Tag Archives: Shell company

Tax Evasion in Hong Kong and the US

The Economist reports about new strategies to evade taxes. One is based on an occupational retirement scheme (ORS) in Hong Kong:

A German or Australian with money to hide can set up a Hong Kong shell company, appoint himself as its director, with a local employment contract, and sign up with a trust company that provides an ORS. He can throw in cash, property or other assets, oversee the account himself, retire as soon or as far in the future as he likes, and then take out as much or as little as he chooses, whenever he wants. An ORS, in short, is like a flexible bank account.

The arrangement falls outside the CRS [Common Reporting Standard] and FATCA because the Hong Kong authorities classify ORS as “low risk” from a tax-evasion standpoint, meaning those running them are “non-reporting financial institutions” under both standards. Not surprisingly, some financial firms are hawking them enthusiastically to foreigners.

Another strategy exploits the secrecy provided by the United States:

It gets all the information it needs from other countries through its heavy-handed application of FATCA, and therefore sees no need to sign up to the CRS. So it is in the unique position of being able to take a lot, give little, and continue getting away with it. Not surprisingly, lots of tainted foreign cash is believed to have flowed into American banks, trusts and shell companies in recent years.

Nevada Shell Companies, Elliott and Argentina—Some Unforeseen Consequences

In an earlier post (April 2015) I wrote:

The Economist reports about Nevada shell companies. In its eternal struggle against the Republic of Argentina, Elliott Management is inquiring about several shell companies in the state. They are suspected to own funds that might have been stolen from the Republic. The hedge fund reasons that it is entitled to those funds because they belong to Argentina, and Argentina owes 2 billion dollars to Elliott according to earlier court rulings. Elliott sued in Nevada for information on the shell companies and has been partially successful.

Now, The Economist reports about some unforeseen consequences of the earlier ruling and the “Panama Papers affair”:

Until now, getting information on clients of law firms in Panama has been [difficult]. … But sleuths may soon find it a lot easier, thanks to a court ruling in, of all places, Las Vegas.

In 2014 Elliott, a fund that owned debt on which Argentina had defaulted, sued in Nevada to compel Mossack’s local affiliate to provide information on shell companies, in the hope of discovering Argentine assets to seize. The affiliate, MF Nevada, claimed—implausibly—that it was independent of Mossack. …

A judge in Las Vegas ruled in March 2015 that Mossack and MF Nevada were one and the same. That put a crack in the wall of secrecy around American shell companies. But its full significance is only now becoming apparent: it means that, under an American law about assisting with foreign legal proceedings, any investigator anywhere in the world can subpoena Mossack, through the Nevada subsidiary, for information that could be relevant to cases in any country. …

Faced with the power of American subpoenas, Mossack’s head office will find it much harder to stonewall foreign requests for information. Ignoring them could mean being found in contempt of court. That would leave it open to penalties designed to compel it to comply, including asset seizures, in other countries where it operates.

 

Nevada Shell Companies, Elliott and Argentina

The Economist reports about Nevada shell companies. In its eternal struggle against the Republic of Argentina, Elliott Management is inquiring about several shell companies in the state. They are suspected to own funds that might have been stolen from the Republic. The hedge fund reasons that it is entitled to those funds because they belong to Argentina, and Argentina owes 2 billion dollars to Elliott according to earlier court rulings. Elliott sued in Nevada for information on the shell companies and has been partially successful.