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06 Sep 2019 Regarding Senior Tax Counsel’s Report ‘Using tax havens – the not so bad, the bad and the downright ugly!’

Editor’s note: Bob Deutsch’s article on tax havens can be found in TaxVine 33 (30 August 2019). 

MEMBER 230 writes: 

Hi Bob, 

I refer to your TaxVine article on 30 August about the use of tax havens. 

I lived and worked in the Channel Islands for 4 years over 20 years ago. The world has changed a lot since then, but even more than 20 years ago, the use of tax havens for warehousing income and assets by Australians was a no-go zone. In 4 years in the Channel Islands, I did not come across any Australians warehousing assets or income in the Channel Islands. From time to time, a client, having become aware of my time in the Channel Islands, asks about the Channel Islands and I wholeheartedly agree with you that there is no place for such use of tax havens by Australian residents. 

There is much misconception about the use of tax havens and your TaxVine article reinforces a stereotype view that there is no legitimate use of tax havens by Australian residents, or at the very least that any use of tax havens by Australian residents is tax avoidance. 

It borders on irresponsible to portray every organisation that has a presence in a tax haven as engaging in tax avoidance. 

There is a widespread misconception that if a tax haven is used then there is no tax, which is simply not true. Depending on the activities in the tax haven, there can be tax payable in the tax haven. Tax avoidance is not the deciding factor for many Australians having a presence in a tax haven! Commercial reality overrides tax! Try getting international trade finance out of a big four Australian bank and you soon realise that you have to go offshore and many of the European banks are based in tax havens. Your suggestion that using a tax haven is to “skirt” Australian tax implications is disappointing and frankly misleading. 

It is possible to fully disclose presence in a tax haven and comply with Australian tax law. For commercial reasons, it is sometimes necessary to have a presence in a tax haven. My experience is that having a presence in a tax haven and complying with Australian tax law results in less after-tax returns to the Australian taxpayer. Such use of tax havens is not tax evasion. The extra tax paid is the commercial cost of having a presence in a tax haven. 

This is not a political response to your article. Malcolm Turnbull as PM disclosed use of the Cayman Islands and to my recollection there was no serious suggestion, he avoided Australian tax. The problem Malcolm had was that once the public heard tax haven, the rest of the conversation was too complicated for the average commentator. 

You are not the average commentator on matters of tax and yet your article was simplistic. Your article lacked balance and I think you should have done much better. 

From a long-term member who does not want ATO attention. 

MEMBER 231 writes: 

Love it Bob – great read. 

MEMBER 232 writes:

Bob Deutsch needs to be careful about his comments on tax havens, especially the Cayman Islands. I believe that the death penalty still exists in Australia for treason. 

The Cayman Islands is a British Overseas Territory and thus under the direct rule of The Queen who last week took back control of the UK. She is also the supreme monarch of Australia. 

She has a similar role in Bermuda and the Channel Islands that Bob mentioned. As monarch, she is able to abolish the tax haven status at a flick of her sceptre. 

This may sound like I am joking but these tax havens exist because the British Government allows them to exist. They could be closed down immediately if Britain imposed tax on them at mainland rates.

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