The red line

Three people want to pay less tax. The first is within her rights. The second plays with them. The third breaks the law.

From a distance, they look alike. Up close, everything sets them apart. Here is where the line runs.

The first optimises. She uses the rules as they were written, for what they are meant for.

Paying into a retirement plan to deduct, keeping shares longer, giving during your lifetime: the law invites you to.

It is legal, and nobody will blame you. The state created these advantages to be used.

The second practises avoidance. She respects the letter of the law, but gets round its spirit.

A scheme with no economic sense. An empty company, a sham contract, just to make a tax disappear.

In France, this is called abuse of law. The tax office can ignore the scheme, and recalculate as if it did not exist.

And it adds a penalty. It can reach eighty per cent of the tax avoided.

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Say ten thousand euros of tax avoided through a scheme. You have to pay back eighteen thousand, plus late interest.

The third commits fraud. She hides income, an account, a sale. She is no longer playing with the law: she breaks it.

Tax fraud is a criminal offence. On top of the tax and penalties, it can lead to court, and even prison.

For a long time, many counted on one thing: bank secrecy. What sat abroad stayed invisible.

In two thousand ten, the United States passed a law forcing banks worldwide to report their American clients.

The rest of the world followed. Under the OECD, countries committed to exchanging bank data automatically.

The first exchanges took place in two thousand seventeen. Switzerland joined the following year.

Today, more than one hundred countries and territories take part. Every year, balances are sent to the country of residence.

Your foreign bank tells the tax office what you have. Even if you forget to say it yourself.

In France, a foreign account must be declared every year. Forgetting costs a fine per account, even with no tax evaded.

Remember a simple test. If you can explain your choice to the tax office without embarrassment, you are on the right side.

If a deal only makes sense because it lowers tax, be wary. And if it requires hiding, it is already too late.

Using the rules, yes. Bending or breaking them, never. Secrecy has almost disappeared.