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One of the questions we often receive from readers is “What country does not have a tax information exchange treaty (TIEA) with Country X?”

In other words, many people have been rather freaked out by recent developments such as Swiss and Panamanian banking information exchange agreements with the US and the UK. They are naturally looking for the best offshore banks in jurisdictions that have still not signed any information exchange treaties with major countries.

My standard response is that, while there are some of these countries (Andorra, for example, has not signed up to any information exchange with the US or the UK and doesn’t show any sign of doing so in the short term), jumping from bank to bank, jurisdiction to jurisdiction as rules change is becoming an ever more hopeless task. Yes, you can move once or twice – but the trend is definitely away from secrecy. Each time you change bank, you also put your privacy at risk. It’s much better to adapt your strategy and live within the system, while choosing a private, offshore bank that has its wits about it and values its international clientele.

The news is not all bad. There are still lots of ways to keep your affairs under the radar within the system. Most people I talk to these days, while they are committed to the idea of privacy as a fundamental principle, are much more concerned about asset protection and diversifying their investments. These are the themes we cover in The Q Wealth Report members’ area. Why go offshore? Tax evasion, as I’ve often stated, is not a good reason to go offshore today.

There’s one country I know of, however, that is really off the radar when it comes to offshore banking. You can open multi currency bank accounts here, and get full internet banking – including of course the chance to send multi-currency international bank wires online. US citizens are very welcome. And everything can be set up by mail, with no need to travel there.

This country, I should warn you, is in Africa. Some people lose interest right there, but I think that is a mistake. This is actually an important gold producing nation, so not surprisingly, it’s doing well at the moment. If you think gold will keep going up in dollar terms (I do) then this country will continue to prosper. The bank I recommend there, to consulting clients, is actually based in Europe and owns a gold refinery.

The country I’m talking about is Tanzania. Here are some of the reasons I like it as a private banking haven:

• The Chinese and Indians certainly have no hesitations about Africa and have been pouring billions in here. It’s a matter of following the smart money.

• Since 2000, production of gold on an industrial scale has increased, especially from the Geita (AngloGold/Ashanti) and Bulyanhulu (Barrick) mines. The future of Tanzania looks bright.

• The Tanzanian government recently abolished a number of taxes, including Capital Gains Tax. And passed a new mining act. There is absolutely no tax on foreign bank accounts held by non-resident individuals or companies.

• Double taxation treaties have been signed with Canada, Denmark, Finland, India, Italy, United Kingdom, Norway, Sweden, and Zambia. Tanzania is also in the process of negotiating treaties with other countries including Belgium, Burundi, Iran, Lebanon, Malaysia, Mauritius, Pakistan, Rwanda.

• The Tanzanian Central Bank was heavily criticized for excessively restrictive precautionary banking regulations during the last decade. The result is that the Tanzanian banking sector is strong and healthy today.

A typical structure I might recommend to consulting clients, depending on their circumstances of course, would be a Nevis LLC with a bank account in Tanzania. As I said, that can easily be set up within a few weeks, with no need to leave home. The bank account can also be used as a platform for buying and selling stocks and investments internationally, though it should not be compared to an international online brokerage account.

More information on this and many other private banking and offshore wealth protection matters can be found in the Members Area here at Q Wealth Report. If you haven’t yet signed up, click here to see a list of the membership benefits.

Peter Macfarlane talks about ‘plain sight’ strategies for international private banking.

‘How to hide money offshore’ is not something many bankers or offshore writers would dare to choose as a topic these days. ‘Financial Privacy is Dead’ would certainly be a more politically-correct topic. Here at Q Wealth we sometimes push the limits, but we don’t have a death wish either… so let me make clear right now that this article is not about how to evade taxes. It is about the best ways to achieve financial privacy in 2011, assuming you are fully compliant with all applicable tax and reporting requirements, but you still want to keep your affairs private for asset protection or catastrophe-planning purposes.

We do not condone tax evasion. It is well known that we are not big fans of tax in general, but the fact is if you think you are paying too much tax there are plenty of ways to reduce your tax bill legally. We write about these techniques from time to time in general terms in The Q Wealth Report, but since we write for an international audience, and everybody’s circumstances are different, you need to talk to an expert who is familiar with the laws in your home country about your individual situation if you want to know how to reduce your tax bill legally. That much should be obvious. The most basic option to reduce your tax bill is to physically change your residence to one of the many countries in the world where you can live happily and tax-free. (And, only if you are a US citizen, you need to change your citizenship as well, which means starting the process of acquiring a second passport.) But I digress…

OK, so provided you comply with your tax obligations at home, beyond that it is your money and you jolly well have the right to do what you like with it, including hiding it. People have hidden valuables for centuries, simply because it is common sense – if you put your assets on public display it won’t be too long before someone tries to take them away from you.

There are dozens of reasons why an individual would want financial privacy. I would turn things around and place the burden firmly on the other side – if someone believes an individual should not have financial privacy, it is up to them to prove why. Many people have a moral objection to having their personal financial information shared internationally, with the presumption of guilt that is implied. One thing is to require individuals to report foreign bank accounts. If the individual consciously chooses to commit the fraud of not filing, he or she takes a big risk and should be aware of the consequences. But for governments to go on fishing expeditions based on mere presumptions is wrong.

Fortunately, despite what the OECD or the IRS want you to believe, financial privacy is far from dead. In fact, that’s why there’s so much fuss about it. If financial privacy were really dead, you wouldn’t hear about it, because it would be a non-issue. But scare tactics are very effective.

The fact is, most countries, even the USA and the UK, acknowledge the right to bank secrecy. Even now, the USA does a big business in secret bank accounts, especially for Latin Americans – famously refusing to turn over information on the secret bank accounts of wealthy Mexicans for example. For those banking in Switzerland, the alpine country strenuously guards the right to bank secrecy, even to the extent of agreeing to collect taxes anonymously for foreign countries like the UK and Germany. Others, like Panama and Singapore, prefer the path of least resistance, signing the Tax Information Exchange Agreements (“TIEAs”) required of them, well knowing that it only takes a few smart lawyers to figure out how to maintain total bank secrecy for their clients in spite of the agreements. I’ve written articles elsewhere on this topic, so won’t go into that now.

We get questions all the time from people who want to know how to open an offshore bank account in a jurisdiction that has not signed a tax treaty with such-and-such a country. For example, Americans are all in a panic about the TIEA signed by Panama with the US recently, and the latest trend seems to be to bank in Singapore instead. If they are choosing Singapore because it’s a financial hub in a growth area, or because Singapore banks are just more efficient and better at service than Panama banks, that’s fine. But if they are choosing Singapore simply because it has not signed a tax treaty with the US, they are making a mistake in my view. Singapore has already signed many TIEAs and there is every reason to believe they might sign one with the USA soon.

The trend is for more and more exchange of information. Eventually, those who keep moving every time a new treaty is signed will have to end up banking in somewhere like North Korea or the Turkish Republic of Northern Cyprus. The latter, a territory that is recognized only by Turkey, is already cashing in on that status but most of the banking industry there is less than reputable. You don’t want a bank account there, trust me. (The southern part of Cyprus is fine, however.)

So, where is the right place to hide your money? I think in plain sight. Here’s an offshore Private Banking and Wealth Management strategy in two easy steps:

1) First, for a layer of privacy you need a tax-neutral legal entity of some sort, like a trust or a corporation. The result of this is that the offshore bank or brokerage account is not held in your name, even though you might be the signatory or beneficial owner. This avoids your name leaking out to the rest of the world on wire transfers etc, and this step also effectively neutralizes most TIEAs at a stroke. If you are American, it also opens up a world of investments that are closed to individual US citizens.This is about the only way to open an offshore brokerage account for US citizens.

LLCs are good for this purpose as they are inexpensive and can generally be treated as simple pass-through entities for tax purposes. Trusts, controlled by a Private Trust Company, are good for slightly more complex situations, such as where you are seeking to pass assets on to your children, or for situations where particularly strong asset protection is necessary.

Of course, you should go ahead and report your ownership of this legal entity if you are required to. Will this raise a red flag? Not as long as you choose a country that is not blacklisted for your LLC or trust. I recommend for example Nevis LLCs, as described in my free Untouchable Wealth report. Major western countries do lots of international trade and it is quite normal for their residents to have business interests in other countries. This way your report will blend in with the masses and you are no more likely than normal to be singled out for audit.

2) You use your offshore entity to open a private offshore multi-currency bank account in a respectable country that is not known as an offshore tax haven, again to avoid raising red flags. The best foreign bank accounts for privacy are the ones in low-profile countries. Denmark and Spain, for example, are two good countries with accessible banking services for expats with foreign companies, that are not on the radar, and where offshore bank accounts can be opened without any need to travel there. Wire transfers to and from these countries will not be subject to the same level of scrutiny that would be found with say Panama or Belize offshore banks. You’ll also find European offshore banking services are generally better.

So it’s really quite simple. The right place to hide your money is a place where you won’t be asked too many questions. By filing the right forms, you will be fully compliant, and you’ll sleep soundly at night without having to worry about future TIEAs that tax inspectors goodness-knows-where might be cooking up. And your bank account will be well hidden in plain sight.

From there of course you can also take things to the next level – for example by buying precious metals in Switzerland. As an internal transaction within your entity, that doesn’t change the value in any way, you can avoid any additional reporting requirements.

If you are new to Q Wealth and would like to know more, check out our free five part e-mail course: Secrets of the Super Rich.

Executive Summary in two lines: Panama has announced plans to to sign a tax information exchange treaty with the USA next week. Should you be worried? If you’ve followed our advice in the past – no. If you’ve set up a non-compliant Panama offshore structure, then it’s time to review it – start here. But Panama remains an excellent place to incorporate your Foundation or IBC.

Here’s my view of TIEAs. Tax information exchange agreements (TIEAs) are usually printed in black and white, and they nominally promote transparency. However, those are about the only aspects of these treaties that are black and white, or transparent. They are more about show. Politicians want to show they have achieved something. In reality, as I’ve said before,  most exchange of information takes place informally.

With the recent news that Panama has agreed to sign a tax information exchange agreement with the USA, I received, as usual, a flood of e-mails from worried clients asking “what should I do?” or “what do you think of such and such?”

Panamanian President Ricardo Martinelli is a smart guy, and in my opinion he knows what he’s doing. Don’t worry. He is not going to destroy the Panama financial services and banking industry, on which much of the Central American country’s economy is based.

I’ve already written a detailed article on this subject for the next Q Wealth Report that is due out shortly.

Those of us who grew up in major economies like the US or the UK tend to think that everything is black and white. However, most of the world doesn’t think quite like that – and neither do politicians anywhere. Politics is about horse trading. You give up something here, you gain something there. Perception by third parties (like voters) is more highly prized than substance.  And that is exactly what is going on here.

The reason for signing this particular treaty is to appease US left-wingers like Senator Carl Levin, who were threatening to block the US – Panama free trade treaty that was already approved some years back but has never entered into force. Obama can now claim credit for getting Panama to cave in on bank secrecy, even though they are doing nothing of the sort. On their side Panama, to quote verbatim their announcement, get to say:  “Panama has already reached 13 separate taxation accords with other nations. By signing those deals and the one with the US, we’re going to get the certification of the world that Panama’s banks are trustworthy.”

Panama and the US need this free trade agreement. Both governments agree. Panama, whose economy is anchored by the Panama Canal, has a service-based economy and is one of the few nations that run a trade deficit with the US. This in itself demonstrates Panama’s strength. It is very different from the other economies in the region who are dependent on the US. American companies shipped $4.3 billion in goods and agriculture products to Panama last year and imported $302 million.

This Free Trade Agreement is going to make it much easier to operate internationally with Panama companies. Once it is signed, the US can no longer discriminate against transactions with Panama companies. In this regard it is excellent news.

But the most obvious benefit of all: Panama won’t be blacklisted. It will have the full ‘certification of the world’ as they call it. This can only be good for the long term future of the offshore finance industry in Panama.

But what about information exchange on beneficial owners who don’t want to be identified?

First of all, this mainly affects Panama banks. We’ve always been careful to advise clients, especially Americans, against banking in Panama. We always said, take your Panama corporation and foundation and bank elsewhere, like in Europe or Asia. Similarly, Panamanian banks have always been notoriously reluctant to do business with Americans.

Even in light of that, Panamanian corporations with accounts at Panamanian banks are domestic, resident Panama business as far as the law is concerned. Nobody is suggesting revealing this information to the United States or any other country.

Secondly, we’ve always advised readers and clients not to do business directly with law firms in Panama, but rather to buy a Panama company or Foundation through a law office in another jurisdiction. Panama has never required us to pass beneficial owner information, so nobody in Panama knows anything about the beneficial ownership of Panama companies set up through my firm, for example. There is no information to exchange. We particularly like Panama because most offshore jurisdictions do require beneficial ownership information. Panama doesn’t. Panama still allows bearer shares.

Panama is apparently attempting to pass legislation, again to please the gringos, that will require identification of beneficial ownership of corporations. This will be practically impossible.

First of all, Foundations do not have owners according to Panama law. Corporations of course do. However, the companies register in Panama goes back to the 1920s. Unlike other jurisdictions, companies are never struck off the register for non-payment of annual dues. It is a practical impossibility for anyone in Panama to identify beneficial owners of companies that technically exist but might have disappeared or stopped trading decades ago.

Well, there will be much more information in my article for members: there are a few other tips and tricks that I don’t want to publish on the public internet for obvious reasons. I’m reminded if the French proverb plus ça change, plus c’est la même chose. The more things change, the more they stay the same. That is the case here. There will be some minor positive changes we as offshore planners can take advantage of. There will be some minor negative changes we can easily get around. Nothing significant is changing, but the politicians on both sides can hail a victory. Perhaps the perfect political deal?

If you wold like to be kept informed of news like this, please remember to sign up for our free weekly e-mail newsletter, Q Bytes.

The following item was published in Saturday’s edition of Q Bytes. We consider The Brussels Agreement (also known as the EU SWIFT Agreement) to be an especially important topic so we are reposting to the blog. To ensure you receive useful information like this in future in a timely manner, simply sign up for your free subscription to Q Bytes. We hate spam as much as you do, and will respect your privacy. Of course, you can unsubscribe at any time.

THE BRUSSELS AGREEMENT MAKES ALL EU BANK ACCOUNTS AN OPEN BOOK TO THE US AUTHORITIES
by Peter Macfarlane, Offshore Banking and Asset Protection Consultant

With remarkably little fanfare, the first of this month saw the entry into force of an important agreement between the USA and the European Union known as the ‘Brussels Agreement.’ This I would regard as the final blow for already weak banking secrecy in European Union countries.

Quite a few astute readers have however noticed this press coverage and e-mailed me questions about it. To answer these questions, I will first reveal below more about the agreement, and then look at its impact on banking privacy. On a positive note, banking secrecy remains alive and well outside the European Union.

The ‘Brussels Agreement’ gives the CIA direct, on-demand access to all bank accounts held in the European Union – period. It also goes under the name ‘SWIFT Agreement’ in European Union papers.

This treaty is an extension and formalization of an existing CIA effort set up shortly after the terrorist attacks in New York in 2001. That program granted the CIA access to data held by SWIFT, the Brussels-based co-operative that processes nearly all international bank transfers. The operation was run covertly until the press found out about it in 2006.

The scope of the Brussels Agreement is, quite frankly, utterly amazing to anyone who cares in the slightest about civil liberties or due process. Far more wide reaching than any Tax Information Exchange Agreements (TIEAs) or Mutual Legal Assistance Treaties (MLATs), and of much greater significance than the recent US attacks on Swiss banking secrecy, the Brussels Agreement simply requires that all 27 EU member states grant requests “as a matter of urgency” for banking information made by the United States under its terrorist finance tracking programme. The records will be kept in a database run by the CIA in Langley, Virginia, for five years before being deleted.

Needless to say, the Brussels Agreement grants US authorities much more scope to consult our bank accounts than that granted to domestic law enforcement agencies in Europe. In the UK and most of Europe a judge must authorise a specific search after receiving a sworn statement from a police officer. In the case of requests from the USA, this due process is completely bypassed.

The USA can also, under the agreement, request so-called “general data sets” perhaps better known as fishing trips, based on broad categories such as “relevant message types, geography and perceived terrorism threats”.

One of the reasons for rushing through this new agreement is that SWIFT at the end of 2009 moved part of its systems architecture to Switzerland, away from its existing computing bases in Brussels and the USA. This would have placed a lot of data outside EU and US jurisdiction, a change apparently demanded of SWIFT by Swiss banks and others concerned about the privacy of their clients’ information. A number of banks had threatened to stop using the SWIFT system altogether if additional privacy protections were not put in place.

We can see that this agreement was rushed through in Europe while attempting to avoid both legal and public scrutiny, because negotiation of the agreement on the EU side was mandated back in July 2009, based on legal provisions in the old Maastricht Treaty that expired at the beginning of December 2009. The agreement was reached just before the deadline, at the end of November. It is limited to nine months duration, but EU documents make clear that this is simply a ‘breathing space’ to keep the program alive while a more permanent bank account information sharing agreement is agreed under the legal auspices of the new Lisbon treaty.

Certain elected representatives in Europe are none too happy about the way the agreement was bulldozed through by Brussels bureaucrats, directly attempting to circumvent normal mandates and procedures. A Bloomberg article just published on BusinessWeek entitled U.S., EU Terror-Finance Data Deal Should Be Vetoed, Panel Says has more information.

Of course, certain safeguards are put in place – the most important of which is that the information is for counter-terrorism use only. If the CIA wishes to reveal information to other US agencies such as the Treasury Department, IRS etc, a European judge must rubber stamp this first. Frankly, however, if it were my information being passed around – which it isn’t because I don’t bank in the EU – this safeguard would give me little confidence. Who is realistically going to trust the CIA?

The actual agreement, a classified document obtained from the EU, is here

An ‘Information Note’ on the subject released by the European Union, is here

IMPACT OF THE BRUSSELS AGREEMENT ON OFFSHORE BANKING AND ASSET PROTECTION

From a banking secrecy point of view, perhaps the most concerning thing is that this agreement has a higher legal force even than national constitutions such as Austria, which protect confidentiality. The CIA can look straight into bank accounts in some of the best offshore banking countries like Austria, Luxembourg, Latvia and Estonia, as well as other EU member states where banking confidentiality has traditionally been less of an issue.

The enormous scope of this agreement also makes minor tax information exchange agreements and the like look insignificant. We would not only not trust the CIA to refrain from sharing this information with other US government agencies. They are likely also to share it informally with their colleagues overseas. The precedent for this would be the UKUSA agreement, for example, where the UK routinely spied upon US citizens at the request of the US, because the CIA was technically prohibited from spying on Americans.

However, let’s not panic either. In fact, this process has been in place since 2001, so it’s nothing new. It’s only new that we are learning about it and it’s being subjected to the democratic process.

The other thing to note is that the EU is the only area where the USA has been able to obtain such ridiculously wide-ranging access. Traditional offshore best banking countries like Switzerland, Singapore and Panama are not covered by this agreement, though you should be aware of transactions that might pass through USA or EU correspondent banks. Switzerland in particular has an excellent clearing system of its own which bypasses SWIFT on Swiss Franc transfers.

The usual message, worth repeating in this case, is that by following the offshore banking advice in Q Wealth you can sleep soundly at night. To recap in a nutshell:

• You should make sure all your structures are legally compliant. Just because I say that banking privacy is NOT dead, and I believe privacy in financial affairs is a basic human right, doesn’t mean you should use banking privacy to hide money. You either get this distinction – or you don’t. Secret bank accounts as a tax evasion tool will not work long term. If you conduct your offshore business in a proper manner following guidelines in my articles, your account will not appear on the radar and your assets will be protected.

• Compliance with your home country’s rules is still easy and possible. Plan your second passport (citizenship) and residence with a professional… considering basing yourself, not just your business, offshore. For Americans this is unfortunately more difficult, since the USA is the only country in the world that taxes its citizens on worldwide income. Americans should therefore consider acquiring a second passport and renouncing their first.

It is perfectly possible and legitimate to protect your assets against the inevitable coming devaluation of fiat currencies, by using offshore multi-currency bank accounts. We have talked recently for example about Norwegian Kroner and Swiss Francs being good investment-grade currencies. Both of these currencies are strong, and they clear outside the EU so they are not affected by the Brussels Agreement.

If you would like to learn more about this, and are not yet a member of Q Wealth, subscribe today to gain access to the wealth of resources in our Members Area.

Better still, come to Cancun next month. We still have a few slots available on our ‘Strategies for Success’ event in Cancun and a few spaces available for one-on-one personal consultations. If you have bank accounts in European Union countries like Austria or Luxembourg and would like them to remain private, this should be a wake-up call. If you haven’t yet moved assets offshore but are considering doing so, also contact Frederick in the Q Wealth Office to set up a personal meeting with Peter Macfarlane in Cancun next month.

Over the last few months and in the wake of the OECD crackdown on tax havens, when talking to my personal consulting clients and handling the free anonymous e-mail consultations we offer to members, I’ve been asked numerous questions about participating in offshore tax amnesty programs like the IRS’s ‘Offshore Voluntary Compliance Program‘ (OVCP), the UK’s ‘New Disclosure Opportunity‘ (NDO) and equivalent programs in many other countries.

Some surprising countries like the Netherlands – including Netherlands Antilles – and Argentina are also getting very agressive with their non-compliant taxpayers and are busy signing Tax Information Exchange Agreements (TIEAs) with offshore havens.

First of all, the usual disclaimers. There is no easy to answer to this question as it depends very much on personal circumstances. International tax lawyers I have talked to are divided in their opinions too. My job here is simply to report what I’m hearing on the offshore grapevine. Nothing here should be construed as tax advice.

The USA  Offshore Voluntary Compliance Program has attracted the severe criticism for being highly ambiguous – even those participating in the amnesty and filing their FBAR forms have received no guarantee that they will not be subject to criminal prosecution later. So, one might ask, what is the benefit of participating in the amnesty? The IRS are effectively saying to taxpayers “you just have to trust us.” Hmm. Any good lawyer will tell you not to trust the opposition. And on that basis many good lawyers have advised clients that it is not in their interests to participate in the amnesty.

Although it has now technically finished, we hear that the IRS may still be offering informal ‘deals’. And the main point of such deals is to collect intelligence on offshore bankers, lawyers, accountants and others who have assisted US taxpayers in tax evasion in the past.

In this regard, I have specifically warned a few clients about undeclared accounts they have in banks that I won’t name in public, but which are likely to be high on the IRS radar. Certain European banks, mainly banks in Switzerland, Austria and Denmark, that I could probably count on the fingers of my two hands, have been very active in the past in terms of marketing their services to Americans. UBS was one of them, but there are others, including some small boutique private banks with mainly American clients.

If the IRS didn’t know about these offshore banks before, they certainly do now. So which banks do you think will be top of the list for auditing with a fine tooth comb once the new QI rules are agreed sometime next year? (More on the new 2010 QI rules coming up shortly in Q Bytes – we are working on that now)

You already know if you are a client of one of these banks or not. In the past, they had representatives travelling worldwide – even to the USA – meeting American clients, often at gatherings frequented by libertarians, banking privacy enthusiasts and the like.

If your hidden account is in a bank with few US clients that has not popped up on the radar, you are undoubtedly in a much more advantageous position. But it’s still not too late to close out your accounts with the affected banks and move assets into a more robust, legally watertight asset protection structure – hopefully including assets that do not trigger reporting requirements (physical gold comes to mind.) By closing such vulnerable accounts as soon as possible, you can minimize (but not eliminate) the risk of detection, since audits should hopefully cover only active accounts.

A second, unstated, purpose of the amnesty programs and the IRS spin machine (press releases etc) is simply to scare people with bluff. A lot of the most productive Americans, who have been the stimulus that brought prosperity, jobs and wealth to their country over past decades, won’t be enjoying a relaxing holiday season this year. We don’t think this is fair, of course.

Although bank secrecy is under attack, it’s certainly not dead yet. On the other hand I’ve been saying for years that it is a BIG MISTAKE to hold unreported bank accounts in your personal name. There are much better ways to legally hide money and protect what is yours. Which are the best offshore banking countries for 2010? We regularly write about such solutions and about the safest and best offshore banks here at Q Wealth Report. We believe in practical, positive advice – not scare tactics.

If you don’t see what you want in our publications, paid-up members are entitled to a free e-mail consultation (subject to the natural limits of my time) and/or to a referral to an expert US tax lawyer we know and recommend based in Panama who can also help with disclosure and amnesty matters.

The IRS have declared the US amnesty a huge success. The UK tax authorities, however, have openly admitted that they are disappointed with the number of people coming through under the NDO. In an effort to attract more, they have extended the deadline through to January 4th.

A separate UK tax amnesty is one negotiated exclusively with Liechtenstein, which it is generally agreed by experts offers very favorable terms to taxpayers. However, only 27 people have come forward so far under this amnesty. From this month, the Liechtenstein disclosure amnesty is being extended to allow UK taxpayers who hold undeclared accounts in other jurisdictions to move those accounts to Liechtenstein and then take advantage of this special amnesty.

Anyway, if you want to be kept informed on this subject it is a regular topic in our weekly Q Bytes newsletter. It is absolutely free, just sign up and confirm your e-mail address. We will not spam you and you can unsubscribe instantly at any time. To sign up to Q Bytes click here.

by Peter Macfarlane

Last week, I wrote an upbeat article on the future of Swiss private and offshore banking, entitled “The Future of Swiss Banking Looks Better than Ever.” This article focused mainly on the recently averted US trade war with Switzerland, and how the IRS got the publicity it wanted to scare people into compliance. It appears that the deal between the IRS and Switzerland regarding UBS account holders has still not been fully resolved, dragging out the publicity machine still further.

But how is this strategy playing out in the rest of the world? Another much vaunted tax information exchange agreement (TIEA) is that which the UK has been negotiating with Liechtenstein. A press release put out by the HMRC (British tax authorities) states firmly that “Those who have been evading UK tax on assets held in Liechtenstein banks must now settle with us. There are no alternatives.”

Is that true? Not really. At any rate there is certainly no need to rush into any hasty decisions…  as the Press Release notes, “The Liechtenstein Disclosure Facility (LDF) runs from 1 September 2009 to 31 March 2015.”

This oddly-named Liechtenstein Disclosure Facility even more oddly also offers “a special Bespoke Service, including an option for personalised treatment by a `discrete [sic] HMRC (UK Revenue and Customs) team to ensure consistency of treatment’” notes TJN. At least it sounds like private banking clients will be getting the VIP service and treatment they are accustomed to!

There are more details which actually make this TIEA extremely favorable to the taxpayer, that I won’t go into here but can certainly cover in-depth in a future article in The Q Wealth Report. The bottom line is that this agreement – even more so than the US-Switzerland example – is more words and political posturing than anything else.

Brits with undeclared holdings in Liechtenstein probably need not be unduly worried, though it is clearly time to start looking into alternatives. One good alternative beckons in Panama for example – the Panama Foundation laws are almost a carbon copy of the famed Liechtenstein Anstalt or Foundation, and there is no TIEA with the UK.

But Brits at least have the option for completely and legally eliminating income taxes at a stroke. And those with undeclared holdings in Liechtenstein have until 2015 to do it. I’m talking, of course, about simply following their money and retiring overseas.

Contrast that to the USA where the IRS is dedicating more and more resources to pursuing thousands non-resident US citizens whom, it believes, are not filing their taxes properly. Americans are left with only one option to legally eliminate US taxes for ever – and that is renunciation of citizenship. It’s a big step, but certainly an option that Americans now seem to be taking up in droves – the brain drain I’ve often talked about. I’m seeing lots of American clients who at least want to establish residency somewhere offshore with a view to keeping their options open. Smart Americans are leaving and taking their money with them.

But it’s not nice to be stateless. So in order to renounce citizenship, or even just to keep their options open, US citizens need to be thinking about acquiring a second passport - whether it be via the slower and more secure route to a new citizenship through residence and naturalization, or the faster route of buying a second passport via economic citizenship programs.

Away from the USA and the UK, all around the world, tax havens targeted by the OECD and G20 summit in April amid a blaze of publicity seem to be getting back to business as normal. Belgium, hardly a low tax nation but another producer of fine chocolate – and one that perhaps surprisingly has substantial interests in managing non-resident bank accounts, just completed the hurdle of signing twelve TIEAs necessary to get off the blacklist. The last five countries they signed with? Singapore, the Seychelles, San Marino, the Isle of Man, and Monaco.

The cracks in the crackdown are beginning to show. A study recently published in Germany claims that “Tax is the price of civilization. Tax havens are the price of globalization.” Governments know that already and act accordingly. Just don’t expect them to admit it in public. And expect them to ramp up the use of scare tactics and bluffing to keep the populace under control.

Further reading: Writer Peter Macfarlane is a commentator, writer and consultant on offshore banking and asset protection matters. He offers a free personal e-mail consultation to all Q Wealth Members. If you are not yet a member, join today for instant access to Peter’s reports including the Practical Offshore Banking Guide, The Gold Report, and “Panama Foundations Demystified.”