It is from Canada that the latest tax evasion scandal arises, the “ISF Gate”, which Release unveiled on December 13 the secret story. According to the daily, dozens of large French fortunes have resorted, for more than a decade, to opaque structures registered in Canada, “trusts” not declared in France, in order to conceal their assets and reduce their tax bill. Their primary motivation was to escape the French wealth tax (ISF), introduced in 1982 when the Socialists came to power and revised several times since.
As is often the case in tax matters, the line between optimization and fraud, in other words between the legal and the illegal, is difficult to draw. But the suspicions are sufficiently substantiated to have triggered several tax audits or adjustments, a police investigation and a judicial investigation.
Less well-known than the old Swiss numbered accounts or offshore letterboxes in Panama, trusts are entities governed by Anglo-Saxon law which house assets (money, villas, paintings, shares listed on the stock exchange, etc.) managed in the name of their actual owners by a trusted person (a “Trustee”). They were originally created to protect inheritances and organize estates while minimizing tax. But the opacity they provide has made them regulatory screens vis-à-vis the tax authorities. And tools very popular with fraudsters and their tax advice.
In fact, at the heart of the Canadian business is Blue Bridge, a wealth management company based in a business district of Montreal, which described itself, at the material time, as a “Benchmark in the industry of trusts and asset management”. And who quotes, even today on his website, among his “Innovations”, “The worldwide use of the Canadian trust as a tool for tax, estate and financial planning”. It is this company which created and administered the famous trusts for these – very – rich French people.
The ISF, this “damn tax”
The story told by Release, partially revealed in 2020 by the Quebec press and the magazine Capital, features two leading roles: the boss of Blue Bridge, a Swiss-Canadian wealth manager called Alain Roch, and a Parisian lawyer specializing in international taxation, Jacques Le Blevennec, posing as a former tax inspector. They would have operated in tandem, the first registering the trusts that the second advising its clients. The two men were generously remunerated in the process, charging clients management fees.
It all started with the election of François Mitterrand and the establishment of a tax on large fortunes (IGF, the ancestor of the ISF). Solicited by large estates who have no intention of paying this “damn tax”, Jacques Le Blevennec sets out in search of a tax haven. He sets his sights on the small British archipelago of Bermuda, in the North Atlantic, known for its zero tax and permissive legislation.
Canada is not a tax haven, but it is then linked to France by a tax treaty which contains an exploitable loophole
When, in the wake of the 2008 financial crisis, the international community begins to tighten the screws on the myriad of small havens thriving around the world, and Bermuda is forced to lift a corner of its banking secrecy, the lawyer finds an alternative: Canada. This great country is certainly not a tax haven. But it is then linked to France by a tax treaty which contains an exploitable loophole: if the income from trusts is clearly subject to taxation, nothing is said about the sums from the capital.
“Banco” , writing Release : Canadian trusts are created to replace Bermudian trusts, in which it is decided to present as capital “All the funds that the beneficiary clients will receive”. To get the money out of the trusts without attracting attention, it first passes through specially created foundations in different countries.
Several billion euros in assets under management
Until 2011, this tax evasion arrangement allowed many French people to legally escape ISF. But a reform voted that year heralds the end of the golden age of trusts for French taxpayers, now required to declare them to the tax authorities – an essential step before they are subject to tax. Some then decide to move their tax residence outside France.
Blue Bridge was able to manage more than four hundred estates for a time, for an amount of several billion euros
According to documents from the police investigation consulted by Release, thanks to this windfall of French customers, Blue Bridge was able to manage over four hundred assets for a time, for an amount of several billion euros. Among them, writes the newspaper, big French names, such as the Schlumberger family, the Seydoux brothers, rich industrialists of the cinema, one of the heirs of the Hermès empire, the founders of Promodès, the son of the creators of Cafés Richard … Some were French residents subject to tax in France, others not, always tax exiles or having fled the wealth tax in the 1980s.
If the tax authorities took an interest in the Seydoux family from 2012, it was only around 2016 that they were able to understand the extent of the system put in place. A source familiar with the practices of Blue Bridge has indeed come forward that year to its services, providing many details on the subterfuge designed by the Franco-Canadian tandem. The tax authorities then launched all-out investigations.
Bending to the reporting rules imposed in 2011, some trust owners, such as the Seydoux brothers, had already informed the tax authorities of their arrangement. This did not prevent the latter from imposing a tax adjustment on several members of the family, specifies the newspaper. Others, on the contrary, had chosen the path of concealment, such as Hubert Guerrand-Hermès, one of the heirs of the Hermès empire, whose trust, endowed with around 500 million euros, according to Release, was only known to the French tax authorities after his death in 2016.
Several investigations opened in France
From 2017, for the most serious cases of fraud, the tax authorities took the matter to justice, which got under way. Investigations were successively opened by the Central Office for the Fight against Corruption and Financial and Tax Offenses (OCLCIFF) in 2017 and the National Financial Prosecutor’s Office (PNF) in 2019, for “aggravated tax fraud”, “complicity in tax fraud “,” Money laundering “and” criminal association “, as confirmed by the PNF in World. No indictment has been pronounced by the justice at this stage, while a new investigating judge has just taken over the case in September.
In December 2019, the financial police seized the list of all the trusts managed by Blue Bridge
Near Release, the company Blue Bridge and Alain Roch have refuted any involvement in “Stratagems” of tax evasion, ensuring respect “Applicable laws”. Alain Roch’s lawyer, Jean-Pierre Martel, added that to his knowledge “No reproach is expressed with regard to Blue Bridge or Alain Roch”. Jacques Le Blevennec refused to comment on this information in the name of professional secrecy. The PNF investigation made great strides forward. In December 2019, during a search, the financial police seized the list of all the trusts managed by Blue Bridge, on which appear “The first names and the initial of the last name of the beneficiaries”. Enough to shake these tax-resistant.
In theory, it is no longer possible to use such a mechanism today to avoid tax, since most of the states of the world have, since 2017, practiced the automatic exchange of information for tax purposes – providing information their peers on financial assets held abroad by their taxpayers. It is also necessary that financial intermediaries, like Blue Bridge, play the game by transmitting to the authorities the identity of the real beneficiaries of the trusts they manage.