Transcript
Use with ChatGPT / Claude Auto-scroll A
Darren Joseph introduces HDJ Tax and sets up a clip from a recent webinar. He frames the discussion as a review of key takeaways.
Speaker A
Hi, my name is Darren Joseph from HDJ Tax, a team that demystifies that sometimes confusing role of International Tax.And HDJ Tax is a part of Moore's role in Asia Pacific, which has over 30 offices as far north as Tokyo and Beijing, all the way down to Auckland, New Zealand, and all the way across to the Gulf states, including Bahrain and United Arab Emirates.So what I want to do now is share a clip from a recent Zoom webinar that we did as part of marp.Take a look.
The speaker explains how jurisdiction success depends on reputation, visibility, and having promoters who can sell the jurisdiction to clients. He uses Singapore, the Cook Islands, and the BVI as examples of places with strong market recognition.
Speaker A
I think just to summarize the four things that I'm taking away from this.
The first thing is that to some extent this is a popularity contest.Like an old fashioned election.It is about popularity, it is about reputation.And to that extent, just like anything else on social media, having more promoters on your side as a jurisdiction helps the cause.Not only that, you have more people speaking on your behalf because these are the representatives that have the trust of the clients.
The more people that you have representing your jurisdiction and selling it to clients is the more beneficial you as a jurisdiction, the more benefits you as a jurisdiction may enjoy.To that extent, as I reflect on that, I think about the initiatives of Singapore.Singapore has always been, everyone agrees, head and shoulders above in these discussions, in these narratives.And when I look at what the Tax Academy of Singapore is doing, basically it's a nonprofit connected to the Inland Revenue Authority of Singapore, more importantly sponsored by the Singapore government, which is of course a pretty deep bucket.And they are going aggressively promoting education at affordable prices, online, offline, in person, across Asia.
And so the more people that they understand that, the more people understand the value that's Singapore has to offer is the more people that can sell for them.And I see that that popularity contest, even though the Cook Islands has this reputation, it is amazingly popular in the United States on the Eastern seaboard.The BVI again when you, when you want to hold assets, so for example ETFs or some sort of brokerage firm in the US and you approach them with BVI, the customer service agents on the phone know exactly what you're talking about.You approach with some other jurisdiction, it's like, where's that in the world?You know, to some extent you hear it in Hong Kong and some of the places offshore sometimes is associated with bvi, associated with certain jurisdictions.So I just want to acknowledge that it is a popularity contest.
This section focuses on banking as a major driver of offshore structuring decisions. It also warns about fintech platforms layered over real banks and the risks that arise when underlying banking policies change.
Speaker A
Second thing is banking.You know, when you, when you in the world of fine dining, you talk about, okay, what is your meal?What wine are you paying with your Meal and same thing with offshore structures like which bank are you going to pair with it?And it's so much of a value driver that sometimes the discussion starts with this is the bank that I can access, therefore which structure can I pair with it?So it's almost a reversal sometimes.And yes, there is a rise in the so called digital banks or these fintech firms, but remember, they're not banks.And there was a huge scandal for those who have structures that were so exposed with Mercury last year.Thousands, hundreds of thousands of people, millions of dollars.Because remember these fintech structures, they sit on top of real regulated banks.
So as banks, the real banks underneath it, even though Mercury bank calls itself a bank, it was never a bank.So the banks that sit underneath it as they change the risk profiles, as the algorithms assess the risk and they change, they adjust their policies accordingly.The fintech lay on top of it, they feel the impact and a lot of people lost money and a lot of businesses were thrown into free fall when these adjustments happen.And these risk adjustments are just part of doing business.So it's just something to be aware of as I reflect on the presentation.
The speaker argues that secrecy is not dead, especially for non-US exposed structures. He discusses the United States as a major secrecy center and points to loopholes in global reporting frameworks.
Speaker A
So for the third thing is secrecy.We're fond of saying that secrecy is dead, but is it really?If it is, that you're not US exposed.We all know the biggest financial center in the world for secrecy is the United States.We all know that they tried to pass a corporate tax transparency act and that fell apart on constitutional grounds.
I mean if you just look at the global flows, the United States is the number one offshore financial center for secrecy, but particularly for non US exposed.So they're not required by FATCA and other reporting requirements.Wyoming, Dakota, Nevada, they're doing pretty well.And there's also been a series of interviews that I've been doing on my own podcast with a guy called Mark Morris.I have over 20, 30 videos with him.This is a guy who's testified before the EU parliament, before the government of Germany, but you know, the government of Germany.He's worked with the Taft Justice Network and he's done a series of articles, interviewed with him in the Economist magazine, which is not a magazine, that's low brows, very high brow and he has shown the, let's say the loopholes or the weaknesses in the present CRS reporting framework, which means that secrecy is still very much alive.
And there's been a rise of jurisdictions and structures that legally, we're not talking about anything untoward, that legally exploit the loopholes in the common, the automatic exchange of information framework, if you're not aware of it, just drop me a message offline and I'll point you in the right direction to just be aware of what your clients are aware.So if you go to your clients and say, oh, secrecy is dead, and they say, well, I subscribe to the columnist magazine, it ain't dead.So if you can't help me, I'm going to go with someone else who can.
So get up to speed.Right.
The final section covers asset protection, trust regulation, and how jurisdictions are tightening their laws. It also explains how well-funded legal teams can still challenge structures if formalities are weak.
Speaker A
The last thing I want to comment on is asset protection.And yes, that is, I mean obviously when we're not talking about things like fraudulent conveyance.So basically a lot of jurisdictions are really catching up.I know Singapore has updated its legislation, especially around trust.The DIFC did a review, Abu Dhabi Global Markets did a review and they, I mean for all its flaws, Cooks and Nevis, they have come head and shoulders in the whole discussion and the debate and the competition around asset protection.And conversely, one of the things that make the Emirates hard to deal with is one of the things that make it appealing because I was reviewing discussions online, there are of course very well known barristers, because we're talking about the common law world now, barristers with certain very well renowned firms in the City of London.And of course, even though it's in Australia or Singapore or Hong Kong, because of the precedence of England and Wales in terms of the common law, there are barristers who apparently and their firms, they're pretty good at cracking structures, even those in so called jurisdictions that are well known for asset protection.
And he's one of the first things apparently from what I see online that they look for ways, especially when trusts are used, of setting aside the trust and just declaring it a sham.
And that's easy to do, not easy to, but it's relatively easy to do when certain procedures and formalities aren't observed and especially if there's a sense of self dealing and et cetera, et cetera.So my point is this, that even though jurisdictions like Singapore, to be honest, I mean to be a trustee, it's something that you need a government license as you do in the difc.So it's tough, it's heavily regulated by the government, but that also serves as a layer of assurance that you have a relatively rock solid structure that is difficult to break apart, where the veil is difficult to pierce compared to other jurisdictions which may be less well regulated and as a result of that light touch, regulation might be cheaper and where there's less formality.But if one of these heavy duty teams come after a structure, it may be easier to crack apart.
So, you know, those are the four things that kind of jump out at me as I reflect on the discussion so far.