British Virgin Islands Business News

The analysis of the latest events in BVI and worldwide, affecting BVI business environment; facts and statistics on BVI International Business Companies involved in global business activities.

Sunday, August 06, 2006

Between tax advisors and tax authorities

continued from US Senate Homeland Security study of offshore tax shelters.

In "IRS Chief Says Offshore Abuses a Problem" publication there are mentioned couple of examples of unprofessional advisers who have invented illegal asset protection and tax planning schemes. In particular, those are mentioned:
1) Quellos Group LLC scheme of capital losses from securities transactions and
2) asset protection advises provided by retired dentist Lawrence Turpen.

Sometimes it is not so easy to distinguish Tax Avoidance from Tax Evasion. Some Tax Evasion method may seem completely legal, but careful look into it may show it is not. There are also situations when the method which was considered to be legal a year ago, cannot be used today because of changes in legislation.

If it is so difficult for specialists to see this difference, then what to say about common client which is seeking tax advisor's service? It must be noted also that in case of tax evasion these are not only providers of non-qualitative tax advise who would suffer but also their clients.
For example, we can observe the publication of Freeman, Haber, Rojas & Stanham, LLP – reputable international firm that consists of a group of attorneys with headquarter in Miami, Florida. Along with other information, it is clearly described here how to reduce the taxes in Florida by:

"1) paying their executives higher salaries and bonuses so that the tax is reduced from the corporate rate of 40% to the individual rate of 31%;
2) work done abroad for a company such as marketing can be paid for and deducted as an expense in the United States; and
3) trips for business are also deductible. Individuals can deduct from their personal income interest on home mortgages, charitable contributions, and a fixed sum for each dependent and medical costs, but receive relatively few other deductions."

Who can guarantee to the client that the advice given to him by law firm or tax advisor will not be put in question by tax authorities later on?

Many multinational corporations have headquarters or daughter companies opened on the British Virgin Islands and other offshore jurisdictions. Also there are many international companies wholly or partially owned by the BVI companies. Some of them are already mentioned in this blog and BVI Company News but there are much more around. Most part of these companies have used services of professionals before setting up business structure; if advisers have done their job professionally, even if put in issue, these taxes should remain as avoided, not evaded.

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