The manner in which the OECD has managed to infer an “Equitable Interest” until death to a Settlor who has irrevocably and definitively abandoned any interest in a settlement defies legal and economic logic. The OECD has no Treaty status to make such effective changes to States’ property laws by regulatory combination with tax administrations. What is more, there is no specific facility enabling such an invention to take place in our enabling legislation, other than by a declaratory requirement. In short there is a non-economic " invisible hand" at work.
The prior practice was that tax laws on property allocations followed property laws. That was a fundamental tenet of the taxpayer accepting the principle of taxation within a democratic context , i.e. certainty.
They may have been influenced by that somewhat romantic saying touted in European law faculties to explain the trust concept to the effect that a trust remains with an Englishman from his cradle to the grave. It would seem neither Her Majesty’s Government nor HMRC have felt it appropriate to defend the legal concept and its functioning abroad.
From offshore experience, the economists negotiating the position of trusts at the level of the OECD fora and in previous TIEA negotiations have simply not defended the concept from the legal perspective, contenting themselves with going along with foreign misconceptions . That political mischief is now coming home to roost, and there is no Talleyrand in place on those fora to recover what is effectively a Napoleonic reversal of Waterloo by a coup de Trafalgar.
What is worse, it would seem that the venerable Pascal Saint Amand has taken it upon himself to treat professionals taking the legal line as enabling the new version of the term “avoidance”, where the Settlor is clearly no longer interested in the Trust.
Whilst it is clear that the so called “Equitable Interest”, inferred indirectly from the reporting requirements evapourates and extinguishes on death, this is still a work of fiction.
What this has done is simply to write the French assimilation of any discretionary trust into a Grantor equivalent, in stone, as opposed to a complex discretionary arrangement, and what is more convert that anathema into a pandemic.
No tax administration will accept from now on that the Settlor is disinterested, simply because he is declared as an account holder.
Whilst the objective is arguably to provoke full disclosure to interested States of the full extent of the trust arrangements, that is tendencious, as most so-called anti avoidance legislations have opted for deeming provision as to fiscal entitlement which, certainly in the French case, are expressed to be irrebuttable.
Can one envisage an economic ‘utopia’ in which the property laws by which economic actors carry out their economic activity are at fundamental odds with an extensive reallocation of those rights according to a fiscal paradigm of property effectively imposed by foreign governments?
The regulation of the fruits of the perceived globalised/globalising economy and its property laws by reference to deemed economic dominion simply will stifle western development. Western investment abroad will be curtailed by hampering the financial flows involved. That is an inflationary process.