Offshore Money Magnets
We are all familiar or have at least heard about financial centers such as the Bahamas, Hong Kong, Singapore, Liechtenstein, the Cayman Islands, and Monaco. Fewer know that Tonga, Nauru, Maldives, Guam, and Nevis have joined the ranks of the offshore service providers.
The common characteristics in the offshore havens are:
- A system of low or no taxes.
- Maximum flexibility and secrecy in the ownership of business entities.
- Strict bank secrecy rules.
This powerful package of services is in high demand from individuals throughout the world seeking privacy for their wealth and protection of assets from government or economic instability. And let’s not forget about taxes. There is a massive flow of funds from the high tax countries-the United States, Canada, and Europe-into the offshore havens.
For example, studies show that when tax rates in a country move above 30 percent, to the 40 percent and higher range, tax avoidance becomes a preoccupation of many individuals and businesses. Much of Europe, the United States, and Canada have progressive tax rates which approach or exceed 50 percent-providing an endless source of demand for the attractive services offered by the tax havens.
A recent study showed that 50 percent of all international transactions are directed through the offshore jurisdictions. Hundreds of billions of dollars in international trade and commerce are routed through these countries each day. These nations allow the greatest degree of freedom in the ownership and operation of a business, and there is little government interference with business activities. It is only natural that international buying and selling of products and services, whenever feasible, are routed to a jurisdiction that protects the privacy of the parties and provides little or no taxation.