Tax Information Exchange Agreements (TIEA)

Definition – This is an agreement whereby one country can request all financial investment information regarding their citizens and corporations. This most definitely includes bank account information and stock brokerage type investments. There is no probable cause requirement to get this information. There is no criminality or dual criminality required. There is not even a tax violation required. The terms used in these treaties run along the lines of the country requesting the information claiming that they believe the information to be relevant to their tax investigation. Would such a treaty allow a requesting country to get information from one who is not a citizen and has no tax liability to the requesting country? This is sort of reading between the lines but we believe if the requesting country said they came across this foreign corporation or person in the course of their investigation and think there could be some relevance they would be able to get the information at least from some countries. Some countries might resist, but then again how hard is the requesting country going to push and how hard is the requested country going to resist? We would say the odds of your information being distributed are way too great.

Implications – We are not advocating breaking tax laws. We are advocating privacy rights. Lets say you are a person of means and have vast wealth invested in a certain country that is in a TIEA. Well your information gets requested by a government that has a treaty with that country. Mind you this is just a fishing expedition, you did nothing and owe no taxes and have nothing to do with the country requesting the information. Now when the government has that information are they going to be respective of your privacy and respect bank secrecy. I would not count on that. These requesting countries generally see bank secrecy as almost a criminal act they can do nothing about and would like to see it eliminated. This government could do whatever they like with your information and they would probably never ever get sanctioned. Remember they are not going to state where they got the information from. At the very least it would sit in their computer files and they could distribute it to whomever they wanted to. Now if this leakage of information led to you or your family being kidnapped, sued, home invasion or burglary, blackmailed, suffering from extortion, stalked, etc. would they really care about these implications the violation of your privacy caused? I doubt it. Contrary to what a lot of governments would like you to believe there are legitimate reasons for bank secrecy.

What to Do – Only keep your assets, corporations and foundations in countries that are not in any Tax Treaties. Any tax treaty could lead to a request for information, not just a TIEA. If there is absolutely no tax treaty with any country in place then you have nothing to worry about in this regards. If there is a tax treaty with any country you are at risk even if you have nothing to do with that country because the requesting country could always say you or your corporation came up in the course of their investigation as previously described above. Remember the country you have your assets in can be expected to take the path of least resistance and give up the information. So avoid any jurisdiction with any sort of a tax treaty to be sure.

Panama – Panama is one of the very few countries in the world that has never signed any sort of tax treaty. No TIEA, no double taxation, no tax treaty of any sort. In Panama all tax offenses are civil including tax fraud. When one country requests information relating to a crime there is a principal applied called dual criminality. Dual criminality means that the crime in question must be a crime in the requesting country and in the requested country. The dual criminality provisions provide safeguards to prevent abuses. Since Panama has no crimes pertaining to taxes this is not an issue in Panama.

Of course one must look beyond this as well and consider the currency used (Panama uses the dollar). Panama imposes no taxation on offshore derived income which means you can have a Panama Corporation, Bank in Panama, have an office in Panama, and if your income comes from outside of Panama there is no taxes due. Panama has no capital gains taxes as well on bank interest and stock market profits. One must consider if the country is an island in the Caribbean subject to hurricanes causing power and internet outages (Panama suffers from no hurricanes, volcanoes, tsunamis, and for these reasons the Panama Canal was built in Panama). There must be reasonable banks in the jurisdiction Panama has 150 large international banks). The jurisdiction should be accessible easily (Panama is 2.5 hours from Miami and is serviced by many international airlines). The country should be in a time zone that is workable (Panama is in EST for six months and CST the other six months – they never change their clock other countries do). The country should have no currency exchange limits (Panama has none).

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