Should offshore financial centers be banned worldwide?
Discussion
Let's face it, they exist for avoiding tax and laundering dirty money (when I mean dirty, I'm not just talking about hiding money from your ex-wife, but money from terror, drugs etc). Only the already filthy rich use them anyways.
Should the Caymans, Cook Islands, Jersey etc be threatened with invasion unless they cooperate and become transparent?
Should the Caymans, Cook Islands, Jersey etc be threatened with invasion unless they cooperate and become transparent?
Nonsense.
Offshore centres are used for many purposes. It is not just about evading tax.
Doing business in multiple different countries can be very difficult indeed. Some countries are an absolute nightmare to do business in. Independent business centres can really simplify the activities of a company.
For some industries, I suspect they would simply not bother to market their products in some countries because local rules and bureaucracy, as well as rubbish administration and corruption, make it impossible. Having a business based in an independent location can be the only practical solution.
It is not just about tax. In spite of the media frenzy.
Besides, if you close down the offshore centres that currently exist, new ones will show up. With the power of money shifting to the East, it really does not matter if the BVI or Cayman are closed down. Money will simply move to Singapore, Macau, Mauritius, for example. These countries will get rich off it. And our influence over these regions will be zero.
Offshore centres are used for many purposes. It is not just about evading tax.
Doing business in multiple different countries can be very difficult indeed. Some countries are an absolute nightmare to do business in. Independent business centres can really simplify the activities of a company.
For some industries, I suspect they would simply not bother to market their products in some countries because local rules and bureaucracy, as well as rubbish administration and corruption, make it impossible. Having a business based in an independent location can be the only practical solution.
It is not just about tax. In spite of the media frenzy.
Besides, if you close down the offshore centres that currently exist, new ones will show up. With the power of money shifting to the East, it really does not matter if the BVI or Cayman are closed down. Money will simply move to Singapore, Macau, Mauritius, for example. These countries will get rich off it. And our influence over these regions will be zero.
toppstuff said:
Nonsense.
Offshore centres are used for many purposes. It is not just about evading tax...
I've dealt with dozens of company groups with offshore entities and in my experience it is almost entirely to do with tax. Offshore centres are used for many purposes. It is not just about evading tax...
The possible exception is China, which has bizarre WOFE rules, but the require offshore company is not always registered in the usual offshore locales (Cayman Islands, BVI, Bermuda, Channel Islands, IoM) as it deoesn't always work for the rules.
A lot of the groups I've dealt with even had onshore entities set up solely to reduce the amount of VAT they paid.
As far as I've seen (no doubt there will be some obscure examples in addition to China above that disprove the rule) you generally don't need an offshore company to do business in most foreign countries, you can do it using the home entity or by setting an entity up in host country.
Setting up a third, offshore entity creates its own problems of admin, logistics, governance, transparency for stakeholders and costs. Hence why in my experience the primary reson it has been done is to lower the tax bill.
You would need a World Police to ban them though.
Edited by youngsyr on Friday 5th April 11:34
An "offshore financial centre" is just a low-tax jurisdiction. What a low-tax jurisdiction is depends on your view on how much tax should be paid. For France, the UK is an "offshore financial centre" and French socialists constantly complain about unfair tax competition and want Europe-wide (high) tax rates. For the UK, Eire was an offshore etc, the US' tax rates are lower than ours, so should we tell them to raise their rates? if so, what do you think their response would be?
Do you see why, without one world govt, this is a daft idea?
If you think companies/individuals are abusing tax havens to avoid UK tax, change the UK tax rules to stop it, or co-ordinate with a few other govts to prevent artificial arrangements to avoid tax. But be v.careful, whilst doing this, that you are not chasing away big business to friendlier jurisdictions.
Do you see why, without one world govt, this is a daft idea?
If you think companies/individuals are abusing tax havens to avoid UK tax, change the UK tax rules to stop it, or co-ordinate with a few other govts to prevent artificial arrangements to avoid tax. But be v.careful, whilst doing this, that you are not chasing away big business to friendlier jurisdictions.
Not the best suggestion to ban them and not only the 'filthy rich' use them. It appears the media has altered the view as to what why off shore entities are necessary. Some are used for efficient tax planning, but others are used as mentioned above for international business interactions.
The best point mentioned is that these 'off-shore' zones you are taking about are only mentioned because of their low/zero tax environments, I hold accounts in New Zealand for example, that's technically off shore.
Remember that off shore entities are subject to different laws too, most have less protection for the user than other more conventional investment tools. 3
Chris
The best point mentioned is that these 'off-shore' zones you are taking about are only mentioned because of their low/zero tax environments, I hold accounts in New Zealand for example, that's technically off shore.
Remember that off shore entities are subject to different laws too, most have less protection for the user than other more conventional investment tools. 3
Chris
youngsyr said:
I've dealt with dozens of company groups with offshore entities and in my experience it is almost entirely to do with tax.
The possible exception is China, which has bizarre WOFE rules, but the require offshore company is not always registered in the usual offshore locales (Cayman Islands, BVI, Bermuda, Channel Islands, IoM) as it deoesn't always work for the rules.
A lot of the groups I've dealt with even had onshore entities set up solely to reduce the amount of VAT they paid.
As far as I've seen (no doubt there will be some obscure examples in addition to China above that disprove the rule) you generally don't need an offshore company to do business in most foreign countries, you can do it using the home entity or by setting an entity up in host country.
Setting up a third, offshore entity creates its own problems of admin, logistics, governance, transparency for stakeholders and costs. Hence why in my experience the primary reson it has been done is to lower the tax bill.
You would need a World Police to ban them though.
My experience of offshore companies is generally from a non UK perspective, so I defer to your experience on issues of VAT etc..The possible exception is China, which has bizarre WOFE rules, but the require offshore company is not always registered in the usual offshore locales (Cayman Islands, BVI, Bermuda, Channel Islands, IoM) as it deoesn't always work for the rules.
A lot of the groups I've dealt with even had onshore entities set up solely to reduce the amount of VAT they paid.
As far as I've seen (no doubt there will be some obscure examples in addition to China above that disprove the rule) you generally don't need an offshore company to do business in most foreign countries, you can do it using the home entity or by setting an entity up in host country.
Setting up a third, offshore entity creates its own problems of admin, logistics, governance, transparency for stakeholders and costs. Hence why in my experience the primary reson it has been done is to lower the tax bill.
You would need a World Police to ban them though.
Edited by youngsyr on Friday 5th April 11:34
I have certainly seen offshore companies used to capture cash simply as a safer and easier alternative to using dodgy local banking services in some countries. The money does not stay offshore either, but is generally remitted through service contracts back to places like the UK or US where some of the work is done. Taxes are then paid on the money remitted, with the offshore entity essentially being a "collection facility" that then sprays the cash back to the service providers in their own countries.
Offshore companies also make life simpler in the absence of double taxation agreements. Without them you can end up paying tax multiple times on the same money, even in countries where the business was'nt even done.
It is only when you try and do business in different countries, with varying degrees of established processes and uneven quality of admin, when you realise that simply dumping revenue in an independent location, audited and custodied with a big financial organisation, can make the business sustainable. Money invariably ends up inside the countries where the work is done and taxes do get paid. Although admitted, maybe not all of it.
The narrative coming out of the media is too simplistic IMO.
Having said that, I do not doubt for one moment that the system of offshore centres is used ( and abused ) to minimise taxes.
But it would be wrong to think that things are not being done about this. They are. The UK HMRC has already pretty much pierced through to the Channel Islands, Isle of Man, Switzerland and Lichtenstein and they are getting taxes collected and disclosure of individuals involved.
toppstuff said:
My experience of offshore companies is generally from a non UK perspective, so I defer to your experience on issues of VAT etc..
I have certainly seen offshore companies used to capture cash simply as a safer and easier alternative to using dodgy local banking services in some countries. The money does not stay offshore either, but is generally remitted through service contracts back to places like the UK or US where some of the work is done. Taxes are then paid on the money remitted, with the offshore entity essentially being a "collection facility" that then sprays the cash back to the service providers in their own countries.
Offshore companies also make life simpler in the absence of double taxation agreements. Without them you can end up paying tax multiple times on the same money, even in countries where the business was'nt even done.
It is only when you try and do business in different countries, with varying degrees of established processes and uneven quality of admin, when you realise that simply dumping revenue in an independent location, audited and custodied with a big financial organisation, can make the business sustainable. Money invariably ends up inside the countries where the work is done and taxes do get paid. Although admitted, maybe not all of it.
The narrative coming out of the media is too simplistic IMO.
Having said that, I do not doubt for one moment that the system of offshore centres is used ( and abused ) to minimise taxes.
But it would be wrong to think that things are not being done about this. They are. The UK HMRC has already pretty much pierced through to the Channel Islands, Isle of Man, Switzerland and Lichtenstein and they are getting taxes collected and disclosure of individuals involved.
Interesting angle and I've seen "aggregator" companies in use before, but tell me this: why does the revenue/cost/cash accumulating company need to be offshore - why can't it be in the domestic country's jurisdiction?I have certainly seen offshore companies used to capture cash simply as a safer and easier alternative to using dodgy local banking services in some countries. The money does not stay offshore either, but is generally remitted through service contracts back to places like the UK or US where some of the work is done. Taxes are then paid on the money remitted, with the offshore entity essentially being a "collection facility" that then sprays the cash back to the service providers in their own countries.
Offshore companies also make life simpler in the absence of double taxation agreements. Without them you can end up paying tax multiple times on the same money, even in countries where the business was'nt even done.
It is only when you try and do business in different countries, with varying degrees of established processes and uneven quality of admin, when you realise that simply dumping revenue in an independent location, audited and custodied with a big financial organisation, can make the business sustainable. Money invariably ends up inside the countries where the work is done and taxes do get paid. Although admitted, maybe not all of it.
The narrative coming out of the media is too simplistic IMO.
Having said that, I do not doubt for one moment that the system of offshore centres is used ( and abused ) to minimise taxes.
But it would be wrong to think that things are not being done about this. They are. The UK HMRC has already pretty much pierced through to the Channel Islands, Isle of Man, Switzerland and Lichtenstein and they are getting taxes collected and disclosure of individuals involved.
Put it another way - if the offshore location didn't have a 0% corporate tax rate, would the companies you've seen be based there? I'd argue that in all but a very few limited examples, the answer would be no.
youngsyr said:
Interesting angle and I've seen "aggregator" companies in use before, but tell me this: why does the revenue/cost/cash accumulating company need to be offshore - why can't it be in the domestic country's jurisdiction?
Put it another way - if the offshore location didn't have a 0% corporate tax rate, would the companies you've seen be based there? I'd argue that in all but a very few limited examples, the answer would be no.
In some cases the domestic country can be a complete nightmare, especially if you are in a business which is regulated or needs some form of compliance or licensing.Put it another way - if the offshore location didn't have a 0% corporate tax rate, would the companies you've seen be based there? I'd argue that in all but a very few limited examples, the answer would be no.
Given the choice between, say, registering domestically, incurring $500,000 in costs and it taking 12 months - if you could effectively do business in the same country from an offshore location and get it set up in a quarter of the time and a tenth of the cost , which would you choose?
As someone who has spent their entire working life in Jersey, I find this sort of attitude incredibly depressing. The complete lack of understanding of the business model of offshore centres, perpetrated not only by the international media, but also people who ought to know better, such as the idiots running the UK Treasury, is appalling beyond words.
Governments across the "offshore financial centres" persist in pursuing ever greater transparency, and in implementing legislation and regulations far above and beyond what the "onshore" jurisdictions have in place, in the vain hope that, at some point, we might become politically acceptable to the wider world. Sadly I believe this hope is wildly misplaced - as small, powerless jurisdictions, we will always be the whipping boy when the sclerotic governments of the "G20" want to find someone on whom to blame their wasteful mis-management and poor governance.
Contrary to popular misconception, tax evasion here, as with many "offshore" centres, and unlike many of the "on-shore" ones, is a criminal, rather than a civil offence; it has been for years.
General tax avoidance is, again contrary to popular misconception, a very limited part of our industry. The simple fact is that, at some point, the tax will always have to be paid.
Trusts
Traditionally the core industry in Jersey, the trust business has been in significant decline following efforts across mainland jurisdictions to counter avoidance through offshore trusts by taxing money before it is put into a trust (such as the CLT in the UK).
Nowadays, the industry remains by providing Employee Benefit Trusts (simply holding share awards etc until they are vested, at which point the employee is taxed on the award in their jurisdiction of residence), corporate trustee arrangements used for the likes of Unit Trusts (income is taxable on the investors when they receive it, and these Trusts will not in themselves suffer tax whatever jurisdiction they are in), and tax planning schemes such as the one used by Jimmy Carr.
The sort of scheme which was used by Jimmy Carr (I am not familiar with his exact scheme, but have seen similar ones) would not have allowed him to avoid tax indefinitely. It enabled him to earn money directly into an offshore company, where the capital could grow free of tax. As soon as he wanted to receive any benefit from either the capital or rolled-up income, UK tax would have to be paid at 40%-55%. The only avoidance mechanism was that the tax didn't need to be paid immediately, not that it didn't need to be paid at all.
Banking
Similarly, our banking sector. If a UK resident individual were to earn money and pay it into a Jersey bank account without having declared it to HMRC, that would be tax evasion and subject to criminal prosecution in Jersey. Any individual at the bank who had any suspicion that this was the case would be guilty of assisting money laundering, and could face up to 14 years in prison. Tax information exchange agreements across the world mean that any tax authority with a TIEA with the jurisdiction (i.e. most of them) requesting details on an individual holding cash offshore will be given that information.
The principal use of offshore bank accounts is for investment vehicles, which I will come on to later.
For individuals, offshore bank accounts only make sense if they are not domiciled in their jurisdiction of residence. For instance, if a worker left the UK to work in Libya, they might keep their savings in bank accounts and investments offshore, so that the income received may be able to avoid tax in their jurisdiction of residence, and their jurisdiction of domicile. Similarly, an individual moving their residence to the UK is able to avoid paying tax on their worldwide income by paying the "non dom charge". They will only be taxed on worldwide income remitted to the UK, so they may choose to keep this income offshore.
Funds
These days the staple of offshore industry, the funds sector has experienced significant growth in recent years. Most investment funds are not taxable as discrete entities in any jurisdiction, but to establish them in "on-shore" environments can sometimes cause tax complications for their investors, and, more importantly, we simply have the expertise in dealing with these types of entities, through long experience.
Investors will always pay tax on the income they receive from investment funds in their jurisdiction of residence. The fund's establishment offshore simply ensures the avoidance of almost any tax implications for the fund management whilst it is operating.
Companies
A large number of international companies are domiciled offshore. Clearly the primary reason is to avoid corporation tax at the top level. However, companies will pay corporation tax on their operations within a jurisdiction - so a Jersey company with UK operations will pay UK CT on all its profits from UK operations.
Do not forget, however, that a company is simply another form of investment vehicle. I would argue that the true scandal is that companies are taxed at all, not that they seek to domicile themselves in jurisdictions where the directors are better able to exercise their fiduciary duty to shareholders to reduce costs (in this case, tax). Since tax will be paid by the shareholders on receipt of dividends from the company (and the whole point of a company is to make profits for the shareholders, which will be returned to them in the form of dividends), then it strikes me as utterly immoral to tax the company as well.
If you dislike any of the specifics of why an offshore jurisdiction exists and is able to be successful, you should lobby your own government to change their tax laws, not try to bully smaller jurisdictions into shutting down.
Governments across the "offshore financial centres" persist in pursuing ever greater transparency, and in implementing legislation and regulations far above and beyond what the "onshore" jurisdictions have in place, in the vain hope that, at some point, we might become politically acceptable to the wider world. Sadly I believe this hope is wildly misplaced - as small, powerless jurisdictions, we will always be the whipping boy when the sclerotic governments of the "G20" want to find someone on whom to blame their wasteful mis-management and poor governance.
Contrary to popular misconception, tax evasion here, as with many "offshore" centres, and unlike many of the "on-shore" ones, is a criminal, rather than a civil offence; it has been for years.
General tax avoidance is, again contrary to popular misconception, a very limited part of our industry. The simple fact is that, at some point, the tax will always have to be paid.
Trusts
Traditionally the core industry in Jersey, the trust business has been in significant decline following efforts across mainland jurisdictions to counter avoidance through offshore trusts by taxing money before it is put into a trust (such as the CLT in the UK).
Nowadays, the industry remains by providing Employee Benefit Trusts (simply holding share awards etc until they are vested, at which point the employee is taxed on the award in their jurisdiction of residence), corporate trustee arrangements used for the likes of Unit Trusts (income is taxable on the investors when they receive it, and these Trusts will not in themselves suffer tax whatever jurisdiction they are in), and tax planning schemes such as the one used by Jimmy Carr.
The sort of scheme which was used by Jimmy Carr (I am not familiar with his exact scheme, but have seen similar ones) would not have allowed him to avoid tax indefinitely. It enabled him to earn money directly into an offshore company, where the capital could grow free of tax. As soon as he wanted to receive any benefit from either the capital or rolled-up income, UK tax would have to be paid at 40%-55%. The only avoidance mechanism was that the tax didn't need to be paid immediately, not that it didn't need to be paid at all.
Banking
Similarly, our banking sector. If a UK resident individual were to earn money and pay it into a Jersey bank account without having declared it to HMRC, that would be tax evasion and subject to criminal prosecution in Jersey. Any individual at the bank who had any suspicion that this was the case would be guilty of assisting money laundering, and could face up to 14 years in prison. Tax information exchange agreements across the world mean that any tax authority with a TIEA with the jurisdiction (i.e. most of them) requesting details on an individual holding cash offshore will be given that information.
The principal use of offshore bank accounts is for investment vehicles, which I will come on to later.
For individuals, offshore bank accounts only make sense if they are not domiciled in their jurisdiction of residence. For instance, if a worker left the UK to work in Libya, they might keep their savings in bank accounts and investments offshore, so that the income received may be able to avoid tax in their jurisdiction of residence, and their jurisdiction of domicile. Similarly, an individual moving their residence to the UK is able to avoid paying tax on their worldwide income by paying the "non dom charge". They will only be taxed on worldwide income remitted to the UK, so they may choose to keep this income offshore.
Funds
These days the staple of offshore industry, the funds sector has experienced significant growth in recent years. Most investment funds are not taxable as discrete entities in any jurisdiction, but to establish them in "on-shore" environments can sometimes cause tax complications for their investors, and, more importantly, we simply have the expertise in dealing with these types of entities, through long experience.
Investors will always pay tax on the income they receive from investment funds in their jurisdiction of residence. The fund's establishment offshore simply ensures the avoidance of almost any tax implications for the fund management whilst it is operating.
Companies
A large number of international companies are domiciled offshore. Clearly the primary reason is to avoid corporation tax at the top level. However, companies will pay corporation tax on their operations within a jurisdiction - so a Jersey company with UK operations will pay UK CT on all its profits from UK operations.
Do not forget, however, that a company is simply another form of investment vehicle. I would argue that the true scandal is that companies are taxed at all, not that they seek to domicile themselves in jurisdictions where the directors are better able to exercise their fiduciary duty to shareholders to reduce costs (in this case, tax). Since tax will be paid by the shareholders on receipt of dividends from the company (and the whole point of a company is to make profits for the shareholders, which will be returned to them in the form of dividends), then it strikes me as utterly immoral to tax the company as well.
If you dislike any of the specifics of why an offshore jurisdiction exists and is able to be successful, you should lobby your own government to change their tax laws, not try to bully smaller jurisdictions into shutting down.
Edited by Dominicc01 on Friday 5th April 13:07
Dominicc01 said:
Companies
A large number of international companies are domiciled offshore. Clearly the primary reason is to avoid corporation tax at the top level. However, companies will pay corporation tax on their operations within a jurisdiction - so a Jersey company with UK operations will pay UK CT on all its profits from UK operations.
A lot of words there, but the bit in bold is the key message, IME.A large number of international companies are domiciled offshore. Clearly the primary reason is to avoid corporation tax at the top level. However, companies will pay corporation tax on their operations within a jurisdiction - so a Jersey company with UK operations will pay UK CT on all its profits from UK operations.
I've underlined an assumption you've made that I disagree with and is easily demonstrated to be false by the likes of Amazon, Starbucks and myriad other companies.
Corporate taxes are generally paid on profits and it's very easy to move profits between jurisdictions.
Another example where offshore companies are useful..
Many companies listed on the Hong Kong stock exchange are registered in Cayman Islands.
Why? Because Cayman Islands law is very similar in structure and operation to UK law. Investors like this.
Cayman makes it easy and fast to set the company up.
Does it save tax? Not a bean. None at all. This is because Hong Kong collects taxes on local listed companies and it doesn't matter where they are registered.
Thousands of companies are set up in this way. There is no tax evasion.
But you won't read this in the media.
Many companies listed on the Hong Kong stock exchange are registered in Cayman Islands.
Why? Because Cayman Islands law is very similar in structure and operation to UK law. Investors like this.
Cayman makes it easy and fast to set the company up.
Does it save tax? Not a bean. None at all. This is because Hong Kong collects taxes on local listed companies and it doesn't matter where they are registered.
Thousands of companies are set up in this way. There is no tax evasion.
But you won't read this in the media.
youngsyr said:
A lot of words there, but the bit in bold is the key message, IME.
I've underlined an assumption you've made that I disagree with and is easily demonstrated to be false by the likes of Amazon, Starbucks and myriad other companies.
Corporate taxes are generally paid on profits and it's very easy to move profits between jurisdictions.
OK, well aside from the fact that you pick up on what amounts to less than 5% of the offshore finance industry to justify the argument "Should offshore financial centres be banned worldwide", I accept that certain transfer pricing practices employed by Starbucks to generate profit in Switzerland, and interpretation of business establishment rules which allow Amazon to generate its European profits through Luxembourg are potentially abusive tax avoidance practices. But on that, my final sentence stands. It would be relatively easy, for instance, for HM Treasury to change the law to end these practices. But it is easier to employ empty rhetoric about the evils of offshore jurisdictions.I've underlined an assumption you've made that I disagree with and is easily demonstrated to be false by the likes of Amazon, Starbucks and myriad other companies.
Corporate taxes are generally paid on profits and it's very easy to move profits between jurisdictions.
For instance, were HMRC to treat all payments to connected companies, parent companies, and other connected entities, outside of the UK as dividends and thus taxable at source, then the questionable transfer pricing methods employed by Starbucks would be ended. Were HMRC to treat all sales to customers within the UK as taxable income in the UK, Amazon's Luxembourg profit centre would be ended.
We're getting into detailed specifics here, but I do think you're oversimplifying the issues.
Not only does the financing become more expensive, but if the JV cannot deduct the interest for domestic tax purposes, then they'll end up being taxed on it twice.
That strikes me as an impossible task.
Dominicc01 said:
For instance, were HMRC to treat all payments to connected companies, parent companies, and other connected entities, outside of the UK as dividends and thus taxable at source, then the questionable transfer pricing methods employed by Starbucks would be ended.
...not quite as simple as that though, is it? What about several parties co-financing a foreign joint venture via debt financing (as is quite common)? Not only does the financing become more expensive, but if the JV cannot deduct the interest for domestic tax purposes, then they'll end up being taxed on it twice.
Dominicc01 said:
Were HMRC to treat all sales to customers within the UK as taxable income in the UK, Amazon's Luxembourg profit centre would be ended.
How would HMRC track all sales by foreign companies to UK residents? That strikes me as an impossible task.
youngsyr said:
How would HMRC track all sales by foreign companies to UK residents?
That strikes me as an impossible task.
How does HMRC track all sales made by domestic companies to UK residents? Put it like that and it seems similarly impossible.That strikes me as an impossible task.
The fact is that they don't. But if they make failure to declare such sales illegal, it has the same effect.
Dominicc01 said:
youngsyr said:
How would HMRC track all sales by foreign companies to UK residents?
That strikes me as an impossible task.
How does HMRC track all sales made by domestic companies to UK residents? Put it like that and it seems similarly impossible.That strikes me as an impossible task.
The fact is that they don't. But if they make failure to declare such sales illegal, it has the same effect.
Foreign companies are not within their jurisdction, so non-declaring is not such a risk.
youngsyr said:
Yes, but UK companies by definition fall within their jurisdiction, so making it illegal for them not to declare sales has some weight.
Foreign companies are not within their jurisdction, so non-declaring is not such a risk.
Well we are arguing about minor specifics of a putative regime which was simply my back-of-the-fag-packet suggestion, so it isn't really a constructive discussion.Foreign companies are not within their jurisdction, so non-declaring is not such a risk.
However, just to answer your point - very few reputable company directors anywhere in the world would countenance the deliberate contravention of the laws of any jurisdiction, never mind one from which they derive a substantial amount of revenue, and in which they could be banned from trading by so doing.
youngsyr said:
I've dealt with dozens of company groups with offshore entities and in my experience it is almost entirely to do with tax.
i can't speak for who you've dealt with but the vast majority of offshore companies/vehicles are simply conduits for international investment. very basicly as an example an onshore us company wants to attract money from around the world. non us investors want to invest in the us but not suddenly find themselves having to file us taxes which they would if they invested directly so they do so via the offshore holding company. the us company still pays us taxes, the foreign investor still pays his domestic taxes. you might not think its a big deal filing one extra tax return but its such a nightmare cross border investment would grind to a halt without what are effectively tax firebreaks. the media portrays places like cayman and bvi as places you can open a secret bank account and hide your money there in the sand. perhaps in the 1970's but the same was true of miami then too, today this is a nonsense. i challenge anyone go to either and open a bank account without hmrc/irs knowing about your account before your plane touches down back home... regarding money laundering well london is the global capital for that, the hardest part 'placement' is all but impossible offshore, there arn't enough 'smurfs'. regarding secrecy; well if you want to start playing those games you have to look onshore towards places like delaware to hide corporate ownership which you can't do in the established offshore centres either. good luck shutting down a us state.
when it comes to tax avoidance i say good luck. is a frenchman moving to london to escape 75% tax immoral? does that make the uk a tax haven? shutting down tax competiton between countries would be very bad for those resident onshore, be careful what you wish for! besides who the hell are we to determine what other countries should charge in tax?
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