JACK'S CORNER
DA MA ZHONG UK POLITICS... Push to be "white" (listed), but offshore ain't necessarily about tax... This conduct smacks of might makes right in the push to be "white" (listed), but the real story of offshore is much more than tax! OECD Global Forum - Conflicting Objectives with Offshore Financial Centers?
The difficulty arises when understanding the OECD's stated purpose for TIEAs, which is "...to promote international co-operation in tax matters through exchange of information to address harmful tax practices. That is, offshore financial centers do not seek to and do not exist to encourage nationals of OECD or other countries to violate the tax or other laws of those jurisdictions. Equally, it is widely held that offshore financial centers do not believe their policies of zero or low tax on various entities and relationships in their jurisdictions are not "harmful tax practices". Competitive to be sure, but why is it that competition is necessarily "harmful"? Substantial Implementation vs Commitment - Any Meaning? The OECD analysis is quite interesting given it appears not to be evenly applied. For example, the BVI, Samoa and the Seychelles, three well-known offshore centers, have emerged on the "white list". The BVI and Samoa have entered into the requisite number of TIEAs with OECD countries while the Seychelles has not entered into one. Perhaps even more intriguing is the fact that several large OECD members such as France, Germany, the United Kingdom and the USA, have not entered into one TIEA with a fellow OECD member. One imagines if you are a member of the "team", then "standards" either do not apply or are assumed to have been implemented or, well, gee, no one really ever paid much attention. This simple analysis begs the question - do the substantial implementation and commitment standards to determine the "white list" and "grey list" members have any meaning at all? Innovations Abound
Conclusion - It Ain't All About Tax NO MORE GOLD IN THOSE STREETS? TAX JUSTICE NETWORK SPEAKS TRUE http://taxjustice.blogspot.com/2010/04/national-geographic-guarded-treasures.html
GCSL NEWS
STEP CARIBBEAN CONFERENCE MAY 2010 A BEAUTY...
AOA KUALA LUMPUR CONFERENCE, OCTOBER 17-19, 2010 AT THE MANDARIN ORIENTAL Professional Business Secretary Recently, I was reading a Shenzhen draft circular (hereinafter referred to as the "Suggestion"), which was prepared by the Internet Supervisory Bureau, and relevant news about "improving and servicing Online Commerce Industry in Shenzhen". In the Suggestion, there are few interesting clauses. It is important to note the Suggestion has not yet been approved by the Shenzhen Municipal Government.
As mentioned above, China follows the "real" business office address. Points 1 and 2 above indicate a willingness to allow for the Virtual Office concept. In addition, point 2 above creates a brand new business of "Business Secretary. Point 3 would implement no restriction on business activities, which would be novel. Of course, the Suggestion is for the Online Commerce Industry, which has unique factors that are unlike others such as Retail, Manufacturing, etc. However, ideas of a Virtual Office, Company Secretary and No Fixed Business Activities are the indication of improving the flexibility of business and commerce environment and requirements in Shenzhen, and perhaps China. China Minimum wage adjustment The labor department of local governments in all major cities and provinces of China usually will do calculations of the previous year of average wages of its local work force and come up with the minimum wage. This year, most of the local governments have increased their minimum monthly and hourly wages at the rate of at least 10%. For instance, Shanghai is 16.6%, Beijing is 10% and Guangzhou is 21%. The effective date for each of locations varies, ie Shanghai is April 1s;, Guangdong province is June 1st; Beijing is July 1st. China Foreign Investment Statistic Update During the same period, China's non-financial industry domestic company's foreign investment into 89 jurisdictions was made via 693 foreign entities with total investment amount of US$4.66 billion. Contributed by Johnson Chien, Managing Director, GCSL Shanghai. HONG KONG Minimum Wage Law Presently Hong Kong has no minimum wage law. The concept has been discussed since 1999 but until summer of 2009, there was no proposal put forth to the Legislative Council with definitive plans. The new proposal is thought to be put into effect either at the end of 2010 or the beginning of 2011. The new proposal for a minimum wage will cover all work groups except for domestic helpers (DH) and student interns and persons with disabilities (PWD). It will be based on the number of hours worked multiplied by an hourly wage. It is anticipated that the Provisional Minimum Wage Commission, set up by the HK Government in 2009 will recommend the minimum wage to be in the range of Last week in HK saw trade union protestors and demonstrations which were calling for a minimum wage of up to HKD 33/hour (USD 4.25), or about HKD 7,000/mo (USD 902). How do these rate contrast to those in the US? Present rates in the US vary from USD 6.15 (Minnesota) up to USD 8.55 (Washington State) by individual states. The US Federal Minimum is USD 7.25 on certain jobs. Mandatory Provident Fund calculations will have to be calculated AFTER accounting for additional reimbursements, and not just on the initial hourly wage rate. It is believed that an employee who is under a HK Contract of Employment where the governing law is that of HK will be subject to the minimum wage requirement, even if the person is not a HK citizen or if the person works outside of HK. One interesting note is that unlike in China, the US and the UK, the new law will NOT seek to regulate the number of hours to be worked. Employers who normally have employees work overtime at a regular hourly rate at their place of business will have to take into account these overtime hours in calculating whether they will be in compliance with the new law. Several issues remain to be ironed out. First, there is a heavy burden of reporting which is being considered for ALL hourly employers which would require the hourly monitoring of hourly low-paid and high-paid employees equally, by such draconian methods as the old punch card system. Is there a better system? We suggest the Committee look at a minimum wage level under which hourly employees would have to account for their time but higher paid hourly workers would be exempt. Second, students may not be in a "full time" accredited co-op program and may still be working at internships under part time programs. This means that some students are in co-op programs which require them to work under internships in order to graduate. Other students not in such a co-op program, still work under internships. The new law would prohibit the use of such student interns, under the guise of protecting paid workers. We disagree and hope that the Committee would re-look at the definition of Student Interns to broaden the definition to include more types of students under the plan. Thirdly, the HK Confederation of Trade Unions (CTU) has asked for the inclusion of domestic helpers (DH) in the wage law. We disagree and think that it would be impossible to calculate the hours a DH works, plus the benefits of free live-in room and board and transportation. Inclusion might also reduce the ability of middle class HK families to afford to legally pay for a DH to live in their homes since in many middle class homes, both parents work full time. Lastly, for PWD's only registration-card carrying persons with disabilities can be tested by an approved assessor for their productivity and if approved, can then be exempted from the new minimum wage requirements. Employers who run afoul of the new laws could face penalties of up to HKD 350,000 (USD 45,000) and up to 3 years in jail. It is difficult to strike a fine balance between the interests of free trade, competitiveness, loss of jobs to a lower cost region, social cohesion, and "jobs for everyone". It is anticipated that this bill once put into effect will help those in low paying jobs such as security guards, cleaning staff as well as staff in the retail and hospitality industries. Stay tuned for more. HONG KONG IMPROVES ANTI-MONEY LAUNDERING EFFORTS Almost two years ago, in 2008 it found that Hong Kong was deficient in 20 of 49 areas measured. FATF generally gives countries two years to improve in the areas in which they are deficient. Hong Kong was found to have a good legal structure in which to combat money laundering and terrorist financing. However of 16 priority areas it was found to be deficient in 6 areas. Deficiencies included lack of a law to ensure financial institutions perform due diligence checks on customers, minimal regulation and enforcement of recordkeeping by financial firms. Hong Kong also had significant shortcomings in implementing UN guidelines on the seizure of terrorist funds. The 2008 report found no evidence of terrorist financing running through Hong Kong. I can assure you that there is no lack of due diligence efforts on the part of any of the banks we deal with in Hong Kong. Their due diligence requirements make those of the US look amateurish. So if the FATF cares to talk to the banks, it would find that the banks have taken it amongst themselves to follow very strict Due Diligence guidelines in dealing with new and existing personal and corporate clients. I'm happy to show the FATF what the bank requirements are any time. They don't have to call the Hong Kong government. They can call me. Even with these listed deficiencies, Hong Kong ranks in the top 50% of countries evaluated by FATF. Hong Kong has until June 2010 to make headway and to show progress in addressing the concerns of the FATF. Hong Kong officials will meet with the FATF in Amsterdam 21-25 June 2010. By contrast, countries such as Belgium, which had made much progress and were at the top end of the spectrum, were only reporting back every two years. Hong Kong was to report back on progress made after two years, with a follow up evaluation by the FATF in year 3. Countries at the low end of the spectrum include Iran, Sao Tome and Principe, Uzbekistan, Turkish Northern Cyprus, Pakistan and Turkmenistan. To its credit, Hong Kong convicted 307 people of money laundering in 2009 (vs. 248 people in 2008) and froze assets worth HKD 1.5 billion, (vs. assets worth HKD 419 million in 2008). However, when recently asked to list concrete examples of achievements in addressing the 49 points in the FATF 2008 report, the Hong Kong Security Bureau and Financial Services and Treasury Bureau were unable to list one single concrete example. The Hong Kong administration has consulted the public on plans to pass laws to regulate record keeping and due diligence but to date no bill has been proposed or passed. The government has announced that it plans to implement a disclosure system for cross border transportation of cash and bearer instruments- which would not limit the amount of cash any one person could bring in to Hong Kong. The Hong Kong tourism industry has already voiced concerns over this suggestion. (Probably the licensed money changers in Sheung Wan should also as their livelihood depends on large numbers of mainlanders who come across the border with undeclared obscene amounts of Chinese RMB and convert them into Hong Kong Dollars which are then used to buy commercial and residential Hong Kong properties. Oddly enough this focus on the cross border transactions is not on the FATF list of the top 16 priority areas. So why is the Hong Kong government focusing on this item when it has failed to make headway on 16 other areas which FATF has listed? Possibly because a Legislative Council subcommittee has voiced concern over Human rights. There is a 2nd meeting scheduled for 6 May. Maybe we'll find out in June after the FATF meeting in Amsterdam. Watch this space. Contributed by Patrick Trainor, Managing Director, GCSL Hong Kong |
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 SINGAPORE UPDATEOF ACRA AND HOUSEKEEPING Among these measures to be launched in April, is one which introduces a new colour coded compliance rating which will be made available in ACRA's free online Directory of Registered Entities. Under this new rating system, companies with good annual general meeting, accounting and annual filing records for the year in question will receive a positive compliance rating and be eligible for the issuance of a Certificate of Compliance by ACRA. ACRA's has stated that a good compliance rating translates into increased trust, thereby enabling companies to build on their brand equity within the business community. "It has always been our aim to promote compliance through education and awareness, instead of imposing penalties and taking up prosecution actions against defaulters." Advisory Note on False Lodgments with ACRA ACRA informed that it recently prosecuted a professional service provider for lodging false information with ACRA. The provider, by using the Professional Number to transact in BizFile for her clients, had changed the residential address of the foreign directors of companies in which she was the local director to that of the registered office of a consultancy company, without authorisation and knowing the information to be false. The provider was fined a a hefty sum of of $21,000. ACRA takes a serious view on false or fraudulent filings, especially by professionals, and will not hesitate to take strong measures, including court prosecution, to maintain public confidence in the integrity of information stored in its statutory registers. Housekeeping Since the implementation of MAS CG Framework in 2007, there has been increased emphasis on effective corporate governance internationally. The recent financial crisis has further highlighted the importance of effective risk management oversight at the Board level. The main thrusts of the proposals emphasize the importance of the role of the Board of such entities and the need for directors to be equipped with the appropriate skills and have the commitment to oversee the operations of the financial institutions. In addition, independent directors play an important role on the Board as they serve as the check and balance to management and majority shareholders and protect the interests of the financial institutions as a whole. Accordingly, MAS has proposed including an additional criterion on the length of board service in the definition of independence and changes to the composition of the board and board committees. Specifically the key proposals in the consultation paper relate to:
MAS expects that most of the proposals in the enhanced CG Framework will take effect from the first Annual General Meeting of each financial institution held on or after 1 January 2011. Exceptions will be given to proposals on the introduction of a new requirement for a director to be deemed non-independent after he/she has served for a continuous period of nine years on the Board; and the raising of the number of independent directors on the Board, NC and RC from the current one-third to a majority. MAS proposes for these two changes to take effect no later than from the first Annual General Meeting of each financial institution held on or after 1 January 2012. This is to take into consideration that financial institutions may need time to reconfigure their Boards and Board Committees to meet the proposed requirements on independence and composition. All these measures are well and good as we look forward to more robust corporate governance structureS in financial institutions. But what about the other companies, especially public ones? Surely the investing public needs the protection as well? Contributed by Lawrence Fong, Managing Director, GCSL Singapore |
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INTERNATIONAL UPDATE Do You Need To Protect Your Wealth? 1. Discourage lawsuits 2. Reduce insurance costs 3. Improve your financial planning 4. Become judgment-proof The success of your asset protection plan then is not whether you will avoid paying something if you are sued. You probably will. Your goal is not to lose significant assets. Contributed by Ooi Hoay Beng, Business Development Director, The GCSL Group of Companies Limited Formal Embargo on Protected Cell Companies and Segregated Portfolio Companies Entities structured as PCCs or SPCs are widely used forms of collective investment vehicles in several jurisdictions. PCCs/ SPCs are statutorily authorized to segregate their assets and liabilities into cells, whereas a MCV is a conventional entity having the flexibility to issue multiple classes of shares due to the powers granted in their constitutions. In the Indian context such collective investment vehicles are eligible for registration as broad based funds under the SEBI (Foreign Institutional Investor) Regulations, 1995, which require the applicant to have minimum of 20 investors, where each investor is not holding more than 49% investments. Despite satisfying the broad based fund criteria at the entity level, the collective investment vehicle has flexibility to pursue dedicated investment strategies for identified investors, which in view of SEBI goes against the basic essence of a broad-based fund. Also, SEBI had expressed concerns for MCVs adding new classes of shares after seeking registration with SEBI and the possibility of misuse of such additional class of shares for round-tripping. SEBI has always been apprehensive in granting registration to entities structured as PCCs and SPCs. The instructions and the Circular for the first time candidly communicates SEBI's stand on the granting registration to entities registered as PCCs/ SPCs and their apprehension on entities structured as MCVs. The key implications likely to surface are lack of flexibility for fund managers to dedicate separate class of shares pursuing different investment strategies for each investor, unless each scheme is broad based. Also, this may hamper the ability of fund managers to offer shares on a non-discretionary basis. Contributed by Nishith M. Desai, Partner, Nishith Desai Associates, India |
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OFFSHORE UPDATE ANGUILLA: WHITE (LISTED) WE ARE... ANGUILLA REMOVED FROM OECD BLACKLIST Publishing date: 06.04.2010 11:25 Anguilla has been removed from a blacklist of countries considered uncooperative by the Organisation for Economic Cooperation and Development, OECD. This was announced in a Government press release issued on March 25. The Paris-based international economic organisation maintains a 'blacklist' of countries it considers uncooperative in the drive for transparency of tax affairs and the effective exchange of information, officially called "The List of Uncooperative Tax Havens." Anguilla's Chief Minister and Minister of Finance, the Hon. Hubert Hughes, who was recently in Brussels, signed two Tax Information Exchange Agreements, one each with Germany and Australia on March 19. Anguilla has now signed thirteen agreements which exceed the twelve required by the deadline of March 31. In its March 22, 2010 publication titled "Promoting Transparency and Exchange of Information for Tax Purposes", the OECD lists Anguilla as being among some 23 jurisdictions in the Caribbean and world-wide which have moved to the new category of jurisdictions having substantially implemented the standard in the Progress Report. France has also drawn up its own tax haven blacklist of countries which it deems to have not complied adequately with international taxation and fiscal standards. Anguilla is currently on this list of 18 countries and efforts are already in progress by the Ministry of Finance to address this issue. As a follow-up to that press release, the island's Governor, His Excellency Alistair Harrison, issued a statement in which he congratulated the Government of Anguilla for concluding the Tax Information Exchange Agreements (TIEAs) with two more countries, Australia and Germany. He noted that as a result of the total of thirteen TIEAs signed, Anguilla had now been placed on the OECD's 'white list" of jurisdictions that had substantially implemented internationally agreed tax standards. The Governor said he was delighted by the conclusion of the TIEAs, which were signed by Chief Minister Hughes. He congratulated the present Government, the previous Government and all public officials and others who had worked hard to conclude the thirteen agreements in less than a year. He observed that getting Anguilla's name on the OECD white list was very important for the island's financial services. The Governor also welcomed the fact that the Government was ready to negotiate a TIEA with France. Note: The correct term was "grey list" which was the list of jurisdictions that were neither on the "white list" nor on the list of uncooperative jurisdictions. Contributed by Carlyle Rogers, Managing Director, GCSL Anguilla BELIZE: TIEAs The Belize Government has been doing its best in recent months to fill its quiver full of TIEArrows (my coinage, of course). In fact, within the last 5 weeks, the government has been on a rampage, signing TIEAs with Australia and Britain. There has also been progress made in terms of an approach made to the Nordic Alliance, a group of eight countries (Denmark, Sweden, Norway, Finland, Iceland, Greenland, the Åland Islands and the Faroe Islands) with a possibility of signing coming soon. Belize has also initiated such TIEAs with Ireland, Italy, Mexico and Aruba. Indeed, the Italian Minister for Economic Development, His Excellency Claudio Scajola, at the beginning of April, paid a visit to the country of Belize, with intent to publicly declare the mutual desire to deepen the existing friendship between Belize and Italy, and the desire to "exchange information". We have a Bel-Can bridge (built by cooperation between Belize and Canada) and a Bel-China bridge (well, you get the idea). Do you think in the near future we will have a Bel-Ital bridge? I just don't know where they would put it. As most of us tuned into the world of the fiduciary services global industry are aware, the Organization for Economic Cooperation and Development (OECD) has flexed its muscle and gained political influence, sufficient to force the hands of many non-member governments to enter into TIEAs with its member countries. It is no coincidence that this has come about by the support of the American government, as the OECD did not gain traction with the previous US administration, but has found a friend in the present one. We have no qualms about people having to pay their taxes. That I think is a general sentiment that if there is a tax to pay, let it be paid. However, to paraphrase Adam Smith, author of the financial classic "The Wealth of Nations", it is a man's right to arrange his affairs in such a manner as to pay the least amount of tax possible. He doesn't advocate the shirking of the responsibility, only the avoidance of a more onerous tax burden. The problem arises in the use of information, by governments, so as to target their subjects who pay taxes, but may have offshore structures set up primarily for the purpose of asset protection or passive investment. Those countries that do so operate on the premise that investment outside of their own country is a crime. We applaud the exchange of information, but I reiterate that the danger in this situation is such that one may get drunk with such power, if one is in the business of collecting revenue (and by this comment I cast no aspersions on the character of the fine folks at the Income Tax Department of Belize...truly a great bunch of people whose focus is only to make life easier for the taxpayer; a great rarity). Coming to my mind, whenever I reflect on this point, is the punch-line from the old Pirelli commercial "Power is nothing without control". Do you believe that once equipped with the information and resulting knowledge that comes directly from activity arising from the exchange of information, the governments will be lenient in their desire to collect tax dollars? The answer to that lies in history, and seeing that I never did that great in history in high school, I will leave you to be the judge. Contributed by Carlo Mason, Managing Director, GCSL Belize COOK ISLANDS: PENAL SANCTIONS UNLIKELY TO SUCCEED AGAINST A COOK ISLANDS TRUST The Cook Islands is a stable democracy, independent since 1964. It is true that it was a pioneer in the area of asset protection trusts, but without a doubt its greatest strength is not so much its legislation but rather the judiciary whose responsibility it is to adjudicate on that law. The Cook Islands has had, and continues to have today, a judiciary which stands out amongst "offshore jurisdictions", particularly those jurisdictions whose legal systems are based on English common law. The Cook Islands have been most fortunate to have had a long line of highly regarded judges appointed from the New Zealand Bench, some of them heavyweights in their own right in the world of jurisprudence. Certainly it is true to say that the Cook Islands, in the middle of the South Pacific, continues to "fight above its weight", a comment often used to describe the impact this tiny nation has made on the regional and international stage. In the Asset protection world, there is very little to dispute the definitive interpretations given by the Cook Islands courts to date. It would be true to say that case law in the Cook Islands has defined the jurisdiction. Such case law allows for the rule of law to take precedence in a world which requires clarity and certainty. Where matters have come before the Cook Islands courts, the judgements that have been delivered are a testament to how a tiny nation can certainly mix it with the proverbial bigger boys. This specific exclusion came before the High Court of the Cook Islands in December 2001, (in United States of America on behalf of its agency the Federal Trade Commission vs. "A" Limited), when it was argued, that the courts have no jurisdiction to entertain an action:
That case highlighted the common law Rule as set out by Lord Denning in the Ortiz case (1982) 3 All ER 432 at 457:
Thus a Cook Islands Trustee was able to repel the full might of the FTC, by relying on well established principles of common law. This was yet another case where the High Court entrenched the integrity of Cook Islands law, but it also illuminates the strength of those whose role it is to adjudicate upon its laws. Contributed by Puai Wichman, Managing Director, GCSL Cook Islands SAMOA: ALOFA AITUTAKI FUNDRAISER
Contributed by Laura Fepuleai, Manager, GCSL Samoa |
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| TIDBITS OUR MONTHLY QUOTE THAT MADE US SMILE THANKS, MOM! "YOU SHOULD HAVE SEEN THE ONE THAT GOT AWAY!" ANOTHER FISHY STORY SPA TREATMENT? * Israel - Snake massages |
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