Puerto Rico law that lets them avoid local and U.S. capital gains taxes by signing agreements with the territory’s government. Paulson, a 57-year-old New Yorker, is considering such a move, according to four people who have spoken with him about it, Bloomberg News reported March 11.
The law was designed to promote investment in the island territory. The unemployment rate there was 14 percent in December 2012, compared with 10.2 percent in Nevada and Rhode Island, the states with the highest unemployment, according to the U.S. Bureau of Labor Statistics.
Puerto Rico’s gross domestic product per capita in 2010 was $16,300, about the same as Botswana or Belarus, according to the CIA World Factbook.

Lost Manufacturing

Puerto Rico wants to diversify its economy, which has lost some of its manufacturing base to low-wage countries such as the Dominican Republic and China, said Gabriel Hernandez, one of the framers of the Puerto Rican tax law and head of the tax division of BDO Puerto Rico PSC.
“It’s our reaction to what happened, that the world got more connected,” said Hernandez, who likened the effort to tax incentives used by states to lure businesses.
The U.S., he said, should embrace “the whole concept of trying to make our economy more independent or more stable or more self-reliant.”
The law takes advantage of the longstanding interaction between the tax codes of the U.S. and Puerto Rico. Under laws previously passed by Congress, all income earned in Puerto Rico by island residents is exempt from U.S. taxation. Residents still owe the IRS taxes on any U.S. income.

Untaxed Income

By moving to Puerto Rico, wealthy Americans can transform potential U.S. capital gains income taxed at up to 23.8 percent into untaxed Puerto Rican income. They must meet residency tests, including spending 183 days a year in Puerto Rico and having social and personal connections on the island.
By contrast, renouncing U.S. citizenship by moving to another country is much more punitive for wealthy taxpayers. They must surrender their U.S. passports and pay an exit tax on the value of unrealized capital gains. As a simplified example, someone giving up citizenship who has $100 million in untaxed stock gains could pay $23.8 million upon departure.
Even with potential tax advantages, Paulson and others considering a move to Puerto Rico should be wary, said Argeo Quinones Perez, a professor of economics at the University of Puerto Rico’s Rio Piedras campus.

‘Third-World Environment’

“For people as wealthy as Mr. Paulson and the like, spending half a year in this provincial, third-world environment would be like spending half a year in minimum-security prison,” he said in an e-mail. “The tax breaks Mr. Paulson and other people and entities enjoy in this fiscal paradise are at the heart of the long-term fiscal crisis and economic stagnation we suffer.”
Puerto Rico, which has a population of about 4 million and is smaller geographically than Connecticut, has been a part of the U.S. since the Spanish-American War in 1898. The commonwealth has a non-voting resident commissioner, Pedro Pierluisi, who represents residents in Congress and caucuses with House Democrats.
In an interview yesterday, Pierluisi blamed Puerto Rico’s unresolved status between statehood and independence. As a state, he said, Puerto Rico would get more federal funding, which would be an acceptable tradeoff for bringing residents’ income under the federal income tax. Residents and employers do pay federal payroll taxes.

Mirror Code

“Short of statehood, this is what you do,” he said, adding that a struggling Puerto Rico economy just encourages migration in the opposite direction, to Florida, Texas and North and South Carolina.
Puerto Rico’s separate tax system makes it different from several other U.S. territories. Guam, the U.S. Virgin Islands and the Northern Mariana Islands all use what is called a “mirror code,” in which they use the U.S. tax code and substitute the name of the territory each time the law says United States. The District of Columbia is treated generally like a state for tax purposes.
The Virgin Islands attempted to lure hedge-fund managers more than a decade ago, using authority Congress granted the territory to encourage economic development.
That effort fizzled after Congress changed the law in 2004 to make it more difficult to recharacterize U.S. income as island-based, and the IRS began auditing more aggressively.

Harmonizing Rules

Puerto Rico’s attempts to lure U.S. taxpayers could draw more scrutiny of taxation in the territories, which hasn’t received much attention lately, said Senator Charles Grassley, former chairman of the Finance Committee, who led the effort against the Virgin Islands maneuvers.
“Harmonizing the tax rules of the territories could be something to look at if Congress and the president undertake comprehensive tax reform,” the Iowa Republican said in an e- mailed statement this week. “Or if Puerto Rico maintains a separate tax system, that could be conditioned on accepting certain rules to prevent tax evasion.”
The hybrid system of Puerto Rican taxation has implications for companies, too. Until 2006, the U.S. offered companies a credit against U.S. income taxes for investments in the territories. Companies also have access to the U.S. market, patent protection and the U.S. legal system, Hernandez said.
After that break expired, companies restructured their Puerto Rican operations to take advantage of the fact that it’s considered a foreign jurisdiction for tax purposes.
Companies such as Amgen Inc., Pfizer Inc. (PFE) and Microsoft Corp. receive local tax benefits from their operations on the island, according to regulatory filings. As with profits in another country, the companies can earn and leave money in Puerto Rico without paying U.S. corporate income taxes.
“The same thing that Paulson is getting, corporations are getting in the manufacturing sector,” Pierluisi said.
At a hearing last year, Senator Carl Levin, a Michigan Democrat, said Microsoft’s method of routing profits through Puerto Rico saved the company $4.5 billion over three years.
Bill Sample, the company’s corporate vice president for worldwide tax, testified at the hearing that Microsoft follows all tax laws.
For U.S. lawmakers concerned about the budget deficit, the Puerto Rico law could be a boon, said Buckley, who now teaches tax law at Georgetown University in Washington. A legislative attempt to prevent Paulson and others from tax-free moves to Puerto Rico could generate revenue for the U.S. Treasury.
“You could get a score here,” Buckley said, “And I doubt a lot of people are going to stand up and defend him.”
To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

Read the article online here:  
Puerto Rico Beyond IRS Reach Woos Paulson-Sized Fortunes - Bloomberg