A tax haven book review by Matt Blackman
It could be argued that almost every country is a tax haven or offshore financial center in some way to somebody, somewhere in the world. Approximately thirty tax havens were identified in the U.S. commissioned Gordon Report in 1983. Tax Havens of the World, written by Walter H. and Dorothy B. Diamond, is a three volume compendium that offers in-depth information on 68 tax havens (three new ones have been added since the last update in August 1997) 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 after a request was made for offshore information while the couple were in Taiwan in December 1973. They were asked to have the information compiled by mid January 1974. The pair were able to complete it in March and the book has grown ever since. Between them, they have written a total of 94 supplements for Tax Havens 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 Bank of New York where Mr. Diamond was Foreign Analyst to keep tabs on taxes for foreign securities and investments. Mr. Diamond estimates that there is more than $5.1 trillion invested in offshore financial centres around the world as of 1997, up from $5 trillion in 1996. One of the fastest growing aspects of the offshore finance industry is the Asset Protection Trust which is a result of the increasing amount of litigation occurring, especially in the United States. There are presently a staggering 100 million active lawsuits in that country according to Mr. Diamond and many are frivolous. His latest work as co-author with Dorothy Diamond, International Trust Laws and Analysis, a two volume 4,800 page book published by Warren, Gorham and Lamont, is a compilation of trust laws around the world and was written for U.S. and offshore legal and financial advisors. I recently read one review of Tax Havens that commented that the authors did not sufficiently cover the topic of trusts. The reason for this is simple. They wrote a whole separate book about them!
The Diamonds have just returned from a trip to a number of former Eastern Block countries including Romania and Hungary. Mr. Diamond believes that these two countries, especially Romania will experience incredible growth in the next few years now that the fighting in that region is over. Hungary has passed laws designed to attract offshore investors and companies.
Tax Havens of the World begins with an introduction detailing the unexpected positive tax haven impact of the United States Revenue Act of 1962. 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 each chapter on 68 tax havens. A thorough history of the growth of tax havens is discussed. According to the authors, U.S. 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. The first ten are 1) guarantees against expropriation, 2) fair treatment by government, 3) investment concessions, 4) low taxes, 5) political and 6) economic stability, 7) tax treaties, 8) minimum of currency restrictions, 9) freedom to import raw materials and 10) minimum of government controls. Others include bank secrecy (11), free remittance of profits (12), local capital availability (19), communication and transportation facilities (22) and (23), security of property rights (26), and last but not least, promotion by government (30).
Each of the thirty characteristics is discussed at length with examples of tax havens to further demonstrate the fact. There are even some strategies that will be of interest to the majority of readers. Changes in U.S. tax law are discussed along with implications to U.S. 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 Internal Revenue Service have come to 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 outside the U.S., 61% do not file income tax returns which is 12 times greater than the 5% of 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 U.S. 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 U.S. Treasury Department senses that an offshore incentive is luring too much business and money away from the Continental United States, it pushes the law makers to shore up the hole.
It is interesting to note that two states in the U.S. recently adopted laws providing offshore financial services other than captive insurance. A bill also has been introduced in the State of Montana that would allow foreigners to establish offshore banking operations by issuing licenses for foreign accounts that would offer 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. If you can't beat 'em why not join 'em!
To do this publication justice, this review should be 20 pages long. There is so much information (well over 1,000 pages) that it would take the average reader weeks to just get through it, once! Each of the 68 havens is discussed in detail and should answer most of the questions for the offshore investor interested in any of the jurisdictions covered in the book. The publication is kept current through a service that prints quarterly updates on changes to the laws of the U.S. and offshore jurisdictions.
Mr. Diamond says that he continues to use the term 'tax haven' even though various tax authorities have attempted to substitute it with the term 'offshore financial centre.' Many may associate 'tax havens' with tax evasion and unscrupulous activities but he believes that more than ninety percent of the people that use 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 are worth the $260 annual cost just to keep current on changes as they affect the U.S. and international investor. Stay tuned for more on this work and upcoming offshore book and newsletter reviews!
*RATING 9/10* Reading Level - Advanced to Professional.*
Disclaimer: The views expressed are independent and the sole opinion of Matt Blackman who has not and will not receive financial remuneration from the publisher or author for this review. Although great care was taken in writing this review, the author cannot and does not gaurantee the accuracy of information contained herein due to its complex nature. Readers are advised to obtain legal councel before making any investment or estate planning decision. Review copy of this publication was supplied by publisher.
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