How can tax authorities stop tax evasion?

If you know what you're doing, evading tax using offshore tax havens is fairly simple:

  1. John owns a carpet making company, Dallas Carpets
  2. He incorporates a shell company in the Cayman Islands, BS Ltd.
  3. BS Ltd. opens a bank account in Switzerland
  4. Dallas Carpets purchases 'services' (such as 'consultancy' or 'administrative services') from BS Ltd. & transfers the payment to Switzerland
  5. BS Ltd. invests the funds in assets (bonds, equities, mutual funds, etc.)
  6. Dallas Carpet’s costs increase, corporation tax decreases & BS Ltd. has tax-free financial capital income in the Swiss account.

Except for more coordinated reporting standards between the likes of the Cayman Islands & BVI and the US & UK, how on Earth can we tackle this?

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