Panama Isn’t the Only Player
In light of the Panama Papers, everyone is a-buzz about tax havens. There seems to be a fine line between unscrupulous tax dodging and the legal loopholes/offshore banking strategies that those who can afford top accountants can take advantage of. The ethics of these financial plays are subject to great debate. On one hand, if it’s technically legal, why not use every strategy out there to maximize your assets? On the other hand, shouldn’t everybody pay their fair share of taxes? Think about the gazillions of dollars that are bypassing Uncle Sam’s coffers due to these overseas corporate shenanigans. It’s enough to make those bank bail-outs seem like pocket change. Panama is getting all the attention right now, but they’re only a small player in this game. Watch this video for an overview of some of the top offshore tax havens and international banking centers where those in the know can stash their cash.
So Where Exactly Are These Tax Havens?
In ascending order, here are the top offshore tax havens around the world, most seeped in secrecy and complex rules that only the very wealthy can afford to decipher.
10. United Arab Emirates
One of the world’s best known tax havens or secrecy jurisdictions. It has a low-tax environment and a complex array of free trade zones with multiple secrecy facilities and lax enforcement.
An island of hospitality to banks and businesses and also one of the biggest global centers for Islamic finance. There is no corporate income tax, personal income tax or capital gains tax. Bahrain also has a wide network of tax treaties with a number of developing countries.
Between $2.81 to $3.38 trillion of tax exempt interest-bearing assets were held by non-residents as of August 2013. Germany does not sufficiently exchange tax-related information with a multitude of other jurisdictions and despite recent progress with its anti-money laundering framework, major loopholes and many implementation deficits still exist
Many members of the population are high-net-worth individuals. Beirut’s offshore financial services sector has been growing at an average of nearly 12 percent per year since 2006. Lebanon’s political and military troubles over recent decades have disrupted the offshore financial sector, but it has proved astonishingly resilient.
The most important private banking and wealth management center in the Eurozone. It has 143 banks holding almost $800 billion in assets, over $300 billion of which are in the secretive private banking sector. It is a center of lax financial regulation and is still one of the world’s most important financial centers. Breaking professional secrecy can result in a prison sentence.
5. The Cayman Islands
The Cayman Islands have banking assets worth $1.4 trillion in June 2014, hosting over 11,000 mutual and other funds with a net asset value of $2.1 trillion. It has 200 banks, over 140 trust companies and over 95,000 registered companies and retains many secrecy features plus laws that can put people in jail not only for exposing confidential information, but merely for asking for it.
This is a major wealth management center, with $1.4 trillion in assets under management in 2013. In 2014 it become Asia’s largest foreign exchange trading center. It hosts a lack of serious reforms to its corporate secrecy regime and a lack of interest in creating public registries of beneficial ownership.
The U.S. has led the charge in combating international tax evasion using offshore financial accounts. However, the U.S. also provides a multitude of secrecy and tax-free facilities for non U.S. residents. It’s one of the few places left where advisers are actively promoting accounts that will remain secret from overseas authorities.
2. Hong Kong
Hong Kong has the second largest stock exchange in Asia after Tokyo with $2.1 trillion under management in April 2015 and over $350 billion in private banking assets. China’s control over Hong Kong has shielded it from global transparency initiatives. It also has not signed the multilateral agreement to initiate automatic information exchange via the CRS.
Switzerland is the grandfather of the world’s tax havens, known to have introduced Banking Secrecy Laws as far back as 1934. However, in 2010, the US enacted the Foreign Account Tax Compliance Act and the Swiss government was ultimately forced to bow to US pressure. In 2013, the US government signed a tax treaty that calls for Swiss banks to provide details on their American account holders.