It’s not easy to catch someone who can disappear at any time – and appear again in a different place.
The offshore industry makes trillions of dollars unattainable for tax inspectors. Any efforts to settle this business in any way bring no more success than attempts to train a cat – and not an ordinary domestic cat (although this task is unrewarding), and a Cheshire cat – a vague and elusive creation that can disappear at any moment on its own desire and appear elsewhere.
It is impossible to even agree on what exactly to consider a tax haven. Or at least agree on the term itself: for someone it is a tax haven, and for someone – an “offshore financial center”. There is no agreement on how many offshore companies exist – or how much money is kept offshore. No statistics can be considered reliable.
All this is very useful to those who are engaged in offshore finance – from the owners of large fortunes to the last lawyer and accountant, who are directly involved in managing accounts, and the offshore jurisdictions covered by the sun. The key word of this industry is complete privacy. Or secrecy – although this word is much less loved here.
The essence of the offshore business was perfectly formulated by a British expert, the author of several books on taxation, Nicholas Shakeson: “Those who know something keep quiet. And those who say they do not know anything.”
But do we know how much money is actually hidden in offshore?
According to a report published in September of this year (one of its authors is economist Gabriel Zukman), a total of about $ 7.8 trillion is in offshore accounts or about 10% of world GDP. The estimate of the Boston Consulting Group is even greater – about 10 trillion dollars.
If you think: “Wow, this is more than the whole economy of Japan!”, Then you are right.
But the real “wow” is the estimate of James Henry, the author of the book “Bloody Bankers”: 36 trillion dollars. This is twice the GDP of the United States, the largest economy in the world.
But for sure no one knows the answer to this question.
And here is another amazing fact. Remember the slogan “We are the same 99%,” invented by members of the Occupy Wall Street movement – as opposed to the remaining 1% of the population, owning a huge share of all world wealth? So, according to Zukman, 80% of all offshore capital belongs to 0.1% of the richest families, and 50% are in the hands of 0.01% of the richest.
And your chances of being among them are, frankly, very slim. For a middle-class person, the cost of servicing accounts will most likely override the possible benefits.
Is it legal but ethical?
Do we know how it all works? Of course, we heard about something: double taxation, tax inversion, offshore trusts, one-day firms and so on. We do not know the main thing: who participates in the schemes and what gets from it.
The whole point is to redirect the money from where the tax rules do not suit you to a safe place where there are not so many of these rules. Or not at all.
Let’s say you have financial assets that you want to protect from lenders. Unsubscribe them to an offshore pacifier company – and voila, they are much harder to get. Need to hide a property? Use trust.
This is not a crime. There are many schemes – legal, illegal, controversial from an ethical point of view. Within the framework of these concepts, there are various variables, something like the western “Good, bad, evil.” But even in the movie, the character called Evil was hardly an absolute evil, and Good was certainly not perfect.
Like the fabulous Cheshire Cat, offshore zones do not always appear where they are expected to be seen. I would not want to confuse you, but offshore are also onshore. Because of this, it is almost impossible to calculate the exact number of offshore centers in the world. There may be 50, 70, more or less. They will appear and disappear.
With a big amendment, we can say that the United States and the United Kingdom are the largest offshore zones.
For example, in some US states, such as Delaware, it is easier to open an offshore company.
And it is not a secret for anybody that the City of London serves the possessions of the British Crown, which include the Channel Islands, the Isle of Man and other territories that miss trillions of offshore dollars.
These are small, often island states that Nicholas Shackson calls “offshore colonies.” “There are not enough experienced and competent specialists. People in these countries think in the following way:” We’d better do what accountants and lawyers tell us. After all, they understand better what is better for our island, ”the expert explains.
But how do offshore zones define themselves?
They argue that banks in offshore zones do not sit on the money – companies simply reinvest funds. Moreover, they say, if there were no offshore zones, there would be no restrictions on the tax rates that may be levied by the state.
Offshore financial centers assure that they simply redistribute money around the world, and the rules introduced over the past ten years make any tax frauds impossible.
Of course, it’s impossible to mix all offshore zones in a pile. Some of them are really well regulated. At the other end of the spectrum is an example of a scandalous investigation into the Panamanian offshores, the results of which were published last year.