Less than six months ago, the mainstream media had a field day announcing the release of the so-called “Panama Papers.” The release consisted of 2,600 gigabytes of data — 11.5 million documents — stolen from the Panamanian law firm of Mossack-Fonseca.

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Their reaction was entirely predictable, once again equating “offshore” with “tax evasion,” “money laundering,” and other criminal behavior. A typical headline was “Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption.”

The disclosures outed some wealthy and powerful people, including at least 29 billionaires and former billionaires from theForbes list of the world’s wealthiest people. In the aftermath, the prime minister of Iceland resigned, accusations arose that Russian President Vladimir Putin used Panama to launder money, and UK voters discovered that the father of then-British Prime Minister David Cameron had decades ago engaged in aggressive — but completely legal — tax avoidance strategies.

Yet, what the media didn’t discuss is that the vast majority who dealt with Mossack-Fonseca violated no laws at all. And many of the so-called “crimes” the Panama Papers exposed took place years or even decades ago.

That’s certainly true in the case of the 2,400 US clients whose dealings with Mossack Fonseca were exposed. The vast majority of those clients appear to be compliant with their US tax obligations. But US politicians anxious to climb onto the anti-offshore soapbox don’t care whether or not they obeyed the law. Indeed, US Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) have demanded that the IRS investigate any US persons with any ties whatsoever to the firm.

In other words, they’re calling for a witch hunt. That’s nothing new. In 2008, the Senate issued a report estimating the annual loss to the US Treasury from offshore tax evasion at that time to be $100 billion. Yet, the only evidence presented to support this huge figure was in a footnote citing several magazine articles, none of which provided any guidance as to how the $100 billion figure was calculated. A few years later, I learned the original estimate came from a guess by a former congressional researcher.

If you’re a US taxpayer who dealt with Mossack Fonseca, brace yourself for a highly intrusive audit. And if you’re not compliant, don’t expect to be able to fix the problem simply by making a “quiet disclosure” by filing amended tax returns and disclosure forms. In 2013, the Government Accountability Office issued a report urging the IRS to target taxpayers engaged in quiet disclosures. Since then, the IRS has wised up to this tactic.

A better idea would be to contact a tax attorney experienced in IRS criminal defense, to discuss enrolling in the IRS’s Offshore Voluntary Disclosure Program.

An IRS witch hunt is just the beginning. Media coverage of the Panama Papers has given high-tax countries the political cover to intensify efforts to crack down on international investments. Within days of the release of the Panama Papers, finance ministers from the G20 group of nations — the world’s wealthiest industrialized countries — endorsed a global effort to crush tax havens.

Again, that’s nothing new. Indeed, in 2009, President Obama called for “shutting down overseas tax havens.” The Panama Papers provides a pretense to intensify those efforts.

Given these developments, should you forget about international investing — especially through some type of offshore structure? Not at all! Indeed, even the International Consortium of Investigative Journalists — the organization responsible for orchestrating the release of the Panama Papers — admits there are perfectly valid reasons to use offshore companies and trusts. Here are 4 of them:

  1. Buying international real estate. Many, if not most, of the Americans tied to Mossack Fonseca hired the firm for this purpose, and there’s a perfectly legitimate reason for doing so. Many nations impose restrictions or outright prohibitions on foreign ownership of real estate. Using an offshore structure to hold the property can overcome this obstacle.
  2. Avoiding probate. Many countries require assets held in your own name to go through a time-consuming and expensive probate process before conveying them to your beneficiaries. Again, an offshore structure can avoid this nightmare.
  3. International tax planning. While it’s unpopular to point this out, the US Tax Code and the laws of most other high-tax countries include incentives for domestic companies to carry on business internationally. What’s more, corporations have a fiduciary duty to their shareholders to not pay a dollar more in tax than is legally required.
  4. Asset protection planning. 50% of the world’s lawyers practice in the US. Over the years, they’ve convinced legislatures and judges to view the wealthy as sheep to be shorn of their assets. A 2007 study, for instance, concluded that America’s runaway legal system imposes a “lawsuit tax” of nearly $900 billion each year on the US economy. It’s only prudent for doctors, entrepreneurs, and others who have accumulated wealth for retirement to place, or to convey to their loved ones to place, a portion of their “nest egg” assets offshore. In many cases, these arrangements involve international companies and/or trusts.

The bottom line is that despite the anti-offshore frenzy orchestrated by the media and government, it’s perfectly legal to invest and do business internationally. Moreover, in many cases, an offshore company or trust can make it easier and more efficient to do so.

Just make sure you understand what you’re doing. If you’re not sure, hire an international tax professional to help.

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