{"id":28823,"date":"2023-10-23T11:05:13","date_gmt":"2023-10-23T11:05:13","guid":{"rendered":"https:\/\/isafespend.com\/personal-finance\/taxes\/fast-cars-and-loose-taxes-does-bernie-ecclestone-belong-in-jail\/"},"modified":"2023-10-23T11:05:14","modified_gmt":"2023-10-23T11:05:14","slug":"fast-cars-and-loose-taxes-does-bernie-ecclestone-belong-in-jail","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=28823","title":{"rendered":"Fast Cars And Loose Taxes: Does Bernie Ecclestone Belong In Jail?"},"content":{"rendered":"<div>\n<p>\u201cI want to be a dad again at 90, and I don\u2019t need Viagra.\u201d<\/p>\n<p>That quote is from U.K. billionaire Bernie Ecclestone, the iconic former boss of the Formula One motor-sport empire. It\u2019s a peculiar lede for an article about international tax, but then Ecclestone is not your average businessman. The phrase \u201csalt of the Earth\u201d was invented for characters like him.<\/p>\n<p>Few of us could do what Ecclestone has done. Born the son of a working-class fisherman, he progressed from high school dropout to globe-trotting dealmaker who hobnobs with A-list celebrities and foreign heads of state.<\/p>\n<p>His is a rags-to-riches story of the highest order. <em>Forbes<\/em> estimated his wealth at \u00a32.5 billion. He resides in Gstaad, Switzerland.<\/p>\n<p>Ecclestone has experienced the kind of sparkling career that might earn someone a knighthood but for the rough edges that occasionally come to light. There was the time he was charged with bribery by state prosecutors in Bavaria. Or the time he was arrested for trying to board an airplane with a handgun. Or the times he heaped praise on foreign dictators with spotty human rights records.<\/p>\n<p>To be fair, if your business model involves staging automobile races in exotic destinations \u2014 sometimes requiring that an entire city center be shut down to clear the roads \u2014 the act of sucking up to authoritarian governments comes with the turf. A high tolerance for sports-washing is a job requirement for his line of work.<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>Indeed, you might argue that sports-washing is an essential ingredient to the product that Formula One offers to host nations. Some people lost their minds when FIFA awarded the 2022 World Cup to Qatar, or when the International Olympic Committee awarded the winter games to Sochi, or more recently when Saudi Arabia launched a professional golf league.<\/p>\n<p>Perhaps those critics weren\u2019t paying attention to the things Ecclestone had long been doing with Formula One. He was decades ahead of all of them.<\/p>\n<p>Part of Ecclestone\u2019s vision was that the Grand Prix schedule mustn\u2019t be confined to traditional European venues. That would include the familiar race circuits in places like Monaco, Monza (Italy), the N\u00fcrburgring (Germany), or Silverstone (United Kingdom). He aggressively pushed the sport into previously untapped markets, especially in Asia and the Middle East.<\/p>\n<p>For 2017, the last season Ecclestone controlled, the race calendar featured stops in Australia, Azerbaijan, Bahrain, Brazil, Canada, China, Japan, Malaysia, Mexico, Russia, Singapore, the United Arab Emirates, and the United States. Only seven of the 20 rounds were held in Europe, underscoring how the sport had gone global under his reign.<\/p>\n<p>Ecclestone also pushed the brand upmarket. These are not sporting events for average blokes with average wages. That\u2019s purposeful. Formula One will never be confused with NASCAR, with its grass-roots cultural association. Good old boys don\u2019t race Ferrari. Exclusivity is a brand attribute that Ecclestone worked hard to maintain.<\/p>\n<p>A business journalist once asked Ecclestone why he made no effort to promote Formula One to a younger demographic. They \u201ccan\u2019t afford\u201d a Rolex, he snipped. Rolex is a commercial partner of Formula One and official timekeeper for its sanctioned events.<\/p>\n<p>Another official sponsor is UBS, the world\u2019s largest manager of private wealth. \u201cThese kids don\u2019t care about banking,\u201d Ecclestone said. \u201cThey haven\u2019t got enough money to put in the bloody bank, anyway.\u201d Spoken like a man who knows his customers.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Caught by CRS?<\/h2>\n<p>The most recent chapter of Ecclestone\u2019s story unfolded on October 12, when he appeared before London\u2019s Southwark Crown Court on tax charges.<\/p>\n<p>He had earlier been charged with criminal tax fraud related to his failure to properly account for two offshore trusts. They were established in Singapore and tied to the local branch of the Swiss bank Julius Baer. He had used the trusts over a period of 18 years, often drawing from the accounts to trade in foreign currencies.<\/p>\n<p>Ecclestone is not the kind of guy who goes down without a fight, so it was surprising when he informed the judge, Sir Simon Bryan, that he was changing his plea to guilty.<\/p>\n<p>He was handed a 17-month prison sentence, all of which would be suspended on account of his advanced age and frail health. His lawyers argued that sending Ecclestone to jail would prove traumatic for his toddler son, Ace. Ecclestone turns 93 this month (the Viagra reference wasn\u2019t entirely gratuitous).<\/p>\n<p>In addition to the suspended sentence, Ecclestone agreed to a \u00a3652 million civil settlement. The figure includes back taxes, a \u00a3330 million penalty, and accrued interest. He\u2019s also on the hook for prosecution costs of \u00a374,000. The settlement covers tax years between 1994 and 2022.<\/p>\n<p>A few things stand out about the way the case was settled. It might be the largest tax penalty ever collected by HM Revenue &amp; Customs. If there\u2019s a bigger one, it escapes my memory.<\/p>\n<p>The penalty amount is substantial in relation to the estimated value of the undeclared assets (\u00a3400 million). A heavy price, but it kept Ecclestone out of jail. The criminal trial against him had been scheduled to start November 15.<\/p>\n<p>I\u2019m not sure what to make of his age and health being factors in the court\u2019s acceptance of the suspended sentence. How frail can he be, given his comments about having \u201clots of sex\u201d with his 46-year-old Brazilian wife, Fabiana Flosi? He\u2019s hopeful that Ace will soon have younger siblings to play with.<\/p>\n<p>Flosi is wife number three. Wife number two, Slavica Radic, was a Yugoslavian-born model (don\u2019t tell me you\u2019re surprised) and a mere 28 years younger than Ecclestone.<\/p>\n<p>Ace will grow up with three half-sisters, the eldest of which (from Ecclestone\u2019s first marriage) is now 67. Ecclestone has a grandchild who is 40 years older than his son, which might be some kind of genealogical record. How does this family not have their own reality television show?<\/p>\n<p>The seed of HMRC\u2019s inquiry into Ecclestone\u2019s tax woes can be traced to his legal problems in Bavaria a decade earlier. His defense in the German bribery case was that the banker, Gribkowsky, threatened to reveal scandalous information about Ecclestone\u2019s personal finances.<\/p>\n<p>Supposedly, the source of funds used for the alleged bribe was an offshore family trust overseen by one of Ecclestone\u2019s former wives and he effectively controlled the trust assets but never revealed their existence to U.K. tax authorities. Ecclestone claimed the accusation was false, but HMRC commenced an investigation into him in March 2012.<\/p>\n<p>Court documents explain that the initial inquiry was conducted under Code of Practice No. 8 (COP8), which applies when a taxpayer\u2019s income or gain is believed to exceed what they\u2019ve disclosed through returns. A COP8 inquiry denotes a possible deficiency not involving fraudulent conduct.<\/p>\n<p>However, during the summer of 2013, the probe into Ecclestone\u2019s taxes was elevated to Code of Practice No. 9 (COP9) which covers circumstances in which HMRC believes the possible delinquency was predicated on fraudulent acts.<\/p>\n<p>In a September 2013 letter to HMRC, Ecclestone acknowledged that he deliberately generated a tax loss through fraudulent conduct. The incident involved the 2007-2008 tax year and his interest in a parcel of local real estate, known as the Cox Lane property. He claimed to have no other tax errors that required remedial attention. HMRC was not satisfied with the response and the COP9 probe continued.<\/p>\n<p>Here we know the precise moment when Ecclestone got himself in trouble. It was July 7, 2015, when he and his advisory team met with HMRC officials in London.<\/p>\n<p>The court records tell us that Ecclestone was represented by attorneys with Alvarez &amp; Marsal Tax UK LLP. At that time, the HMRC inquiry had already been dragging on for three years, with both sides eager to move toward a conclusion.<\/p>\n<p>The purpose of the meeting was to set the factual record straight as part of the Contractual Disclosure Facility (CDF) procedure required for COP9 inquiries. Ecclestone welcomed the CDF procedure, viewing it as an opportunity to exonerate himself, and adding that he was tired of paying lawyers\u2019 fees.<\/p>\n<p>During the encounter, HMRC asked whether Ecclestone was involved in any family trusts, either as settlor or beneficiary. He acknowledged a single domestic trust, which had been set up for the benefit of his three daughters.<\/p>\n<p>He was specifically asked if there were offshore trusts. He answered no, without ambiguity. As it turns out, that wasn\u2019t accurate. He knew or should have known about the two trusts in Singapore held with Julius Baer.<\/p>\n<p>HMRC eventually learned of the undisclosed Singaporean trusts. They knew that Ecclestone had assigned them informal names: the \u201cKinan\u201d trust and the \u201cNanki\u201d trust. Therein lies the basis for the fraud charge against Ecclestone, to which he recently pleaded guilty.<\/p>\n<p>Court documents refer to HMRC being tipped off by authorities in Singapore, but it would be nice to know more about how the exchange of information unfolded.<\/p>\n<p>It\u2019s likely the information was obtained from a treaty request (under article 27 of the Singapore-U.K. tax treaty of 1997) or through the automatic exchange of information made possible by the OECD-supported common reporting standard (CRS).<\/p>\n<p>CRS is the counterpart to the Foreign Account Tax Compliance Act for the rest of the world, only better because it\u2019s based on reciprocity rather than the threat of punitive withholding. In the days following Ecclestone\u2019s guilty plea, there was speculation across social media that Ecclestone was brought down by CRS, although there\u2019s no way to substantiate that and HMRC hasn\u2019t commented.<\/p>\n<p>The timeline suggests CRS didn\u2019t play a role. The United Kingdom wasn\u2019t participating in the CRS regime as of 2012, when the COP8 investigation was launched. No countries were on CRS at that time.<\/p>\n<p>The preliminary political commitments didn\u2019t occur until October 2014. Nor was CRS operational as of July 2015, when Ecclestone made his false statement to HMRC during the CDF meeting. The United Kingdom began to exchange information under CRS in 2017, with Singapore joining in 2018.<\/p>\n<p>HMRC might have been on to the offshore trusts as early as 2013, when Ecclestone\u2019s case was converted to COP9 status. At a minimum, HMRC knew about them by August 2016, when HMRC officials asked Ecclestone\u2019s lawyers about the Nanki trust.<\/p>\n<p>Later, in 2017, Ecclestone was again interviewed about his tax affairs and admitted to having \u201cvery recently\u201d learned about the Kinan Trust. It\u2019s clear HMRC knew about them prior to CRS going live.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">A Fair Outcome?<\/h2>\n<p>What we have here is a flamboyant billionaire who, despite his advanced age, has a penchant for younger foreign wives. He likes his fast cars, his luxury yachts, and his private jets. He relishes the spotlight and routinely makes outlandish comments that some people find offensive.<\/p>\n<p>He\u2019s been closely associated with some dodgy business dealings over the years, and twice paid large sums of money to avoid criminal trials that might have landed him in jail. We could describe that as a life well lived.<\/p>\n<p>We could just as easily describe it as an appalling case of the ultrarich using their wealth and influence to avoid repercussions that the rest of us would be unable to escape.<\/p>\n<p>The headline to this article asks whether Bernie Ecclestone belongs in prison. He\u2019d say that\u2019s a silly question because he\u2019s far too wily to end up in jail. It certainly helps that he has the financial means to buy his way out of trouble.<\/p>\n<p>He didn\u2019t invent the legal system that allows rich folks to enjoy better outcomes than the rest of us, but he has benefited from it. He\u2019s unapologetic about his successes, the greatest of which is his ability to survive scandals that would have sunk others.<\/p>\n<p>A better question to ask is whether the Ecclestone affair is a useful illustration of how information exchange between national revenue bodies is supposed to operate. We must assume the fraud would never have been discovered, but for the information provided by Singaporean officials.<\/p>\n<p>In the old days, that happened through a tax treaty mechanism. These days, it occurs through automated data collection and exchange, under CRS or FATCA. The older methods worked fine, to the extent the requesting state knew what it was looking for. The newer methods work more efficiently and cast a broader net.<\/p>\n<p>Over the years, this column has spent a lot of time criticizing the burdens imposed by FATCA, which continues to be a data-harvesting operation of massive proportions. While there are fair criticism of FATCA, it\u2019s worth pointing out why automatic information exchange is considered necessary to modern tax administration.<\/p>\n<p>If billionaires are going to tell fibs about their taxes \u2014 and there\u2019s no reason to think that will ever stop \u2014 then tax authorities will require data collection tools that support their enforcement efforts.<\/p>\n<p>In Ecclestone\u2019s case, it appears the treaty mechanism did its job. That\u2019s not always going to be the case.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/taxnotes\/2023\/10\/23\/fast-cars-and-loose-taxes-does-bernie-ecclestone-belong-in-jail\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cI want to be a dad again at 90, and I don\u2019t need Viagra.\u201d That quote is from U.K. billionaire Bernie Ecclestone, the iconic former boss of the Formula One motor-sport empire. It\u2019s a peculiar lede for an article about international tax, but then Ecclestone is not your average businessman. The phrase \u201csalt of the<\/p>\n","protected":false},"author":1,"featured_media":28824,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[56],"tags":[],"class_list":{"0":"post-28823","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-taxes"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.12 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Fast Cars And Loose Taxes: Does Bernie Ecclestone Belong In Jail? | iSafeSpend<\/title>\n<meta name=\"description\" content=\"\u201cI want to be a dad again at 90, and I don\u2019t need Viagra.\u201d That quote is from U.K. billionaire Bernie Ecclestone, the iconic former boss of the Formula\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/isafespend.com\/?p=28823\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fast Cars And Loose Taxes: Does Bernie Ecclestone Belong In Jail? 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