Pandora Papers: What are they and how can you stay out of it? -opinion

The International Consortium of Investigative Journalists published more racy stories on the high seas events of famous people on October 3 in the Pandora Papers. This follows previous scoops on the Panama Papers. We will not repeat any of the published names as there is no evidence of wrongdoing.

What is the ICIJ?

The ICIJ says it is a US-based non-profit organization funded by donations with its own team of reporters and a global network of reporters and media organizations working together. Its website invites whistleblowers to come forward.

What does the ICIJ want?

The ICIJ says it collaborates in investigations that expose the truth and hold the powerful accountable.

Tax calculation (credit: INGIMAGE)

What’s in Pandora’s Papers?

The ICIJ says that nearly 12 million leaked files have uncovered financial secrets of 35 current and former world leaders, more than 330 politicians and public officials in 91 countries and territories, as well as cabinet ministers, ambassadors, fugitives, con artists and murderers.

The leaked records apparently come from 14 offshore services firms around the world that set up shell companies and other offshore “corners” for clients who often seek to keep their financial activities in the shadows.

Does it matter?

The ICIJ says that at least $ 11.3 trillion remains “offshore,” according to a 2020 OECD study. But the ICIJ admits that it is not possible to know how much of that wealth is linked to tax evasion and other crimes and what part involves funds that come from legitimate sources and have been reported to the corresponding authorities.

Entrepreneurs operating internationally apparently say they need offshore companies to run their financial affairs.

But ICIJ says these issues may amount to shifting profits from high-tax countries, where they are earned, to companies that exist only on paper in low-tax jurisdictions. The use of offshore shelters is especially controversial for political figures, because they could be used to keep politically unpopular or even illegal activities out of the public eye.

Why the name Pandora Papers?

According to the ICIJ, the Pandora Papers provide details on tens of millions of dollars that were moved from coastal paradises in the Caribbean and Europe to US states, including South Dakota, which has apparently become a major destination for travelers. foreign assets. “As a citizen, I am very sad that my state was the state that opened Pandora’s box,” a former legislator told ICIJ.

Comments – general

The focus of the ICIJ seems to be on people rather than companies. If so, the ICIJ may be rendering a useful service if it is actually exposing the corruption of individual leaders and officials. The ICIJ should clarify its purpose.

Furthermore, the ICIJ appears to miss the objective of corporate tax planning. A legitimate strategy of many multinationals is to maintain intellectual property in offshore companies that sell products through Internet cloud websites. These strategies are only now becoming the target of proposed OECD measures known as the two-pillar fiscal package. Pillar 1 proposes to transfer some taxable profits to the countries where the clients are located. Pillar 2 (strongly supported by the administration of US President Joe Biden) requires a global minimum tax rate of 15%.

The two-pillar package would only affect the largest multinationals with global revenues above € 20 billion (pillar 1) or € 750 million (pillar 2). Other changes to income tax, VAT, and sales tax are starting to affect many more e-commerce merchants.

Comments – Israel

Israel repealed exchange controls in 1998, so Israelis are allowed to have assets abroad.

In addition, new residents and returning elderly residents (who lived abroad for 10 years) are exempt for 10 years from Israeli tax on foreign source income. They are also exempt in that 10-year period from disclosing foreign, overseas or other assets.

When not covered by an exemption, Israeli residents and businesses must adhere to a number of Israeli rules that address situations abroad. These include:

Companies controlled and managed in Israel are residents and taxable in Israel;

The Israeli tax on so-called dividends from undistributed profits of passive “controlled foreign companies” of more than 40% to 50% controlled by Israeli residents and paying less than 15% tax abroad;

The Israeli tax on so-called dividends from undistributed earnings of “foreign professional companies” that primarily perform various services and are at least 75% controlled by Israeli residents;

Transfer pricing without arm’s length conditions;

Artificial or fictitious acts;

Anti-money laundering review procedures of Israeli banks;

Automatic exchange of information between banks and tax authorities.

In short, tax avoidance is increasingly difficult and the use of a foreign location is less relevant in many cases, leaked or not.

As always, consult experienced tax advisers in each country at an early stage in specific cases.

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The writer is a certified public accountant and tax specialist with Harris Horoviz Consulting & Tax Ltd.



Reference-www.jpost.com

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