Beware of Foreign Tax Evasion Promoters

Beware of Foreign Tax Evasion Promoters

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Fortunately, the Milwaukee Brewers surprising loss to the St. Louis Cardinals in the National League Championship Series has not blurred Milwaukee lawyer and blogger Brian Mahany‘s judgment in tax matters.¹

Mahany, proprietor of the law blog, Due Diligence, gives some excellent advice to prospective offshore investors in Looking to Evade Taxes? There are Still Plenty of People Willing to Help You:

Enter Ras al-Khaimah, a small Arab emirate that borders Oman.  With a population of less than 300,000 and land mass of 650 square miles, RAK is not large by any standard. It’s government is an absolute monarchy meaning the ruling Sheikh can pretty much do whatever he wishes.

According to the advertisement I received this morning, for a “small” fee of several thousand British pounds, one receives “all the usual offshore Company [sic] benefits. No taxation, no VAT and no requirement to file accounts with the added benefit that RAK Companies offer total discretion and confidentiality.”

If you aren’t convinced, the ad goes on to say, ” RAK Offshore has not signed, and has no intention of signing any exchange of information agreements with any country. RAK Offshore is Non-Compliant [sic] with OECD requirements and therefore provides the very best in security and asset protection.”

This is exactly what UBS investors were told. We know how that worked out for them, don’t we?’

Mahany continues (emphasis added):

Many offshore promoters attempt to legitimize their product by wrapping themselves in the cloak of asset protection. This particular provider, however, pretty much brags that its product is not compliant with international disclosure treaties of which the U.S. is part.

There is a legitimate use of offshore structures to avoid frivolous litigation. Many people intentionally or mistakenly believe, however, these vehicles relieve them of their tax reporting obligations. They don’t. Those that buy this particular product to avoid taxes may well be headed to a prison cell if caught.

While the RAK may or may not be part of a tax exchange agreement, there is nothing to prevent the absolute ruler from cooperating with law enforcement officials from the U.S. and other jurisdictions. And whenever funds are transferred there is always a paper trail.

Unless one plans on chartering a large boat and sailing around the world with large sums of cash stuffed into suitcases, hiding your money from the taxman isn’t as foolproof as many of these promoters suggest.

Good stuff.

Footnotes:

¹   I rooted for the upstart Brewers until I realized they had the militant nutjob Nyjer Morgan as their starting centerfielder. Morgan is listed in the Brewers’ players’ guide as being six feet tall. He’s lucky to be 5’7.” His lack of stature is surely part of his problem. Come to think of it, I believe I read somewhere that Napoleon had a Nyjer Morgan complex.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

Comments

  1. Thanks for the shout at Peter. Unfortunately good people fall these promoters all the time. I had one client who invested in a bogus welfare benefit plan argue with me that I didn’t know what I was talking about AFTER he hired me to review the promoter’s plan. Although he didn’t believe me, he did sit up and listen when assessed a $2.4 million penalty from the IRS.

    If you want great tax advice, talk to Peter – not some promoter who suggests you set up a phony tax shelter in a non-compliant country!