LiveOffshore - Liberty, Financial Privacy, and Economic Freedom

An offshore bank is a bank located outside the country of residency of the depositor. Offshore banks are often found in low tax jurisdictions or tax havens.

Offshore banks are attractive --but also controversial -- because they are often used by depositors as a way to avoid income taxes in their country of residence or citizenship, protect assets in unstable regions of the world, and, in some instances, to launder money from criminal activities.

The advantages of offshore banking include:

• Greater Privacy
• Lower regulation
• Low or no taxation
• Protection against political and financial instability
• Higher rates of interest on deposits

The controversy of offshore banks includes:

• Alleged criminal activity such as tax evasion, money laundering, terrorist financing, and organized crime
• The hiding of assets from authorities
• Stability of the international financial order

In 2000 the Organization for Economic Co-operation and Development (OECD) in conjunction with its 30 member states launched an assault on the offshore financial world. Roughly 40 countries were blacklisted. Since that time many tax havens have complied with some of the demands of the OECD and have, to their credit, cleaned up their practices by passing and enforcing tough new legislation.

The assault on low-tax-jurisdictions has been severely criticised. Low-tax-jurisdictions are a competitive threat to the cartel of high-tax-jurisdictions such as the United States, France, Germany, and many other European socialist countries. If a company in the United States can organize under the laws of Ireland, for instance, which has a corporate tax rate of 10 percent, there is an economic incentive to move money, assets, and entreprenurial talent overseas. This tax competition is a direct threat to the taxing powers of high-tax-jurisdictions. By blacklisting tax havens, these high-tax-jurisdictions are trying to dictate tax policy to these low-tax-jurisdictions. National sovereignty, political, and economic liberty are under assault.