OFFSHORE FINANCIAL CENTERS 101 – Introduction

Bordejando das costas do Paraísos fiscais

It is difficult, if not impossible, to find a definition that qualifies the so-called tax havens, even though it cannot be denied that some characteristics are shared among them.

Foto articolo tax haven

For many the transition from “paradise for pirates and colonizers” to “paradise for tourists and wealthy businessmen“, even though requiring centuries, seems to have been if not natural at least inevitable: children of the colonialism at first, sons of globalization then. For our sections dedicated to offshore financial centers proceed with an analysis centred on thirty-threetax havens” (for concrete data see attachments) which offer “offshore trusts. What emerges is a portrait rather homogeneous, although, of course, every country has peculiarities of its own.

The “tax haven” is generally an island (thirty out of thirty-three countries, except Belize, Panama and Gibraltar), with an average area (excluding New Zealand) of 2.304 km2 (ten times smaller than Lombardy) and less than 430.000 inhabitants in 87% of the cases. However, if we exclude the four countries with a population exceeding one million inhabitants, the average population is just over 114.000 per unit. The GDP per capita (PPP) is about 25.100 USD, with a registered minimum in Vanuatu, 4.800 USD, and a Bermudan zenith at 86.000 USD. The currencies in 70% of the cases are hard currencies (Dollar, Euro, Pound Sterling) or otherwise pegged (fixed exchange rate) with USD or Pound Sterling. The official language is English (except Cyprus and Labuan), element which represents a key facilitator in international trading and business operations. The presence of international airports and of an efficient telecommunications system completes the picture. Moreover, if we exclude financial services, tourism has been and remains one of the pillars of their economy (for 78% of them), although these countries are often at the mercy of natural hazards (81%), sometimes facing dramatic consequences affecting their already poor resources.

revolutionary-soldiersAll were colonies and one third (seven British Overseas Territories and three British Crown Dependencies) still are. The nineteen independent States gained their independence (as many as sixteen from the United Kingdom) only recently, between 1960 and 1986 (the only exception is New Zealand in 1907). The legal system is overwhelmingly based on Common law. Finally, thirty-one jurisdictions (except New Zealand) figured in the twelve blacklists.

Tax havens tend to have open economies. They are also more likely to have British legal origins and parliamentary systems. Tax havens have more homogenous populations than non-havens and their governments’ levels of spending, relatively comparable to their GDP, are, nevertheless, similar to those of non-havens. To conclude we want to recall eleven out of 33 signed the Hague Convention.

Countries outside the Common law tradition (Dubai, Bahrein), Civil law countries (Malta, Argentina, San Marino, Panama, Uruguay, Paraguay, Luxembourg) countries of mixed law traditions (Jersey, Guernsey, Mauritius , Seychelles, Cyprus) have in recent years enacted laws on trusts or institutions that the statutory comparative analysis considers structurally and functionally equivalent to a trust. OFCs jurisdictions do not tax the income in the hands of the trustees so long as that income has a foreign epicenter (origin country): they may be called “offshore trusts”.

originalBordejando das costas do Paraísos fiscais
(or in other more explicit terms, navegar mudando de rumo frequentemente, consoante a direcção do vento”) 

We will see how historically, economically, geographically, politically, and socially, all jurisdictions that offer the offshore trusts, share a common background that shall never be ignored in any foreseeable decision being it at a local or a global level. For convenience, we divided the OFCs in 5 subsections, namely:

  1. Taxation motivated trusts
  2. Financially oriented trusts
  3. Asset protection offshore trusts specialists
  4. Remoteness (secrecy?) directed trusts
  5. A bonus State (it is a very unknown OFC: write your guesses in the comment section below!)

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