In recent years, high-tax administrations have led an international campaign
aimed at destroying what is collectively known as the offshore financial sector,
or offshore tax havens in plain language.
Tax avoidance and bank secrecy:
The core of offshore business
Traditionally, offshore tax havens provided services aimed at those wishing
to minimise their tax liabilities and maintain the privacy of their financial
affairs.
Offshore companies incorporated in tax haven jurisdictions would be used for
tax-efficient and confidential holding of assets or tax-efficient trading. Offshore
bank accounts fell under the protection of strict bank secrecy laws and
would be used for confidential holding and investment of funds.
Growth of offshore business
in the nineties
The use of offshore financial centres increased dramatically during the nineties.
This can, at least to a certain extent, be attributed to the wider availability
of information, particularly due to the growth of the internet.
Where in the past offshore matters were only discussed in specialist publications
and journals, and offshore banks received their business mainly from introductions
made by a limited number of specialised offshore advisors, the past ten years
changed all of this.
Offshore bank secrecy legislation can successfully frustrate efforts by governments
to monitor their citizens' financial affairs.
Many more individuals and companies, previously ignorant to the possibilities
on offer offshore, soon realised that the Bahamas wasn't just some far away
exotic location where one might take a vacation; in fact, the Bahamas was suddenly
but a mere mouse click away, and there were instant, tax-free companies to be
had, together with bank secrecy for anybody who asked!
Offshore bank secrecy legislation in particular can successfully frustrate
efforts by governments to monitor their
citizens' financial affairs. Keen to keep at least some of their assets
out of reach, the overtaxed populace were suddenly joining the path to offshore
financial freedom in numbers never seen before.
High tax man fights back
Not surprisingly, this state of affairs was not to the liking of the administrations
of high-tax, industrialised nations who had seen their revenues decline as more
and more prudent investors started moving
their assets offshore.
To their dismay, the tax-cartel governments could no longer rely on the average
person's ignorance of offshore matters to protect their tax bases. Yet something
had to be done.
In a free society, it is impossible to stop the flow of information; censorship
was not an option. Another tactic was needed, and they duly devised one. It
was to be a tactic well tried and tested before, one that often gets results.
It's called propaganda.
Offshore banking illegal?
Sensation-hungry media
backs the bureaucrat
Sensation-hungry, ill-informed and often left-leaning journalists were quick
to jump on the bandwagon and happily deliver the bureaucrats' message. Frequent
media attacks against anything offshore leave the the average man on the street
with a false impression -- that anything involving offshore havens is probably
illegal.
When did you last read a newspaper article that mentioned any or all of the
following: "offshore company", "offshore bank accounts",
"bank secrecy"? Was it an article advocating the use of offshore services
for legal asset protection? Probably not. Chances are the same article also
contained the words "money laundering", "criminal gangs",
or "Russian mafia".
Naturally, money gets laundered offshore, and whilst criminals have successfully
used offshore havens to hide their illicit gains, they have also used onshore
banks in equal if not greater measure. The majority of offshore business has
always been legal, despite the impression we might get from the underhand publicity
campaigns.
One illegal act which might make use of offshore havens is tax evasion -- but
equally offshore havens are used by prudent corporations and individuals alike
for the entirely legal practice of tax avoidance.
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