Offshore Banking Centers
Definition of Offshore Banking and Offshore Financial Centers
An Offshore Banking Center (OBC) or Offshore Financial Center (OFC) is a place where offshore banks and financial institutions are established that do not participate in the domestic banking system. These companies often benefit from lower regulation and taxation, and only offer financial services to those outside the host country.
While financial institutions in offshore banking centers often pay less tax than their onshore counterparts, they bring significant income to the host country through licensing fees. As a result there is competition among offshore centers to offer the most favorable operating conditions. These frequently include:
- Very low or no taxation
- Light or moderate regulation and the promise of little interference from authorities.
- Bank secrecy protection
Classifying Offshore Financial Centers
Offshore centres often vary greatly in terms of size and the services they offer. Some, like Nevis or the Cook Islands, offer limited banking services, but have legislation allowing the incorporation of tax-free trusts and companies. Others like the Cayman Islands and Channel Islands provide deposit-taking and lending services on a large scale. Still greater financial centres such as the US, UK and Switzerland could be classified as "offshore" because they provide banking services to both residents and non-residents.
Tax Evasion & Money Laundering in Offshore Centers
In response to claims of widespread abuse of bank secrecy in offshore banking centers for tax evasion, the OECD (a Paris based think tank sponsored by developed nations) has published several lists which classify offshore centers according to financial transparency, and willingness to exchange tax-related information.
As of July 31st 2009, a "White list" (those who have substantially agreed to implement an internationally agreed tax standard) includes:
Argentina, Australia, Bahrain, Barbados, Belgium
Bermuda,
Canada,
China,
Cyprus,
Czech Republic,
Denmark,
Finland,
France,
Germany,
Greece,
Guernsey,
Hungary,
Iceland,
Ireland,
Isle of Man,
Italy,
Japan,
Jersey,
Korea,
Luxembourg,
Malta,
Mauritius,
Mexico,
Netherlands,
New Zealand, Norway,
Poland,
Portugal,
Russian Federation Seychelles,
Slovak Republic,
South Africa,
Spain,
Sweden,
Turkey,
United Arab Emirates,
United Kingdom,
United States,
US Virgin Islands.
A "Grey list" of jurisdictions that have committed to the internationally agreed tax standard, but have not yet substantially implemented, includes:
Andorra,
Anguilla,
Antigua and Barbuda,
Aruba,
Bahamas,
Bahrain,
Belize,
Bermuda,
British Virgin Islands,
Cayman Islands,
Cook Islands,
Dominica,
Gibraltar,
Grenada,
Liberia,
Liechtenstein,
Marshall Islands,
Monaco,
Montserrat,
Nauru,
Neth. Antilles,
Niue,
Panama,
St Kitts and Nevis,
St Lucia,
St Vincent & Grenadines,
Samoa,
San Marino,
Turks and Caicos Islands,
Vanuatu,
Austria,
Belgium,
Brunei,
Chile,
Guatemala,
Luxembourg,
Singapore,
Switzerland,
Costa Rica,
Malaysia (Labuan),
Philippines,
Uruguay.
|
