Panama Papers: the necessity to differentiate between tax evasion and non-evasion

Panama Papers: Onshore, Offshore and Substance – the necessity to differentiate between tax evasion and non-evasion

Written by Robert Anthony
Published in “Tax Planning International Review”, Gestion de Fortune and l’Agefi

For the last few years there has been a trend led by the G-7, then the G-20, to encourage transparency and exchange of information on a global level. The issue of the Panama Papers highlights the necessity to differentiate between tax evasion and non-evasion. (…)

How offshore Companies and Anti-Avoidance Legislation have evolved considerably over recent years?

It was common practice to buy properties in Spain by way of offshore companies before the law changed. If one looks at the publicity around Lionel Messi, one understands why he may have purchased a Panamanian company before changing his mind: however, in this case it does not make him a tax evader! Owning assets in an offshore company is not illegal. If the income is declared within the rules of one’s country of tax residence, this should not be an issue. However, in practice, there are people incorrectly commercializing the use of companies to make money; they do not respect the law nor do they make clear in their advice to their clients the ramifications of the actions instigated by them. The evolution of using even onshore entities involves real substance: ‘‘letterbox’’ companies, whether onshore or offshore, have serious flaws. For many years, people have been carrying out tax planning to reduce taxation legally; conferences and fiduciary companies have been selling solutions as packages. This resulted in countries passing anti-avoidance tax laws to close loopholes in their domestic laws. The chess game then became how to go round the new legislation. More legislation was passed to make this illegal in several countries. Obviously, especially in a poor financial climate, countries cannot afford to lose their tax revenues. Read more in the following articles “Tax Planning International Review” – Mai 2016, or L’Agefi – 18 avril 2016 or Gestion de Fortune – N°270 – Mai 2016