Taxation of Liechtenstein foundations

LIECHTENSTEIN(taxnews) – According to the statistics of the Public Registry, as of 31 December 2009, 1,618 registered foundations as well as over 42,000 foundations and trusts have been identified in Liechtenstein, most of which have been established by foreign founders or in favour of foreign beneficiaries. In 2011, Liechtenstein adopted a global revision of its tax law. One particular feature of this regulation is the implementation of a new basis for the taxation of Liechtenstein foundations.

 

Establishing a foundation

As of 2011, the new revised tax law additionally eliminates the levy of inheritance and gift taxes. Thus, to establish a foundation in Liechtenstein, only the payment of a formation tax (Gründungsabgabe) is now required. The taxable basis is based on the original capital contribution paid into the foundation at creation and, at minimum, corresponds to the statutorily imposed minimum of CHF30,000. Contribution of assets to the foundation’s reserves, however, is not considered part of the tax basis. Subsequent contributions by the founder as well as third party donations will not further subject the foundation to formation tax, so long as they do not substantially modify the original capital contribution.

According to the new tax law, the rate of formation tax imposed on foundations amounts to 0.2 per cent of the original capital contribution, but a minimum of CHF200. Additionally, foundations benefit from a general exemption, limiting taxation to a capital value of CHF1 million. Consequently, for a foundation established with the statutory minimum capital contribution of CHF30,000, the minimum amount of CHF200 will be imposed, not 0.2 per cent of the capital amount. On the other hand, charitable foundations benefit from full exemption from state taxes and will thus not have to pay any formation tax. Besides the formation tax, upon enrolment in the Public Registry (commercial registry), the foundation must also pay a registration fee. The majority of Liechtenstein foundations, most of which are established by foreigners, are deposited foundations, which do not require registration in the Public Registry or, thus, the payment of a registration fee.

The registration and filing (Eintragungs und Hinterlegungsgebühr) fees are determined and levied by Liechtenstein’s tax authorities. Registered foundations pay a registration fee of CHF700; for deposited foundations, the filing fee amounts to CHF300 if they deposit their foundation deed. Some additional fees may be imposed upon confirmation of signature or when requesting register extracts.

The Land and Public Register Office will only proceed to the publication of the enrolment upon proof of payment of the formation tax. The tax, registration and filing fee are due regardless of whether the founder is a Liechtenstein resident or a foreigner and whether the foundation is revocable or irrevocable. From a Liechtenstein perspective, the transfer of assets into the foundation does not generally trigger any additional tax consequences for a foreign founder except in the case where these assets constitute a Liechtenstein permanent establishment or Liechtenstein real estate. In conclusion, no tax consequences will arise if only movable assets are transferred to the foundation. However, if a resident founder transfers movable assets, a Liechtenstein permanent establishment or Liechtenstein real estate to the foundation, a dedication tax (Widmungssteuer) will be levied on the transferred assets.

 

Ongoing taxation

With regards to ongoing taxation, Liechtenstein tax law differentiates between revocable and irrevocable foundations.

For wealth tax purposes, the Liechtenstein legislator considers revocable foundations as fiscally transparent. The assets, regardless of the civil perspective, will be attributed to and taxed in the hands of the founder. However, the foundation’s governing bodies can opt for an independent taxation, therefore subjecting the foundation’s assets to wealth tax. But in order to determine the tax rate, the assets of the resident founder have to be pooled together with the assets of the foundation. A priori, foreign founders are not subject to Liechtenstein wealth tax except where they own a permanent establishment or real estate in Liechtenstein, the independent taxation option is irrelevant in their case.

On the other hand, revocable and irrevocable foundations are recognised as tax subjects based on their legal seat in Liechtenstein and are therefore subject to corporate income tax. However, particular tax regimes exist for non-economically active foundations, fiscally qualified as so-called private assets structures (Privatvermögensstrukturen). In this case, the foundation is not subject to ordinary income taxation and will only be imposed a minimum corporate income tax of CHF1,200, payable annually. Following a request of the Liechtenstein government, on 15 February 2011, the European Surveillance Authority issued a notification that Liechtenstein private assets structures do not constitute ‘undertakings’ within the meaning of the state aid rules under the European Economic Area Agreement and therefore do not involve state aid. Conversely, the economically active Liechtenstein foundations cannot be considered as private asset structures and therefore will be subject to a corporate income tax of 12.5 per cent.

For a regularly taxed foundation, the effective tax rate, dependent upon the equity return, is substantially reduced by a notional interest deduction of 4 per cent of the foundation’s average equity. Thus, financing with equity becomes fiscally equivalent to financing with debt, so that the choice of financing can be made exclusively on the basis of business criteria. If the foundation is financed with equity, only interest yields over 4 per cent will be taxable because of the notional interest deduction. Furthermore, the taxable basis for purposes of corporate income tax is lowered by a favourable holding regime. Specifically, dividends and capital gains deriving from shares in domestic and foreign entities are fully tax-exempt in Liechtenstein and, consequently, depreciation of participations allows for fiscal write-downs and value adjustments. Likewise, income deriving from foreign permanent establishments and foreign real estate is exonerated. With regards to income deriving from intellectual property rights, 80 per cent of the positive income is considered as a commercially justified expense. If the foundation obtains foreign interest payments, which are subject to a source tax in the other state, this tax can be credited against the Liechtenstein income tax, based on the relevant double tax convention, or in the case of reciprocity.

 

Taxation of the beneficiaries

Within an irrevocable foundation, if the value of the beneficiary’s privileges can be determined, the beneficial interest will be subject to wealth tax only in cases where the beneficiary is a resident and therefore subject to unlimited tax liability. If the value of the beneficiary’s privileges cannot be determined, or if the beneficiary is a legal entity or a non-resident, the beneficial interest will not be subject to wealth tax.

However, with regards to distributions, a difference is made between revocable and irrevocable foundations: distributions by a revocable foundation are considered fiscally as direct contributions on behalf of the founder to the beneficiaries since the assets of the foundation are assimilated to those of the founder. As a result of the suppression of the inheritance and gift tax in the 2011 tax reform, these distributions are no longer subject to such tax. Additionally, distributions made to an individual will not be considered as taxable income. In conclusion, there are no tax consequences for contributions made within revocable foundations in Liechtenstein.

Distributions from irrevocable foundations paid out to Liechtenstein residents are subject to personal income tax, unless the foundation’s assets are subject to wealth tax. Frequently, however, the beneficiary of the foundation does not have his domicile or habitual abode in Liechtenstein and hence is not subject to taxation. In such a case, the taxation of the contribution will be dependent upon the beneficiary’s resident state. In Liechtenstein, no source taxation is levied on contributions. This applies even if the distributing foundation holds a Liechtenstein permanent establishment or real estate.

 

Dissolution of the foundation

Dissolution does not trigger any tax consequences on the level of the foundation, with the exception of a permanent establishment in Liechtenstein. Liechtenstein tax law does not differentiate between contributions made during the life of the foundation and those paid at the time of the dissolution. The source tax exemption equally applies to distributions made at dissolution. Likewise, the origin of the distributions, whether paid from equity or capital gains, is irrelevant.

 

Relation to the resident state of the beneficiary

According to a few states’ tax legislation, the Liechtenstein foundation can be considered as fiscally transparent if the founder has a dominant influence upon the commercial activity of the foundation and this control is based on a mandate contract. The Liechtenstein foundation loses its shielding effectiveness in the country of the beneficiary. The tax veil is pierced and, as a result, the foundation’s assets will be attributed to the founder and may be taxed in his state of residence. Additionally, contributions paid out from a transparent foundation will be considered as transferred directly from the founder to the beneficiary and, as such, may give rise to a gift tax in the beneficiary’s state of residence.

Recently, following pressure from the international community, Liechtenstein has adopted several bilateral tax information exchange agreements (TIEAs). These agreements are based on the OECD Model and purport to enable the exchanging of relevant tax information upon the other state’s request. As the time of writing, Liechtenstein has concluded TIEAs with the US, the UK, Germany and 20 other countries, this number continuously increasing. From this agreement derives a commitment to administrative assistance, which may also be applied to foreign beneficiaries of a Liechtenstein foundation.

Accordingly, a foreign tax authority can receive a request based on the TIEA to provide information on the ownership structure of entities, including information about all persons involved in the structure. With regards to a foundation, Liechtenstein must provide information on the founder, the members of the board and the beneficiaries. The application of the TIEA provides a possibility to lift bank and trust secrecy in Liechtenstein.

 

Summary

Liechtenstein continues to be an interesting jurisdiction for foundations. The regular taxation is extraordinarily advantageous, especially for international investments; a lump-sum taxation of foundations is still possible under certain conditions. In international relations, Liechtenstein is progressively losing its former reputation as a tax oasis in consideration of the increasing number of TIEAs it has concluded. A stable political environment, a solid tax framework, and superior quality of services present Liechtenstein as an attractive location for financial planning.

ABOUT THE AUTHORS: Roland A. Pfister is lecturer at the University of Liechtenstein, Vaduz, and a tax advisor at Tavernier Tschanz, Geneva; Patrick Knörzer is assistant professor at the University of Liechtenstein, Vaduz, and member of the Liechtenstein tax reform group.

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China’s wealth is what scares the West

GlobalTimes.cn – A poll released on March 27, conducted by GlobeScan and the Program on International Policy Attitudes, reveals rising levels of concern within many of China’s key trading partners, especially within the G7, regarding the country’s increasing economic power.

In France, Canada, Germany, Italy and the US, the survey found the majority held a negative image of China. Great Britain and Mexico also saw a drastic worsening of China’s image, though overall opinion still remains positive.

Aside from Mexico, these nations all have one thing in common: They form the bedrock of the modern developed world.

Their fears stem from a sense of historical superiority, and mirror the natural reaction of changes within the landscape of international politics. The concern expressed is not the manifestation of people or governments advocating another path, but rather should be expected with the rise of any nation.

US wealth and arrogance led to a worldwide negative opinion of the world superpower.

In 2006, GlobeScan released the results of a survey revealing that the US had climbed off the bottom spot as the most negatively viewed country worldwide. This was only achieved thanks to Iran’s inclusion within the sample for the first time.

As the sole superpower for many years, the US is constantly being scrutinized. This same level of scrutiny is now also being placed upon China thanks to its gradual transition toward becoming a “stakeholder” within world politics and the global economy, rather than an onlooker.

A hardening opinion within European countries has been aided by increased media coverage of the Chinese economy. Concerns by US officials over the allegedly artificially inflated value of China’s yuan, a complaint as much about trade as it is about quelling domestic agitation over unemployment, has unfortunately led to China being portrayed as a currency manipulator, strong-arming the world economy at a time of worldwide hardship.

But China is a victim of its own success. In a world dominated by Western media outlets, no amount of diplomacy can prevent China from receiving censure.

However, despite the almost inevitable backlash which must come from a rise in power (be it economic or otherwise), there are aspects of the survey which are particularly telling. A number of countries and regions, such as China’s immediate Asian neighbors and the African states polled, already see China as their most important trade partner, while many more feel that trade relations with China will be their most important in a decade. There is a sense of optimism, therefore, within the rest of the world regarding China’s ability to maintain steady growth.

Furthermore, these indicators are acceptance of a new world order, grudgingly or otherwise.

This acceptance embodies a spirit vastly different in nature from the Cold War which dominated the political landscape from 1945 until 1991. The US and the Soviet Union were ideological enemies, whose leaders both had their fingers on the nuclear buttons.

Monday’s world sees a system whereby all sides are interconnected. Thankfully, globalization has made large-scale conflict even more costly than ever before, virtually guaranteeing that peaceful relations will prevail between the world’s existing and emerging superpowers, regardless of ideological differences.

Only 35 percent of people polled felt that China practices unfair trade policies – not a particularly stunning revelation given the nature of media broadcasting and US scapegoating over the currency issue. The figure is only 7 percentage points higher than the number of respondents who felt that US trade practices were unfair.

What is particularly interesting about this survey is that it also covered military expansion.

However, when the BBC reported the results they only paid attention to the fears which have resulted from China’s economic rise.

This is a clear reminder of what really worries the elite of the West: the loss of economic standing, and the knock-on effect that China’s growth will have on their own jobs.

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Russia’s lessons for SA’s elite

BusinessReport – There are two main reasons why corruption thrives. The first is because prosecution is weakened by the public’s indifference towards corruption; and this makes it unpopular for anti-corruption crusaders to go after perpetrators.

The second reason has to do with the increasing resourcefulness of those who engage in corrupt activities. They are an elite group that thrive through corruption and subsequently sustain themselves through corrupt activities.

The latter case is of serious concern here and it usually involves the use of state resources – be it policy, direct acquisition of state assets, and also the use of state development financing institutions – to sustain the emergence of such a class of elites. The best known example of this is the acquisition of vast wealth after the collapse of the Soviet Union in the 90s.

A group of quasi-businessmen emerged and captured huge stakes in Russia’s oil and gas industry

The group came to be dignified by the name oligarchies.

The most prominent face of this group is Mikhail Khodorkovsky, who is serving a jail term for tax evasion and other grand embezzlement-related offences in Russia.

The emergence of such a group in Russia and how it came to reconstitute and legitimise itself in the face of the global business community could be a useful point of reference for South Africa.

It is important to ask if South Africa is experiencing the emergence of an oligarchic class that thrives by capturing state resources and then repackaging them as legitimate business ventures.

This phenomenon would amount to corruption, but not in a straightforward sense.

Rather, it is in a sense of rent-seeking: making wealth without engaging in economic activity.

The modus operandi is to use state resources to build business empires and concomitant political influence to ensure further expansion. Down the chain, the group would then capture political office in a way that shields their way of acquisition from government scrutiny. That completes the cycle and can leave the nation and the political system heavily reliant on the interests of the group.

This sounds like reading from Karl Marx, but sad as it is, it is how political influence is traded with financial influence in our societies.

The complex issue about this method of accumulating wealth is that big financial institutions are used to finance most of the deals concocted under suspicious circumstances.

And, big finance houses end up being entangled in this web of acquiring assets through state resources.

Western financial institutions played a key role both in advising and financing some of the acquisitions that led to the formation of the post-Soviet oligarchic business ventures – including the once giant Russian oil company, Yukos, and Bank Menatep, for example.

One of the stories that does not see the light of the day in relation to this experience in Russia is exactly how the oil and gas stakes were acquired in the first place.

The stories that are often repeated include when companies such as Yukos and Bank Menatep appear on the scene as legitimate companies whose shareholders also involve established western banks.

Khodorkovsky acquired most of his wealth through a close relationship with the Kremlin.

He aggressively cultivated his political connections to amass wealth, simple as that.

This does not mean he was not a visionary; but he followed dodgy means to get to the helm of the petroleum business in Russia and became one of the main global players in the business.

The assets that constituted Yukos were acquired in controversial wholesale privatisation as the Soviet Union was collapsing.

Why all this sordid post-Soviet history with gangster bankers and death squads?

The developments and the emergence of the oligarchs in Russia show how corrupt, but not illegal, means of acquiring wealth through state resources have created champion business elites in a state of chaos. The international business community came to adore the oligarchs irrespective of their ruthless and openly corrupt way of accumulating wealth.

When the state apparatuses were used to reign in the oligarchs, most of whom are in exile and jails now, an outcry emerged.

Vladimir Putin’s regime was becoming unsettled by the potentially democratising elites who had put Russian companies on the global map. Here, in South Africa, there is a group of elites who are rapidly accumulating wealth through dodgy but not illegal means.

Their deals are financed by established international financing institutions and also government’s development financing institutions, such as the Industrial Development Corporation.

This gathering group of elites is doing well not because it has business acumen, but because it is not totally against private business, thus, it is not agitating against private capital.

The main question to ask is whether this way of accumulating wealth and assets is sustainable in a way that will not pose a long-term risk to the notion of private business and private property.

Thus, would these methods not unduly bring about distortions in private business and result in a crisis of legitimacy when it comes to the private sector in a similar way as was the case in the post-Soviet oligarchs in Russia?

As far as South Africa is concerned, we seem to have mostly individuals accumulating wealth in a seemingly unjustified manner .

We have turned our attention away from the institutional apparatuses under which the phenomena is taking place.

Individuals come and go, but the system would have a long-lasting effect on society.

Individuals only take advantage of what is tolerated by the system.

They do not necessarily make policy for us. They only utilise it.

At the core of our policy though, lies a fundamental confusion as to what constitutes acceptable private wealth accumulation.

South Africa is rapidly shifting towards a sophisticated type of corruption, the type of corruption that is not illegal.

This state-sanctioned type of corruption could pose a serious legitimacy problem on private capital, if it has not already started bearing such consequences.

The public frustration with the controversial acquisition of wealth by a select few is such that the call for nationalisation would gain momentum in South Africa’s development discourse.

Private companies and financing institutions whose concern seems to be to survive in the uncertain business environment in South Africa, would ultimately be labelled collaborators and may risk their reputations by being involved in some of the dodgy deals concocted by the select few who are politically connected. Attempts by established financial institutions, to raise questions about the controversial business deals involving the select few, raise the dilemma for them of being seen as insubordinate to South Africa’s development agenda.

Even more challenging is that private companies and other international financial institutions can count only on the support of the emerging state-assisted business elite to fend off calls for the abolition of private capital.

A similar challenge was seen with Russian oligarchs when they came under pressure from Putin’s regime: the oligarchs were the only force at the forefront of the defence of private capital.

Then the question arose as to how they accumulated wealth in the first place, a question that weakened their line of defence against the repossession of their assets by the state. South Africa needs to be careful to avoid the situation where the morally controversial businessmen who unduly attained their wealth through the state come to be the one and only line of defence of private capital in the country.

Their defence will be weak.

It will not hold against the assault mounted on private capital given circumstances that there seem to be fewer cases of legitimate private capital that have emerged in the post-apartheid era.

Quite often in South Africa, it is argued – in defence of the ensuing controversial acquisition of wealth by the politically connected – that the state is assisting those individuals with the aim to level injustices of apartheid because the apartheid system also created its own elites through state resources.

This argument is untenable because apartheid citizenry is fundamentally different from the expectations of a post-apartheid democratic citizenry.

The two cannot be compared at all; there is no moral equivalence between an apartheid citizen and a post-apartheid citizen.

The emerging group of elites who unduly benefit from political connections will become a liability to private capital in South Africa.

They may not be counted upon to be upstanding defenders of private capital.

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US Top ten list: Tax evaders’ wall of shame

The Washington Times – When you read about GE paying no corporate federal taxes in 2010 while getting a $3.2 billion rebate, does your blood start to boil?

If you listened to the corporate whining, you probably thought companies like GE paid 35% in federal taxes. Not so. It’s a rare company that ponies up that amount.

For too long the American public has been hornswoggled by this century’s “robber barons.”

Remember, it was our tax dollars that saved the hides of many of these multinationals with colossal bailouts, and how do they say thanks?

By not paying their taxes. Nada, zero, zilch. And it’s legal, thanks to Congress.

However, I am betting you’ll pay your 2010 taxes on April 15th.

It is shameful that our giant corporations ship American jobs abroad, leaving our workers on unemployment insurance. These same businesses then have the nerve not to pay their fair share.

Want to know who these corporate culprits are? Look no further than the Wall of Shame where you will find the top ten Corporate Tax Dodgers, many who brought this country to the brink of an economic meltdown.

WALL OF SHAME

The Outrageous Top Ten in Alphabetical Order

1. Bank of America took $336 billion in bailouts in 2009, but in 2010, flush with $4.4 billion in profits, it paid no taxes. Even Forbes magazine asked, how is that possible? Probably thanks to their 115 offshore tax havens.

2. Boeing just received $35 billion from our government to build 179 airborne tankers, but despite nearly $10 billion in profits from 2008 to 2010, it too paid no taxes, again thanks to foreign tax havens.

3. Citicorp took $476 billion from the bailout and then made monster profits in 2010, yet it paid no taxes, thanks to 427 subsidiaries in tax havens like the Cayman Islands and Hong Kong.

4. Exxon/Mobil, received huge oil subsidies from the government and earned $45 billion in 2009 but paid no taxes, again thanks to stashing profits in places like the Bahamas and Singapore.

5. GE – see last week’s column for the stats and facts on this corporation’s tax dodge.

6. Google utilizes a technique that moves most of its income through Ireland and Netherlands to Bermuda, making its tax rate 2.3 percent.

7. Mega Pharmaceuticals Merck earned $9 billion in profits and paid no taxes in 2010, while Pfizer (largest drug maker) owed $10 billion in taxes but found the necessary loopholes to pay no taxes, thanks to its offshore subsidiaries in places like Luxembourg and the Isle of Jersey.

8. News Corporation, Rupert Murdoch’s media monolith that owns Fox News avoids paying American taxes through its 152 subsidiaries in tax havens from the British Virgin Islands to Hong Kong.

9. Verizon, despite making $24.2 billion in pre-tax US income, paid no taxes and actually claimed a federal refund of $1.3 billion for the last two years, again all thanks to those offshore subsidiaries.

10. Wells Fargo, the fourth largest bank in the US, which took $107 billion in bailouts, wrote off all its losses by acquiring Wachovia, thus paying no taxes. Yet its CEO earned $5.6 million in cash for his salary and $13 million in stock.

Don’t you wish you could stay where you live now but declare your income in Bermuda or the Grand Cayman Islands? Then you could go visit your money and write it off as a business trip.

The GAO (the Government Accountability Office) found that 18,857 US companies keep a post office box in one five-storey building in the Cayman Islands.

In fact, 80 percent of the largest US corporations use offshore tax havens. Little wonder 57 percent of these companies paid no federal income taxes for at least one year from 1998 to 2005.

How Corporations Get Away with It

So where are our elected officials and loud mouth politicians on this topic?  Pretty quiet, aren’t they?

That is except for Presidential Wannabe Newt Gingrich, who during a recent interview excused Arch Coal, the second largest coal supplier in the US, which paid no taxes in 2009 on its $42 million profit.

Sounds like small potatoes when compared to what other corporations are doing, but pay attention to Gingrich’s logic.

He defended corporate tax loopholes, saying,“They are an incentive, not a loophole. We should celebrate that as a good thing.”

Gingrich went on to say that these companies “employ thousands…of people [who] are contributing a lot to America.” (http://www.youtube.com)

In other words, we workers will pay the taxes, but not the corporations. Sounds a lot like Leona Helmsley, who famously said, “Only the little people pay taxes.”

What Gingrich doesn’t say is that Arch Coal made a direct $100,000 contribution to his political committee, American Solution for Winning the Future.

Nor does he reveal that Arch Coal is notorious for cutting off the top of mountains to dig for coal, leading the EPA to revoke the permit to slice off the tops of some of West Virginia’s pristine mountains.

No wonder corporations court politicians. As Deep Throat so wisely told reporter Bob Woodward,“Always follow the money.”

What Would Happen If Corporations Paid Up?

Often you’ll hear someone rhapsodize about lowering the corporate tax rate to 25%, as though that would suddenly give corporations a moral compass.

So let’s dare to dream big and assume that corporations would suddenly feel a surge of social responsibility, deciding to pay their taxes like the rest of us.

No more loopholes for them. No more offshore tax havens. No more accounting gimmicks. The result? Billions of dollars in tax revenue.

But the reality is that instead of focusing on tax loopholes, the Republicans are eager to take a scalpel to the IRS, cutting $600 million from its budget. The result? The IRS would collect $4 billion less in revenue.

With that kind of muddled thinking, it’s no wonder so many of us hold out little hope that there will be any meaningful tax reform done by this Congress.

It is going to take taxpayer anger to light a fire under these guys.

Americans need to do what military families did to keep the Republicans from closing down the government and delaying their pay. They deluged the offices of their Representatives with stories of what a government shut down would do to their lives without those paychecks.

Taxpayers’ voices can only be heard if raised.

The Wall of Shame should be hanging in every Congressional office.  Congress should be as furious as we are at these corporations.

Talk is cheap and to continue to do nothing is a price America can no longer pay.

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Tax office slaps 474 bln won in penalty taxes on evaders

Switzerland accounts involved in Korea tax fraud

SEOUL, April 11 (Yonhap) — South Korea’s national tax office said Monday that it has slapped a combined 474.1 billion won (US$437.1 million) in penalties on businessmen and companies for evading taxes in the first quarter.

There were 41 cases of tax evasion detected in the first three months of this year, and those cheaters evaded taxes by hiding personal wealth in overseas tax havens or falsifying export and import documents, the National Tax Service (NTS) said.

The total amount of fines is close to 50 percent of the NTS’s target to ferret out and penalize offshore tax evasion schemes this year, it added.

The tax office said it has levied 410.1 billion won in penalty taxes on a businessman who operates a fleet of 160 vessels through various paper companies headquartered in a tax haven. The office didn’t disclose the identity of the tax cheater.

“The person, who resides in South Korea, has never paid local taxes while holding profits in accounts in Switzerland, the Cayman Islands and Hong Kong,” the NTS said.

The office said it plans to step up cooperation with foreign countries such as the United States, Britain, Japan and Canada to find others who may have tried to violate the law.

“Every effort will be made to pursue people and firms that try not to pay taxes by using offshore tax evasion methods,” the office said.

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Birmingham fraudster was victim of Reservoir Dogs-style torture

LIECTENSTEIN(sundaymercury.net) – GAMBLING-addicted fraudster jailed for his part in a £60 million VAT fraud was once the victim of a Reservoir Dogs-style attack.

Kuldip Singh Sander, 50, of Birmingham, was sentenced to seven years for money laundering last week.

He was the last member of a 17-member gang to be locked up. In total, the criminals were handed 50 years behind bars.

But Sander first hit the headlines after masked men abducted him, his chauffeur and a lapdancer girlfriend from a street in Birmingham at gunpoint in December 2002.

The three were hooded and taken to a factory in Smethwick where the money launderer, who was bound and gagged, was systematically tortured.

His attackers disguised their true identities by using colours instead of their real names – mirroring famous scenes in cult movie Reservoir Dogs.

Gambler Sander, who the day before had won £100,000 at the horse races, was beaten with a golf club, mallet and snooker cue before an electric drill was used on him by ‘Mr Red’.

During the six-hour ordeal, the 20 year-old lapdancer – who was being guarded by Mr Pink – was raped three times at the factory.

The three were eventually released after money was paid over.

Two men were later jailed for 21 years for the attack, while Sander needed skin grafts as a result of the injuries to his legs.

The 50 year-old, who is said to have once dated Grand National jockey Jacqui Oliver, was the last defendant of the £60 million VAT fraud to be locked up.

Others jailed in five trials after a huge investigation by Revenue and Customs included Philip Wharam, 52, who bought the title “Lord Wharram”.

Sander was a key figure in the VAT swindle which funded phenomenally luxurious lifestyles for many in the gang. He used the proceeds of the tax scam to settle his heavy debts with bookmakers.

Sander was one of 11 of the gang who came from the West Midlands.

He was responsible for opening and operating fake bank accounts, through which millions of pounds was laundered from businesses in the UK, Holland, Belgium and Germany.

Sander, who has a previous conviction for money laundering in 2004, denied four money laundering offences.

But he was found guilty by a jury and was sentenced at Birmingham Crown Court to seven years in prison, minus 607 days already spent in custody.

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Are Tax Havens Hellish for the U.S.?

General Electric bending the tax laws to the limit

IDG.no – General Electric’s tax strategies this week were targeted for analysis by investigative organization ProPublica, in collaboration with Fortune magazine. Reporters on the case included former New York Times Pulitzer-winner Jeff Gerth, of ProPublica, and Allan Sloan, of Fortune Magazine.

It’s worth a look, if only to see how something as complex as GE’s long-developed tax-minimization strategy gets explained by skilled reporters bent on breaking it down into simple components for a general audience.

The report examines how GE, like many companies, treats tax avoidance as a “profit center,” but unlike most, tasks nearly a thousand employees with the mission. ProPublica calculates that 2008 and 2009 reported profits were boosted by about $1 billion because of a change in how GE treated some overseas earnings, for example. Often, the people charged with reducing taxes include former IRS employees it hires — using a sort of revolving door similar to what exists between the Pentagon and defense contractors (including, of course, GE.)

The article also notes that GE CEO Jeffrey Immelt was recently selected as chair of President Obama’s Council on Jobs and Competitiveness.

In addition, the story looks at GE’s “active finance exemption,” designed to let its overseas lending activities stay untaxed in the U.S. “It is so important to GE that the company discloses in its financial reports the periodic need for this tax break to be renewed by Congress,” says ProPublica.

Another focus on GE’s tax strategy involves how it takes advantage of the irony of the “American Jobs Creation Act of 2004,” which gave tax breaks to companies that located jobs overseas. “It actually led GE to shift some of its aviation leasing operations to Ireland in order to qualify for a tax deferral,” the story notes, saving the company hundreds of millions of dollars in taxes annually.

To some degree, of course, these are all strategies that American business uses routinely. But, as a recent “60 Minutes” interview with Cisco CEO John Chambers suggests, the tax-haven approaches certainly are subject to review in a nation that needs to revamp its revenue base.

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