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Offshore Banking: Offshore Tax Drain? Offshore Banking: Offshore Tax Drain?


Offshore banking:
Offshore tax drain?

Confidential offshore banking is not popular with the tax cartel governments who would rather see your money within easy reach.

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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

High-tax administrations have instigated publicity campaigns with the intention to blur the line between legal tax avoidance and criminal tax evasion, and incorrectly associate all offshore business with criminality and money laundering.

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.

Big government wishes it were otherwise.

 


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