(Mossack Fonseca) - On November 30, 2015, the International Monetary Fund (IMF) admitted China’s renminbi (RMB), also known as the Yuan, into the Special Drawing Rights (SDR) basket of currencies. Effective October 1, 2016 the RMB will be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound. Launching the new SDR basket on October 1, 2016 will provide sufficient lead time for the Fund, its members and other SDR users to adjust to the change, according to an IMF press release.
The following weights have been established for each of the five currencies in the new SDR basket that will take effect on October 1, 2016:
• U.S. dollar 41.73 percent (compared with 41.9 percent at the 2010 Review)
• Euro 30.93 percent (compared with 37.4 percent at the 2010 Review)
• Chinese renminbi 10.92 percent
• Japanese yen 8.33 percent (compared with 9.4 percent at the 2010 Review)
• Pound sterling 8.09 percent (compared with 11.3 percent at the 2010 Review)
The Role of the SDR
The SDR was created by the IMF in 1969 as a supplementary international reserve asset, in the context of the Bretton Woods fixed exchange rate system. The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.
The SDR interest rate provides the basis for calculating the interest charged to borrowing members, and the interest paid to members for the use of their resources for regular (non-concessional) IMF loans. It is also the interest paid to members on their SDR holdings and charged on their SDR allocation. The SDR interest rate is determined weekly and is based on a weighted average of representative interest rates on short-term debt instruments in the money markets of the SDR basket currencies.
Why the IMF Added the Renminbi
China is the second largest economy after the United States and is first in world trade. The renminbi is the No. 4 currency for global trade, accounting for about 2.5 percent of the total, according to SWIFT, the organization for interbank financial transfers. Beijing controls the flow of money into and out of its economy but has encouraged the use of the renminbi abroad, especially for trade, which helps Chinese exporters by eliminating the cost and risk of volatile exchange rates. Since 2009, China has signed currency swap agreements with central banks in Britain, Brazil, Canada, Indonesia, South Korea and other countries. Branches of Chinese state-owned banks in Britain, Australia, Germany, Switzerland, Russia, France and Singapore have received authorization to take deposits or settle trade-related transactions in renminbi.
Impact on Global Finance
The SDR has no direct link to financial markets or private business. Over time, the IMF decision might prompt central banks to hold more reserves in renminbi. JP Morgan economist Haibin Zhu said renminbi holdings might rise to 5 percent of global reserves, or about $350 billion, over five years. That might encourage more use of renminbi for trade and investment. "Longer term, this is a huge step", said Stephen Innes, chief trader for the currency firm OANDA in Singapore. "Once investors become more comfortable with Chinese markets, especially if they continue to progress with opening policies and make the same strides they did over the past year, international markets will really embrace Chinese capital markets".
Impact on China
Economists say the IMF decision could encourage Chinese leaders to further relax controls on the renminbi. The ruling Communist Party's latest five-year development plan says the renminbi will be "freely tradable and freely usable" by 2020. The surprise August introduction of a new mechanism for setting the government-controlled exchange rate led to 3.5 percent devaluation. However, the country's top economic official, Premier Li Keqiang, said in September that there were no plans for further declines. Some traders worry Beijing might devalue once it achieved its goal of being added to the IMF basket. But others say Chinese leaders want to be seen as reliable. The renminbi's addition is "an endorsement as an international currency", said Chen Kang, chief bond analyst for SWS Research Co. in Shanghai. "That will encourage China to adopt more measures toward accelerating the process of the opening of its foreign exchange markets and capital markets".
The renminbi's government-set exchange rate still follows the dollar despite the new mechanism for setting its value. For now, that makes the renminbi a dollar in disguise, according to Derek Scissors of the American Enterprise Institute in Washington. Until the renminbi is allowed to trade freely, the IMF decision will "increase the dollar's importance", said Scissors. "Those governments or investors hoping for a dilution of dollar dominance for portfolio diversification or political reasons are getting exactly the opposite".
On November 25, 2015, the European Parliament (EP) approved a resolution to make corporate taxes “fairer across Europe”. The resolution calls on EU member states to “agree on mandatory country-by-country reporting by multinationals of profits and taxes, a common consolidated corporate tax base (CCCTB), common definitions for tax terms, and more transparency and accountability with regard to their national tax rulings for companies”, a press release issued by the EP said.
If the EP resolution (as it stands) is passed into law by the European Council it would result in the following:
•Large multinational corporations would have to pay taxes in the countries where most of their financial activities and profits are made
•Smaller EU economies that offer more competitive corporate tax rates with fewer regulations would stand to lose significant tax revenues as multinationals migrate out of their jurisdictions
•Jurisdictions outside of the EU would attract multinationals with more favorable tax and regulatory schemes
A Comparison of EU VAT Tax Rates as of 1 January 2015:
Country VAT Tax Rate (%)
Czech Republic 21
Sources: the Malta Independent and the European Parliamentary Research Service
Read Article Here.
Mossack Fonseca & Co. - Office Profile
At the 8th meeting of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, held in Barbados on 29-30 October 2015, Panama was officially accepted into Phase 2 of the information exchange peer review process.
The Global Forum peer reviews occur in two Phases: Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework.
Panama’s Foreign Ministry noted that the country’s implementation standards for the exchange of tax information upon request will be assessed, with particular attention to those jurisdictions with which Panama has agreements that allow the exchange of information.
Panama’s Deputy Foreign Minister Luis Miguel Hincapie said "This step reflects the commitment of Panama in this area and the significant progress in updating our legal framework. In a short time we have adapted to the standards of fiscal transparency while at all times defending national interests”. He went on to say that President Juan Carlos Varela, in his recent speech at the General Assembly of the United Nations, announced that Panama, like its major trading partners, is committed to the automatic bilateral exchange of tax information, but with some conditions. The President said the exchanges will have to take into account national circumstances, the international geopolitical environment, and the right of each country to take the necessary measures to ensure that the automatic exchange of information is not misused to impair the competitiveness of some countries for the benefit of others. President Varela proposed that the issues be incorporated into the regular agenda of the United Nations to ensure that they are discussed by the countries on equal terms.
There are now 96 jurisdictions which are committed to making the first exchanges of information in 2017 or 2018. Panama has committed to commence automatic exchanges in 2018.
El sistema de tratamiento de aguas residuales del Centro Educación Básica General El Valle (CEBG), será una de las acciones que llevará a ejecución, la empresa Mossack Fonseca, después de suscribir una carta de intención con autoridades del Ministerio de Educación, como parte del Programa Mi Escuela Primero.
La rúbrica de la carta de intención estuvo a cargo del Viceministro académico de Educación, Carlos Staff y el Director Ejecutivo de Mossack Fonseca, Rubén Hernández, al cual además concurrieron personalidades como: la coordinadora de Responsabilidad Social Corporativa de la Empresa, Susana Fonseca y la líder y miembro del Programa Mi Escuela Primero, Ayleen Varela.
Durante la firma de la carta de intención, el Viceministro de Educación manifestó que se sentía complacido con el apoyo recibido por esta empresa panameña en una escuela de Coclé, beneficiando así a la población estudiantil de aquellas regiones apartadas del país.
Con este tipo de actividades el programa Mi Escuela Primero busca mejorar las condiciones de los centros educativos oficiales del país y por ende se verán beneficiados los estudiantes a recibir sus clases en escuelas dignas, subrayó el Viceministro Staff.
Mossack Fonseca & Co. - Perfil de oficina
Mientras tanto, el Gerente General de Mossack Fonseca, Rubén Hernández, resaltó que es para la empresa un privilegio unirse a este importante proyecto desarrollado por el Gobierno Nacional y el MEDUCA, de la mano de importantes empresas que fomentan como valor fundamental la responsabilidad social empresarial y en pro de la educación.
Cabe resaltar, que Mossack Fonseca, se compromete con este proyecto, porque causará un gran impacto y mejora social; pensamos que los niños de hoy harán crecer aún más al país y por ello debemos ofrecerle una educación digna, especificó Susana Fonseca, coordinadora de Responsabilidad Social Corporativa. Leer aquí.
At the October 29-30, 2015 meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes (part of the OECD), Cyprus, Luxembourg and the Seychelles were lauded for making significant changes to their legal frameworks and practices, each earning an overall rating of “largely compliant”. To achieve a “largely compliant” rating, a jurisdiction can only be deemed by peer reviewers as having (at most) minor shortcomings in the implementation of the 10 essential elements that are rated.
The brief primer below provides an overview of the methods, standards and rating paradigm used by the Global Forum.
Peer Reviews are conducted by an assessment team composed of 2 expert assessors provided by peer jurisdictions and co-ordinated by a member of the Global Forum Secretariat. The assessment team’s report is presented to the 30 member Peer Review Group (PRG) and, once approved (by means of consensus) it becomes a report of the PRG which will then be submitted for adoption by the Global Forum.
The Global Forum’s Standards & Rating Paradigm
The Peer Reviews happen in two Phases:
• Phase 1 is a review of each jurisdiction’s legal and regulatory framework for transparency and the exchange of information for tax purposes
• Phase 2 involves a survey of the practical implementation of the standards.
The Global Forum breaks down the standards of transparency and exchange of information into 10 essential elements under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information.
The Global Forum’s 10 Essential Elements of Transparency and Exchange of Information for Tax Purposes:
A. AVAILABILITY OF INFORMATION
• A.1. Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
• A.2. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
• A.3. Banking information should be available for all account-holders.
B. ACCESS TO INFORMATION
• B.1. Competent authorities should have the power to obtain and provide information that is the subject of a request under an EOI agreement from any person within their territorial jurisdiction who is in possession or control of such information.
• B.2. The rights and safeguards that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.
C. EXCHANGING INFORMATION
• C.1. EOI mechanisms should provide for effective exchange of information.
• C.2. The jurisdictions’ network of information exchange mechanisms should cover all relevant partners.
• C.3. The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
• C.4. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
• C.5. The jurisdiction should provide information under its network of agreements in a timely manner.
The French Minister of Foreign Affairs, Lauren Fabius, Senator Jacques Gautier, Vice-president of the Senate Foreign Relations Committee, and Secretary General of the French Presidency, Jean Pierre Jouyet, all agreed that Panama “is no tax haven” and they recognized the “solid financial platform” of the Central American country, as stated by the Panamanian Ministry of Foreign Affairs. This information was provided following meetings held between the Panamanian Vice-president and Minister of Foreign Affairs, Isabel de Saint Malo, and the above-mentioned authorities during an official visit to Paris.
Mossack Fonseca & Co. - Office Profile
The Panamanian Foreign Minister applauded France, a member of the OECD Peer Review Group, for offering support to remove Panama from the European Union’s discriminatory lists. Read Article here.
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The BVI Financial Services Implementation Unit (FSIU) is using their new website and social media pages to “inform, educate and engage the population on the subject of financial services”, according to a BVI press release on November 18, 2015.
On the website, BVI Forward Campaign, visitors will have immediate access to the report of the financial services consultancy, the ten priority initiatives being pursued as part of the campaign, as well as the latest industry and campaign related news. The website will also feature continuous messages from various spokespersons including industry executives, senior industry professionals, and others.
The FSIU has also created the following web pages to share actionable information about financial services and their current efforts to strengthen the industry:
• BVI Forward Facebook
• BVI Forward Twitter
• BVI Forward LinkedIn
• BVI Forward YouTube
Director of the FSIU, Mr. Kedrick Malone said “The BVI Forward campaign relies heavily on our website and social media because young people are part of a key demographic we need to engage on financial services. We have targeted information for various age groups and inclusive of all forms of media but we will focus extensively on digital and social media simply because of the pervasive influence among persons in that age category”.
November 20, 2015―The Judiciary of the Republic of Panama and the International Trademark Association (INTA) signed a Memorandum of Understanding (MOU) that sets forth a foundation for future cooperation between the two groups, and recognizes both the need for robust intellectual property (IP) systems in a rapidly changing and increasingly integrated global economy as well as the central role of Panama in international maritime trade.
Panama’s economy and infrastructure have driven its rapid rise in the areas of maritime trade and intellectual property protection.
Panama has one of the fastest growing economies in the world, to wit:
•Over the past 10 years, Panama’s GDP has grown at an annual average rate of 7.8%.
•The IMF has projected Panama’s GDP growth at 6.1% and 6.4% for 2015 and 2016, respectively―far outpacing all countries of North and South America.
•Poverty levels in Panama have been reduced from 39.9% to 26.2% percent over the past decade.
•The Panama Canal is arguably the most important maritime waterway in the world, connecting North and South America and the Pacific and Atlantic oceans.
•In 2016, the Panama Canal expansion project will be completed. The existing locks can handle cargo ships carrying up to 5,000 20-foot containers (TEUs). The expanded locks will handle megaships carrying up to 13,000 TEUs. The expanded canal will only bolster Panama’s role as an international business hub, and the canal’s annual revenue is projected to increase from $2.6 billion in 2014 to $6.2 billion by 2025.
•A vastly expanded, ultra-modern international airport with connections throughout the world.
•The world’s second largest free trade zone with170 multinational companies and over 100 international banks
Mossack Fonseca & Co. - Office Profile
Panama’s Maritime Trade and Intellectual Property Protection
Both INTA and the Panamanian government appreciate the impact of the Panama Canal expansion on global trade and the global trademark community. Transshipment and transit of goods through free trade zones and free ports contribute significantly to the trafficking of counterfeit goods, and eighty percent of the goods passing through the canal are goods in transit. The MOU will serve to develop cooperative activities in the field of trademarks and other related areas. INTA and the Judiciary have already begun organizing judicial training seminars. Other areas of future cooperation include:
•Development of collaborative projects related to trademarks, dispute settlement, trademark rights enforcement, and other related areas;
•Exchange of information, experiences and educational materials;
•Development of studies; and
•Organization of meetings and conferences.
“Panama plays a critically important role in the global economy and international maritime trade and this will only increase with the expansion of the Panama Canal,” said INTA President J. Scott Evans. “At the same time, Panama’s economy and middle class are growing. The INTA looks forward to working with the Judiciary to enhance its effectiveness for brand owners and consumers in Panama and around the world.”
The INTA released this micro-documentary video to explain the impact of the Panama Canal expansion on brand owners and consumers around the world.
Source: The International Trademark Association
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As I am so accustomed to interviewing entrepreneurs, I was interested in the path of a Human Resources professional for such an international corporation with over 500 employees. So, I'm happy to present an interview with Katia Solano the Director of Human Resources for Mossack Fonseca & Co (MF).
Established in 1977, Mossack Fonseca is a leading global company which provides comprehensive legal, trust and accounting services.
Katia's been at the company for more than 20 years. She's moved through many different positions, learning different skills along the way, from reception to filing and then as the personal assistant to one of the founders of the company.
"I worked with the founder when MF was a pretty small company; we were around 30 employees at that time. Later, I worked on accounts receivables and payables, and then I came to the human resources department."
Give me an overview of the work that is done in the human resources department.
"Human Resources is a company-wide department, so it has to do with the human resources policies for the entire MF group―the hiring process, candidate selection, training and development, performance evaluation, benefits and salaries, internal communications, leadership development, deployment, cascading goals, the company culture, and induction, amongst others. I work closely with the CEO and the management team. I deal with all the managers of the different offices around the world. I have a team of six employees."
To what degree do you keep your finger on the pulse of hiring?
"I meet at least once a week with the Recruitment and Selection Specialist―she reports directly to the Human Resources Coordinator―but I meet with her once a week because the recruitment process is a key process in any organization. However, I don't interview candidates unless we are going to hire someone for a key position, like for example a lawyer or a management team member―somebody of a high level―whether here in Panama or in any of the offices abroad. In Panama it is very difficult to hire good people because the labor market is so tight."
Katia, what do you do to recruit qualified employees, whether in Panama or abroad, when faced with a shortage of available talent?
"Well it is very helpful that we have a well-known, highly respected name here―so lawyers, in particular, want to work at MF; I'm always receiving resumes in my inbox or through LinkedIn. We usually advertise our positions online. Plus, we are involved with universities―we maintain close contact with them and they always refer people to us for internships. We do the same thing with high schools―we usually have maybe 15 interns that are about to graduate from high school, so they do their internships here―many times when they finish their degree programs they apply to work here. In addition, we try to be involved in all the job fairs."
Your internship program with students from high schools and universities sounds like a great way to evaluate talent.
"Definitely, because when they come to intern with us we really do make an effort to teach them as much as possible. I insist that all our managers make sure to give them as much training and experience as they can handle. There are many companies that simply have their interns do menial tasks; however, I insist that we don't do that with ours. At MF, the interns learn about the company, its mission, culture, and values, and usually they like it and they go back to school or university with a good impression. They share that information with their friends and we usually receive some resumes from other students of the same schools that want to do internships with us. Also, there are many professors who know that we really train their students and they refer candidates to us."
How important is it keep personally connected to the process of adding new personnel to the MF team?
"It is very important because our recruitment process is integral to the future of the company―so to me recruiting talented people is directly related to the strategy of the company because we offer our clients specialized services so we really need to have talented people to be able to provide our clients with excellent service. "
Do you have any hard-fast rules that are followed in your own selection of team members or those who will be working close to you?
"Selecting a new employee is kind of tricky because it is not only that you want to have the person with the perfect profile, but you need a combination of skills and attributes―you need somebody who has the capacity and desire to do the job they have applied for―somebody who has a clear vision of what they want in the short and long term―and they have to be a good fit with our company."
Do you have an anecdote or philosophy to share that comes to mind that would sum up your thoughts about hiring?
"To me, attitude is everything. You may have a good candidate with the perfect academic background and experience, but if the person does not really want to do the job they are applying for, then we are wasting our time. Usually I hire people with little to no experience and then we train them; they appreciate that and they tend to stay for a long time."
Katia's priorities and methodical approach align with Hiring Truth 1: Be diligent, not desperate from my book The Naked Interview: Hiring without Regret. She is ensuring the candidates are carefully selected and that they are cared for with training to help them stick.
"Now, I know that millennial are different. I have millennial on my team and you have to know how to manage them to keep them interested and motivated. One way I do that is by assigning them various projects―you needs to work differently with them."
"We keep them interested and motivated by offering them attractive benefits, continuous training and education―and the opportunity to move laterally (to work in a different department) and up―depending on the individual's skill set and our company needs. Another advantage of MF is our multicultural and international environment where they can work and interact with our colleagues and clients all over the world."
"Everything is different now. I mean the usual human resources process is different now because you cannot plan their careers anymore; they have their career already planned and they evaluate the company to see if the company meets or exceeds their expectations and in particular, what the company is going to give them, so everything has changed."
What is the best interview question you have ever used?
"I use a combination of questions. When you are going to interview a candidate, you have to be clear about what you or the manager needs, and of course, what the company needs. Sometimes you need to help the managers to identify what they need. When I am doing an interview I pay attention to everything and usually I write down everything they say, so I will ask questions like: How do you see yourself (as a professional) in two years? ― What do you want to do? ― Why? ― What kind of company are you looking for? ―What would be your ideal job? I ask about previous bosses and companies to get an idea of what type of boss and company culture they like―or dislike."
What has driven your personal success at Mossack Fonseca Group?
"I like to serve people. I am proud of being a member of MF and also of the human resources department. I feel that we support MF―its management and reputation. I tell my people every day that we are service providers. To me, it is critical to be willing to serve our internal and external customers, and to maintain the highest professional standards."
Interview by David Lee Jensen
On October 29, 2015, the Swiss State Secretariat for International Financial Matters announced that the double taxation agreement (DTA) with respect to taxes on income and capital between Switzerland and Argentina will enter into force on November 27, 2015. It replaces the agreement of 1997 and is in line with the current international standard on the exchange of information.
The purpose of the new agreement is the avoidance of double taxation with respect to taxes on income and on capital, particularly those on dividends, interest and royalty payments. It adopts the majority of the provisions of the former agreement and complies with the current international standard on the exchange of information upon request. The new agreement will be applicable from January 1, 2016, with the exception of taxes withheld at source, for which relief will already be applied in 2015 according to the agreement.
The new agreement sets the maximum withholding tax rate for dividends at 15 percent, and provides for a ten percent rate where the beneficial owner is a company that holds directly at least 25 percent of the capital of the company paying the dividends. The withholding tax rate for interest payments is capped at 12 percent. The maximum withholding tax rate for royalties is 15 percent, with reduced rates of ten, five, and three percent applicable in certain circumstances.
Who is Mossack Fonseca?
The Mossack Fonseca Group is a leading international corporation which provides comprehensive legal, trust, technological and accounting services. With over 500 staff members in all continents, Mossack Fonseca provides personalized advice based on more than 36 years of experience in the market. They also offer world-class service through their exclusive online services which are available 24 hours a day.