Skatteudvalget 2016-17
SAU Alm.del Bilag 203
Offentligt
Comments for Folketinget Fiscal
Committee Consultation on Tax
Havens
Adam Hofri-Winogradow, Hebrew University of Jerusalem
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
How Wealth Managers can be made to contribute to
closing Legal and Regulatory Loopholes:
a case study from Israel
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trusts are formalized relationships concerned with the transfer or
holding of property by some person, the trustee, for another, the
beneficiary
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They create great opportunities for tax planning, because the property
seems to be owned by no-one
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Until 2006, Israel had no tax regime in place for bona fide trusts, so they
were widely used for tax minimization
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In 2002 a public sector committee was appointed to propose a trusts
taxation regime. Because there were no civil servants with the
understanding of trusts necessary to formulate such a regime, three
private wealth managers were appointed to the committee.
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
How and Why did the Wealth Managers involved agree
to create a Tax Regime which eliminated Planning
Opportunities?
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Some goodwill: many wealth managers are far from immoral and will
assist the public sector if asked to do so. Their pride in their expertise
can be usefully exploited.
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The new regime created a heavy compliance burden, which ensured
that wealth managers expert in trusts will continue to have
remunerative employment: instead of profiting from
planning/avoidance, they now profit from compliance
•
The regime included a quid pro quo in the form of a purposely-
designed loophole (much smaller than the pre-existing one)
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
The 2013 Endgame
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By 2013, tax authority personnel developed sufficient expertise in
trusts and trusts taxation to draft and pass an amendment closing the
loophole created in 2005
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Private wealth managers complained and threatened, but to no avail
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
Generalizable Lessons
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Wealth managers can be swung from facilitating avoidance to
facilitating compliance, so long as their own interests in being
employed are safeguarded
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Public sector capacity is all-important.
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Bait and switch: private wealth managers can be recruited into jump-
starting public sector capacity. Once this capacity develops, the
services of private wealth managers are no longer necessary (at least
to the government).
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
Practical Suggestions
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Wealth managers should be invited to contribute to relevant
legislative and regulatory processes
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The compliance burden resulting from the existence of legal or
regulatory requirements can be used to tempt wealth managers into
cooperation with public authorities
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Protecting wealth managers’ income stream by creating heavy
compliance burdens can be seen as a strategy for wealth
redistribution
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Governments can use the wealth management profession as a
means for encouraging the wealthy to behave in ways which are
deemed desirable