Showing posts from 2013

Paying Nanny Taxes in 2014


The Caribbean Challenge

Last week, a Bloomberg article reported that Barbados is to be fire 3,000 public sector workers by March and freeze wages.  The IMF apparently said that “urgent adjustments” are needed given Barbados’s debt to GDP ratio hit 94% in September.  By comparison, a ratio of 93% forced Cyprus to seek an EU brokered bailout in March.
Finance Minister Chris Sinckler told lawmakers that the government risks “further hemorrhaging” of its reserves and the local currency’s peg to the dollar if nothing is done.  “Weak exports and tourism arrivals, slow growth and expansive fiscal policy have led to a sharp increase in public debt and fiscal financing pressures,” the IMF said in a statement after a 10-day visit to the island of 288,000 people.
Unfortunately Barbados is not alone.  The Caribbean has seen eight debt defaults since 2003 in six countries, including Jamaica, Belize, Grenada, Dominica and St. Kitts & Nevis.   Barbados’s $3.7 billion economy will shrink 0.7% this year while Caribbean …

Facebook ‘Likes’ Tax Schemes to Avoid Paying Uncle Sam

by BRIANNA EHLEY The Fiscal Times

Well, the U.S. government isn’t going to “like” this: Facebook shifted a little over $1 billion in profits earned overseas to the Cayman Islands last year.  The world’s largest social networking site avoids hefty tax bills on most of its international earnings by using a web of subsidiaries in Ireland and the Cayman Islands, a favorite tax haven for many multinational corporations because it has no corporate tax.  Related: Offshore Accounts on the Rise and Costing Taxpayers Facebook uses a tax-avoidance scheme that has been dubbed the “double Irish” because it involves two subsidiaries incorporated in Ireland. Similar strategies have been employed by other large multinationals like Google and Apple. In Facebook’s case, one subsidiary, Facebook Ireland Limited, collects advertising revenue from around the world. In 2012, for example, it boasted a profit of €1.75 billion (or about $2.3 billion), but that quickly turned into a pre-tax loss of €626,000 (or…

U.S. Employee Working in Iraq and Afghanistan Could Not Exclude Portion of Earnings from Income

Because a U.S. employee's tax home was in the United States rather than a foreign country, he could not exclude his overseas earnings from income. Daly v. Comm'r, T.C. Memo. 2013-147 (6/6/13).
James and Candace Daly were married and lived in Utah. James was a U.S. citizen and worked full time for a communications company. In 2007 and 2008, James's employer contracted with the U.S. Department of Defense, and James's work for his employer involved the government contract. During the two years in issue, James was assigned to work in Afghanistan and Iraq. When he worked overseas, James was unable to choose the location or duration of his assignments. While in Afghanistan and Iraq, James was provided with a government authorization to travel and lived and worked on U.S. military air bases. He was not allowed to leave either of the military bases on which he lived and worked or have his family live with him during the duration of the assignments. His wages were deposited elec…

The Education Game

We were raised to be very conscious of formal education and to value it.  A good degree is a ticket, a passport as well as an insurance policy.  I thought that the ‘West’ was a bit too obsessed with formal education until I moved to Asia.  Last month, there was an article in the Economist on South Korea that I think would equally apply to other countries in the region.
As most of us would guess, South Korea comes at or near the top of most international comparisons of reading, maths and science.  But the article is at pains to point out the costs.  Much effort goes into costly credentialism, rather than deep learning.  Furthermore, the system excludes late-developing talent and the expense of educating children is one reason why South Korean has a worryingly low birth rate.  Of course, other education-obsessed countries in Asia face similar problems.  In fact, past South Korean governments tried to help parents by banning out-of-class tutoring with the President of Seoul National Uni…

The weak link - Cleaning up trusts and similar entities will hurt money-launderers, but it will need a lot of political will

WHEN Mark Morris, a Zurich-based tax consultant with a conscience, requested a meeting with the European Commission to explain the many devious ways in which tax evaders were using shell companies and other vehicles, a bored official offered him 20 minutes. “Once I started describing all the loopholes,” Mr Morris recalls, “his eyes lit up. Two hours later he was still listening, scribbling furiously.”

Only a fool holds dirty money in his own name these days. Anyone in the know tries to conceal ownership through labyrinthine combinations of anonymous shell companies and arrangements such as trusts and foundations. Campaigners have worked hard to expose the extent of this “layering”, helping to push corporate transparency up political agendas. G8 countries backed mandatory registration of real, or “beneficial”, owners at their summit in Northern Ire…

FATCA and Trinidad

Earlier this month, there was an article on FATCA in the Trinidad Express extensively quoting a local attorney named David West.  Mr West is the former Head of the Central Authority Unit and a certified anti-money laundering specialist who went on to call on those drafting the Inter-Governmental Agreement (IGA) with the US to ensure that reciprocity is part of the arrangement.  That is to say, if financial institutions based in Trinidad and Tobago must report the financial activity of certain US persons to the IRS, US based financial institutions must report the activity of certain Trinidad and Tobago persons to the government of Trinidad and Tobago.
Mr West makes a very good point and appears to have a better grasp of FATCA than others.  Here I am thinking about the opening remarks of the Governor of the Central Bank of Trinidad and Tobago at the meeting of the Council of Securities Regulators of the Americas (COSRA) in October 2012.  The Governor in his wisdom, concluded that “ther…

FBAR Penalties

Effective July 1, 2013, FBARs must be filed electronically using the E-Filing System maintained by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). 

This mandatory electronic filing requirement applies to all FBARs, and to amendments of previously filed FBARs, that are submitted by individuals or by entities on or after the effective date.

“Quick Reference Guide to International Penalties”


Should You Opt Out Of IRS Offshore Amnesty?

Since 2009, many U.S. persons with foreign accounts and income have sought shelter from the IRS onslaught. Not everyone has entered the IRS voluntary disclosure program. Still, it can be the safest move and the only one guaranteeing no prosecution. You may fear that if you don't enter the program, you might be caught and it will be too late to get the program's formulaic deal.
After all, at least the penalties there are capped. Undisclosed foreign accounts or income can be serious and can carry civil and criminal penalties. The IRS Offshore Voluntary Disclosure Program (OVDP) isn't perfect, but it is a finite way of getting beyond the fear of discovery and prosecution. If you are evaluating the current 27.5% miscellaneous offshore penalty and cringing about how much it will hurt, what about opting out?
There is much talk of opting-out but sparse data so far. The opt-out election is irrevocable and is typically made after th…

FATCA and the Petrodollar

Last week I spent time watching some videos in a new YouTube channel that I subscribed to, called FATCA Forum and reading thru a website called  It was moving seeing first-hand accounts of how this law is impacting regular people.  There is this one clip in which a man is actually crying as he describes how it has ripped his family apart.  Of course FATCA is used as a catch all term to describe other related US compliance rules which include FBAR and PFIC reporting, together with similar efforts being promoted by the UK (son of FATCA) and other OECD nations.  One thing commentators are failing to do in my opinion, is to explain what exactly is driving this.
Previously, I wrote about the 2007 to 2010 period where rich countries saw the ratio of their gross sovereign debt to GDP spike from 74% to 101% on average.  British public debt jumped from just 44% of GDP to 79%, while US debt leapt from 66% of GDP to 98%.  Furthermore, thanks to weak profits and higher unemploym…

Unreported Bank Account In Singapore?

(Reuters) - Banks in Singapore are urgently scrutinizing their account holders as an imminent deadline on stricter tax evasion measures forces them to decide whether to send some of their wealthiest clients packing.
The Southeast Asian city-state has grown into the world's fourth-biggest offshore financial center but, with U.S. and European regulators on the hunt for tax cheats, the government is clamping down to forestall the kind of onslaught from foreign authorities that is now hitting Switzerland's banks. Before July 1, all financial institutions in Singapore must identify accounts they strongly suspect hold proceeds of fraudulent or wilful tax evasion and, where necessary, close them. After that, handling the proceeds of tax crimes will be a criminal offence under changes to the city-state's anti-money laundering law. "Because of banking secrecy, Singapore used to be an attra…