An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction(ortax haven) that providesfinancialand legal advantages.These advantages typically include:
- greater privacy
- low or no taxation
- easy access to deposits
- protection against local political or financial instability
Myths
- The public mistakenly links offshore banking to criminal activities, terrorism-financing and money laundering.
- Secondly, people think that offshore banking services areonly for high-income class, since ordinary people cannotafford them.
- All operations conducted through the account is protected by the legislation.
- Offshore banks provide access to politically and economically stable jurisdictions.
- Offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the homecountry due to lower overheads and a lack of governmentintervention.
- Interest is generally paid by offshore banks without tax deducted
- Offshore finance is one of the few industries, along with tourism, that geographically remote island nations cancompetitively engage in.
- Offshore banking is often linked to other structures, such as offshore companies, trusts or foundations
- Account is protected from creditors, tax authorities and other interested parties.
Offshore Banking Disadvantages
- Offshore banking has been associated with the underground economy and organized crime, through money laundering.
- The existence of offshore banking encourages tax evasion, by providing tax evaders with an attractive place to deposit their hidden income.
- Offshore jurisdictions are often remote, so physical access and access to information can be difficult.
- Developing countries can suffer due to the speed at which money can be transferred in and out of their economy as “hot money”.
- Offshore banking is usually more accessible to those on higher incomes
Comments