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PPLI: Efficiency = Balance

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Harmonious Efficiency = Private Placement Life Insurance

When the elements of a transaction are balanced it produces Harmonious Efficiency. This is exactly what is achieved for the assets of wealthy international families in a properly constructed Private Placement Life Insurance Policy (PPLI). PPLI is a product that dates back to the 1980s, so you are not employing something that was invented yesterday. Life insurance regulations and laws are also well-established and relatively straightforward in most countries throughout the world. PPLI provides a balanced approach to structuring assets that does indeed produce Harmonious Efficiency.

We have chosen two examples of Harmonious Efficiency that are analogous to PPLI. The basic tenants of the Efficient-Market Hypothesis (EMH) are set forth below. From the world of retail sales we give you an example of how a novel approach to selling a product created Harmonious Efficiency.

Harmonious Efficiency implies that all parts of a structure fit together and work toward solving a client’s financial aims. These aims are stated most succinctly in the six elements of Expanded Worldwide Planning EWP. (Please see Wikipedia International tax planning for a complete explanation of the six elements). They are:

Privacy
Asset protection
Succession planning
Tax Shield
Compliance simplifier
Trust substitute

We quote from the Principles section of the Wikipedia article:

“Foreign Account Tax Compliance Act (FATCA) and CRS. At the heart of EWP is a properly constructed Private placement life insurance (PPLI) policy that allows taxpayers to use the regulatory framework of life insurance to structure assets along the client’s planning needs. These international assets can also comply with tax authorities worldwide. EWP also brings asset protection and privacy benefits that are set forward in the six principles of EWP below. The other elements in the EWP structure may include the client’s citizenship, country of origin, actual residence, insurance regulations of all concerned jurisdictions, tax report requirements, and the client’s objectives.

Planning with trust and foundations frequently offer only limited tax planning opportunities whereas EWP provides a tax shield. Adding a PPLI policy held by the correct entity in the proper jurisdiction creates a notable planning opportunity.”

Trying to understand the stock market has challenged many to produce come theories that explain its behavior. One of them is the Efficient-Market Hypothesis (EMH). We quote from the Wikipedia page on this subject.

“The efficient-market hypothesis (EMH) is a theory in financial economics that states that asset prices fully reflect all available information. A direct implication is that it is impossible to “beat the market” consistently on a risk-adjusted basis since market prices should only react to new information.

The Efficient Market Hypothesis (EMH) was developed by Eugene Fama who argued that stocks always trade at their fair value, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by chance or by purchasing riskier investments. His 2012 study with Kenneth French supported this view, showing that the distribution of abnormal returns of US mutual funds is very similar to what would be expected if no fund managers had any skill—a necessary condition for the EMH to hold.

There are three variants of the hypothesis: “weak”, “semi-strong”, and “strong” form. The weak form of the EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. The semi-strong form of the EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. The strong form of the EMH additionally claims that prices instantly reflect even hidden “insider” information.

There is no quantitative measure of market efficiency and testing the idea is difficult. So-called “effect studies” provide some of the best evidence, but they are open to other interpretations. Critics have blamed the belief in rational markets for much of the late-2000s financial crisis. In response, proponents of the hypothesis have stated that market efficiency does not mean not having any uncertainty about the future; that market efficiency is a simplification of the world which may not always hold true; and that the market is practically efficient for investment purposes for most individuals.”

At the outset the firm StockX did not have the goal of making market efficiency its top priority, but it has brought it to the secondary market for high-end sneakers. We quote from “This Website Is the Stock Market for Nikes and Rolexes” by Jacob Gallagher of The Wall Street Journal.

“It was Tuesday, Nov. 13, 2018. Though Josh Luber would rather it didn’t, in three days, Adidas was planning to re-release the Yeezy Boost 350 V2 “Zebra,” a black-and-white striped version of its Kanye-West-designed sneaker. Mr. Luber, co-founder of StockX, an online trading platform for sneakers, streetwear, handbags and watches, hates when companies disrupt his market strategy. Within a week, his hypothesis was confirmed: Yeezy Zebras were trading for about $270 on StockX, just $50 above retail and well below their peak of $2,000.

Tracking sneaker values has long been Mr. Luber’s obsession. In the late 2000s, he was a strategy analyst at IBM in New York who spent his nights trawling eBay for data on how much sought-after shoes were selling for on the secondary market. He compiled those figures into Campless, a sort of Kelly Blue Book for sneaker-resale value. But Mr. Luber wasn’t satisfied with eBay. His beefs weren’t limited to the bad photos that sellers posted or their habit of selling fakes. What really bugged him was the absence of price standardization. One dealer might peddle a pair of Nike Dunks for $100 and another might list the same shoes for $300. Mr. Luber envisioned a more orderly market, with a New York Stock Exchange-style ticker, that would make the value of a pair of sneakers transparent, in real time. When those Dunks sold for $100, everyone on the market would know about it, thus forcing other sellers to knock their prices down to the going rate.

Around that same time, Dan Gilbert, the founder of mortgage lending company Quicken Loans, noticed that his teenage son was flipping sneakers on eBay for profit. Intrigued, Mr. Gilbert founded a research team on sneaker reselling who discovered what Mr. Luber was working on. Mr. Gilbert bought Campless in 2015 and the pair joined forces (along with COO Greg Schwartz), launching StockX, “the stock market of things,” based in Mr. Gilbert’s hometown of Detroit in February 2016.

Today, StockX employs nearly 550 people worldwide, and has added watches, handbags and streetwear (including widely hyped hoodies, T-shirts and even skateboards from brands like Fear of God, Off-White and Bathing Ape) to its marketplace. Mr. Luber explained that StockX only deals in rarefied products that balance liquidity and scarcity. A J. Crew gingham shirt will never be on StockX because it’s too common, nor will a Picasso painting, because it’s too rare. A variety of Nike Air Jordans of which only 1,000 pairs may exist is ripe for StockX’s marketplace.

Because of these items’ scarcity, fakes remain a major issue on the resale market. StockX only accepts new merchandise and employs over 100 authenticators to identify counterfeits. “When we started the business three years ago, we couldn’t go to LinkedIn and find sneaker authenticators,” said Mr. Luber. “We basically created that career.” It takes about 90 days to train authenticators who use scales, durometers (to measure density) and apps to spot fakes. Korre Jefferson, 20, a retail associate in Brooklyn, N.Y., said he liked knowing that someone had validated the authenticity of the sweater and pair of sneakers he purchased on StockX this year: “Sometimes on [resale marketplace] Grailed you might have someone selling something that’s clearly fake, so it’s nice to have that security with StockX.” Over email, Grailed co-founder Jake Metzger explained, “We have a team of experienced moderators combing the site every day looking for suspicious users and listings. Any user caught actively selling fake merchandise is banned from the platform.”

The aim is not to turn novices into sneakerheads willing to pay 11 times the retail cost for a pair of Nike’s Off-White Air Jordans. Rather Mr. Luber would like to create a destination for sneaker buyers of every ilk. He noted that a lot of items on StockX do sell for less than their sticker price: “Sometimes it’s just access. It’s a general-release shoe from three years ago, but it’s just not available on Nike.com so now you can get it on StockX.”

In further attempts to expand its reach, last month StockX opened an office in London and has its sights set on China. There are regional differences here and there—fewer basketball sneakers in Europe, more Nike Air Force Ones in New York—but by and large, users want the same sneakers and clothes whether they’re in Brussels or Brooklyn. Often these days, that means Yeezys, Off-White Nikes and Supreme.

For Lucio Nunes, 20, a student in Switzerland who has sold shoes on StockX for two years, using the London office has improved his selling experience. Shipping rates are cheaper, as he no longer has to send his shoes further abroad, and his money clears faster. Still he said, the one downside to StockX is that it has lowered prices throughout the sneaker flipping-world. “The prices are much more visible because everyone looks at StockX and takes it as the market price,” said Mr. Nunes. It’s harder to cheat the market when the ticker price is just a click away.”

The Efficient-Market Hypothesis (EMH) is brought to light in this last quote from Mr. Nunes. Like all theories EMH works up to a point. If EMH worked perfectly there would be no Warren Buffet or successful hedge fund managers like Steven Cohen.

PPLI structuring achieves Harmonious Efficiency through using the conservative vehicle of an insurance policy. Like a trust it is a structuring tool, but a more powerful one in that it has added tax and privacy benefits. The performance of the assets in the policy is managed by an asset manager, and the assets are kept in separate accounts for the policyholder. The performance of these assets is independent from the structure, but the tax benefits of PPLI do provide Alpha thus giving the asset manager an added advantage.

The Harmonious Efficiency we achieve for our clients brings them balance and makes them very satisfied. Please let us know how we can create Harmonious Efficiency for you.

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by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc

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PPLI AND JURISDICTIONAL ISSUES

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Whose Jurisdiction Is This? Private Placement Life Insurance Defines and Simplifies

A proper understanding of jurisdictional issues is key to a successful Private Placement Life Insurance (PPLI) structure. One cannot simply take the assets of wealthy international families and move them offshore and expect a good result. The tax residence of the family is paramount, as well as the tax residence of the beneficiaries. A PPLI structure that is successful in one country, might not work in another. These factors must be thoroughly researched for the wealthy international family to have a successful PPLI structure. Since these PPLI structures tend to be long-term the necessity for this thorough research is even more compelling.

What are the areas that must be looked at to produce a successful outcome? The jurisdictional issues involved in all these areas must be addressed: tax treaties; tax laws; insurance laws; forced heirship issues, trust domicile; location of the assets; and tax reporting issues.

For our examples which illustrate jurisdictional issues, we give you one news story and excerpts from an excellent scholarly article: “GILTI: “Made in America” for European Tax Unilateral Measures, Excess Profits & the International Tax Competition Game” by G. Charles Beller, UVA Law School, Class of 2018, Virginia Tax Review (forthcoming 2019).

As you will read our news story demonstrates how an unwanted intrusion by one jurisdiction into another can produce a very bad result. In the area of international taxation, individual countries are now competing with each other for international tax dollars. Governments are looking for a system that avoids unwanted intrusions at any level and respects the sovereignty rights of each country.

A key question posited by this article is: “How does Global Intangible Low-tax Income (GILTI), the U.S. global minimum tax on excess profits introduced with the “Tax Cuts and Jobs Act’s” (TCJA) fit into the larger debate about international tax avoidance, “harmful tax competition,” and taxation in the “digital economy”? As you will read, the article reaches a compelling new paradigm, partial developed from game theory, that could be a model for future international tax transactions.

Here are some key points from the article:

“Rather than perpetuate trans-Atlantic hostilities as Europe and the OECD consider the “digital economy,” the U.S. tax and business communities should explain how GILTI promotes beneficial competition on productive factors, discourages base erosion and profit shifting by U.S. multinationals (MNEs), and provides cover for European and other developed countries to modernize international tax rules consistent with longstanding principles of tax territoriality.

Political developments in the European Union and OECD suggest that EU member states need not feel guilty about leveraging a GILTI-esque minimum tax tool to combat the challenging issues facing international taxation in the digital age. Indeed, Germany has suggested a GILTI like minimum tax tool as part of a multilateral OECD proposal to confront challenges in taxing the “digital economy” – “a kind of BEPS 2.0” that utilizes U.S. unilateral action to facilitate multilateral cooperation.

At the heart of the controversy over GILTI, “Digital Taxation,” and the larger BEPS project is a debate about the propriety and benefits of tax competition. While tax competition is a controversial concept among economists and tax lawyers, recent scholarship provides a typology to talk productively about tax competition.

This paper draws on the theory of tax competition and language of international tax neutrality to argue that international tax policy must be viewed through the lens of “national welfare” when considering strategic incentives and thus positive predictions about nation state behavior in the international tax competition game.

Viewing tax competition and GILTI’s global minimum tax through the prism of game theory yields important insights into the potential for unilateral U.S. action to alleviate global collective action problems. An important question in evaluating GILTI is whether it enables potential cooperative behavior among developed economies through signaling and minimum standards by a sovereign with “pricing” power to set global rate and base terms for MNEs.

In short, is GILTI a harmful unilateral measures that undermines cooperative efforts in the OECD and EU? Or is GILTI like FACTA — a veiled if unsolicited gift for developed EU economies? This paper answers these questions and highlights the potential of a global minimum tax on excess profits to further debate about international taxation in a digitized economy while retaining foundational principles of tax territoriality.

Sovereignty and multilateralism have become buzzwords defining battle lines in a global debate about political ideology and international relations. International tax policy is a technical field that must skirt ideological battles and avoid aligning with “pure” multilateralism or “radical” unilateralism. While BEPS took an ideological position in arguing that cooperation stands in conflict with unilateralism, this paper shows how unilateral measures can foster beneficial cooperation in certain areas of the international tax policy.

As the FACTA/BEPS histories and GILTI parallels suggest, cooperative action is facilitated under certain scenarios through unilateral action with cooperative potential. Global minimum tax rates can operate as a sovereign cartel tool without clear efficiencies for productive factor competition or tax diversity. GILTI takes a different approach. It does not attempt to impose a global minimum tax rate by way of multilateral horse-trading. Instead, GILTI implements a resident based global minimum tax on excess profits that enables productive factor competition. Moreover, GILTI respects traditional principles of tax sovereignty and territoriality. GILTI’s resident based global minimum tax allows competing sovereigns to set their own rate and base terms. GILTI merely limits the benefit that foreign source rates confer on resident foreign profits.

As a result, GILTI’s resident global minimum tax tool shifts international tax competition away from a cat and mouse game of tracking down and labelling “tax havens” or “harmful” tax competition. Instead, the hunt for “harmful” tax competition is replaced with a productive experiment among competing sovereigns for a diverse array of resident benefits that allow domestic firms to exploit excess profits at home and abroad. Under GILTI (and similar tax tools), resident MNEs share the surplus of excess foreign profits with the resident sovereigns that make those profits possible. By enabling resident sovereigns to share in excess profits while at the same time limiting the tax benefit of foreign low tax rates, GILTI furthers productive factor competition.

As EU member states seeks to develop international tax policy for the “digital age,” productive factor competition should be a primary goal. Moreover, Europe must avoid a “two-hemisphere” mindset that targets digital tax revenues earned in the EU while dismissing identical proposals from developing countries targeting European revenues around the globe. GILTI bolsters productive factor competition while retaining the foundational principles of tax territoriality and sovereignty that protect resident firms when operating in foreign markets. That’s why GILTI is a tax tool “Made in America” for European tax.”

Our news story demonstrates a more confrontational jurisdictional dispute with a sad ending: “American Missionary Killed by Isolated Tribe Wrote of Confrontation With the Group,” by Corinne Abrams and Rajesh Roy of the Wall Street Journal.

“As American missionary John Allen Chau sat aboard a boat near a remote Indian Ocean island known for its violent and isolated inhabitants, he wrote a message to his mother and father he made clear might be his last.

“You guys might think I’m crazy in all this but I think it’s worth it to declare Jesus to these people,” he wrote Friday. “Please do not be angry at them or at God if I get killed—rather please live your lives in obedience to whatever He has called you to and I’ll see you again.”

Within a day, Mr. Chau was missing. Five fishermen who took him to North Sentinel Island said they saw the body of someone resembling him being buried under the sand by members of the tribe that allegedly killed him.

Mr. Chau, 26, was visiting the island in India’s Andaman and Nicobar archipelago to try to spread the word of God, according to diary entries released by police.

The tribe has a long history of violent resistance to outsiders and is protected by laws that bar visitors from docking boats within 5 nautical miles (5.75 miles) of the shore.

Mr. Chau’s Instagram page shows a young man passionate about travel and new experiences. In July, he posted photos taken from a canoe and from a diving expedition with the hashtag #Andamans. Many of his posts are hashtagged #Solideogloria, the Latin phrase for Glory to God Alone.

In the journal, Mr. Chau wrote that he was on a mission to establish a kingdom of Jesus, Dependra Pathak, director general of police in the Andaman and Nicobar Islands said. Instead, he died during a “misplaced adventure in the highly restricted area,” Mr. Pathak wrote in a statement.

The islanders, part of the Sentinelese tribe whose origins date back tens of thousands of years, have a long history of hostile reactions to outsiders.

“They are very aggressive and violent. Anyone trying to access the area gets showered with arrows,” Mr. Pathak said.”

Luckily, at Advanced Financial Solutions, Inc. our job is not to decide what is right and proper for one jurisdiction in its relationships with other jurisdictions. Our job is to arrange the jurisdictional elements of PPLI structuring to achieve the best possible result for our clients. From our years of experience, this best possible result is a combination of outstanding tax savings, privacy enhancements, and asset protection benefits. We would like to help you achieve these benefits too. Please contact us with your worldwide asset structuring needs.

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by Michael Malloy CLU TEP RFC, @ Advanced Financial Solutions, Inc

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

Resolving the Contradiction of Changeless Change

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PPLI Can Do It

Can you use a well-established product as a process for the structuring of the worldwide assets of wealthy international families? Yes, is the resounding response from Private Placement Life Insurance (PPLI).

PPLI is both a standard product and a process, and hence its versatility, and at the same time, its stability. PPLI gives a structural framework to the diverse holdings of wealthy international families. Because PPLI is a product and common in the world’s tax and legal frameworks, there is a large body of laws and regulations that give advisors–a road map to follow.

This allows PPLI to give the assets of wealthy international families full privacy and tax savings, and at the same time, compliance with the world’s tax authorities.

To explore the concept of change, our article gives you an example from the world of self-driving automobiles. We also share with you a legal challenge to the OECD’s CRS program.

Changeless Change is also a good description of China. This ancient civilization has transformed itself into a 21st century nation in only a few short years. Shanghai, China, is the venue of the video, “Our Journey Together” Part III, of my presentation at the 5th annual FOA Forum that we offer you below.

PPLI is also known as Private Placement Variable Universal Life Insurance (PPVUL). Its name speaks to the internal workings of the product. It is both life insurance and a home for investments. This is a definition from Cornell University Law School’s Wex Legal Dictionary:

“A form of whole life insurance that combines aspects of universal life insurance and variable life insurance and provides for a death benefit and accrues cash value on a tax-deferred basis. Variable universal life insurance (“VUL”) policies allow for flexibility in premiums, death benefits, and investment options.”

So how does a product become a process, a structuring tool? PPLI is a type of PPVUL, but with very unique characteristics. These are the characteristics that allow clients to accomplish so many valuable elements in the single structure:

Open Investment Universe–Almost any asset that can be held by a trust company can become part of a PPLI policy. With proper structuring even operating businesses can be included.

Simplified Reporting–The assets inside the policy are held in separate accounts for the policyholder, meaning that they are not part of the general assets of the insurance company. But for reporting purposes, the insurance company becomes the beneficial owner of the assets.

Asset Protection–The insurance policy adds another layer of asset protection in the structure. The domicile of the insurance companies also is a help here, as they are located in jurisdictions that have strong asset protection laws, like Bermuda and Barbados.

Low Fees/Commissions–Most often there is a 1% set-up fee. And the ongoing fees are frequently less than 1% of the assets inside the policy. This contrasts sharply to the large first year commissions charged by Universal Life and Whole Life policies.

Now for our examples of how change plays out in the world today. Self-driving cars and the OECD’s CRS are concepts that did not exist a few years ago. To make their way into our everyday world is not an easy task. They both have something to offer, but they must fit into other structures that have existed for longer periods. They are like new pieces of a jigsaw puzzle introduced when the puzzle seems to be complete.

“Self-driving cars Encounter Political Roadblocks” by Mike Colias and Tim Higgins of the Wall Street Journal, give us a glimpse into the process of integrating technological change into the world.

“Auto makers and other companies racing to commercialize self-driving car technology are facing pushback from local politicians, complicating their plans to bring real-world testing to more U.S. cities.

In New York City, General Motors Co. has put on hold plans to begin testing in Manhattan because Mayor Bill de Blasio has expressed concerns about the technology’s safety, according to people familiar with the matter. GM said last year it would be the first company to start driverless-car testing in the city, starting in early 2018.

In Chicago, the city council’s transportation-committee chairman has vowed to block self-driving cars from operating in the nation’s third-largest metropolis, citing safety concerns and the potential for displacing taxi drivers and other jobs.

Even in Pittsburgh, a hotbed for autonomous-vehicle research and development, city officials have recently adopted more stringent requirements, demanding that driverless-car developers detail how a vehicle’s safety system works before granting permission to test on public roads.

A fatal crash in March, when an Uber Technologies Inc. self-driving test car stuck and killed a pedestrian in Tempe, Ariz., has fueled concerns over putting such prototypes on public roads, especially in big cities that tend to be more crowded, transportation officials say. Also, many city leaders say they want companies to show that the technology will provide wider social benefits, such as reducing congestion and helping low-income residents get around.

“It’s a lot of local politics that are difficult to navigate,” said Bradley Tusk, founder of Tusk Ventures, which works with startups on regulations and other political issues. “These are hard issues. You’re talking about small spaces that are very congested.

Meanwhile, a Senate bill that aims to establish nationwide regulations for self-driving cars has stalled in Congress. Without federal direction, cities and states are left to act on their own, creating a patchwork of rules and red tape for companies plowing billions into the technology and hoping to eventually turn their testing into profitable ventures.

GM Chief Executive Mary Barra has called self-driving vehicles “the biggest opportunity since the creation of the internet.” GM, Alphabet Inc.’s self-driving car unit Waymo LLC and others are betting these services will create a market for customers wanting to hail a robotic car much like they do an Uber or Lyft Inc. ride. Some analysts estimate that market could eventually be valued at trillions of dollars.

GM and Waymo are among companies that have been testing in a handful of U.S. communities for years and are getting closer to launching services to paying customers. GM plans to introduce a new robot-taxi service next year, likely in San Francisco, where the auto maker has done the bulk of its testing. Waymo said Nov. 13 that it will begin offering rides in self-driving cars to Phoenix-area customers in the coming weeks.

Companies say that in some cities, they are working closely with officials to assuage concerns, but much more work is needed before a wider rollout is possible.”

Barney Thompson of the Financial Times, shares with us “EU National Challenges HMRC Over New Data Sharing Rules.” CRS aims to assist governments in the fair collection of taxes, but are data protection safeguards in place to protect our rights to privacy?

“An EU national is challenging HM Revenue & Customs over new rules that require tax authorities around the world to automatically exchange information on millions of their citizens who live abroad.”

In a complaint to the UK’s data protection regulator, the EU citizen said the common reporting standard — a key measure against tax evasion developed by international experts that is now being gradually introduced by more than 100 countries — made her personal information vulnerable to cyber hacking or an accidental leak.

However, campaigners have defended the measure, saying it was an important tool in the fight against tax avoidance and evasion, notably through offshore financial centers.

The EU citizen who has made the complaint about the common reporting standard — who does not want to be identified — is currently domiciled in Italy but is described as having “a very international background”.

She lived in the UK for several years and was tax resident in Britain, acquiring a unique taxpayer reference and a national insurance number. She also still has a UK bank account with a deposit of £4,000.

Even with this relatively small amount, her bank is required under the common reporting standard to disclose certain information to the HMRC, including the account number, balance, her name, date of birth and tax number.

In turn, HMRC must pass on the information to its counterpart in Italy, which it is due to do in September.

Exchange of information would be automatic

In theory, any UK bank account holder living in another country that abides by the common reporting standard falls under the scope of its rules.

Within the EU, almost 19m people are estimated to live in a different member state to the one in which they were born.

Like the US foreign account tax compliance act, on which it is based, the common reporting standard was designed as a way to counter global tax evasion by making the exchange of information between countries automatic rather than have tax bodies request it if they suspect wrongdoing.

The standard was developed by the Organisation for Economic Cooperation and Development, the Paris-based international body that co-ordinates co-operation between different tax jurisdictions.

Several countries have poor data security

In her complaint against the common reporting standard to the UK Information Commissioner’s Office, the EU citizen said the exchange of information required by the rules will expose her to “a disproportionate risk of data loss and potentially hacking”.

She added: “This risk has crystallised recently in light of incidents in which HMRC has lost data concerning UK taxpayers and recent data breaches concerning UK banks.”

Her complaint cited how HMRC had lost the personal records of 25m taxpayers in 2007, as well as a media report in 2017 outlining how the tax authority’s website was vulnerable to cyber attacks. HMRC subsequently took action to fix the weaknesses.

Among the countries that have signed up to the common reporting standard are several with poor data security records, added the woman’s complaint.

Furthermore, data leaks such as during the TSB online banking failure this year and attempts by cybercriminals to hack the online tax details of British taxpayers illustrated the dangers around the mass exchange of sensitive personal information, it said.

As a result, the common reporting standard infringed the new EU-wide General Data Protection Regulation, which came into force in May, as well as European human rights laws, said the complaint.

Rules risk ‘identity theft on a grand scale’

The Information Commissioner’s Office has the power to impose temporary or permanent limits on the processing of personal data if it decides that GDPR rules are being infringed.

The office said:

“We have received a complaint relating to HMRC and the common reporting standard and will be looking into the details.”

Filippo Noseda, a partner at law firm Mishcon de Reya, who is acting for the EU national, said the data breach risks involved in the standard “could lead to identity theft on a grand scale”.

Mr Noseda acknowledged that rich clients of law firms would appreciate not having their tax details and activities shared between authorities.

But he added:

“The endgame is not to go back to banking secrecy. We need to find a system that is balanced.”

John Christensen, director of the Tax Justice Network, a campaign group, defended the common reporting standard, saying it needed to be broad to deter individuals from using offshore structures to avoid and evade tax.

“The [standard] has given the tax authorities the information they previously did not have access to, which enables them to pinpoint where tax evasion is happening,” he added.

“Tax avoidance and evasion are . . . deliberately and purposefully depriving tax authorities of finances.”

HMRC declined to discuss the EU citizen’s case but added:

“HMRC shares some personal data with overseas tax authorities to ensure that the right tax is being paid. HMRC only ever shares information when it’s entirely lawful to do so. This includes complying with applicable GDPR requirements.”

Advanced Financial Solutions, Inc. uses a stable and well-accepted financial concept, life insurance, to structure the assets of wealthy international families. Our main tool, PPLI, is a versatile and underutilized form of life insurance that gives excellent structuring results. Please join our list of very satisfied clients by contacting us today about your worldwide assets. We are here to bring you the right kind of change that is disruptive in a positive way.

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by Michael Malloy CLU TEP RFC, @ Advanced Financial Solutions, Inc

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli