The Paradise Papers: How Ridiculously Easy It Is for the Rich to Avoid Taxes
This article claims to give specifics, but carefully omits that all legal ways to transfer money from a trust to a US individual will require the individual pay taxes on it. The offshore trust only serves to defer taxes, not avoid them, unless the money remains outside the US permanently.<p>The US&#x27;s tax policy is to tax income when it&#x27;s brought into the country. One can debate the pros and cons of that policy, but it was a very intentional choice. Calling compliance with that law &quot;avoiding taxes&quot; is like calling an average American who deducts mortgage interest a &quot;tax avoider&quot;: they&#x27;re complying with the letter and the spirit of the tax law. Its implementors considered the pros and cons and decided that, on balance, the mortgage interest deduction made sense. Someone who isn&#x27;t paying taxes they don&#x27;t owe is not a &quot;tax avoider.&quot;<p>As an example, this article&#x27;s sole proposed way to get the cash from a trust is patently illegal:<p>&gt; When your Uncle Joe dies, the insurer pays. The cash goes into your bank account tax-free. How can the taxman prove otherwise? You have a policy and Uncle Joe’s valid death certificate issued by your own government. The money is home free.<p>… which they gloss over with:<p>&gt; If the phony insurance policy is too gruesome for you, you can find something more appealing in the summaries of the multitude of methods on the IRS website. A simple workaround would be to get a credit card from a foreign bank and pay it off through your secret bank account.<p>This isn&#x27;t &quot;a simple workaround,&quot; it&#x27;s a recipe for getting prosecuted for tax fraud – and quite possibly going jail, since it would be clear that this was intentional fraud.<p>For a few perspectives that cover the issue better, start here:<p>* <a href="https:&#x2F;&#x2F;www.irs.gov&#x2F;businesses&#x2F;income-from-abroad-is-taxable" rel="nofollow">https:&#x2F;&#x2F;www.irs.gov&#x2F;businesses&#x2F;income-from-abroad-is-taxable</a> (the IRS&#x27;s own statement on hiding income offshore). &quot;In addition to reporting your worldwide income, you must also report on your U.S. tax return whether you have any foreign bank or investment accounts.&quot; This isn&#x27;t some theoretical risk; if, or more likely when, this account gets discovered, they&#x27;ll be prosecuted.<p>* <a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2017&#x2F;11&#x2F;07&#x2F;world&#x2F;offshore-tax-havens.html?_r=0" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2017&#x2F;11&#x2F;07&#x2F;world&#x2F;offshore-tax-havens...</a> (look for examples how someone can actually get the money into the US without paying taxes; you won&#x27;t find many, if any)<p>* <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;UBS_tax_evasion_controversy" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;UBS_tax_evasion_controversy</a> and <a href="https:&#x2F;&#x2F;www.cbsnews.com&#x2F;news&#x2F;swiss-to-let-banks-lift-secrecy-in-us-tax-deal&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.cbsnews.com&#x2F;news&#x2F;swiss-to-let-banks-lift-secrecy...</a> (2013; history of US pressure on the last few countries that are or were part of the worldwide banking system but didn&#x27;t disclose transactions)<p>* <a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;view&#x2F;articles&#x2F;2017-11-08&#x2F;proxy-fights-and-mystery-trusts" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;view&#x2F;articles&#x2F;2017-11-08&#x2F;proxy-fig...</a> - Matt Levine&#x27;s summary (quoting the FT): &quot;Otherwise, the Paradise Papers seem to be &#x27;dull reading,&#x27; and they describe plans that are &#x27;mostly, if not totally, legal&#x27; -- &#x27;Some are not even questionable from a legitimacy point of view.&#x27;<p>This sentence of the NYT article a good summary of the US&#x27;s tax policy:<p>&gt; “I would have told the guy, ‘You’ve got this money offshore — just leave it offshore,’” Mr. Pfeifer said. “And he did.”<p>Again, there are pros and cons to that policy, but this article doesn&#x27;t try to point those out, it tries to paint people complying with the letter and spirit of the tax law as unethical.