Richards Financial Havens

1. Auflage 2017
ISBN: 978-1-5069-0510-5
Verlag: First Edition Design Publishing
Format: EPUB
Kopierschutz: Wasserzeichen (»Systemvoraussetzungen)

E-Book, Englisch, 100 Seiten

A comprehensive presentation of the financial and legal implications and the risks of Financial Havens and their benefits.

Autoren/Hrsg.

Richards, William

Leseproben

Chapter One - Financial Havens
  The prosperity of economies realized monumental benefits from the technology revolution of innovation. It has enabled major developed economies to penetrate the market place of under developed and emerging economies to a degree not before possible. Therein is provided the new frontier of economic expansion, opportunity to grow economies which creates a path to revitalizing from the devastation of a brilliantly managed modern version of a depression and escape from governmental blunder. And it is this spectacular innovation and technology revolution that has proved elusive and defiant of precedent jurisprudence principles. Technology ushered in a financial environment that changed the ground rules of the two most important components of this access to markets: international trade and financial capital movement. The expansion of global trade resurrected themes of old, the principles of mercantilism. Mercantilism is the raw basic need dating to the early fourteenth century where Italian merchants, the Medici’s, traded along very ancient north-south routes. This was generated by the need to import and export. The underlying philosophy was exports were to exceed imports, the origin of surplus trade. Trade continues as a barometer of commerce and its attendant benefits of market expansion. However with the innovation revolution, the fluid movement of capital between global financial markets found that the speed and velocity magnified the dynamics and influences of economic progression. The international community did not possess an international apparatus to thwart the adverse effects of such revolutionary innovation. This influence of capital velocity by innovation formed new complexities of dramatic increases of risk. It was the effects of a transformation of external market capital to particular domestic markets with unprecedented lighting speed and in unprecedented amounts that created financial risks that were unforeseen. And the same was true with respect to exiting capital of domestic internal markets to external Euro markets. Such enormous excesses of liquidity nurtured domestic economies as they basked in these disproportionate allocations of global capital. A binge occurred and became intoxicating for the most sophisticated economies. It engendered irresponsibility and one of history’s most imprudent and dysfunctional episodes of government. The thing speaks for itself as developed economies inch their way utilizing untested waters of monetary policy to restore stability and confidence in the international monetary system. It is for these reasons that Financial Havens are the interconnection that facilitates global transacting to facilitate international commerce and the international monetary system. This naturally pours-over to the subject matter of Eurocurrency and Global Markets. These concepts of internal domestic markets and external Euro markets form the foundational basis upon which international commerce flourishes. Understanding Financial Havens and their relevance to the International Monetary System is important and requires a cursory explanation of the United States regulatory scheme. A base foundation of supervision, examination, and enforcement of this banking system establishes principles of influences in the connection. It is presented in an abbreviated manner to enable the reader to understand the need to achieve and maintain prudent standards for financial institutions. What is to be gleaned from this observation is that international commerce that enters the external market, enters a lightly or non-regulated market place with no defined lender of last resort. That is the nature of Financial Havens. And as importantly, despite the deficiencies that occur in domestic supervision by financial authorities world-wide, comparatively most sovereigns’ systems are deemed quite prudent by comparison. International commerce and investment is facilitated by the use of external markets situated offshore that provide tax neutrality and a cost saving regulatory environment. A skeletal overview of the role they play is set forth. It is intended to serve as an introduction in the mechanism of entity structuring utilized in entering the external market. Just as the external market provides linkage from one domestic market to another, the Financial Haven situs provides a linkage between each domestic economy functioning in international commerce to another. Once transactional activity exits an economy and is operative, it is viewed by the domestic economy in terms of where income taxation jurisdiction commences and ends. This is the Source of Income doctrine. Most economies have a sovereign source of income revenue scheme of laws to determine the tax jurisdiction of income and expenses derived from various foreign sources. Treaties often address source of income. As a general proposition, source of Income and jurisdiction to tax is formulated upon citizenship and residency of a taxpayer, the permanent establishment or place of business of a taxpayer and income concepts of being sourced in a sovereign. Permanent establishment or place of business along with income concepts are theories and terms of art utilized in the determination of tax jurisdiction upon foreign persons. The traditional basis for asserting tax jurisdiction has experienced the repercussions innovation and technology has permeated upon the global effects of economic integration. This evolution is provided in the text treatment of electronic commerce. Its expansion through judicial defining and re-defining is a tantalizing advancement from the requirement of a minimal physical presence to an economic presence. It has every essence of inventive jurisprudence, crafted with design. Taxing jurisdiction arises in the outbound organizational structure. The determination of corporate structure is established from the onset in the organizational phase. A segment is devoted to outbound considerations, incorporating the theme of entity structure in international commerce. The United States is specifically guided in this respect by corporate statutes whose purpose is to assert tax treatment of certain ownership structures and activities differently than domestic corporations. These are the Subpart F Income statutes and are an essential consideration in the organization of an entity or structure of entities designed to traverse in the complexities of transnational activity. The implication of the taxation of corporate entities within a structure requires consideration of taxable events in the organizational phase. An equally important consideration in the establishment of the initial business structure is Transfer Pricing. It governs the arm’s length pricing principles that prohibit the artificial shifting of income, deduction, and credits among related corporate structures. These related entities have specific guidelines applicable to entity affiliation that fulfill corporate structure planning. Just as the Subpart F Income rules that govern corporate status of controlled and non-controlled entities, these arm’s length principles address similar type affiliated entities that comprise tax planning structures. As does the consideration of the organization phase, the tax implications of corporate entities within a structure require consideration of taxable events in conjunction with the operational and retirement phase. That consists of Reorganizations and Liquidations. The text revisits the standard domestic reorganization, operational phase and directs the reader to the differing treatment accorded foreign related entities that engage reorganization to achieve desired shareholder benefits. Additionally, liquidation of the domestic entity is contrasted with the treatment of a foreign subsidiary as well as affiliated foreign to foreign entities of a domestic parent. As a consideration of the offshore status is contemplated in an organizational phase, and particularly the ownership structures regulated by Subpart F Income provisions, understanding the use of trusts becomes a useful tool. Trusts deemed to be foreign trusts can provide, additionally, a means to diversify a taxpayers’ liability exposure. The tax treatment to a Settlor differs from domestic trusts and those differences are contrasted. International commerce in most instances is conducted by contractual agreement. Perhaps no area of financial and taxation law has more impact with respect to evaluation of the associated risks; the inherent legal, market, and credit risk that accompany Financial Havens. Commercial agreements that involve parties of different sovereigns are subject to legal risks that are much different than exposure and risks in domestic agreements. Legal risks are a subject matter that carries extraordinary importance. Similar to the jurisprudence evolution of Source of Income innovation and the technology revolution, the judiciary has struggled not only domestically but transnationally in application of precedents with respect to jurisdictional legal risks. This evolution from traditional standards of determining jurisdiction has coped with the newly developing jurisprudence necessitated by electronic communication and publication doctrines. In addition to jurisdiction, international commerce requires an appreciation of risk occasioned by the Act of State Doctrine, the Foreign Sovereign Immunity Act that prevails among sovereigns, as well as the recognition and enforcement...