Tax Arbitrage

BOOK REVIEW

TAX ARBITRAGE
The trawling of the international tax system

By Nigel Feetham

Spiramus

ISBN: 978-1907444-43-2

www.spiramus.com



LEGAL, YET IMMORAL! HERE'S EVERYTHING YOU NEED TO KNOW ABOUT TAX ARBITRAGE.

An Appreciation by Phillip Taylor MBE and Elizabeth Taylor of Richmond Green Chambers

"International tax arbitrage is a form of legitimate tax planning." So declares Nigel Feetham, the author of this really quite enlightening, fascinating and thought provoking book, which sets out to explain arbitrage: what it is, what it does and why it has engendered such controversy, particularly in the UK -- even though, like it or not, it's legal.

As a partner at a leading Gibraltar law firm and Visiting Professor at Nottingham Law School, Nottingham Trent University, Feetham is both an international lawyer and an academic. His book is therefore useful if you wish to understand the ins and outs of arbitrage -- and it is not to be unexpected that he emerges as an extremely competent advocate of the practice.

'Tax Arbitrage' is, in his words, 'unashamedly not a technical tax book nor is it a typical law book. As such, it's as much intended for...interested (laymen) and business people as it is for tax practitioners and students'.

As mentioned in the book's introduction, arbitrage is one of two kinds of international or cross-border tax structuring (we assume that means avoidance?). One emanates from zero tax jurisdictions, commonly termed 'offshore' or 'tax havens'. The other is 'tax arbitrage' -- for which there is apparently no single definition and in which, because of its specialized nature, there are no more than three-hundred practitioners worldwide.

Feetham has therefore set out to demystify tax arbitrage. He examines some of the resultant press coverage, including some recent court cases, as well as campaigning by certain pressure groups. He also considers the confusion over the boundary between 'legality' and morality' as well as the difference between 'avoidance' (legal) and 'evasion' (illegal), an issue which should of course be of abiding interest to lawyers, accountants and others in the financial services industry.

Basically, tax arbitrage is a 'commercial activity that...seeks out differences in tax rules in two or more jurisdictions to achieve a tax benefit.' The term seems to have originated in the Wall Street Journal in 2006 in which 'tax arbitrage' was described as a system which 'plays off one nation's tax system against another to reduce the banks' tax bills'.

Subsequently, the term became rather better known when the post-banking crisis finally emerged, with governments (make that taxpayers!) having to bail out financial institutions -- hence the topicality of this well-written book and the interest it will inevitably create.

For further research, the book provides useful sources relating to this highly specialized subject, together with Table of Cases, appendices and index. The publication date is 1 March 2011 and this work gets the informative legal balance on tax arbitrage just right.

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