Profound thought

What impact is global tax transparency and anti-abuse regulation having on private wealth? Marcus Hinkley answers some common questions notably about the Asian market

What does 'global tax transparency' mean to you, and what are the implications for practitioners in the private wealth market in Asia?

As an offshore lawyer, for me global tax transparency is profound in three ways:

1. It means the phrase "tax haven" can finally be put to bed. This is recognised by David Cameron, the UK prime minister in his recent speeches, and by the Organisation for Economic Co-operation and Development (OECD).

2. It changes client emphasis. Clients have long arbitraged between various jurisdictions' anti-money laundering requirements. That has gone and is now irrelevant. Tax transparency has levelled this playing field. Now clients should look to which jurisdictions can safeguard their information.

3. It will also end the ability for onshore locations to use international finance centres (IFCs) as a scapegoat for their inability to balance their own budgets.

In the event that something is exposed, what are the consequences of this for the institution and for the client's banker?

Dovetailed with tax transparency, it is making tax evasion a money laundering offence. Therefore, if tax evasion is exposed, the institution and its employees are looking at serious penalties.

How do you see the impacts of tax transparency trends on the tax haven countries? Can the IFC's private client business survive in a tax transparent world?

Does laundered money, and I include tax evasion in this definition, represent a significant part of an IFC's book of business? If it does, we may as well pack our bags, but it doesn't. In fact, these initiatives by the OECD will make transparent what the offshore world was saying all along: that our business is not funded by money launderers but people using legitimate tax planning, asset protection and succession planning opportunities.

What is the Foreign Account Tax Compliance Act (FATCA) impact on the Asian private wealth market? And, with FATCA coming to Asia, what is the recommended action for those high net worth individuals who are resident in Asia but also US persons?

The impact is profound: FATCA was the start. It fundamentally changed the focus from the OECD's model of tax information exchange agreements/double tax agreements disclosure on request (where the onus was on the relevant government) to automatic exchange of information, with the onus shifting to the service provider. It has also emboldened other countries to follow suit, for example the UK's son of FATCA. I wonder what the EU has in store for us.

Most clients still hold assets in their names, and, indeed, most clients have no structure in place. How would you advise a client in this situation?

In a world of creditors and predators, it is much better to control your assets than to own your assets. This is particularly so of the high net worth individuals, who are usually entrepreneurs: risk takers. But you don't want to take risks with your family's financial peace of mind. It's not right for everyone. But consider the advantages, in your circumstances, of offshore ownership structures.

 

Marcus Hinkley is a group partner and head of the Singapore office for Collas Crill

He writes a regular blog about Asia for Private Client Adviser