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Contributed by:
Matt Blackman
It could be argued that almost every country is a tax haven in some way to somebody, somewhere in the world.
Approximately thirty tax havens were identified in the US commissioned Gordon Report in 1983. Tax
Havens of the World, written by Walter H. and Dorothy B. Diamond, is a three volume compendium
offering in-depth information on 68 tax havens and touches on more than 20 others. This is the most complete work
of its kind that I have discovered in the two years of cataloguing books on offshore financial centres.
According to Mr. Diamond, 600 correspondents help contribute to updates and information gathering in the numerous
offshore centres covered in the book. The book was first written upon request from Taiwan in December 1973. It
was completed in March 1974 and it has grown ever since. There have been 94 supplements since it was first published.
Walter Diamond 84, an expert in foreign tax and trade, has lead a distinguished career. He is author of Foreign
Taxes and Trade, briefs published monthly since 1950 following a prior request by the president of the
Federal Reserve Bark of New York where Mr. Diamond was Foreign Analyst to keep tabs on taxes for foreign securities
and investments. Mr. Diamond estimates that as of 1997 there is more than $5.1 trillion invested in offshore financial
centres around the world. One of the fastest growing aspects of the offshore finance industry is Asset Protection
Trusts, which results from increasing litigation, especially in the US where there are presently a staggering 100
million active lawsuits, according to Mr. Diamond, and many of them are frivolous. His latest work as co-author
with Dorothy Diamond, International Trust Laws and Analysis, a two volume 4,400 page book published
by Warren, Gorham and Lamont, is a compilation of trust laws around the world and was written for US and offshore
legal and financial advisors.
The Diamonds recently returned from a visit to several East European countries including Romania and Hungary.
They believe that these countries, especially Romania will experience substantial growth in the next few years.
Hungary has passed laws designed to attract offshore investors and companies
Tax Havens of the World begins with an introduction detailing the impact of the US Revenue Act
of 1962 and from that point on the introduction takes an American point of view. However, following the introduction
the authors present an unbiased appraisal of the advantages and pitfalls in chapters on 68 tax havens. A thorough
history of the growth of tax havens is discussed. According to the authors, US legislation designed to curb the
use of tax havens has had the opposite effect. One of the most interesting parts of the publication is the introduction
covering 30 key characteristics of tax havens considered in order of priority, according to a survey of international
companies operating in offshore financial centres. They include:
- guarantees against expropriation,
- fair treatment by government,
- investment concessions,
- low taxes,
- political stability, and
- economic stability,
- tax treaties,
- minimum of currency restrictions,
- freedom to import raw materials and
- minimum of government controls,
- secrecy,
- free remittance of profits,
- local capital availability,
- good communications and transportation
- security of property rights, and
- promotion by government.
Each of the thirty characteristics is discussed at length with examples of tax havens to further demonstrate
the fact. There are strategies given that should interest most readers. Changes in US tax law are discussed along
with implications to US companies operating in a number of offshore jurisdictions. The section entitled Bank
Secrecy gives an interesting insight into why tax authorities in high tax nations such as the IRS loathe
the existence of tax havens. Between 1968 and 1971 the IRS identified 50,000 suspected tax evaders by photocopying
envelopes in a New York City Post Office sent from Switzerland. There were 168 audits but no prosecutions could
be made because of the difficulty in obtaining the necessary documents from the Swiss banks. Of the 1.8 million
Americans living abroad, 61% do not file income tax returns which is 12 times greater than the 5% delinquency for
Americans living at home.
Government Cooperation is a full twenty pages long and discusses the evolution of a number of
tax havens offering incentives to encourage investment from foreigners. The US Congress has moved to counter many
of the incentives offered offshore with new and complicated tax law changes and one gets the sense that American
offshore businesses, investors and multinationals are in the middle of a very large game of cat and mouse. Whenever
the Treasury Department senses that an offshore incentive is luring too much business and money away, it pushes
Congress to close the loophole.
Interestingly, two states in the US recently adopted laws providing offshore financial services other than captive
insurance. A bill introduced in Montana would allow foreigners to establish offshore banking operations offering
limited financial privacy, asset protection and exemption from corporate taxes. Presently, Alaska and Delaware
offer attractive asset protection trust legislation as alternatives to going offshore.
There are well over 1,000 pages. Each of the 68 havens is discussed in detail and should answer most offshore
investor questions. The publication is kept current through a service that prints quarterly updates on changes
to the laws of the US and offshore jurisdictions.
Mr. Diamond believes that more than ninety percent of the people using tax havens are honest and law abiding.
Tax Havens of the World by Walter and Dorothy Diamond (not to be confused with Tax Havens
of the World by Thomas Azzara) is sold by Matthew Bender Books for $350. The quarterly updates cost $260
per year to keep current with changes as they affect the US and international investor. n
This column is dedicated to reviewing books on the subject of offshore investing and asset management. It
is designed to provide an insight into the publications available to assist readers looking for the best
information available for their money.
If you have comments or questions about a review or have read a publication of interest that you would like
to discuss, please e-mail Matt Blackman at:
review@goldhaven.com
fax him at (604) 904-4283,
or visit his Web site at:
http://www.goldhaven.com
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