Offshore Banking

What Is the Meaning of Offshore Banking?

Offshore Banking and Tax heavens

When we talk about tax havens, we mainly mean those states that guarantee a minimum or even zero tax on bank deposits. A choice of this kind is motivated mainly by political reasons, in that a large amount of capital is attracted from foreign countries and in exchange offers extremely reduced taxation. From the tax payer’s point of view, going back to the original definition of “tax heaven”, the so-called tax haven is, for all intents and purposes, a refuge from taxation on income, which can therefore be counted among tax avoidance techniques.

Concept of a tax haven

The concept of a tax haven is closely linked to that of offshore companies, which literally means “” society outside the jurisdiction “”. Essentially an offshore company is a company that is registered under the laws of a foreign state, but carries out its activities outside the state or jurisdiction in which it was registered.

Given these two definitions, it is important to stress that one of the main objectives of setting up an offshore company is to reduce taxation. Although, through a particular configuration of the company itself, it is also possible to obtain other advantages, such as: asset protection, bureaucracy simplification, cost optimization. In reality, off-shore companies are set up mainly to carry out rather dangerous financial speculations, while maintaining a high degree of confidentiality, to cover prohibited or illicit operations, or to hide budget losses. It is precisely by virtue of these characteristics that off-shore companies become the flagship in the corporate structure of the major multinationals. Another important aspect of offshore companies is that they have no offices and no employees. The only thing they have is a tag outside the door, but often that is absent.

But how many tax havens are there in the world? There are more than a hundred and they seem to be constantly growing. According to a recent report by the Italian law enforcement agency, tax havens are used, not only for the reasons mentioned above, but also to launder money, to escape creditors or even to escape the claims of the spouse following the separation. Furthermore, according to industry professionals, it appears that the demand for foreign companies is increasing among middle-income people.

Among the best tax havens of 2016, following the Panama Papers scandal, the following countries have been included: Luxembourg, the Cayman Islands, the Isle of Man, the Isle of Jersey, Ireland, the Mauritius Islands, the Bermuda, Monaco, Switzerland and the Bahamas. Each of these states has its own specialization in “” tax matters “”.

Thinking of defeating tax havens is, to date, illusory. It would take a drastic solution – as suggested by Zucman – which envisages the creation of a mandatory global financial register. Practically “fanta-finance” ”.

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