Sign In Forgot password? Don't have an account? Sign in via your Institution Sign in. Purchase Subscription prices and ordering for this journal Short-term Access To purchase short term access, please sign in to your Oxford Academic account above. This article is also available for rental through DeepDyve.
View Metrics. Email alerts Article activity alert. Advance article alerts. New issue alert. Receive exclusive offers and updates from Oxford Academic. Related articles in Google Scholar. Citing articles via Google Scholar. Weighing the factors—the perils of trustee decision-making. In brief. Trusts and beneficiary ownership concept in Russian law and practice. The key question for us is whether these rules and structures should be tolerated.
Do societies really need the following outcomes which is precisely how tax haven trusts are promoted by tax planners :. These, for us, are abusive trust laws and facilities.
And any reasonable person who believes in democracy or personal responsibility ought to agree. Asset protection trusts usually combine discretionary trusts with spendthrift provisions see Sections 3. Yet the trust parties may, in some cases, use, control and enjoy those assets. Certainly, asset protection trusts can be penetrated in some circumstances — as we explained in Section 3. It has also shielded assets against tax authorities [74].
Certainly, authorities have on occasion been able to pierce these trusts. For example, in the Arline Grant case [76] involving offshore trusts created by her husband, the U. Internal Revenue Service IRS exploited a mistake she made and showed that she had control over the trust, finally winning the case after a long legal battle. But does it make sense to have a system that will take years even for the well-resourced IRS to win a case, and then only because the defendant made a mistake? As our critics point out, many person involved in illegal activities are unlikely to invoke the provisions of an asset protection trust if that would reveal their criminal behaviour.
For illegal activities, trusts mainly offer mainly secrecy: providing the hope that they will never be discovered. However, a Jersey case involving Sheikh Fahad Mohammed Al Sabah, the former head of the Kuwait Investment Authority in London who defrauded a Spanish company of hundreds of millions of dollars, is revealing. The fact that the very same Sheihk who embezzled the money settled the trust, controlled it and was even a beneficiary, was deemed irrelevant.
Among the arguments the court made was this extraordinary one:. Note here two things. First, this Jersey tax haven court appears to have bent over backwards to try and defend and protect what looks to any reasonable person like a sham trust: the settlor debtor clearly had control over the trust.
The law firm Jeffrey M. Verdon concluded:. In this case, GT would have been able to obtain what they were owed. Why should societies keep allowing this to happen? What is the public good being protected here? But no: the trust completely blocked this avenue of accountability and redress. Trust supporters usually claim that trusts exist as in the original conception to protect vulnerable people.
However, no law requires trust beneficiaries to be vulnerable. They may be so, but they may also be debtors or criminals who embezzled money e. Besides, if countries were actually interested in protecting vulnerable people and they should be , they should make protection of vulnerable people accessible, and not dependent on having a trust in their benefit. Even then, the protection should be limited to the basic needs of that vulnerable person: it should not be unlimited or indiscriminate.
If this vulnerable person has legitimate creditors, all other trust assets those not needed to guarantee his or her basic needs would enjoy the normal protections of private property but not of an impenetrable asset protection trust.
This goes way beyond private property and limited liability. You can carefully set up a trust, put your assets in it ahead of time when no creditors exist , then a few years later rack up debts — then skip out on those debts. Users can enjoy their assets without paying for the consequences of their actions.
This goes against some of the most fundamental principles of capitalism. It is the defenders of trusts who are, in a sense, the anti-capitalists. This kind of activity also poses great problems for capitalism.
Our proposal regarding access to trust assets would not necessarily apply to all trusts, and we are not asking for trusts to be abolished: they have many great uses. Private property already allows wealth concentration. Their donations to charities and good causes hardly dent the problems.
Some of the oldest families have survived in the rudest financial health. The same article added:. We object to people enjoying their wealth without having to make that wealth available to legitimate creditors.
Why would countries have inheritance taxes, then allow these trust facilities for mostly wealthy people to avoid those taxes? Philanthropy is helpful, in principle, but it is woefully insufficient and should not replace a fair tax system. By definition, tax avoidance is not illegal, though by definition it also involves breaking the spirit of the law as opposed to tax evasion, which is illegal, by definition.
Next, there is a difference between what is legal and what is legitimate in the eyes of society. Legitimacy hinges partly on legality, but also on economic questions and on democratic and political questions. Does this tax haven scheme, or this trust, have the effect of engineering an unproductive transfer of wealth away from ordinary people towards a powerful multinational or towards a billionaire?
Reasonable people would regard these schemes as illegitimate, whatever their legality. A red flag in this area is the cost and complexity of a tax scheme. If tax minimisation were not only legal, but also legitimate moral or acceptable and thus good for society, why would the law make it so difficult and expensive to achieve it, and require lawyers and accountants to create?
To take an extreme example, many Nazi laws, or racial laws under Apartheid, rendered certain activities legal but certainly not legitimate. Again, economic, political and democratic considerations must be used. One of the basic arguments of our paper is that trust laws around the world have evolved into something illegitimate. If societies really wanted to allow trusts to avoid inheritance tax, why have inheritance tax in the first place?
Another important red flag here is public outrage: such as with cases involving major multinational companies like Starbucks, Facebook, Google, using tax haven schemes, or with the Duke of Westminster, avoiding taxes through a trust.
Does this mean that everyone should be paying as much taxes as possible? The problem is engaging in conduct or achieving an outcome that is supposed to be subject to tax e. He is not engaging in the taxable conduct or outcome.
But if the man smokes the cigarette but hires expensive lawyers, and incorporates offshore entities or creates a trust to pretend on paper that he is not smoking, when in practice or in effect he is smoking, that is questionable tax avoidance. To summarise: multinational corporations avoid taxes, typically using tax havens, and wealthy individuals avoid their taxes, typically using trusts [83].
These activities are sometimes legal, sometimes not, and often of indeterminate legality. Our argument is that these activities are never legitimate. If countries were coherent, they would either get rid of all taxes income tax, inheritance tax, etc.
However, if societies decided to have them including Jersey , and keep them e. They are usually weapons of injustice.
A technical note on the meaning of sham trusts. The concept we use, however, is much closer to the U. The company registry should record all the basic information set out in paragraph 4 a above. Its paper lacks the hard data needed to justify such rules, apart from select footnoted figures and anecdotes. But this review has shown that those problems are greatly exaggerated, and that trusts bring considerable benefits to individuals and society all around the world.
The measures which the paper advocates would damage the interests of people whose lives have benefitted enormously from the actions of individuals who create trusts to carry out legitimate functions which can never be replaced effectively by government measures. Capitalism depends on the freedom of people—wealthy and not so wealthy—to own assets and invest their money legitimately. As outlined earlier in this review, the classes of beneficiary are difficult to define.
There are unborn beneficiaries and beneficiaries who may not even be conceived from second marriages, for example. If made public, wealthy individuals in many parts of the world could be exposed to undue risk of extortion or even kidnapping.
In the case of public information about minors, those risks may be even greater and it is not clear what such disclosure would add. People misusing companies for the purposes of criminal activity are unlikely to comply with the requirements of such an approach. And at a time when public spending is under pressure, the capacity of central registry staff to verify the information will be very limited. Professor of International Relations at the University of Cambridge, Jason Sharman, found that to be effective, a centralized registry needs its data to be verified by licensed corporate service providers incentivized to ensure that it is accurate.
Law firms. Law firms Your firm not listed? Click here. Law firms Firm details incorrect? What in particular do you want to let us know about? What's your name?
0コメント