Investment Research Group
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As one put it “Every person could be a world citizen - in effect, his or her own sovereign, with no allegiance or obligations, including the requirement to pay taxes to governments formed under the old notion of nationhood."
The opportunity to make big money in an investment scheme and avoid paying tax on it can be very alluring but often such offers are a downright scam. Goldhaven, an investor information and education service in US, offers some tips on how to avoid getting burned.
- If an "opportunity" appears too good to be true, it probably is. If others, including your friends, claim to have been paid, it could be a well-orchestrated scheme where some investors are paid back in order to encourage others to invest.
- Know the person or company with whom you are dealing. Do your homework. Visit the business location and consult with local banks, regulatory authorities or the company's accountant. Real investments are audited; scams are not.
- Follow common business practice. Be wary of businesses that operate out of post office boxes and do not have a street address, or of dealing with persons who are never in the office when you call, but always return your call later.
- Make sure you fully understand any business agreement you enter into. If the terms are complex, have them reviewed by a lawyer.
- Be wary of business deals that require you to sign nondisclosure or non circumvention agreements that are designed to prevent you from independently verifying the credentials of the people with whom you intend to do business.
- Avoid anyone who encourages you to break the laws of any nation or pitches an investment that relies on complete secrecy. A secret is safe if only you know about it, and this is impossible when using an offshore structure.
- Determine how safe the investment is before spending a lot of time and money investigating the offer. If you are being asked to trust your money to someone else whom you don't know, be suspicious.
- Be wary of any offer that pressures you to make a decision in a short period of time.
- If your instincts are warning you to beware, don't get involved until you feel comfortable. Often greed can overwhelm common sense, and this is always a mistake.
- Avoid investment or loan schemes where the main benefit of the transaction appears to be the tax breaks you will receive.
At the best of times, schemes to avoid tax are a dangerous business. Take the case of Willy Nelson, 71, one of the legends of Texas music. At his peak Nelson made millions of dollars, and with the help of his advisers he entered into some complex transactions that enabled him to avoid paying all the taxes due. Many years later, now well past his earnings peak, the US authorities nabbed him for tax avoidance and penalised him millions of dollars. Poor Nelson had to stage special concerts to try and repay the tax authorities.
The problem with tax avoidance schemes is that most tax law includes a provision that you cannot enter into a scheme to avoid tax, the kind of blanket provision that really gets you into trouble. It’s not like the road code, where you either broke the law or you didn’t, because a lot in taxation is open to interpretation and it can take a lengthy court battle to decide who is right.
