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Judge Defends Bahamas

Monday, August 23, 2010

A Supreme Court judge in the Bahamas has in a recent judgement spoke out against the labeling of tax minimization arrangements in the Bahamas as ‘fraudulent activities’, underscoring that in English and international tax laws tax avoidance by way of tax-efficient planning through the use of tax neutral jurisdictions remains legal despite rhetoric circulating as a result of the Organization for Economic Cooperation Development’s crackdown on so called ‘tax havens’.

The highly complex case, in which the comments have arisen, relates to a thrown-out request by Ecuadorian banking authorities for assistance in the prosecution of the Ortega family with respect to their ownership of now-collapsed Ecuadorian commercial bank, Banco Continental, a number of Bahamian International Business Companies, and a Bahamian-domiciled mutual fund, Inter-American Asset Management Fund, in a case dating back to the mid-1990s.

Delivering a defense with respect to those operating financial services business from the Bahamas, Justice Neville Adderley, said:

“The court takes judicial notice that the Financial Services Sector has long been recognized as the second most important economic sector in The Bahamas next to tourism in terms of employment and contribution to the Gross Domestic Product.”

“It has gained, and had done so by 1995, an international reputation as a non-tax international financial centre known for bank secrecy which produced numerous financial products including international business companies, trusts, mutual funds, and other vehicles to facilitate the lawful and legitimate avoidance of taxes, proper estate planning, private wealth management, and private banking. This proved attractive to and was extensively utilized by citizens and institutions of high tax jurisdictions including Ecuador.”

“We must resist the temptation to pin a badge of fraud on persons who make use, legitimate use, of offshore jurisdictions like the Bahamas.”

“We see today the manifestation of frustration of the high tax countries in not being able to keep up with the various legitimate schemes devised by and for international financial centres like the Bahamas.”

“Specifically, what some have called a heavy-handed and unilateral approach has been taken by the countries of the Organization for Economic Cooperation and Development (OECD) vis a vis the international financial centres (which when located outside the OECD have the depreciative label of “tax havens”). They have devised various lists: the “white list” “grey list” and the “blacklist”. These initiatives appear to be designed to set new evolving standards of disclosure in financial services required by the OECD countries irrespective of the legislative framework of the respective offshore jurisdictions.”

“It has long been settled in English and international law that there is nothing wrong with a person so ordering his affairs to lessen his burden of taxes by lawfully avoiding (in contradistinction to evading) or otherwise making lawful use of offshore jurisdictions. I would doubt that as a matter of practice or prudence professional advisors who devise legitimate schemes to avoid taxes or otherwise to lawfully avoid provisions of the laws of their countries first discuss the details with the authorities of their countries… as legislators would very likely plug the legal loopholes.”

“The court does not accept, therefore, without other admissible evidence that failure to discuss with or disclose to the regulators of their home countries the details of lawful schemes of avoidance (or which they believe to be lawful) set up in international financial centers like The Bahamas is in itself a badge of fraud or an indication of dishonest intent."

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions


Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation


Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees


Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees


Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax


Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision


Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment


Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations


Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations


Madeira: Legal Framework and Formation Rules and Fees


Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004


Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment


Monaco: Legal Framework and Formation Rules and Fees


Nevis: Legal Framework and Formation Rules and Fees


Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama


Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance


Vanuatu Legal Framework and Formation Rules and Fees

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