They Will Hunt You


As a macro investment shop our focus is on the big picture. We look for the themes that will shape markets and often history. We all know the Middle East is unstable, we all know the U.S. elections today are a disaster today regardless of who wins, we all know that we are consuming resources on Earth far too fast. What you may not know is that you are about to participate in a sport you didn’t choose to join. You are going to be hunted. Did you spill your espresso as you read that?

Welcome to the OECD’s Common Reporting Standard (CRS),  a modern day witch hunt and the biggest assault on privacy that no one is talking about.

Before explaining what CRS is let’s start with a few observable facts:

  1. global governments are spending beyond their means
  2. politicians are not in the business of taking responsibility they are in the business of assigning blame
  3.  rich people are easy to blame and are thus easy political targets

With those 3 facts in mind it does not take a rocket scientist to predict that taxes will go up, particularly on the wealthy, and that governments running out of money will seek new, creative, and aggressive ways to identify the wealthy, and their assets so that they may tax them or outright confiscate them. As tax rates soar there is little distinction between taxation and confiscation.

This new era of increased taxes and “transparency” via the automatic exchange of information between governments is the biggest theme that is being overlooked by mainstream media.

A brief history:

2010 The U.S. passed the Foreign Account Tax Compliant Act (FATCA).

FATCA was a brilliant and diabolical piece of legislation that effectively forced foreign financial institutions and foreign governments to report the financial accounts of Americans. Sometimes U.S. diplomacy works with a carrot and sometimes a stick but FATCA was primarily just a big stick. The penalty for non-compliance with the U.S. ranged from automatic withholding taxes on foreign financial institutions to prosecutions by the Department of Justice. The real threat the U.S. used, without saying it directly, was the threat of losing access to the U.S. financial system and U.S. dollar based transactions.

From a government point of view FATCA was and continues to be a BIG success as the access to private data and assets on Americans pours in to the IRS.

Shortly after FATCA the rest of the developed world thought that if it was good enough for the U.S. everyone should have their own version of FATCA. Enter the OECD’s Common Reporting Standard (CRS), a global FATCA of sorts.

Proponents of a global tax information sharing regime will cite examples such as these:

A recent study found that 94% of Italians evade taxes.

6 in 10 Greeks don’t pay taxes (

But are these really good examples? Maybe taxes are just too high?

The Organization for Economic Cooperation and Development (OECD) has taken it upon themselves to simplify tax collection for the whole world. This they claim will help fight corruption and end tax evasion.

As of this post there are 101 countries committed to exchanging information underneath the OECD’s framework. You can view the most recent list here ( Spoiler alert: every offshore financial center has committed including most recently Panama, which will be the subject of a separate post.

With FATCA and CRS coming into force privacy will soon be dead. Not only is this dangerous for high net worth citizens from several countries around the world it violates a basic human right that impacts everyone regardless of their socioeconomic status. Our media has quickly embraced the headlines that come from data leaks like the “Panama Papers” and helped frame a story that those that want privacy must have something to hide. This is a false narrative. Of course criminals should be prosecuted but using offshore financial structures does not make one a criminal. It is the public that should enjoy privacy and governments that should be transparent. In today’s world we have things backwards.

The problem is high taxes and governments that overspend. What do you think governments will do when they can easily identify the entire private holdings of all citizens? Do you think they’ll just let it sit there? Not a chance.

Consider the following:

1. Income tax rates are way too high. The OECD average is 42% and that’s just income tax rates. Add VAT, sales tax, and other local taxes and the average person is giving over half of every dollar they make to their government. Said another way the government is a 50% partner in everything you do whether you like it or not. Is that equitable? Absolutely not.
2.Central banks printing money is a hidden tax. Sadly there is not one country on the planet that isn’t on a paper fiat currency system. The world has gone mad with printing money sending bond rates negative and adding over $57 trillion in debt since the last crisis. Make no mistake this behavior is a tax on all of us. Add that pain to your 50% or higher rate.

3. Government corruption is rampant even in developed countries. Why should citizens feel like paying taxes when they see their governments siphon off the money in obscene ways? In Venezuela and Brazil the state owned oil companies PDVSA and Petrobras have been the source of billions of stolen money. In the U.S. we act like we don’t have corruption on the scale of emerging markets but that’s highly debatable as the U.S. government awards special contracts for building a website or protects oil interests in the Middle East by sending Americans to war. $800 million for and $106 billion for the F-35 fighter jet are two examples.

How do we get out of this mess? We reject CRS and FATCA as well as any politician that supports their implementation. We get informed and we raise the awareness of those around us. Personal privacy is not a negotiation. If you’re voting in the U.S. today be sure to vote down anyone that’s limiting your rights.

The macro trend for the world is not pretty right now and unless you stay informed and take action it won’t get better. Please exercise you rights while you still have them.