The only way I can understand how widespread this is, is that a majority of the powerful string-pullers in the world are participating in the scam.
If a company has an international ownership structure that's complex enough that makes it difficult or impossible to follow the trail of ownership / leadership / directorship, then the company shouldn't be allowed to operate.
All the fuss and bluster in various countries about multi-nationals dodging their local tax responsibilities, and yet this is allowed to go on. There were a couple of such companies that have Australian Government contracts that were revealed to have opaque international ownership.
In the current environment of growing suspicion about foreign ownership and its relationship to national security, you'd think these issues would be a priority. How do you curtail foreign ownership and Chinese / Russian influence if you can't work out who's ultimately responsible? Maybe that's just talk to distract us non-string-pullers?
I found it pretty illuminating, in another leak, the Paradise papers, to see that the Queen of England, who is also the head of the state in Bermuda, where this leaked came from, had huge investments in off-shore companies:
It is no secret that Juncker, the head of the European Commission, was the leader of Luxembourg when it established itself as a tax haven power house, and blocked any serious EU reform to curb tax evasion.
The various leaders of the world are the first to use these services. Theses funds allow them to finance campaigns, bribe officials, and maintain the statu quo. Of course they use political power to maintain this situation.
I don't often say nice things about GWB's administration but one thing that came out of their terrorist paranoia was that they managed to basically kill the tax haven status of Switzerland, where some funds transited. But it took all the weight of the USA while it was in berserk mode to shut down such a thing. There is dozen more to go.
> I don't often say nice things about GWB's administration but one thing that came out of their terrorist paranoia was that they managed to basically kill the tax haven status of Switzerland
That seems like it could have been a counter-productive strategy. Better that your enemies use a well-understood banking system with [theoretically] reliable and consistent bookkeeping than for those transactions to shift to a more disperse, more chaotic international system. Even if Swiss accounts were nominally secret, AFAIU the CIA and NSA had developed a fairly reliable system for snooping around.
There's a reason New York and London continue to be world leaders in processing financial transactions--the governments have been intentionally tolerant of shady characters, shady businesses, and shady nations as long as the transactions nominally followed the law. Among other benefits, that puts you in a good position to keep track of the bad guys and, when it really counts, to take them down. If you police too heavily all that activity goes somewhere else.
But it does leave you open to accusations of aiding & abetting bad behavior. There's a limit to what can be politically and legally tolerated in New York and London. But you can structure the international system to channel those intolerable transactions to the least worse alternatives.
Like so much with the War on Terror, the better approach would be to improve HUMINT and investigatory resources, rather than pushing the activity further underground and playing a game of whack-a-mole.
To be fair I take this as a gain as I see tax haven as a much more harmful thing than Al-Quaeda ever was. It is an enabler not only of terrorism but of several crimes that causes a countless amount of death globally.
And no, I don't buy the "we tolerate it so that we could watch it". Too much private money is at odds there. The truth is that this still exists because otherwise there would be no channel for the Saud family to fund the Bush one or for Russian oligarchs to pay up GOP members.
Except the crackdown has arguably led to faster evolution of tax havenry. Over the past 15 years the traditional tax havens have lost considerable business to new jurisdictions offering more complex and cheaper havens (e.g. trusts and property schemes), attracting smaller customers (e.g. small-time multi-millionaires) who previously couldn't have afforded to indulge in these activities. The market has grown. That was inevitable to some extent but when your achilles heel is your ability to respond to change (which government agencies suck at) it's a risky strategy to shake-up the system.
It is natural that it tries to evolve, this is an enemy with more resources than the US army. We wont kill it with one attempt. We need to keep continue still.
In my opinion, leaks have been the best tool so far: it adds a risk to tax evasion that is kind of new. Every added cost or added risk is welcomed.
And people usually hate when I mention that, but I am fairly convinced that most of the value of bitcoin comes from people desiring to move huge funds discreetly and efficiently between accounts. It probably made the whole industry move faster than countries' regulations.
You want to siphon away some money ear marked for a vaccine program in your shady country? A friendly tax haven can be very beneficial in such a scheme. I am sure there are lots of more subtle but yet, in aggregate, very dark patterns.
Swiss banks were still used for the 1MDB operation, which involved Saudi Arabian intermediaries who 1) presumably understood the limits to Swiss secrecy and 2) probably ran in the same circles as those associated with militant organizations. And that began after the Bush administration.
Moving transactions to other systems is also risky for the bad guys, in terms of higher transaction costs and less predictability regarding the degree of confidentiality. It's like in computer security--you can't defend against an omnipotent attacker, rather you have to make some assumptions about your visibility and desirability as a target vs the strength of defenses. Choosing to go with some new, untested service may make you invisible or may leave you a sitting duck; how can you know?
Moreover, while organizations like Al Qaeda would have steered absolutely clear of the normal system, they benefit when more money moves via the darkest channels. They benefit from improved consistency, reliability, liquidity, and cover traffic.
The UK Queen (or her managers) invested in an offshore fund, which for UK tax purposes was tax transparent. That meant the fund itself did not pay taxes, but tax was paid "in personal name" on any gains.
This results in an outcome which would've been exactly the same as if she had directly made the investments in her personal name. Meaning: a whole lot of talk about nothing by people who are clueless about tax matters.
These kinds of arrangements are not the problem. Neither is Emma Watson purchasing a property through an offshore company for privacy reasons.
The problem is autocrats siphoning off billions from their local economy and hiding it through layers of shell corporations across the world, which are not limited to just companies based in offshore tax havens.
Does the UK queen pay taxes in the UK? I'm pretty sure the royal family was exempt at one point, but I haven't followed it for a long time. I think they actually receive funds from the tax payer.
She voluntarily pays taxes on her personal income, although as Sovereign she is constitutionally exempt.
She also donates all of the income from Crown holdings to government, as I recall. Most of the complainers about the royal family being taxpayer supported don't realize what a bargain the UK gets, they make a lot of money from HMTQ.
Although I expect some of them complain because they want the whole institution of monarchy abolished.
Personally, I find it quite interesting how several European monarchies within themselves managed to "strike a bargain" between old vested interests (the Crown) and commoners such that probably revolution was averted - and that this "power balance" lives on to this day.
See then the article on the Sovereign Grant, which carefully mentions that the Sovereign Grant is just a small part of the total cost of the monarchy. Note also that the same article mentions that the Royal Family also has private income which is undisclosed, separate from the Sovereign Grant.
I'm not particularly pro or against a monarchy, however, even IF the annual cost is £300m, I don't even get why it matters in the case of the UK? The Crown Estate owns £12bn worth of assets and returned £328m in 2016/17.
As these assets (while held in trust and managed professionally) belong to the sovereign, they are self sustainable and have covered all expenses. If there would be no monarchy, it's not unlikely these assets would return to the royal family.
Then look at the value a monarchy brings. In many parts of the world, a king or queen carries more respect than a president. They can help facilitate trade and form relationships that might otherwise not exist, because they're around for a long time as opposed to shorter term presidential thinking.
"In 1760, George III reached an agreement with the Government over the estate. The Crown Lands would be managed on behalf of the Government and the surplus revenue would go to the Treasury. In return the King would receive a fixed annual payment - what later became known as the Civil List." From http://www.thecrownestate.co.uk/en-gb/resources/faqs/
It seems the handout you are talking about are essentially part of the dividends that flow back from the yield generated by the assets of the Crown Estate. Austerity or not, these assets are worth a lot of money.
If you have a billion dollars worth of assets (or in this case, 12 billion), even during economic crisis you'll likely still be making ends meet without issues.
It seems that you do not know how the Civil List works, and why there was controversy about it in the last decade, and why it finally got tweaked into the "Sovereign Grant". Furthermore, it seems to me that you do not know about the issues with the Sovereign Grant, or the recent controversy around the Royal Family's overspending. Lastly, it seems that you do not understand that the Sovereign Grant (previously, the Civil List) only represents a small portion of the money actually doled out to the Royal Family.
I do not mean to say this in a judgemental tone, as much as: "I'm glad you're participating, but...if you don't know the basics, why are you? I'm not an educator, so I don't know how much patience I'll have to bring you up to date. What's your stake in this?"
My stake in this is pretty clear: I'm a republican. I think that FOIA requests have allowed republicans to build a strong case around the issues surrounding the Royal Family's finances.
I can appreciate that there might be "spiritual" benefits to having a monarchy, as it is representative of a historical tradition, but frankly, what traditions does the British Monarchy stand for? It has a history of trying to either maintain or reinforce the status quo (i.e. the distribution of power and wealth), including economically (e.g. through protectionist laws, or Royal support of monopolies). In other words, a history of stifling innovation, if it threatens tradition. There's a reason Tories (royalists) are typically conservative (and not in a good way). Let's also put aside issues surrounding colonialism, mistreatment of labour during the industrial revolution, etc.. Also, it's not the case that the Royal Family is powerless today. To pretend otherwise is to be naive, as they remain well connected to politicians and corporations. Thus, they continue to be a family-centric (rather than nation-centric), non-transparent (key issue!) powerbase.
If we're looking for tradition, we ought to be willing to look at it without sugar coating it, otherwise we should be willing to form new traditions. If we're looking for a figurehead above party politics, who is around on a longer time scale than a prime minister, there are non-monarchist ways of providing such a figurehead.
Meanwhile, the IRS and the US government are more worried about shaking down middle-class expats with the absurd reporting requirements of FATCA and the only double-taxation system in the world.
The IRS & treasury department obviously have the power to get international governments to cooperate, but choose to focus their power on Johnny-salaryman instead of international money launderers.
As usual, the rich and powerful have ways around this (ie. holding assets in offshore corporations) while the little guy with no powerful connections gets screwed for his meager salary.
Care to elaborate on this point? The US (like most other developed nations) has tax treaties with many other countries, partly to ensure that its citizens are not taxed twice on the same income.
For most US citizens living abroad, the practical outcome is that you don't pay 'double tax', but you pay the higher of {where you live, USA} taxes. (There's an alternative option that results in lower taxes, but only works for those earning less than ~$100k/year.)
If you're a US citizen permanently living abroad, you still have to pay taxes to the US. As far as I know, relinquishing citizenship is the only way to avoid that. The treaties might make the taxes fair in the end, or even reduce the taxes owed to zero, but it's still a ridiculous requirement and a lot of headache and potential accounting expenses for the individual. You still need to file the paperwork.
Then there are things like FBAR. Pension savings can also be tricky, since the US apparently doesn't honor foreign equivalents to 401(k). Employer contributions, and tax-deferred contributes, can/will end up being taxed under the same double-taxing scheme as regular income.
As a counter-example, I moved from Norway to the US some years ago. I was required to pay income tax to Norway for (if I remember correctly) two years after moving, and the Norwegian tax authorities would tax me on my entire US income, but allowed me to use the US taxes as a credit against my Norwegian tax obligation. After the two years, I no longer have to pay Norwegian taxes on my US income.
True, but if US non-residents were not taxed by the US, the whole issue goes away.
In case I wasn't clear, even if "double taxation" doesn't actually result in double taxation or an additional tax obligation -- i.e. (owed_US - owed_foreign) > 0 -- then it's still an unnecessary headache for the citizen.
In the US, thanks to extremely complicated rules and lack of centralized information collection -- many people use an accountant to file their taxes, which is much less common in other parts of the world. In my native Norway, for example, the tax authorities already have everything most people need to file, and indeed if you don't file at all they will simply calculate your taxes for you. (Unlike the US, they will mail a bill if you owe anything.) Living outside the US then potentially means having to use an American accountant to figure things out, unless something like TurboTax can do the job. (Last I checked, apps like TurboTax didn't do complex use cases like FBAR.)
In general these treaties protect foreign nationals living in the US from double taxation much more than US citizens living abroad. Also, I hope you're in one of the 70ish countries that has treaties! Because if not you could be looking at a 65-90% tax rate on any income over roughly 100k depending on the place.
Also, even in countries with a treaty, it doesn't always prevent double taxation of both income and capital gains.
For example, the Obamacare surcharge on investment income of 3.8% isn't eligible for any foreign tax credits...and it's not like any expat could even take advantage of Obamacare if they wanted to. Hell, I had trouble trying to take advantage of an Obamacare plan when I just moved to a different state.
This also doesn't include the added cost of the accountant needed to prepare expat taxes, which can easily run $4k-8k for foreign accountants who know the US system and understand the specific rules of their treaty.
"Also, I hope you're in one of the 70ish countries that has treaties! Because if not you could be looking at a 65-90% tax rate on any income over roughly 100k depending on the place."
My understanding is that US Citizens living outside the US can claim the Foreign Tax Credit, and that this doesn't require a tax treaty between the US and the country of residence.
The IRS guidance on the subject doesn't (as far as I have read) specify that a tax treaty must exist, for the FTC to apply.
Any pointers to more info?
(Regarding your last issue about the need for an accountant, due to the complexity of the US tax system: that's a good point but orthogonal to the worldwide tax and double taxation issues.)
Technically I think the more correct response here is that the U.S. is one of two countries in the world (Eritrea being the other - and never a good country to be compared with) that have a Citizenship based system of taxation.
Secondly - as you pointed out - U.S. citizens who make more than a certain amount and live in a low/no income tax jurisdiction will end pating U.S. taxes.
Not to mention the dacronian reporting requirements.
Pay the higher to the respective country or to the US? I have friends who make less than $100k but pay both US and expat host country taxes that would benefit from this.
I am an accountant, but I am not your accountant, and what follows is NOT advice:
The US government offers its overseas resident citizens two schemes to ensure they don't pay what you referred to as 'double tax'. You can choose only one or the other, not both.
Instead of A, you can calculate your US taxes as normal (i.e. as if you were living in the US), but then deduct the amount of any tax you paid in your country of residence. If you live in a high-tax country (e.g. UK), then IIUC your tax bill after deducting tax paid in your country of residence would be zero, i.e. you would not pay any taxes to the IRS.
According to OECD's "Taxing Wages 2017" report, an average earner in the UK pays less tax than a single average earner in the US. For a married single-earner couple, taxes will be lower in the US, and other specific situations can play in as well (e.g. while PPP adjusted income for average earners in the US and UK was almost identical, the nominal amounts diverge a bit more, so if you compare specific nominal income levels it may shift things a bit), but in general it's way too simplistic to assume the UK will be high tax and the US low tax.
I know that wasn't your point - it's just a pet peeve of mine that people seem to think US tax levels are so low; they can be, if your family situation is right, your deductions are just right, and you happen to live in one of the lower tax jurisdictions, but it can just as well go the other way. Similarly that a lot of people seem to think the UK is so high - it's below the OECD average.
If you want an unambiguous "high tax" example, go with Belgium - they top the OECD tax data on almost every measure by a large margin (40.7% tax + employer social security for an average earner vs. 26% for US and 23.3% for the UK according to Taxing Wages 2017) or Germany (39.7%).
Thanks. This is very interesting. Will take a look at the report. My intuition is that the US/UK difference flips around once you're well over median income, but haven't looked at the numbers.
A term I've heard in the last decade that describes this situation is "superclass." There exists a global class of politically powerful super rich that are beyond rich in the conventional sense and are more like planetary royalty. In that sense we already do kind of have a global government, and it is not a democracy.
When I actually try to think about it - I’m not sure I have a robust understanding of what these people are like.
Celebrities? Sure.
Trust fund slackers? Yep.
Superclass...Maybe?
Edit: not suggesting that celebrities are part of the superclass but that I understand the general lifestyle associated with celebrities (I was previously employed in the film industry). On the other hand, I really don’t understand the lifestyle and social environment of this ‘superclass’. Perhaps, I simply lack the imagination to conceptualize what it would be like to possess a billion dollars. Perhaps, it’s just too divorced from my own reality.
"Oligarchs": people who made their money by sweeping up ownership of the privatised companies after the USSR. Saudi crown princes. Politicians from the more corrupt states. Basically the opposite of celebrities.
Most celebrities aren't. Maybe a handful, but having a net worth of say $25M is a drop in the bucket compared to 11/12 figure individuals- the marginal advantages at that point must be very abstract.
When you approach billionaire money probably ceases to exist in any tangible sense. You could afford literally any apex product of the entire human species to the extent that you could experience it subjectively.
At that point it starts to become about power.
This is probably made all the more true by the fact that we don't live in anything approaching a libertarian/voluntarist world. Getting that rich means you are now a 'player' among other power players whether you like it or not, and other power players don't always play fair.
Basically you probably are forced to become some kind of oligarch or politician or give some of your money away to stay below a certain threshold.
But I've never been up there so I don't really know. I'm only observing from afar.
I’ve always felt that the least convincing arguments (for me) in favor of libertarianism have come from the already rich and powerful. I’m sympathetic to many libertarian ideas; however, when an already powerful person argues for them I can’t shake the feeling that they simply want me to voluntarily give up governmental structures that are - probably - the most significant form of power I have access to (even if they are collectively possessed).
This would seem to sync with the <it’s not wealth but power> alignment of the superclass.
A key problem with libertarian thought is the notion that it is possible to erect a hard firewall between economic wealth and the power of the state (or any other entity or combination of them) to initiate force.
In practice as long as the state (or any other force wielder) and economic actors exist in the same universe the latter can use money or deception to influence the former. Money can be used to amplify deception through intelligence tradecraft.
This means that large enough concentrations of wealth inevitably tend to mutate into political power a.k.a. the power to initiate force.
Rand is probably the worst offender when it comes to outright denying this and refusing to examine its implications.
Sounds like a logical approach — no trail, no business. But I would imagine this is the system, the very people hiding behind these shells, are willing to hold in place and have the perfect power/influence/capital to keep it, which doesn't make it a priority.
I didn't understand for quite some time why prosecutors couldn't go after and find tax perpetrators who they knew had offshore structures. Until I finally found out how simple it is. One of two or both reasons:
1)As laid out in this article by the BBC, there simply is no record of the true beneficial owner.
2)The jurisdictions have no legal agreements with western countries to hand over their records.
Example: Person A in western country X has an offshore structure going through countries Y and Z, both of which have no legal agreement with country X.
Now through some leaks and witnesses, prosecutors in country X know that person A is hiding something in Y and Z, but they cannot prove it. They cannot obtain those records legally, if there even are any.
How does the "beneficial owner" benefit from the ownership if he can't prove he's the owner? How do they get their money out? And can't we tax them at this point?
Yes I understand these are difficult schemes but can't you just freeze accounts you don't know who the owner is and see who comes out of the woodwork.
Just freeze all accounts until paperwork X is signed, problem solved?
Usually through trustees and fiduciaries in yet again different jurisdictions. Until you prove beyond a reasonable doubt who the beneficial owner is, it's really legally ambiguous to enforce any laws or regulations.
There are efforts aiming at this [1], but it will take time.
This kind of thing is making me think that more effort should be made for realistic land/property taxation; not only is that where a lot of the wealth ends up being kept, but it's fundamentally impossible to hide.
It needs proper cadastral property registration and a link to the tax system. It can even be privacy-preserving; the system doesn't need to care who owns the land, just that the taxes are paid.
For the UK I'd happily swap out council tax + stamp duty for a 1-2% annual property tax.
You might have to rethink your math, here in the U.S. property taxes average 1.15% already, and would need to go up to like 8.2% just to account for personal income tax (not including payroll taxes, social security, Medicare/Medicaid, and corporate taxes)
I think the point is to tax land value, not land. You can buy well over ten thousand acres of land in the highlands for about $5,500,000 (i.e. the price of a really nice house in London) [0]. It's an enormous amount of land, but you can't really do very much with it so the value is relatively low.
If they don't know who the owner is, what's to stop anybody from dressing as a shady businessman, walking up to one of these guys and saying, "yeah, I'm the owner of whatever Corp. I'd like a billion dollars, please."?
I'm sure there are extra details that'd require extra snooping, but how much extra detail is needed if they can't find owners even with a frantic internal investigation?
If you want to know the beneficiaries you want to look at banks. Due to all the pressures from US pretty much all banks require to know the end beneficiary regardless of company structure and "appropriate" authorities in US generally have access to this info.
If they think they're being taxed too much, they can move themselves and their business somewhere with lower tax rates. The reason most of them don't is because they are benefiting massively from the societies they live in - they just don't want to pay their share for the benefit they received.
I'd have much more sympathy if these people actually voted with their feet and left high tax jurisdictions (properly), but the reality is that most of these people want all the advantages without the downsides.
> If they think they're being taxed too much, they can move themselves and their business somewhere with lower tax rates
A different way of looking at it would be if they did move themselves and their businesses then we'd be in a worse position than with how they are now. We'd get zero benefit from the business being located in the UK and also we'd also collect less tax.
I can clearly see how the lack of fairness can be taken, but implementing your suggestion would be much worse.
If too many people leave, it would be a sign that the tax system truly is unfair to these people, and in fact this is a regular part of the discourse on tax levels in most countries.
My point is that most places have a tax system that is the way it is exactly because it strikes a balance where most people are still willing to live there when they earn a lot without evading taxes.
That some decide they don't want to leave, but don't want to pay their taxes either, then does not get much sympathy from me.
> I can clearly see how the lack of fairness can be taken, but implementing your suggestion would be much worse.
My only "suggestion" is to actually enforce the law and expect people to pay the tax that they are legally required to pay, and if someone don't want to pay the tax rate they're actually obliged to pay, then they should leave.
If that causes too many people to leave, then there's a debate to be had about tax levels. But what is truly unfair is to have some people pay their full tax bills while others evade them.
Because they are paying a lot of tax in real terms, also remember there is a lot more to tax than just income or corporation taxes. The 'not paying any tax' meme is grossly oversimplified and misleading IMHO.
For example if they buy a £5,000 jacket in the UK then £1,000 of that is collected as VAT. If they live & shop elsewhere we don't get that revenue in the shops nor do we collect that VAT.
As a percentage they generally find ways of paying less but it will still be a substantial tax revenue.
I think great number of people who use those services can't afford 5 grand jacket. I am talking about people making 100-200k a year. They are really anally violated by taxes.
I earn in that range, and I'm certainly not "really anally violated" by taxes. In fact, I pay a lower percentage tax now than I did when I earned 80k, as the combination of higher pension contributions and other legal ways of reducing tax has a higher impact for high earners than for most lower earners.
Overall, I look at my neighbours who earn less combined than I earn alone, and they're far worse affected than I am by taxes despite paying far less.
Hypocritical how? I've pointed out exactly that taxes in that income bracket are in fact unfairly low. I consistently vote to redress that. You're the one claiming that people at my income level are paying so much we're "anally violated", when the reality is that our tax burden is quite insignificant.
There will always be cheaters. In this case, rich cheaters.
The people "resorting" to Fonseca were the privileged. They must not get any clemency in their transgressions. I'm happy to see there's at least some fallout from all of this. I expected less.
100% - except what’s extremely frustrating is the [willful] ignorance of the press in reporting on the issue. There are some people in these documents that should be named shamed (and probabaly prosecuted) but most of the “celebrity” clients seem to be undertaking perfectly legal/normal tax planning activities.
E.g. just about every U.S. university invests their endowments through offshore vehicles, and are not doing anything remotely seedy
Corporations are a collective fiction. They're entities that only exists because society agrees that they exist because they are generally considered beneficial. But they do not have an existence absent a legal system imbuing them with rights and responsibilities.
As such, society sets the rules, and those rules are a trade-off between the substantial powers that comes from the various features available, such as creating a corporate veil, maintaining an existence independent of its owners, or limiting liability, and the responsibilities we expect them to comply with partly to reign in those powers, partly to protect owners from each other, and transparency is an important part of both most places in the world.
If you don't want your personal financials exposed that way, then don't use a corporation for them. Their purpose is not to shield your personal finances.
If your jurisdiction does not provide adequate privacy protections for individuals then that is a separate problem - for corporations the lack of privacy most places is an intentional feature.
> because they are generally considered beneficial
Thanks, but no. I don't want to live in a society that's ruled according to other people's ideas of what benifits them and find this idea completely immoral and alien. As a person, I want to be able to do whatever I very damn please, benificial or no, as long as it doesn't infringe other person's freedom.
The very point of a corporation is that it is a legal fiction that society agrees to honour.
Without negotiating those terms, why should society as a whole honour it if you decide to invent new rules and apply them to your new fictional entity to shield you from liability for example?
What you are suggesting does infringe on other persons freedoms in that your unilateral corporation only has meaning if you force others to act as if it exists.
Put another way: If I decide I'm King of my own kingdom, and insists that as king I can dismiss any debt I incur, why should society accept my fantasy to the detriment of other members of society? If I insist that I can incorporate some new class of corporation not subject to the rules of society, I'm no different than a madman proclaiming his own fictional kingdom - it has no real existence unless I negotiate that existence and the rules governing it with society around me (one such alternative might be to simply accept one of the existing forms of business).
> Without negotiating those terms, why should society as a whole honour it if you decide to invent new rules and apply them to your new fictional entity to shield you from liability for example?
Because it only concerns them if they enter any agreement with this fictional entity, and they're free to choose to do or not do it.
> If I decide I'm King of my own kingdom, and insists that as king I can dismiss any debt I incur, why should society accept my fantasy to the detriment of other members of society?
Because people that lend you something would have to sign a contract (out of their own free will) where it clearly states that they're lending to a virtual "kingdom" of yours, where you can dismiss any debt you want.
> it has no real existence unless I negotiate that existence and the rules governing it with society around me
"Society" is a peculiar word. Because if you meant "people", then I agree - you'd have to negotiate it with people that you would want to sign agreements with you, as I stated above.
However, if you meant government, or people that wouldn't have to enter any agreements with your virtual entity, I don't see why the hell it's their business to tell you what imaginary entities you can create.
> Because it only concerns them if they enter any agreement with this fictional entity, and they're free to choose to do or not do it.
Incorporation is a legal agreement between you and a government representing people around you that effectively acts as legal shorthand to create a basic set of rules and obligations.
If you just want it to remain your own fictional entity no-one is stopping you from inventing whatever rules you want as long as it remains in your own head, and nobody are requiring you to disclose any details. But you can't incorporate and expect to be able to dictate your own terms.
And the moment you enter into any kind of business under the name of your fictional, unincorporated entity, you're also entering into agreements with people on its behalf. If you do that on behalf of an entity that have no legal existence without making it explicit that said entity have no legal existence, you're harming people by tricking them into agreements where they lack legal protections they expected they'd have.
And if you do make it explicit, sure, I'm sure you could find a way of doing that which would be legal, but nobody would do it as they'd have no legal recourse against a non-existent entity if it doesn't hold up its side of the bargain. Feel free to try.
To put it another way: Nobody would accept entering into a contract with the Magic Kingdom (the fantasy place, not a legal entity of the theme park) unless Disney or a subsidiary is also party to the contract so they can sue Disney if the Magic Kingdom does not deliver on its obligations.
> Because people that lend you something would have to sign a contract (out of their own free will) where it clearly states that they're lending to a virtual "kingdom" of yours, where you can dismiss any debt you want.
They can't sign a contract with my virtual kingdom, because it has no legal existence. Any such contract would likely be void in the best case, or involve fraud on my end in the worst case.
However, if they sign a contract with me, they're just routing around my delusional "kingdom", and we're back to the point that I can't demand of society to accept my new type of corporate entity - I can't invent my own shorthand, because nobody else recognises it.
How world works is neither static nor universal. There are political forces acting out of utilitirian ethics, trying to benifit the whole society - but thankfully, there are also forces fighting against it, and very successfully, at times.
Privacy is for things you do in private. Forming a corporation is necessarily public because a corporation is a creation of the state, and therefore everyone's business.
I believe Emma Watson was caught up in this as she had an LLC to obscure her ownership in a flat in London so she could avoid stalkers and thus violence. There are legitimate uses for obscuring the ownership of a legal entity.
Suppose Emma Watson starts dealing heroin, and the state wants to seize her assets. Does she have the right to hide her assets to protect herself from the violence of the state, or only fans?
That's a good reason why a court could order that an LLC be allowed to mask its ownership, but not a good reason why all LLCs should be allowed to do so as a blanket policy.
Self-employed people by definition are not working for a corporation. If they worked for a corporation, they would be employees, even if they also were the sole owner of that corporation, as the corporation is a separate legal person.
Then they're not self-employed. They're employed by their corporation.
They may be "self-employed" in a social sense, but they'd not legally be considered self-employed in any jurisdiction where I know how it works.
E.g. I used a limited company in the UK to employ myself. For the purposes of everything relevant, I'm an employee of that company, as well as a director, and the sole owner, and the relevant records are publicly available because I chose to form a corporation. Socially I might have been "self employed" but legally I'd explicitly chosen not to be because the benefits I got from that outweigh the downsides. If I didn't want to reveal that information, I had the choice to operate as a sole proprietor without forming a company.
This is my point. Why is there a double standard against business owners? As an individual everyone agrees privacy is important. As soon as that same person is a business owner, then they don't have the same rights?
Because corporations exist purely to establish trust.
Depending on where you live, I don't believe there's much stopping a group of people getting together and offering services, they can do so anonymously if they want.
However, when you incorporate you do so specifically to register your "group" with the government so that people dealing with you know you're operating legitimately, following laws etc. It's about trust, trust is inherently not anonymous.
People do not incorporate so others know you're "operating legitimately." Incorporation is required for legally formalizing ownership structures, separating your own assets from company assets, getting your employer identification number (which, in turn, is necessary to hire people), get a business banking account for the operation, clarifying tax/expensing factors, and numerous other business related reasons.
While I'm sure somebody somewhere has incorporated for trust, but that's a very obscure reason. It's certainly not "the specific reason for incorporation." It also doesn't even make any sense. One of the benefits of incorporation is to minimize the recourse available to customers - namely in that your personal assets cannot be touched. Somebody operating an unincorporated business is exposing themselves to unlimited liability if they run afoul of anything.
Most places sole proprietorships (under whatever name) and/or partnerships can still hire people, and get separate bank accounts and the like. This certainly includes the US, as well as the UK and most European countries (I don't know if it applies to all of them).
You most certainly can obtain a EIN in the US without being incorporated, and a fairly large portion of non-incorporated businesses will need one.
> One of the benefits of incorporation is to minimize the recourse available to customers - namely in that your personal assets cannot be touched.
... and that's one of the key reasons why the other side of the coin is additional transparency to counter the increased abuse potential.
Corporations are not about trust - they are about risk.
Most simply the ability to pool and share risk among a group of people and in most cases limit the extent of of personal risk when undertaking some activity.
The person has the same rights. The business - assuming we're talking about a corporation - does not, as corporate law is explicitly a legal creation that grants a number of rights to entities that have no independent existence in return for various reporting requirements.
If you don't wish to provide that information, the solution is simple: Don't put yourself in the situation of being a member of a corporation in a position that your local jurisdiction require details of.
> but they'd not legally be considered self-employed in any jurisdiction where I know how it works
In the U.S., most self employed persons contract for their entities. They are not employees of the entity. The entity may, for tax purposes, be a disregarded entity. This may be a quibble of a jurisdictional nature.
The point remains, relative to the original issue, in that whether or not information is public generally is related to your choice to be the owner or director of a corporation, not to your employment arrangements. If you choose to insert your own corporation in between, you're electing to accept the trade-offs of increased transparency because of the advantages it brings.
I've contracted for US corporations both with and without a self-owned corporation in between.
Afaik Sweden is pretty transparent in that regard and it's completely normal to be able to check the employment status and income of other swedish citizens.
Norway too, leading to yearly "fishing expeditions" for newspapers writing about what celebrities earned and paid in tax.
The justification for this in Norway at least was that it's considered a social concern whether or not you pay your taxes, and that it was considered important that people should be able to trust that people around them also contribute.
But it's arguably shifted quite significantly in balance now that it's possible to look up online (and various restrictions have accordingly been put into place) vs. before when you used to have to go to the tax office and look it up in physical books - the latter took care of the public interest aspect while making it too cumbersome for people to do just to satisfy random curiosity (e.g. before it went online, I don't think I knew anyone who had ever bothered; afterwards "everyone" has probably looked up someone).
It sounds like tax evasion was a motivating factor in needing the privacy.
> Other correspondence points to the primary reasons many clients were using offshore structures.
> One Uruguayan financial planner commented: "…the main purpose of this type of structure has been broken: confidentiality".
> Another intermediary wrote: "… the names of our customers have been known by the authorities of their countries. Thanks to Mossack, customers have to pay incomes taxes."
> Anything that enables tax evasion .... should be banned
Do you know the difference between evasion and avoidance?
Tax evasion already is illegal. Paying your car mechanic in cash and it not going through the books is evasion and is illegal.
Tax avoidance is not. When you used to buy the under £15 DVDs from Jersey you were avoiding paying the VAT you should have been but was perfectly legal.
But I want to balance that right to privacy against the additional 'powers' you get when using a company to conduct business. We imbue companies with a lot of benefits depending on their form like limited liability, different taxation arrangements and we should be able to identify the principals of those companies publicly.
Most countries have laws that treats certain types of companies as a legal person in most respects. How far it extends varies, but it's certainly not unusual for companies to have extensive rights.
The very name "corporation" hints at this (from lating "corpus"), and the idea of a corporation predates the existence of the US by more than a millennium.
If a company has an international ownership structure that's complex enough that makes it difficult or impossible to follow the trail of ownership / leadership / directorship, then the company shouldn't be allowed to operate.
All the fuss and bluster in various countries about multi-nationals dodging their local tax responsibilities, and yet this is allowed to go on. There were a couple of such companies that have Australian Government contracts that were revealed to have opaque international ownership.
In the current environment of growing suspicion about foreign ownership and its relationship to national security, you'd think these issues would be a priority. How do you curtail foreign ownership and Chinese / Russian influence if you can't work out who's ultimately responsible? Maybe that's just talk to distract us non-string-pullers?