Japanese Foreign Tax Havens: The Panama Files

[Mike Oxlong]

'Panama Files' reveal Secom founders' use of offshore tax havens

A Panama-based law firm helped the founders of Secom Co, Japan’s top security company, obscure their wealth through a web of shell corporations, a massive data leak tying several world leaders to offshore tax havens showed Monday.

Secom director Makoto Iida and the late former director Juichi Toda were among the clients of the law firm Mossack Fonseca & Co, one of the world’s top creators of shell companies—corporate structures that can be used to hide the ownership of assets.

The leaked documents showed the Secom founders managed more than 70 billion yen ($626 million) worth of their stock holdings in the company via shell firms in foreign tax havens.

The law firm’s leaked internal files, containing information on 214,488 offshore entities connected to people in more than 200 countries and territories, were obtained by the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists, with which Kyodo News and other media outlets are in partnership.

Iida, 83, and Toda, who died in January 2014 aged 81, founded Secom in 1962 as Japan’s first security company.

The leaked documents show that a number of shell firms linked to the two men and their relatives were established in the 1990s on the British Virgin Islands and the island of Guernsey, known as offshore tax havens. The documents stated that the purpose was to distribute Secom stock holdings among the relatives ahead of the deaths of the founders. By using the shell firms, the two founders were able to effectively manage a large number of Secom shares that were not listed as directly under their control.

The Secom founders “had probably decided to use the offshore scheme in a bid to avoid or substantially reduce the inheritance and gift tax burden on the relatives,” said Tasuku Honjo, a professor emeritus at the Nagoya University of Economics.

A former National Tax Agency official pointed out that the use of several firms in foreign tax havens “makes it more difficult for the Japanese tax authorities to probe into someone’s assets.”

Meanwhile, a certified public accountant well-versed in international tax affairs commented, on condition of anonymity, that Iida and Toda had likely taken the step to “prevent their relatives from going bankrupt when they inherited the shareholdings and paid the taxes.”

Secom’s public relations department denied its founders had set up the firms to avoid tax. In a written response to Kyodo News, the company said its disclosure of information to tax authorities concerning the case and its payment of taxes have both been appropriate and in compliance with the law.

“Regarding your statement that there are various opinions and views in connection with this case, the tax authorities, as well as the legal experts we had consulted, have not questioned its legality and we trust their views,” the company said.

The leaked records also expose the offshore holdings of 12 current and former world leaders, including Iceland Prime Minister Sigmundur David Gunnlaugsson, and reveal how associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies.

Movie star Jackie Chan and renowned soccer player Lionel Messi were also among Mossack Fonseca’s clients.

The International Consortium of Investigative Journalists is a global network of more than 190 reporters in more than 65 countries who collaborate on in-depth investigative stories.

http://www.japantoday.com/category/crim ... tax-havens

[Wage Slave]

What's the bet nothing much comes of this. It's one thing to crack down on expats with a few grand in bank accounts here and there but quite another to take on people like this. And Secom are probably right - It's legal. If your wealth makes it worth paying expensive lawyers to set up networked holding companies around the world it can be made legal. And if the law is changed, then the contingency plans are already in place.

Is it moral though? I wouldn't say so and I would guess a fair proportion of these fuckers are fairly Nationalistic in their views and politics.

[matsuki]

Meanwhile, a certified public accountant well-versed in international tax affairs commented, on condition of anonymity, that Iida and Toda had likely taken the step to “prevent their relatives from going bankrupt when they inherited the shareholdings and paid the taxes.”

Not that I agree with the inheritance tax but couldn't they have just sold the shares?

[Wage Slave]

Meanwhile, a certified public accountant well-versed in international tax affairs commented, on condition of anonymity, that Iida and Toda had likely taken the step to “prevent their relatives from going bankrupt when they inherited the shareholdings and paid the taxes.”

Not that I agree with the inheritance tax but couldn't they have just sold the shares?

Or sold some of them. Of course they could have. I suppose though that they also wanted to keep the, public in name only, company in the hands of the family rather than have the inconvenience of having the great unwashed poking their nose in.

As for inheritance/gift tax - well, agree with it or not, it's the law of the land. The rest of us have to pay it so I don't agree it's moral for the very well off to use their wealth to avoid it via lawyers in Panama.

[wagyl]

Meanwhile, a certified public accountant well-versed in international tax affairs commented, on condition of anonymity, that Iida and Toda had likely taken the step to “prevent their relatives from going bankrupt when they inherited the shareholdings and paid the taxes.”

Not that I agree with the inheritance tax but couldn't they have just sold the shares?

I thought you favoured going to Vegas and then telling bare faced lies about the transaction afterwards.

Not that Wage Slave has any high moral ground: while he thinks it is wrong to use professionals in Panama to reduce tax burden, he has previously approved of the use of professionals within the jurisdiction to reduce liability to inheritance taxes.

[matsuki]

I lost it all in Vegas!!

[Wage Slave]

Meanwhile, a certified public accountant well-versed in international tax affairs commented, on condition of anonymity, that Iida and Toda had likely taken the step to “prevent their relatives from going bankrupt when they inherited the shareholdings and paid the taxes.”

Not that I agree with the inheritance tax but couldn't they have just sold the shares?

I thought you favoured going to Vegas and then telling bare faced lies about the transaction afterwards.

Not that Wage Slave has any high moral ground: while he thinks it is wrong to use professionals in Panama to reduce tax burden, he has previously approved of the use of professionals within the jurisdiction to reduce liability to inheritance taxes.

That's not true. I only consulted a lawyer to get clarification of the rules and my liability under them. That's entirely a different thing.

[Samurai_Jerk]

Is it moral though? I wouldn't say so

I don't know if it's a moral question but it's definitely fucked up. However, I don't necessarily see it as the fault of people who take advantage of the loopholes. It's a problem with governments setting up tax codes that allow this kind of shit to happen. Of course a lot of the ultra wealthy use their power and influence to keep their taxes as low as possible while letting the little guy get the shit taxed out of him which is morally corrupt.

[legion]

For me the big issue is how do they now keep us drones running around on our little wheels in the rat race? For example if you are working for Secom how would you feel reading this news then being expected to put in unpaid overtime while going without a pay rise for the 10th year running?

It also makes economic planning a farce, money which the central banks create is going straight into tax havens. This is now happening to such a degree that one of the people who inspired Gordon Gekko now endorses Bernie Sanders. The reason he gives is the velocity of money, what we have here with this tax evasion, sorrrrrrry, "avoidance" is the deceleration of money. Hence the stagnation of the economy.

[Wage Slave]

Also called the velocity of circulation which I prefer as a term. But yes, when I was in university the prevailing view was that the velocity of circulation had been more or less stable for decades so the debate was focussed on the money supply. That's definitely changed.

And yes, at root, it's a misallocation of resources problem which is exactly what the neo liberal economists told us that neoliberal economic policy would avoid. It turns out that money doesn't trickle down. It flows up and pools. And that's been fairly obvious since the 1990's I reckon.

[Mike Oxlong]

For me the big issue is how do they now keep us drones running around on our little wheels in the rat race? For example if you are working for Secom how would you feel reading this news then being expected to put in unpaid overtime while going without a pay rise for the 10th year running?

It also makes economic planning a farce, money which the central banks create is going straight into tax havens. This is now happening to such a degree that one of the people who inspired Gordon Gekko now endorses Bernie Sanders. The reason he gives is the velocity of money, what we have here with this tax evasion, sorrrrrrry, "avoidance" is the deceleration of money. Hence the stagnation of the economy.

I was under the impression that the way to increase aggregate spending is to shift income downward, which this fellow did not discuss. How will banking reform achieve that?

[Wage Slave]

I thought he was talking mostly about misallocation of resources and fiscal policy (aka tax and spending policy) to address that and so raise demand in the method you mention. He mentioned banks insofar he also thought it would be a good idea to change the rules to try and get banks playing a bigger part in the real economy, especially lending more, in place of speculating on the financial markets.

[Mike Oxlong]

I thought he was talking mostly about misallocation of resources and fiscal policy (aka tax and spending policy) to address that and so raise demand in the method you mention. He mentioned banks insofar he also thought it would be a good idea to change the rules to try and get banks playing a bigger part in the real economy, especially lending more, in place of speculating on the financial markets.

He mentioned stagnant wages and inflation reducing the buying power of the American worker. Fiscal stimulus and banking reforms are the solutions he talks about, and yes that is supposed to address getting the banks back to lending to the consumer and do less speculating, and get the government to give tax breaks or increase spending. That's something positive, but does nothing to address the stagnant wages he mentions at the start.

From what I recall PM Abe also needs some ideas on how to convince companies to increase salaries to help stimulate consumer spending.

[Wage Slave]

Is it moral though? I wouldn't say so

I don't know if it's a moral question but it's definitely fucked up. However, I don't necessarily see it as the fault of people who take advantage of the loopholes. It's a problem with governments setting up tax codes that allow this kind of shit to happen. Of course a lot of the ultra wealthy use their power and influence to keep their taxes as low as possible while letting the little guy get the shit taxed out of him which is morally corrupt.

There are exemptions available to everyone if you wish to take advantage of them - That's not the same thing as a loophole or what is under discussion here. And then there are wholly artificial schemes designed to remove money from view and shelter it from tax. That is not a careless loophole in the tax code, that is money being hidden away in the financial system by people with sufficient funds to do it. You cannot write a tax code to prevent it unless you get really draconian and give the tax authorities the right to just declare schemes artificial and solely for the purpose of artificially avoiding tax. Or to just say we don't believe you when you say the money was handed to a corporation in Panama over which you have no control or interest in.

As it stands what is happening is not illegal. But, it is highly opaque so if someone is doing something illegal we have no way of detecting it. We only have their word for it that nothing illegal is going on.

[Wage Slave]

I thought he was talking mostly about misallocation of resources and fiscal policy (aka tax and spending policy) to address that and so raise demand in the method you mention. He mentioned banks insofar he also thought it would be a good idea to change the rules to try and get banks playing a bigger part in the real economy, especially lending more, in place of speculating on the financial markets.

He mentioned stagnant wages and inflation reducing the buying power of the American worker. Fiscal stimulus and banking reforms are the solutions he talks about, and yes that is supposed to address getting the banks back to lending to the consumer and do less speculating, and get the government to give tax breaks or increase spending. That's something positive, but does nothing to address the stagnant wages he mentions at the start.

From what I recall PM Abe also needs some ideas on how to convince companies to increase salaries to help stimulate consumer spending.

Yep, that's a fair point. Fiscal policy can of course help raise wages to an extent by reducing taxes on the lower paid and increasing them on the higher paid. You could of course mandate higher minimum wages or even a national living wage but that might have other undesirable consequences. I suppose his contention would be that first you raise general demand through fiscal policy. That general rise in demand will then feed through to the labour market and exert upward pressure on wages.

However, if you have a relaxed immigration policy that upward pressure on wages may not materialise for people at the lower, less skilled end of the income distribution. However, it will further up as the economy expands. But that's another issue.

[legion]

From what I recall PM Abe also needs some ideas on how to convince companies to increase salaries to help stimulate consumer spending.

The problem he mentions is how the rich spend very little of their money, obviously they are hoarding the lion's share in tax havens. On top of this the money the rich spend doesn't really circulate through the economy very quickly. Everyone else spends money where it matters.

Craig Murray suggests the western corporate media is diverting attention from the western hoarders by focusing on the Saudis etc.

https://www.craigmurray.org.uk/archives/2016/04/corporate-media-gatekeepers-protect-western-1-from-panama-leak/

It is going to be interesting to see how this plays out.

[Mike Oxlong]

Yes, Edelman did mention that. He also mentioned that the US has been in a recession the past 15 years, and explained it to the incredulous panel in terms of wages and inflation so they could wrap their tiny brains around what they were hearing.

Anyway, back to my first point on the vid clip - to increase aggregate spending income should be shifted downward (to prevent the hoarding and circulation issues).

• Distribution of Income: This is directly related to wages and profits. When worker's real wages increase, then people will have more money on their hands because their overall income has increased. When this happens they tend to consume more causing the consumption expenditures to increase.

Wage Slave talked about moving the aggregate expenditures curve upward by lowing income taxes for lower income earners, raising it for the rich and other fiscal policy. That will help, but a rise in real wages would have a faster impact, which would then be bolstered by the measures he suggested.

[wagyl]

Meanwhile, a certified public accountant well-versed in international tax affairs commented, on condition of anonymity, that Iida and Toda had likely taken the step to “prevent their relatives from going bankrupt when they inherited the shareholdings and paid the taxes.”

Not that I agree with the inheritance tax but couldn't they have just sold the shares?

I thought you favoured going to Vegas and then telling bare faced lies about the transaction afterwards.

Not that Wage Slave has any high moral ground: while he thinks it is wrong to use professionals in Panama to reduce tax burden, he has previously approved of the use of professionals within the jurisdiction to reduce liability to inheritance taxes.

That's not true. I only consulted a lawyer to get clarification of the rules and my liability under them. That's entirely a different thing.

Your definition of entirely and my definition of entirely must differ.
viewtopic.php?f=11&t=30700&p=355246#p355246
Consideration of a discretionary trust -- which is bending over backwards to distance your assets from yourself, with no purpose except to avoid inheritance tax liabilities -- seems to me to differ from controlling assets via offshore entities -- which is bending over backwards to distance your assets from yourself, with no purpose except to avoid a variety of tax liabilities and perhaps to preserve those assets from bankruptcy risk -- by only a matter of degree.

[Wage Slave]

Oh, I see. OK, here are the differences:

1. According to tax law in the UK if you gift assets at least 7 years before you pass away then they are not liable for inheritance tax. This allowance is available to everyone rich or poor and doesn't require a lawyer or anything else. You can simply do it at any time if you so choose. It entirely depends on individual free choice and how much you trust your family.

2. It is entirely transparent. The money is in clear sight and any income or subsequent capital gain remains taxable. The source of the money and any additions to it are also transparent.

3. The setting up of a discretionary trust changes none of the above. Exactly the same rules apply and there is the same transparency. The only reason for setting up a trust rather than gifting directly is that it allows a measure of control over how the beneficiary spends the money. This is often useful in the case of children and young people.

Compare and contrast with very wealthy people hiring expensive lawyers to disappear money from view in a network of holding companies based in tax havens. If you think that is the same then I suggest you are being a bit too fundamentalist about it. In that case why not say that making sure that all your personal allowances are used when paying income tax is no different to concealing money via Panamanian lawyers and places like the British Virgin Islands.

And in any case, even if you say that morally, avoiding tax is avoiding tax and it's that simple - One is transparent and remains in the tax system while the other is opaque and remains outside the tax system. Those are important differences.

[Wage Slave]

Afterthought - Purely in the interests of moral discussion ...

Is there a moral difference between an impoverished man who steals a loaf of bread to feed his family and a man with means who steals a loaf of bread because he thinks no-one is watching and he can save a few bob?

[Samurai_Jerk]

Afterthought - Purely in the interests of moral discussion ...

Is there a moral difference between an impoverished man who steals a loaf of bread to feed his family and a man with means who steals a loaf of bread because he thinks no-one is watching and he can save a few bob?

If the poor man really cared about his family, he'd steal a bag of rice.

[wagyl]

Does that loaf of bread contain a red herring as an ingredient?

Or are you saying that the Brit who sets up a discretionary trust does so so that his meagre assets which he has not managed to spend before he dies (or that he gave away but dies too quickly afterwards) are not subject to tax and so that his children will not starve?

These arguments always seem to rely on terms like "very wealthy people" and "expensive lawyers."
What is the net wealth cut off, above which it suddenly becomes immoral to use these schemes?
If I offer to hide your assets for a low fee, is it now no longer an immoral act, and just a canny use of the lacuna in the tax law?

[Wage Slave]

Does that loaf of bread contain a red herring as an ingredient?

No. I specifically said that was a point for more general but still relevant discussion.

Never mind that. How about the fundamental differences I pointed out earlier?

[wagyl]

I have issues about you saying that a discretionary trust is transparent. Is there a register of trusts? Can I go to that registry and see what the terms of the trust initiated by Slave Papa were? Or is it a document kept at the solicitor's office which is pulled out when HMRC do an audit?

On a more philosophical level, parking assets offshore often just ends up postponing tax liabilities rather than avoiding them. As Apple has found with its offshore assets, they attract a tax liability when brought back onshore. Fine if you are in a wealth building part of your cycle, but when you or your descendants come to draw down on those assets, if you are still in your higher taxation jurisdiction, that income, albeit delayed, will be subject to tax.

As part of a more general but still relevant discussion, is it an immoral act to agree to work on oil rigs in the Gulf under conditions of reduced or even zero income tax?

Never mind that. How about giving me your amounts of net assets above which one becomes "very wealthy" and it thus automatically becomes immoral.
What is the maximum hourly rate can I charge for my services before I become an expensive lawyer and my use automatically becomes immoral?

When will the United Kingdom rein in the Crown Dependencies and the colonies in the Caribbean?

My personal view is that the offshoring of assets is not prima facie illegal. No one will give you a medal for paying more tax than you have to. Why is arranging your affairs so that you avoid paying more tax than you need to while keeping within the rules set out, suddenly an immoral act?

Is it right that the Prime Minister of the UK comes from a family which benefitted by guiding other people how to use these very rules?

[inflames]

One of the big issues with tax laws is that the rules are written one way, and there are a ton of people trying to outgame the system. Say, for instance, we say a dog is an animal with 4 legs, barks, and is born with a tail and 2 ears. If you take a cat, tape on a tape recorder that plays barking noises, it meets the definition of a dog. Everybody knows it's a cat, but it meets the definition of a dog. That is the problem with tax laws, except that while people will do stuff about you taping a tape recorder on a cat, politicians don't do a thing about the tax system. Hence you get companies such as Apple with shell corporations (no address or employees) just to reduce tax, and no politician does a damn thing about it.

[Wage Slave]

I have issues about you saying that a discretionary trust is transparent. Is there a register of trusts? Can I go to that registry and see what the terms of the trust initiated by Slave Papa were? Or is it a document kept at the solicitor's office which is pulled out when HMRC do an audit?

That is a sufficient level of transparency. Nobody is saving everybody has to right to see everything, just that lawful authority should be able to. The point really is however that the existence of a trust or otherwise is perfectly irrelevant for tax purposes. It is the gifting 7 years before death that gives rise to the lack of tax. And that is available to everyone at any time as it is expressly allowed.

On a more philosophical level, parking assets offshore often just ends up postponing tax liabilities rather than avoiding them. As Apple has found with its offshore assets, they attract a tax liability when brought back onshore. Fine if you are in a wealth building part of your cycle, but when you or your descendants come to draw down on those assets, if you are still in your higher taxation jurisdiction, that income, albeit delayed, will be subject to tax.

Dubious, because there are no doubt ways and means to repatriate the money.

As part of a more general but still relevant discussion, is it an immoral act to agree to work on oil rigs in the Gulf under conditions of reduced or even zero income tax?

Of course not if someone is working in a country with low or even zero income tax and he or she keeps their visits home within 90 days or whatever limit is in force.

Never mind that. How about giving me your amounts of net assets above which one becomes "very wealthy" and it thus automatically becomes immoral.
What is the maximum hourly rate can I charge for my services before I become an expensive lawyer and my use automatically becomes immoral?

My fundamental test isn't net wealth. My moral test is : Is this an allowance expressly given by tax law to all taxpayers? If it is, then no-one needs to hire a lawyer at all at any price. The fact that this method of avoiding tax is only available to the wealthy is just an aggravating factor.

When will the United Kingdom rein in the Crown Dependencies and the colonies in the Caribbean?

I wish. With you 100% on that one. Guernsey as well.

My personal view is that the offshoring of assets is not prima facie illegal. No one will give you a medal for paying more tax than you have to.
Why is arranging your affairs so that you avoid paying more tax than you need to while keeping within the rules set out, suddenly an immoral act?

There are perfectly valid reasons to keep certain assets in a variety of countries of course and of course it isn't illegal in itself. It becomes an immoral act when there is deception and concealment of true source and ownership. These people are not taking advantage of allowances within the tax system like everyone else - They are making money appear to disappear while retaining ownership in secret. You can't tax what isn't (apparently) there.

Is it right that the Prime Minister of the UK comes from a family which benefitted by guiding other people how to use these very rules?

No, of course it's not.

[wagyl]

Dubious, because there are no doubt ways and means to repatriate the money.

I know it wasn't your suggestion, but if we are talking ways and means, then you can just go to Vegas, and then hand cash back to your children secretly. And that doesn't require any lawyers either.

Perhaps for future iterations of this argument (and there will be) it might be best to concentrate on deception and concealment, and not on how wealthy the people doing those acts are (or what their agents charge to perform those acts). For your information, setting up a shell company in the British Virgin Islands will set you back about USD 1500 to 4000. These are not sums which limit them to the super-wealthy. It can be worth about that much for your privacy, for example to hide from the public record that you are the owner of that house in Kensington.

Otherwise, the argument are muddied by suggestions that it is OK to move to work in a low income tax region so long as you follow the rules, but it is IMMORAL!!!! to ask a legal office in Panama to create a company for you, even if you follow all the rules. Mentioning the very wealthy and how much their lawyers costs leads to wicked thoughts in my head that a person is very wealthy if they have, say, 110% of the assets and income you have.

PS Guernsey is a Crown Dependency.

[Wage Slave]

Correction re Guernsey noted.

OK, regarding the 110% thing - In the case of SECOM, which is what we were discussing in the first place, the two gentlemen concerned place shares to the value of 626 million US dollars in a network of shell companies in order to remove that money from view of the Japanese Tax office.

What about the opacity concerns? Is it actually acceptable that we don't know who the owners of assets are and where the funds came from? It sounds like a bit of a criminal's charter to me. Yes, there is no evidence of illegality on the part of my client - and that is because we have made it impossible to get any evidence.

When I open a bank account these days I am often asked where the funds came from as well as to establish my identity with documentary evidence. They say that that is to prevent money laundering but presumably none of this actually important.

[wagyl]

Privacy has a value. This thread is not private, so I will obscure some details, but just as an example, in relation to a person with a headache after a sports tournament, I know who his employer is, what position they are employed in, how messy they kept their dormitory room at university, their parents' address, their father's employer, what position their father is employed in, and what their favourite TV show is. And I haven't started on Facebook yet. Half of that information, they let leak themselves, and they probably prefer that they hadn't done so.

You come back again to wealthy people. And you were the one who first made an issue of the wealth. Is the moral crime here that people have 626 million US dollars in shares? Would you be less likely to declare the actions to be immoral if it was 626 US dollars worth? Either the wealth of the people involved is relevant or irrelevant. Please make up your mind whether morality changes with dollar value. And whether theft is OK if your family is hungry.

Hint: despite what you seem to claim in your first post, it isn't made legal by the actions of the lawyers. It is legal all along, for any sum of money. Granted, it is not worth going to that effort to avoid 10 yen of tax, but as I pointed out above, if it saves you 60 man, it might be worth considering.

But anyway, you seem convinced of your own angelic moral purity, It must pain your soul to be surrounded by so many people with loose morals. Don't wear yourself out drawing lines in the sand, with discretionary trust instruments on one side, and democratic election of morally fallen parliamentary leaders on the other.

[Wage Slave]

Yeah, well it's not often I find myself nodding along with a Max Hastings opinion piece but it would seem quite a few people (moral angels or not ) agree. Including quite a few Icelanders who look like they are going to get rid of their PM over it.

No wonder people who pay tax are so sick of the spivvy elite