Skatteudvalget 2016-17
SAU Alm.del Bilag 203
Offentligt
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Creative Compliance
wealth management, taxes and the law
Brooke Harrington, PhD
Professor mso
Copenhagen Business School
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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A brief introduction
•
I’m a sociologist who spent 8 years studying
wealth managers—the professionals who
make offshore tax avoidance possible
–
trained for two years to learn techniques,
access practitioners and professional meetings
–
credentialed as wealth manager; didn’t practice
–
conducted lengthy, in-depth interviews with 65
wealth managers in 18 countries
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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Research sites
London: 3
San Francisco: 1
Los Angeles: 3
Cayman Islands: 4
Panama City: 4
Chicago: 2
Channel
Islands: 4
New York: 4
Geneva: 7
British Virgin
Islands: 3
Dubai: 3
Singapore: 2
Seychelles: 2
Montevideo: 1
Johannesburg: 5
Buenos Aires: 2
Mauritius: 4
Cook Islands: 4
Shanghai: 1
Hong Kong: 4
Vaduz: 1
Zurich: 1
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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Result
•
a global look at a global phenomenon
–
critical to understand how offshore and tax
avoidance/evasion work trans-nationally
–
insight into mentality/motives of enablers
•
publications
–
book came out last year (soon in Danish)
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articles in popular press and academic journals
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all at www.brookeharrington.com
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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What we should be asking
•
what can be done about tax
avoidance?
–
this is the $200B question
–
a huge amount of tax lost to world governments
each year is not due to evasion
–
much is due to professionals working in the
“grey areas” of the law
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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The lesson of the past year
•
lack of legal action after the Panama Papers
–
11.5 million documents, 40 years’ worth of
records, the whole world digging into the data
–
…but not a single prosecution
–
recall what Mossack Fonseca said afterwards:
“we didn’t break any laws”
–
even if untrue, it has proven practically
impossible to
win
a case in court
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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Why direct attacks often fail
•
focusing on illegal activity like tax evasion
–
this is trivial for wealth managers to avoid: they
specialize in “creative compliance”
–
in other words, they adhere to the letter of the
law while violating it in practice
–
and even with questionably legal schemes,
professionals know most tax authorities do not
have the resources to investigate/prosecute
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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Examples
•
the European Savings Tax Directive
–
a policy that showed poor understanding of the
tax evasion problem; repealed after 10 years
•
CRS and beneficial ownership registries will
likely meet a similar fate
–
does not even consider broad classes of trusts
–
of those that are considered, many are—or can
be made—exempt
–
prediction: trusts will be used
more
to avoid tax
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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In other words…
•
the law may not be your most effective tool
to combat the problem
–
that does
not
mean “give up the fight!”
–
it just means: fight smarter
–
know your adversaries and their vulnerabilities:
don’t play to
their
strengths!
–
this is where I can help
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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Can also answer questions on
•
how the 3 basic tools of wealth management
are deployed to hide assets from taxation
–
understanding uses of trusts, firms and foundations
•
the uses of offshore
–
where wealth moves around the world, and why
–
the specializations of diverse offshore centers
•
problems of policy and legislation
–
how enablers are likely to respond when efforts are
made to stop them
 SAU, Alm.del - 2016-17 - Bilag 203: Præsentationer fra høringen om skattely i Skatteudvalget den 29. maj 2017
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Looking forward to your
questions…