Shady business: How the rich stash their cash

The global mega rich are invading New York City. Foreign investors are pouring billions of dollars into pricey real estate all through the façade of shell companies.

According to a lengthy New York Times investigation, big investors are setting up limited liability companies or LLC’s that act as a front for investors to remain anonymous. Almost half of the most expensive real estate in the country is purchased anonymously through these shell companies.

Yahoo Finance senior columnist, Michael Santoli says the super wealthy see these real estate buys as a safe investment. “We have this class of global mega rich with a lot of money to stash places. They want a safe place for it. If they can’t get a return they want it to hold its value.”

The Times reports that only a third of the owners actually live in the condos. “It’s really not a place to live. It turns out its places for people to put a lot of money. Who knows where they made the money? The laws here allow them to remain completely in the dark or almost completely secret in terms of the identity of the buyer,” says Santoli.

Often times the LLC is registered in the names of relatives, lawyers, accountants and others. The properties are bought on behalf of the group, further clouding where exactly the money is coming from. These investors are considered nonresidents and avoid paying city taxes while receiving some pretty generous property tax breaks in the process.

Santoli says buying under the LLC allows investors to bypass money laundering hurdles and compliance issues. “The buyers are kind of executing a little bit of a regulatory arbitrage or opportunism. It’s not easy to put actual cash here and it’s not easy to buy stocks, but somehow because of local laws and other things it’s easy enough to buy a hard asset like a condo.”

Several sales are made in cash, eliminating paper trails like mortgage statements. Real estate agents say anonymity is key to recruiting and maintaining clients. “The real estate agents think of themselves as shielding their wealthy clients the way private bankers do,” says Santoli. As long as they are receiving the cash, there’s little incentive for them to investigate where it’s actually coming from.

The ultra wealthy have also long adored the secrecy of Swiss banks for stashing their cash. Documents leaked by a former HSBC (HSBC) employee and analyzed by the International Consortium of Investigative Journalists exposed how HSBC used its Swiss private banks to help some high profile customers avoid taxes and hide more than $100 billion. 

Mentioned in the documents are actor Christian Slater, model Elle MacPherson and fashion designer Diane von Fürstenberg. Some of the world’s most dubious leaders also show up in the leaked docs- former Egyptian president Hosni Mubarak and current Syrian ruler Bashar al-Assad.

Extremely wealthy people are looking for new ways to keep their money safe. “You have this super elite mega rich with billions and billions and they look around the world and there are no easy returns to be had anywhere. You can’t just put it in bonds and get a good return so you might as well go to extra lengths to keep it safe somehow.”

Read more: Shady business: How the rich stash their cash - Yahoo Finance

Tax Havens: "The Netherlands is not a tax haven", says minister - but reports contradict his statement

The Netherlands - major tax haven

The Netherlands is not a tax paradise, junior finance minister Frans Weekers said on Tuesday following the publication of two reports on Dutch tax treaties.

But reports contradict his statement.
.
A report for Holland Financial Centre by economic institute SEO said that €278bn flow through shell companies based in the Netherlands every year.

This stems from the tax break on participations, relatively low tax on interest and royalties and the wide tax treaty network with other countries, the SEO report says

The SEO report states the Netherlands has some 12,000 multinational holding companies, of which 75% are based at trust offices. These holding companies generate between 8,800 and 13,000 jobs – or around only  one job per company.

Another report on Tuesday said the Netherlands’ extensive tax treaty network with other countries leads to huge revenue losses in developing countries.

Research by multinational research institute Somo shows ‘28 countries together lose €771m on dividend and interest tax income alone every year,’ because of Dutch tax treaties.

But the total amount will be far higher because the calculations do not include tax avoidance through profit shifting with the use of royalties and capital gains

‘This report shows Dutch tax treaties have a seriously negative impact on poor countries’ revenue and that there is no evidence these tax losses are compensated by an increase in investment as a result of having tax deals,’ said Somo researcher Katrin McGauran.

In particular, Eastern European countries such as Serbia, Ukraine and Croatia have very disadvantageous treaty provisions, the report states.

In late 2012, Mongolia cancelled its tax agreements with the Netherlands and other countries because of the loss of revenue.

Read more: DutchNews.nl - The Netherlands is not a tax haven, says minister