It is the field of tax planning that the term "offshore" is most frequently found. In this context, "offshore" is used to describe those arrangements whereby a taxpayer can take advantage of the favourable tax regimes of another country without having to leave his home country and move physically to the other country.

Jurisdictions which appear attractive to citizens of countries with relatively high tax rates are known as tax heavens, or fiscal paradises, or low tax areas or international offshore financial centres (IOFC). Typically, a tax haven will:

1. have very low or no taxes;
2. levy taxes on its resident population but levy no taxes at all, or at low rates, on profits from foreign sources;
3. grant special tax privileges or incentives to certain persons or for certain transactions.

So how does a highly taxed resident of one country take advantage of the low taxes offered by a tax haven?

All tax regimes will apply a test as to residence, domicile or nationality to determine whether an individual citizen to liable to pay taxes in their country. The liability of companies to taxes will depend on their central management and control, beneficial ownership, place of incorporation or the location of its registered office. In addition to defining who pays tax, the source of nature of the income on which the taxpayer is to pay tax must also be defined.

The trick in most offshore tax planning is to ensure that the above tests no longer apply in the high tax jurisdiction but apply in the low tax jurisdiction. This attractive state of affairs may be achieved by:

• relocating the taxpayer (or his wealth) in a tax heaven;
• relocating a company(or part of its operations) so that it is registered and controlled in a tax haven;
• diverting income to a tax haven and/or holding the investment producing the income (the "source") in a tax haven.

Obviously, the high tax countries are not happy to suffer the resultant diminution of the revenues and take measures, through their tax laws, to deter their taxpayers from using tax havens. Such anti-avoidance measures are designed either to stop the transfer by a taxpayer of assets or profits to a tax haven, or to reduce the effectiveness of an offshore scheme by penalising the taxpayer in his home country.

For an individual or company considering using an offshore financial centre, it is essential that tax advice is sought in their country of residence and an effective tax planning scheme put in place.

Although, as implied by their pejorative name of "tax havens", the shielding of wealth and assets from the effects of high and continuing taxation has been the traditional role of the IOFCs, there are many other "tax neutral" reasons to use an offshore location where the avoidance or deferral of tax is not the primary objective.

For example, an offshore location might also be used to protect wealth or assets from the effects of:

• Political Instability - The risks of holding assets in highly volatile and politically unstable areas of the world (including the introduction of exchange control regulations and the "freezing" of assets held in those areas) can be avoided.
• Family dissipation - Personal wealth may need to be protected from dissipation by profligate children or bounty hunting spouses so that future generations can enjoy the family riches.
• Death Duties - death duties, inheritance taxes and similar taxes on death can in a few generations eliminate a family's wealth. (For example, members of Kenyan families who have emigrated to the United Kingdom and have since established homes and businesses in the U.K, should consider holding their assets in an offshore trust). Fixed succession or forced heirship rules of other countries may be avoided by relocating the family's assets in an IOFC.
• Lack of privacy - The laws and practises of most IOFCs offer a considerable amount of confidentiality to those who use their services. Typically, secrecy is provided by the use of nominees and trusts. It should also be noted that this cloak of confidentiality may be lifted where fraud or criminal activities (e.g. money laundering, arms dealing, drug trafficking, etc.) are suspected.
• Complex and onerous legislation - Laws in tax havens tend to be less complicated and therefore onerous, time-consuming or expensive regulations of another country may be avoided (e.g. audit requirement for company accounts, ship registrations ["flags of convenience"], patent registrations, etc.)

We are in the process of setting up our web site at the address : http://www.btinternet.com/~Alexandergrant. Our e-mail address, for ease of communication in London is Alexandergrant@btinternet.com.

Re - organising the office

The main purpose of an office is to support the business activity. Virtually all clerical activities needed to support the business enterprises are carried on from the office.

Some of the office activities include management of information and data, financing business activities, handling of money, collection and distribution of mail, drawing, provision of security and safety services, etc.

Visible symptoms of an office which may require re-organisation:

• Delays in locating documents, either in trays, tables, or other places in the office
• Difficulties in retrieving information
• Lack of authority necessary to carry out duties of a particular job
• Absence or lack of co-ordinated actions
• Duplication in the use of applications of procedures
• Inadequate or slow communication from top to bottom or vice versa
• Low staff morale resulting in low productivity
• Incurring costs which are out of proportion to productivity

It should not, however be automatically assumed that these symptoms must be the results of bad organisation - other factors may need to be considered as well. For example, new technology or growth in the business may destabilise an existing good organisational structure.

Once the need for re-organisation has been clearly established, specific steps must be taken by management. Usually, it helps to bring in an expert to discuss these needs with Management. Working with the support of the Management, and the rest of the affected staff, the expert is likely to look at the following stages:

• Study the existing organisation structure or draw one, if none exists in the form of a chart
• Study the job description of the workers and confirm with each if they fit in with what they do in practice
• Summarise the duties which have to be performed in the office as a whole
• Diagnose possible faults and problems. Discuss these with Management
• Review organisational objectives, systems and procedures, adequacy or otherwise of staff in terms of number, type, level or ability
• Consider alternative ways of distributing responsibilities, duties or authority within reasonable costs. Involve subordinates where their ground experience is useful
• Assess the extent to which proposed re-organisation will help in overcoming the faults or deficiencies or meet the demands of change
• Prepare a new re-organisation proposal and submit to Management for approval. Remember that the role of an expert is twofold:

- to look at the organisation with a neutral approach, and

- to apply his vast experience to fit different circumstances

The Management too, will find that the staff easily accept the advice of a neutral person, and implement it more easily. Any sudden or drastic change in Management approach is likely to be resisted by staff. This is why the use of an external expert is advisable. So call us today for a course on "Management of Change". We shall tell you how to manage change without upsetting the existing order.

ALEXANDER GRANT & ASSOCIATES

VICTOR HOUSE, 4^TH FLOOR, KIMATHI STREET, NAIROBI, KENYA

Telephones : 002542 221306 / 245694 Facsimile : 002542 224314

Although all reasonable care has been taken in the preparation of this news briefing, Alexander Grant & Associates cannot accept any responsibility in law for its contents. Clients are advised to seek independent professional advice before taking action in consequence of anything contained herein.