Whilst tax havens may have the negative connotations of tax avoiding fat cats and illegal offshore holding corporations, they’re actually simple and (when used correctly) legitimate means of maximizing your savings. There is no denying that there are too many illegitimate schemes set to hide away wealth, but there are also many that adhere to UK regulations and have very open and transparent policies.
As the year draws to a close, there is a lot to say about the developments in offshore investing. With EU crises, data leaks and new agreements, it seems like 2013 may herald a great change in how companies and private investors handle their money abroad (legally, that is).
In April, The Guardian and The International Consortium of Investigative Journalists published a list of companies, government officials and wealthy families that have been using covert companies and bank accounts to accumulate their wealth abroad, keeping it hidden from authorities in UK and, consequently, taking advantage of tax hideouts. Coinciding with the data’s publication, this year’s G8 summit, chaired by David Cameron, emphasized the tax evasion issue and called for transparency amongst the international community. It was agreed that enforcing tighter rules on corporate taxes would make it more difficult for multinational companies to shift their income and avoid taxes. The ultimate goal being to make information on corporate and individual taxes available automatically, aiding and expediting countries’ detection of fraud and evasion.
With this theme of transparency in mind, Ireland and the Isle of Man, two very popular tax havens amongst British investors, have also made changes to their regulations. Having agreed to automatically exchange tax information with the UK, the Isle of Man signed the agreement on October 11th, whilst Ireland is closing loopholes stopping corporations from transferring funds to avoid higher taxation.
However, regulations alone aren’t the only factors determining the status of offshore investment in 2014. The balance of power amongst countries offering appetizing tax rates for hungry offshore investors has shifted considerably over the last year. In March, banks in Cyprus sustained major damages from Greek bond defaults. They were forced to close their doors in an attempt to keep investors from moving their capital elsewhere, causing inevitable losses. Gibraltar on the other hand, has almost quadrupled her number of funds between 2008 and 2012, attracting more and more traders, many of whom had previously worked at investment banks in Switzerland or London.
As greater transparency remains the theme for 2014 in every aspect of global economy, we’re left to wonder how successful these efforts will be. Whilst Switzerland is on the brink of conceding to the USA over US citizens’ illegal accounts, will financially precarious nations truly kowtow to international pressures and put their economies at risk?