Friday, April 08, 2016

Tax evasion: A man, a plan, Panama!

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The Jesus helmet, for when Jesus placards on your scooter aren't enough.

Lots of comments on the Panama Papers and Taiwan, but the key one is here:
When news of the leaks broke on Sunday, some local media initially linked several prominent Taiwanese to the latest tranche of leaked documents. The names included President-elect’s brother, Tsai Ying-yang, and the heads of several companies such as Ting Hsin International Group, Taiwan Semiconductor Manufacturing Company (TSMC) and Advanced Micro Devices (AMD).

Chen, however, said such information was exposed by ICIJ in 2013.

While the ICIJ on its website notes that there are“legitimate uses for offshore companies, foundations and trusts,” the Panama Papers leak points to widespread illegal or unethical operation of offshore accounts and companies to evade taxes. The latest release of data has sparked tax evasion investigations into possible tax havens, causing the Prime Minister of Iceland to resign.
There are indeed legitimate uses. Many people have offshore companies for a wide variety of reasons. Taiwan's laws, it was explained to me by a corporate law office employee the other day, are hugely restrictive. For example, let's suppose a group of investors wants to form a company. Under Taiwan law, they have to have face to face meetings once a month (this has been changed to virtual meetings in recent years). They can't conduct things via email or snail mail. In many jurisdictions shareholders and founders regularly and normally make contracts among themselves about how the company is going to be conducted, defining who might run the firm and what percentage of profits or shares they might get. Such contracts are iffy under Taiwan law. And so on. In order to run companies the way they want, it's perfectly normal for people to offshore their firms. So let's wait and see what comes out...

...though as he noted, the legit activity tends to take place in the British Virgin Islands and similar. Panama is for illicit stuff since it isn't party to many international agreements on laundering, etc.

FOARP passes along a theory that many have been theorizing since this news broke -- the PRC hasn't made Panama switch recognition because so many corrupt officials have money there:
Interestingly, the Panamanian government even sought to switch recognition to the PRC as recently as 2009, only to be rebuffed by the PRC government out of an apparent desire not to breach the diplomatic truce between the two sides of the Taiwan strait. Funnily enough, despite the end of the "truce" with the recent establishment of diplomatic relations between the Gambia and the PRC after their 2013 breach with Taipei, there has not been any sign, yet, of movement in the Panamanian case despite the long-expressed desire to switch recognition.

The suspiciously-minded might suspect that the PRC leadership are purposefully delaying the switch as the "Panama Route" is rumoured to have proved useful for them and their families. However, there is not nearly enough evidence at the moment to draw this conclusion - but if Panama's diplomatic switch from Taipei to Beijing is significantly delayed, you might be forgiven for thinking that their motive in doing so may have something to do with keeping the "Panama Route" open.
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5 comments:

TaiwanLawBlog said...

Taiwanese company law would still be applicable if these companies want to legally do business in Taiwan as they will have to form local subsidiaries. I suppose the ones that benefit from offshore companies to get around Taiwanese laws are ones that are not conducting business legally in Taiwan?

As for monthly meeting by investors...is that supposed to be monthly face-to-face board meetings? Surely that's not a legal requirement.

Unknown said...

"if Panama's diplomatic switch from Taipei to Beijing is significantly delayed" - this is a very interesting observation.

Do you happen to be in ShuiLi about one month ago? I think I might have met you at the train station?

Unknown said...

"if Panama's diplomatic switch from Taipei to Beijing is significantly delayed" - this is a very interesting comment.

Do you happen to be at the train station of ShuiLi, Nantou about a month ago? I think I might have met you at the train station?

Michael Turton said...

Do you happen to be at the train station of ShuiLi, Nantou about a month ago? I think I might have met you at the train station?

I was there a couple of times in the last month.

Anonymous said...

I think US is always suspicious about the relationship between Taiwan and China:

http://www.businessinsider.com/r-us-navy-officer-charged-with-spying-possibly-for-china-taiwan-2016-4

Is Taiwan intelligent agency in bed with China?