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Estates & Wills & Trusts

Thinning the corporate veil

By Ian Hull

In what is being touted as a key move in the development of African nations, the G8 made waves this week in the world of beneficial ownership and offshore finance. Paul Collier (director of the Centre for the Study of African Economies at Oxford University and advisor to British Prime Minister David Cameron) stated that, “by some estimates, African countries lose twice as much through tax avoidance and corruption than they receive in foreign aid”.

The UK had taken the lead in promoting this agenda, which David Cameron hoped would culminate in the sharing of expertise with developing nations in order to assist with auditing companies and enforcing the payment of taxes. Such policies could also assist in preventing money laundering in countries whose vague land ownership systems have left them susceptible to abuse.

Unfortunately for Mr. Cameron, it turned out to be too-ambitious an undertaking, with the summit closing with no major signatories to the proposal.

An agreement on a standard for corporate beneficial ownership registries was expected to be produced this week at the G8 meetings – whether trusts were to be included was not clear; nor was the breadth of who could access the registered data. It seems clear that public departments such as law enforcement and tax authorities would have access to such information, but it remains to be seen whether this information would also be made available to the general public.

While the UK and some of its dependencies (such as Jersey, Guernsey, and the Isle of Man) and others (including Bermuda and BVI) appear to have committed to multilateral conventions implementing these regimes, some G8 members, notably the US, have not voiced clear support for beneficial ownership registries domestically, especially in jurisdictions where comprehensive corporate ownership information is not collected. Most notable is the state of Delaware in the US, where even shareholders of record are not tracked. Such commitments to automatic information exchange by these offshore jurisdictions is said to "represent the biggest ever step change in the level of tax transparency of the Crown Dependencies and Overseas Territories.”

Meanwhile, Canada’s position remains muddled and surprisingly reserved. Officially, such reservations are based upon the need to respect provincial autonomy. Such respect involves the need for consultations with the Provinces, industry leaders and First Nations prior to domestic implementation of any agreements reached at the international level.

The focus of the G8 meeting was on three areas: tax avoidance; financial reporting by multinational corporations; and disclosure of corporate beneficial ownership. The latter has been heralded as the easiest way to prevent businesses from hiding ownership interests behind shell companies in offshore tax havens.

In the background, there remains the concern that initiatives involving the automatic exchange of tax information internationally cannot be accomplished without inevitably disclosing confidential information. Many developing nations are calling for such information to be made publicly available, but are meeting resistance from developed nations. Conversely, many members of the OECD feel that that if such disclosure is not made, then “the issue is simply relocated, rather than resolved” as stated by the OECD. Apparently, there is not a ‘one size fits all’ solution to the quandary of transparency.  Read Toronto Estate Law Blog


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