Does tax planning still work in a world of Tax Information Exchange Agreements ('TIEAs'),' ever stricter compliance and KYC regimes, a focus on taxation on the wealthy and the targeting of tax havens? The new private client and wealth preservation environment has come about in recent years as a result of a succession of paradigm-challenging events, namely the collapse of world's financial markets in the wake of Lehmann Brothers, loan defaults, rising unemployment and explosion of sovereign debt issues leading to bailout after bailout of ailing European economies. All these factors have combined to deliver a death blow to the last remaining shreds of confidence in, and a tightening of, international money markets, a series of events which has brought the management of private wealth into sharp focus.
It is, however, important to maintain perspective and understand the reality of the wealth preservation business, particularly in the context of a jurisdiction like Gibraltar. Today, tax planning remains your route map for wealth preservation, few trusts are ever actually subjected to attack by the authorities and access to information by the authorities is hardly on the basis of an 'open book' approach. In order to access the information they covet, they need to be able to meet a series of criteria designed to protect individuals from prying eyes on a 'fishing expedition.' So confidentiality in bona fide situations can still be maintained and protected from attack.
As we progress, some private wealth management realities remain unchallenged whilst others adapt to the new business environment: people today follow their money, not the other way around; technologies and cheap air travel make choice of country of residence an easier task than ever before and ensuring tax residency in an 'onshore specialist finance centre' also limits tax information exchange risk. Therefore, despite entering into a large number of TIEAs with countries around the world, Gibraltar continues to offer modern and acceptable tax planning solutions in what is otherwise a very difficult economic market. Why?
Gibraltar's membership of the EU has been quite the mixed bag for the jurisdiction. It has brought to our financial services offering both opportunities and challenges and the local industry has managed to deliver on the promise of the opportunities of said membership whilst effectively dealing with every challenge laid down before it over the years. The crux of the matter, however, is that our membership of the EU is, beyond question, one of the fundamental advantages the jurisdiction is able to offer.
In addition to that, the availability of favourable tax regimes for high net worth individuals, the availability of trust solutions found in common-law based legal systems such as ours, allied to the lack of capital gains, wealth or inheritance tax, make Gibraltar an ideal place to consider in a wealth management, tax planning context. In addition, a consideration of all the advantages bestowed by our membership of the EU, in particular the ability to passport financial services throughout Europe makes for a compelling case.
As a jurisdiction, Gibraltar has been enjoying a steady demand for its solutions for a variety of factors. Tax measures taken in the UK in recent times, such as the imposition of the 50% income tax and other prohibitive measures, have driven many of the City's highest flyers out of London and on to friendlier places that were offering simple and far more economical tax treatment. Many of these exiles sought 'refuge' in Switzerland, a location which for very long represented the last bastion in secrecy and confidentiality which, in addition, offered simpler and more advantageous tax treatment for such individuals. In 2010, however, Zurich abolished it's lump sum tax regime which saw 46% of it's resident rich foreigners move away to pastures new. As quoted recently in the UK press, La Gauche, Switzerland's left wing party, recently started a petition to seek the abolition of favourable tax deals for rich foreigners throughout the country, a petition which enjoys widespread political support and voting is due to be conducted in a number of other Cantons over the next few months.
It seems, therefore, that a sea change may be on the cards which may well see significant wealth seeking a new home within Europe. I am of the view that Gibraltar offers much which can draw the interest of this newly mobile wealth by offering a wide range of tempting solutions for high net worth individuals: a common law jurisdiction offering the trust and planning solutions such individuals require, onshore and within the EU yet remaining distinctly attractive from a tax perspective.
This is a private client offering which is now bolstered by a robust and eminently reasonable corporate taxation regime, allied to continued investment of time and money by the industry in the development of all our financial services products, particularly in the funds context. Gibraltar will continue to play it's recently rediscovered role of European specialist onshore domicile of choice for private individuals, asset managers and funds for some time to come.
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