Ever since the G20, I've known what it's like to be a doctor: everybody wants your diagnosis on their financial malady.
Where should I move my cash? Is it safe in Bermuda, the Cayman Islands, Bermuda, Liechtenstein, Singapore ? One person even told me he was worried about his account in Austria. The moment anybody hears that I edit a specialist wealth management magazine, this is the question I keep getting asked at dinner or lunch parties – even at lunch on Easter Sunday.
Ever since the G20, I've known what it feels like to be a doctor. Everybody wants your diagnosis on their particular financial malady – imaginary or real. Whether it's their concerns about that little account in Liechtenstein which they may have to disclose – make that will have to disclose, unless they want it shut down under the new Liechtenstein Declaration negotiated with HM Customs – or whether they should fess up to that account in the Cayman Islands which could get them a lesser penalty under the terms of the 2007 government amnesty, it's my humble and not terribly expert opinion – rather than those flash-Harry hedgies with their Maseratis and their Titanium Amex cards – that people want to hear.
And it's not only because I don't charge £500 per hour, like their tax lawyers. It's because the rich are genuinely scared and are desperate for advice about how to cling onto (hide, protect, squirrel away) their capital like never before.
Actually, the panic amongst the rich set in a few months ago. The moment that President Obama announced that tax havens – of all things – were going to be a major concern and 'issue' of his White House administration, it was time for the tax lawyers to start popping open the champagne.
I was amused to hear that even in the weeks before Gordon Brown boldly declared at the G20 that the era of off-shore banking secrecy was over, the fax machines of the specialist private client law firms in London that cater for the tax affairs of the super-rich had already been regularly running out of paper overnight as anxious clients – including Mayfair hedge fund managers on holiday in St Moritz, Rich Listers aboard their yachts in the Bahamas and private equity barons at villas in the Maldives – worried whether they should urgently move the millions they have stashed away in such previously ‘safe’ banking countries as Switzerland, Liechtenstein, the Cayman Islands, Monaco and Luxembourg.
‘Our fax machines had to be manned during the night by interns that we paid to sleep in the office,’ I was told by one senior partner of a top specialist tax and trust law firm. ‘That’s because we always tell our wealthy clients to never, ever, communicate with us by e-mail on any subject relating to their off-shore accounts as if they are audited we have to hand the emails over. Faxes are much safer and are always destroyed.’
All over London, it seems, as ‘tax havens’ where the city’s super-rich have been squirreling away millions away from the prying eyes of global tax authorities – and often wives, families and mistresses – have become the target of political ire, a sense of panic amongst the rich has set in about whether their off-shore money (even if it is in a numbered account) is ’safe’ any more.
Any hedge fund or private equity player who thinks that this recession might be an ideal time to get a cheap divorce – when the value of his art collection, shares portfolio and houses in Notting Hill and Oxfordshire are down perhaps 35% – will now have to think very hard before filing for divorce and filling in his Form E which states his ‘full and frank’, in legal speak, financial disclosure.
Failure to mention that ’retirement fund’ of say fifteen million dollars that he has hidden away in the Cayman Islands, and which his wife doesn’t know about, let alone HM Customs, now carries a threat of prison – in addition to a huge punitive fine and being seized by the courts.
‘Previously discreet and ‘safe’ banking countries like Switzerland and Monaco are suddenly going to get a whole lot more ‘cooperative’ with tax authorities and EU courts demanding information about their client accounts,’ admits a top London divorce lawyer. ‘Now is maybe the time to start shopping around for a bank account somewhere below the radar.’
In the next few months, Spear’s will be on the vanguard of informing readers about the latest developments in the often murky world of tax havens. After exhaustive research and talking with the finance ministries, bankers, lawyers and accountants of around 25 of the most 'advantageous' tax havens, we will be publishing the ultimate Spear's Power Index, a guide to the world's best and worst tax havens, from Macao to Monaco, with a comprehensive rating and ranking system so that the 'tax conscious rich' – as I have been discreetly advised by a top tax trust lawyer to now refer to former tax dodgers – can see where the best places are today to bank off-shore.
Unlike many of the guides that have rapidly appeared in the last few weeks since the G20, Spear's will be reporting directly from many of the tax havens in question, not unlike undercover Michelin guide reporters who travel anonymously to the finest global restaurants.
With the likes of such former enfants terribles of the off-shore world like Monaco, Liechtenstein, Luxembourg and Switzerland all being pressurised and bullied by the OECD to become 'tax compliant', a whole slew of new tax havens are now being auditioned and reviewed by the international rich – and their advisors. Our guide should hopefully save our wealthy, tax conscious readers many tens of thousands of pounds in charged legal hours.
Of course, the tax haven issue and the new reign of tax terror practised by the G20 countries has largely been a convenient diversion from problems at home. The rich are an easy target today, not the least as there is now a real sense of real sense of an anti-rich popular revolution is in the air.
The on-line fashion store Net a Porter have recently introduced a new buying service that allows you to have your designer shopping delivered in a brown paper bag. At the anti-G20 protests that I observed first-hand, it was clear from the banners and placards waved around by the thousands of marchers that it was anybody who was the rich, not just the bankers, who were the target of populist fury.
I watched from ten yards as protestors scrawled ‘Eat the Rich’ in red paint on the walls of the bank of England. As the G20 Summit ended, the Economist went to print with a cover that screamed ‘Get The Rich!’, featuring a battle scene from the French revolution super-imposed on a backdrop of Canary Wharf.
Likening the new rage against the new breed of super-rich to the anger felt by the 18th century mobs that railed against the Them and Us injustices of France’s ancient regime is not far off the mark. As Harvard professor Dominique Moisi has recently pointed out: ‘Are not senior bankers today like the aristocrats of yesterday, their privileges no longer justified by their social functions?’
Although a tax war on the super-rich has been brewing for years – it is a particular favourite cause of Brown – it has only been since the wheels have come off the banks and tax payers have had to bail-out the reckless financiers, that governments and their tax officials have really decided to try and bleed the rich where it hurts most: in their bank accounts.
After the G20 Summit, which introduced a three tier report card for global off-shore financial centres, graded according to a country’s willingness to hand over details of client accounts, Monaco was taken off the blacklist and placed on a ‘greylist’ of countries that have now promised to sign various tax treaties and start co-operating with tax authorities in the future.
Within a week, most other countries – including Liechtenstein, Cayman Islands and even Macao – had made promises that they would clean up their act by the end of the year. Nobody wants to be on the blacklist other than countries that see being on it as a perfect marketing opportunity to the shady rich who want to hide their assets at all costs.
But as more information comes out about tax havens and the blacklist starts becoming greyer by the week, it only confirms my original view that the whole tax haven issue is political posturing which will end up changing very little. Yes, there will be some changes, and – in the case of the likes of accounts held by dictators like Saddam Hussein or dubious oligarchs who have plundered from their countries and opened billion dollar accounts with the spoils – it is only right that the banking authorities in countries like Monaco and Switzerland tighten up their laws with regards to sharing information regarding criminal clients.
But the real issue that is not being addressed is how an attempt to close down these financial offshore centres – including London (where much of the off-shore banking is managed, from offices in Mayfair or Canary Wharf) – would be disastrous for the global economy at a time when money needs to flow and when entrepreneurs, businessmen and corporations – from multi-national companies to financial services – need to feel they can move money around freely without fear of bank accounts being frozen, inspectors arresting them at airports and corporate or individual assets seized.
At a time when the world leaders are calling for a super-sized economic fiscal plan that will stimulate the global economy, paralysis of the off-shore banking system is very last thing the financial world needs right now.