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  5. > 2020 Foresight Report: No Safe Havens – Changes in Offshore Private Banking

Synopsis

The report provides analysis, information and insights on regulations for curbing offshore tax evasion implemented by various governments across key markets and their impact on wealth management companies:
• Intensive analysis of the measures being taken by some of the developed nations and emerging economies to mitigate offshore tax evasion by their taxpayers and the corresponding impact on wealth management companies
• Detailed analysis of the initiatives being taken by some tax havens in order to stop inflow of untaxed wealth and the specific effect this has on wealth management companies in their territories
• Insights into what wealth management companies can do to keep growing their business despite paucity of offshore funds due to punitive measures being imposed by the originating countries on concealed offshore incomes
• Provides a snapshot of the broader trends related to the growing prominence of certain locations as tax havens and the dynamics between onshore and offshore wealth due to taxing the previously untaxed offshore wealth

Summary

Governments globally have been taking initiatives to curb offshore tax evasion for many years. However, this phenomenon has assumed increased urgency since 2008–2009 when economies across the world, developed nations in particular, were severely impacted financially. Their prime targets have been offshore tax havens such as Switzerland and Singapore. Coordinated and individual actions taken by different jurisdictions have significant ramifications for offshore wealth management companies and other institutions whose business is significantly driven by offshore deposits. The economy at the forefront of fighting offshore tax evasion is the US. It has entered into agreements with several nations to ensure that their financial institutions implement the provisions of the Foreign Account Tax Compliance Act (FATCA), passed by US Congress. Under FATCA, the financial institutions of partner nations are required to give details of accounts held by US taxpayers with them, or be subject to a withholding tax of 30%. Jurisdictions such as the UK have been signing bilateral agreements with other economies, under which limited timeframe disclosure facilities are being offered to offshore account holders to come clean on their wealth or face penalties. Wealth management companies in tax havens entering into these agreements are expected to handle significant funds through tax payments by offshore account holders. This comes under the category of tax information exchange agreements, whereby financial institutions in treaty countries are required to submit client data.

Scope

• This report provides a detailed analysis of measures being taken by some developed nations and emerging economies to mitigate tax evasion offshore by their tax payers
• It explains the key provisions of some of the important acts such as the Foreign Account Tax Compliance Act in the US
• It details the measures being taken by certain tax havens to reduce their geographies from being used to evade taxes
• It details the impact on wealth management companies that had previously derived a major share of their business from offshore wealth
• It details the market entry strategies and product, target and customer retention strategies used by various wealth management companies in the wealth management industry
• It suggests the new business models and marketing strategies to be adopted and the new geographies that have to be targeted by wealth management companies in tax havens to keep their business growing

Reasons To Buy

• Understand the significance of the measures being taken by some nations such as the US, the UK and Germany to tax the offshore concealed wealth of their taxpayers
• Comprehend the impact on wealth management companies whose business is driven mainly by offshore wealth
• Gain insights into the business models that have to be adopted, the inherent strengths that have to be highlighted and the jurisdictions that wealth management companies in offshore tax havens have to focus on to continue to expand their businesses



Key Highlights

• The US, through the medium of FATCA, has been putting the onus on financial institutions based out of its treaty partners to provide information about the US taxpayers holding accounts with them by a certain date or be subjected to withholding taxes.
• Countries such as the UK are mainly offering disclosure facilities to their citizens to come clean on their offshore wealth upon which they would be subjected to lower penalties.
• Some countries such as Germany are not hesitating from buying out stolen offshore bank data and based upon it are taking punitive measures both against those who have evaded their taxes and also the banks abetting them.
• Wealth management companies in offshore tax havens have to increasingly highlight the wealth management proficiencies that they have built over a period of time rather than highlighting confidentiality of tax information.
• Due to the reduced returns on wealth deposited offshore due to penalties, individuals will increasingly keep their money onshore. In the long run, it would be in the interest of the offshore wealth management companies to obtain full-fledged licenses to operate onshore in the countries that they have previously been dependent on business for.

Table Of Contents

2020 Foresight Report: No Safe Havens - Changes in Offshore Private Banking
Table of Contents
1 Executive Summary
2 Global Snapshot and Outlook
2.1 Global Offshore Tax Evasion Dynamics
2.2 Regulations and Compliance across Key Markets
2.2.1 Developed economies
2.2.2 Tax havens
2.2.3 Emerging economies
2.3 Recent Developments and Future Outlook
3 Developed Economies
3.1 The US
3.1.1 Introduction to FATCA
3.1.2 Key agreements with offshore economies
3.1.3 Impact on wealth management business
3.1.4 Challenges
3.2 The UK
3.2.1 Introduction to offshore tax evasion regulations
3.2.2 Key agreements with offshore economies
3.2.3 Impact on wealth management business
3.2.4 Case study
3.2.5 Challenges
3.3 Germany
3.3.1 Introduction to offshore tax evasion regulations
3.3.2 Key agreements with offshore economies
3.3.3 Impact on wealth management business
3.3.4 Case study
4 Tax Havens
4.1 Switzerland
4.1.1 Initiatives to curb tax evasion
4.1.2 Key agreements
4.1.3 Impact on wealth management business
4.1.4 Case study
4.1.5 Challenges
4.2 Singapore
4.2.1 Initiatives to curb tax evasion
4.2.2 Key agreements with other economies
4.2.3 Impact on wealth management
4.2.4 Case study
4.3 Hong Kong
4.3.1 Initiatives to curb tax evasion
4.3.2 Impact on wealth management businesses
5 Developments in Emerging Economies
5.1 Brazil
5.2 Russia
5.3 India
5.4 China
6 About WealthInsight

List of Tables

Table 1: Key Destinations for Offshore Wealth, 2011
Table 2: Offshore Tax Evasion Regulations in Developed Economies
Table 3: Anti-Tax Evasion Legislations in Tax Havens
Table 4: Initiatives to Curb Offshore Tax Evasion Taken by Emerging Economies
Table 5: US Accounts Held By Financial Institutions and Reporting Guidelines
Table 6: Exempted Offshore Institutions and Products
Table 7: FATCA Regulations and their Implications
Table 8: Number of US HNWIs and their Overall Wealth, 2008-2017
Table 9: Key Challenges of FATCA Regulations
Table 10: Penalties for Different Inaccuracies

List of Figures

Figure 1: FFIs Under FATCA Regulation
Figure 2: Obligations for FFIs Under FATCA Regulations
Figure 3: Evolution of US FATCA Regulations, 2010-2014
Figure 4: US FATCA and its Impact on Financial Institutions
Figure 5: Completed and In-Process Agreements with Offshore Economies, February 2013
Figure 6: Taxation Agreements Between the US and Switzerland
Figure 7: Taxation Agreements Between the US and Ireland
Figure 8: Taxation Agreements Between the US and Mexico
Figure 9: Taxation Agreements Between the US and Denmark
Figure 10: Taxation Agreements Between the US and the UK
Figure 11: Number of US HNWIs and their Overall Wealth, 2008-2017
Figure 12: Case Study - HSBC
Figure 13: Case Study - Wegelin and Co.
Figure 14: Classification of Territories for Determining Penalties for Offshore Tax Non-Compliance
Figure 15: Classification of Territories for Determining Penalties for Offshore Tax Non-Compliance
Figure 16: Benefits to Individuals who Volunteer under LDF
Figure 17: Benefits of Providing Information under IOMDFK
Figure 18: Case Study - Tax Payments and Offshore Employee Benefit Trusts
Figure 19: Case Study - Offshore Tax Evaders Roderick Smith and Stephen Howarth
Figure 20: Case Study - Credit Suisse
Figure 21: Case Study - UBS
Figure 22: Singaporean and German Tax Agreements
Figure 23: Case Study - Bank of Singapore
Figure 24: Impact of Tax-Evasion Regulations on Hong Kong Wealth Management

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