Offshore finance
It is not easy to say succinctly what offshore means because it can be interpreted to mean so many things that limiting its scope seems almost impossible . One observer has suggested that offshore is a concept more appropriately defined not by whether a financial centre is large or small but rather by whether the client resides outside the jurisdiction providing the particular financial service .It is often said that elephants are hard to describe but, once seen, they are easily recognized .The same might be said of offshore. The boundaries of offshore are not fixed and its shape does not conform to any particular model or style that is readily identifiable in fact one of its characteristics is its ability to change shape in adapting to new circumstances .
Offshore finance is an expression that means different things according to the interests of the persons using it. Some see it as nothing more than the use of one island or another to hide or launder illegal moneys. Others see it as being useful in the evasion or avoidance of taxes. It may be true to say that in its early days the business of offshore finance was noticeably influenced by the existence of such activities, but to believe that modern offshore financial centres and the activities conducted in them are primarily concerned with such purposes would be a gross misconception of the facts . Nowadays offshore financial activities as they are conducted in reputable offshore financial centres play a legitimate and integral role in international finance and trade .
The line between offshore and onshore centres is almost indefinable. Modern communications and the internationalization of commerce ensure that offshore business need not be physically carried out in a specific location . A deal can be structured anywhere and booked in the most appropriate jurisdiction .
This view is reinforced when one considers that the availability of offshore facilities is not confined to recognizable offshore financial centres. The expression offshore centre includes onshore centres such as Luxembourg, Liechtenstein, Switzerland and Andorra. Other onshore examples created to compete with the legitimate use of offshore financial centres include :
- In the United States America the creation of international banking facilities in a number of United States"> cities for the purpose of conducting certain types of international banking business, principally for corporations, in a modified tax environment .
- Domestic international sales corporations, and later,
foreign international sales corporations, both of which benefit from tax
concessions to encouraging
United States export trade. - In Belgium, head office co-ordination centres are accorded tax exemptions if they meet certain basic requirements.
- In Eire, Shannon Freeport, and later the Dublin international finance centre, both accord tax privileges .
Other examples can be cited, although not all have achieved the success which was expected of them, principally because there is a psychological aspect to the use of offshore centres . It is generally considered that the objectives that are sought are less likely to be interfered with in a proper, independent offshore jurisdiction than will be the case where concessions are granted by a government with short term advantages in mind . As a result many major financial institutions have established subsidiaries or branches in the better known offshore centres and conduct or book substantial volumes of business through them .
It is important to recognize that the greater part of the financial activities conducted in the offshore financial centres which banks, insurance companies, trust companies, investment managers and accountants are mentioned in the major financial institutions and firms .One cannot reasonably suggest that they operate, or wish to operate, to different, lower standards when conducting their offshore business . Furthermore, if it is proper for them to operate in an offshore financial centre to facilitate their international business, it is just as legitimate for them to encourage their clients to do so .The same ground rules apply.
Of course there are offshore islands which facilitate money laundering and tax evasion, but they can be readily distinguished from the legitimate offshore financial centres . Nor those jurisdictions which seek to promote themselves as offshore centres on no better grounds than that they are tax havens . The offshore financial centres which are the subject of this work play a legitimate role in the conduct of international financial and investment activities both for individuals and for corporations and sets out to explain how they do so and under what circumstances . Of course, fraud, money or securities scams and tax evasion are commonplace, but the extent to which they are found in a modern, properly regulated offshore financial centre is no more significant, when considered as a fraction of the total financial business conducted, than is the case in any major onshore financial centre in the world .
For a proper understanding of the term offshore finance it is important to recognize that a difference exists between an anything goes offshore tax haven territory and a modern, properly regulated offshore financial centre of which there are quite a few . There is a concentration in the matter of convenience more than anything else, on several offshore financial centres .They are representative only and have been selected for their reputation and maturity.
Most people who consider offshore services have only a superficial knowledge of such services and the advantages which they confer .Indeed, the picture of many people conjure up is based on anecdote and misconceptions . A primary aim of this chapter is to enable prospective clients and their financial advisers, whose knowledge may be equally sketchy, to use offshore services confidently and to develop a sound understanding of what is involved so that solutions to their specific requirements can be devised in a manner which is compatible with their home country circumstances .At the same time it should not be regarded as a do it yourself guide to the setting up of offshore financial structures .Modern international business is complex and has to take account of a wide range of factors .
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