Evidence from leaked account data on how elites use offshore banking [pdf]

It's not that their forced, it's that they get to. That's the reward for doing so well. It's also happens to be the cost of not getting eaten.

Tax law has issues, but deficient analysis, audit and enforcement against richer, more complex files is a huge issue.

Why fail to fix one over the other?

These people figure they can't attract legitimate investment so instead they index on how to bar the exits. It is more conspicuous who doesn't get the scrutiny of Brookings, ICIJ, TJN, and organizations like them. (hint: you elected them) These places are just fronts for post-hoc policy justification, and papers like these are pseudo-intellectual activism masquerading as scholarship.

I see a similar authoritarian nerd attitude in security all the time, where someone finds an unexpectedly invasive surveillance method and then tries to ingratiate themselves to the institutions who can mandate it. They think they have made something people want, when in fact they have only invented a new way to betray their fellow citizens to the insatiable will to power of bureaucracies. (Contrary to the talking points of their apologists, bureaucracies are in fact not made of people, they are made of bureaucrats)

Let's look at a problem these organizations don't care about, like the real social issue that is domestic money laundering, which not only converts the proceeds of really harmful crimes into legit bank deposits, it harms communities directly with real estate and rental bubbles, diseconomic businesses, dumping, political and police corruption, all of which their anti-capital policies directly create. The revenue-gap nerds are fine with laundering because some of it comes into the tax net, social consequences be damned.

While I have never earned enough to hide it in my life, I wish the class of people who think governments have a revenue problem but not a spending or scope problem would try solving a problem they didn't first cause for a change instead of thinking the world needs more of their concern and facilitation.

You could also just fund enforcement and have real penalties with teeth. You get a few hundred multi millionaires going to prison and the problem will go away. When you're at that level, it's simply not worth taking the chance if the risk is real.

For some reason edit is not working here's with the format fixed:

Throwaway for obvious reasons

Since the world is lacking in the department of opinion of wealthy men[1], let me add something to this discussion:

I'm currently in the situation of becoming rich (from a global standpoint, unicorn early employees would laugh at my near future net worth) due to selling my company. I'm having conversations with both tax lawyers and private bankers who are interested in helping me manage my future money. It's very clear for both sides that:

a) I never want not to be rich again

b) Paying less taxes is better than paying more taxes

Even so, all the professionals I talked to were very straightforward with saying that trying to avoid taxes would bring more headaches than it was worth it. Deferring taxes is considered kosher even for tax authorities as long as I declare everything I have correctly and it wouldn't be that bad after the first uh, let's say bite after the liquidation event.

Still, they insisted that an offshore structure would be useful to me for the rest of my life. I'm not American, I'm a citizen of a developing country that isn't a total mess, but it's... developing. And let's leave it at that. A few cases that convinced me:

1) Tax officers have no downside to suing even completely transparent transactions. It's completely possible to get a tax bill with a heavy fine on top years after the fact because suddenly someone thought something was off. One of the tax lawyers I talked to mentioned[2] how he nullified a ~hundreds of millions fine/reassessment, but only after a long (+expensive) legal battle and a lot of stress for the sellers. Totally unfounded, and he mentioned it happened more than once.

2) I almost lost my exit because the government bureaucracy was not working due to covid and the buyer had a hard deadline for Q1. Said bureaucratic procedure would be a single docusign in a business-friendly jurisdiction (aka tax heaven)

3) American private bankers find it a hassle to deal with developing country clients directly, handling their money through offshore accounts (as a business client, that is, the shell corp is the private banking client) is a lot easier.

4) This is not a case, but: I don't love paying taxes, but I understand that I live in a poor country and of course taking a tax dollar from me is a lot fairer than taking a tax dollar from my poor neighbor. Still, it is not beyond the realm of possibility that my government, or at least a few unsavory parties that could be in charge one day, decides that it wants to set a high wealth tax or outright confiscate investments and I don't plan on making that easy (see point a above).

So, there's that. No need to feel sympathies for the (future) millionaire here, just want to share that avoiding taxes is not my primary concern, and could not be for others, too.

[1] Yes, this is a joke [2] Later I confirmed with said client, he was still angry at it