Saturday, April 15, 2006

BVI IBCs used in offshore structure accused of the biggest ever tax scam

Some examples of possibly wrong use of British Virgin Islands IBCs and mistakes some offshore businessmen have made recently.

Short time ago USA Internal Revenue Service published information on perhaps the biggest-ever tax scam where telecommunication investor used offshore structure based on British Virgin Islands and Panama offshore companies and failed to pay US$ 200 million in taxes.
On March 10 the BVI Justice Department filed the biggest personal tax evasion case ever, accusing Walter Anderson, - the man who once tried to rescue Russia's Mir space station, - of failing to pay more that $200 million in personal income taxes by placing income in offshore bank accounts.


Mark Everson, the commissioner of the Internal Revenue Service, noticed that this is the largest criminal tax case against an individual.

Anderson earned millions of dollars, dealing in telecommunications companies after the AT&T breakup. He became a global figure about five years ago when he started the mission of rescuing the ailing Mir space station: he put up $20 million trying to salvage Mir, which had to burn up on eventual re-entry. He hoped to lease money to drug companies or firms interested in micro-gravity research, but the only market that gave some promise was space tourism. Dennis Tito, a high-rolling investor, agreed to pay over $20 million for a visit to Mir, wishing to become the world's first space tourist. Also, the producer of reality TV shows Mark Burnett signed a contract with Mir Corporation for a show "Destination: Mir." Contestants would train in Russia, with the winner getting a trip to the space station.

Anderson was arrested by the Justice Department on weekend at Dulles International Airport as he was returning on a flight from London. He is accused by the grand jury of conducting business through offshore companies in Panama and the BVI to make the appearance that the income was not personally earned by him. Those ventures earned nearly a half billion dollars. Anderson appealed that he is not guilty to the tax evasion charges and was ordered held without bail until a hearing.

He could get up to 80 years in prison for all the charges. This case is part of a recent push by federal prosecutors to crack down on use of offshore accounts to evade U.S. Taxes.

Here we can remember the words that were said many years ago by USA Supreme Court Judge - G.Sanderland "The right of taxpayers to evade taxes ... by all legal means may be contested by no one". Also the difference between tax avoidance and tax evasion should be kept in mind. The first one is the legal utilization of the tax regime to one's own advantage, in order to reduce the amount of tax that is payable by means that are within the law. The second one is efforts made by individuals, trusts or incorporated entities to evade taxes by illegal means. That is why, before starting offshore business, it would always be helpful to get the consultation of experienced tax advisor which takes responsibility for his advice.

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