
The British Virgin Islands’ Struggle to Protect Its Dark Offshore Economy - ucha
https://www.bloomberg.com/news/features/2019-07-03/the-bvi-s-struggle-to-protect-its-dark-offshore-economy
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darawk
> Not surprisingly, many people in Road Town argue there are perfectly
> legitimate reasons to use a jurisdiction such as the BVI. The Panama Papers
> leak revealed, for example, that British actress Emma Watson bought her
> London house with a BVI company to prevent stalkers from tracing where she
> lives.

> But transparency threatens none of that.

It sure seems like transparency threatens Emma Watson's use case...

~~~
dgacmu
But we can and should have onshore mechanisms - convince a judge you need it,
get an onshore anonymous trust whose details are sealed except to law/tax.
Seems like a darn good idea, in fact.

(This is where a lawyer steps in and points out that something like this
already exists, right? I know nothing about British law...)

~~~
malandrew
> get an onshore anonymous trust whose details are sealed except to law/tax

So you want to give government the unilateral right to determine who merits
anonymity. What could possibly go wrong?

~~~
dgacmu
Well, it might be preferable to protecting only the super-rich. :)

but, just as seriously, it's not clear that we actually value anonymous
property ownership when it has serious repercussions for our tax base and
things like holding properties vacant. (See Vancouver). It's just another
place that we have to walk a careful line between individual rights and not
causing huge social problems.

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motohagiography
I'd argue any article about "tax havens," that does not include a section on
SPVs for insurance and other securities is un-serious agitprop. The
"trillions" of dollars of assets registered in these countries is mainly
collateral that secures agreements and contracts that yield income that gets
taxed in the country where it is ultimately realized.

Writing about these countries without addressing how mainstream financial
instruments work should be treated as very revealing.

~~~
justincormack
There is no reason SPVs shouldn’t be supported onshore.

~~~
motohagiography
I'd say they cannot work onshore because it just substitutes a transparency
problem with a much more complex harmonization problem for rules across
borders, which creates new arbitrages and political leverage points. The
offshore situation we've had for a couple hundred years now is a case of
better the devil you know. The rules in haven countries are established,
clear, and provide a foundation for all the value in international trade. The
only problem is it limits the total dominion of one group via surveillance,
which I think is a feature, not a bug.

For Special Purpose Vehicles to work onshore, you need something like income
trusts, which barely exist anymore because of people who write articles like
the one above. It is a custodian with limited liability that does not pay tax,
so that you can hold assets in it and invest them to preserve the availability
of the principle after a trigger event. Governments hated them because they
diverted money out of income tax flows, and it is more politically expedient
to solve revenue problems instead of spending ones. I think this aspect of the
system works, and this sort of lazy propaganda needs to be recognized for what
it is. I respect there are other views on this, but they should be held to a
standard of financial literacy this article did not meet.

~~~
pudo
To say that the current system works (its current form is a few decades old at
best) is to ignore the massive impact that secrecy jurisdictions have on
virtually all developing countries. Offshores are used there to facilitate the
extraction of trillions in wealth that often is directly stolen from public
resource (such as direct tax revenue, procurement contracts, and, natural
resource concessions).

Of course you can argue that any financial problem the public sector has is
always a spending problem and never one with the tax base, but that strikes me
as a fringe political opinion, and particularly as not a decision that the
people of Ghana, Russia, or Ukraine got to make for themselves. Perhaps
they're not small government ideologues and would actually prefer to have
health care and schools.

Justifying all this by saying that very wealthy and powerful people and
corporations need privacy to protect them is pretty cynical.

(Disclaimer: I'm an enthusiastic contributor to "lazy propaganda" like this)

~~~
motohagiography
The problem these and other less democratic countries have is that the
government can stay in power using resource extraction wealth to pay their
police and armies and they do not rely on direct taxation for their revenues.
The reason the people do not have a say in how money gets spent is because
there is no political reason to ask them. See De Mesquita and Smith on that
dynamic.

The problem for developing countries is not foreign bank "secrecy," (a
presumptuous term itself) it's their domestic resource curse and other
governments propping these leaders up. For these third party countries to
decline to sign surveillance agreements and tax treaties that disadvantage
them is not "secrecy," its sovereignty.

Attacking the sovereignty of financial centres is a sordid attempt to bar the
exits and prevent capital flight when large state governments impose ever more
wealth destroying policies to buy votes.

If by "fringe," you mean that solving the spending problem before the revenue
problem is beneath discourse - the policy makers of every Tory, Republican,
and Conservative party in the western world would probably like to have a
word. As would a number of Liberal parties as well. Contributing to lazy
propaganda that advocates for soaking "the rich," seems rather more a fringe
activity, and further, if it does not include an understanding of the
mechanisms of finance, one that is intellectually dishonest at that.

~~~
pudo
You're mixing a few things up here. The set of countries that are affected by
the resource curse, and those dealing in financial secrecy (what else would
you call it?), are disjoint.

The phenomena are linked through money laundering: wealth generated from state
capture in one country does not want to stay in the politically and
economically unstable environment it has helped create. It therefore needs to
be channeled into the western financial system, the UK or Europe. That's done
using shell companies in the BVI, CY, SY, LUX, MT, CH, KN etc. This way
financial secrecy creates impunity, where the wealth taken from developing
countries evades domestic accountability.

Examples: the Aliyevs, Dos Santos, Karimova, Yanukovych, Roldugin, the cabinet
of Goodluck Jonathan, and even the Guptas.

It's also a bit weird to describe this as in issue of BVI sovereignty. The BVI
government is run by a governor appointed by the British queen on advice from
the British government. It basically duck types as a colony. The same is even
more true for IOM, GG, JE. If only there were some explanation for why it
benefits the UK to have half a dozen financial secrecy jurisdictions in its
sphere of influence. The system is clearly all about sovereignty.

Finally, I did not say that discussing spending was beneath discourse --
merely arguing that governments doing taxation was pretty much what makes them
governments. Otherwise it's a golf club.

I'll remain eternally grateful for any further explanations of the mechanisms
of finance and their benevolence you may have to offer.

~~~
motohagiography
There _is_ no domestic accountability in those kleptocratic countries
precisely because their governments do not make the majority of their revenues
from a personal income tax base. I have doubts about the sincerity of western
people who seem so terribly concerned about victimized peoples in distant
countries when the net effect of the policies they advocate are really about
domestic wealth redistribution. The kind of sanctimonious moral arbitrage that
exploits "the people," of these countries as a pretext for influencing
domestic policy with sob stories is utterly disingenuous.

Kleptocrats gonna klepto, and the reason they can is they can afford to pay
the military to keep them in power, with funds that come from resources or
puppeteer empires. Offering gratitude without demonstrating understanding or
any meaningful benefit just tells people their shared experience was wasted on
you.

~~~
pudo
So to be clear: "Kleptocrats gonna klepto" is the deep "understanding of the
mechanisms of finance" and the cure to "lazy propaganda" that you advertise
for?

Beyond that, thanks for going full ad hominem.

~~~
motohagiography
If by ad hominem you mean in regard to the disingenuous and sanctimonious
basis for many arguments against the sovereignty of financial centres, it is
in reference to the quality of argument, and mere sarcasm is not moral high
ground. Regarding the mechanisms of finance, I heartily recommend reading up
on topics like insurance linked securities, catastrophe bonds, and other event
driven insurance contracts that require managing long term collateral.

I'll leave any final words on the topic to you.

------
ptah
strange that the locals don't benefit at all

~~~
c256
The piece suggests that the (relative to taxes) small fees they charge make up
a very large part of the government’s income.

