![]() "There's a growing research talking about the finance curse," Mr Zinsak says, "that a lot of these economies are overly-financialised and that it's actually hurting the local economy by having this offshore cash flowing in."Ī 2016 feature in The Atlantic describes how many of these countries end up being run by, or for, international elites. When your population numbers in the thousands, these can be enough to underwrite the nation.Īlthough, both Mr Zinsak and Mr Ward point to recent research indicating that being an offshore financial centre does not always leave smaller nations better off. "It looks like it's easier to go after people at the lower end, rather than people at the top end, because aspiring people who are trying to take advantage of these can't hire an army of lawyers if they get into trouble," he says.īermuda is famous for its quirky business attire (shorts) and as an offshore financial centre. ![]() ![]() However, he also says the biggest cost is not setting up the offshore structure, but getting the right advice to make sure it is done legally. "Which makes it all the more time to crack down on this before it becomes a lot more widespread than it already is," he says. Mr Ward says there's anecdotal evidence that more people are. So why aren't millions of ordinary Australians setting them up to try to lower their tax bills or hide their assets from creditors? Many of these shell companies and trusts cost around a thousand dollars, or even less, to set up and not much to maintain. "And, certainly, it may be legal, but it's increasingly being viewed by large swaths of the global population as completely immoral and illegitimate." So why don't more people use them? "But, if you are setting up these structures and shifting the money on the basis of fraud, then there's a lot of grey area in there as to whether this is legitimate or not. "I'd say that a lot of it is probably technically legal," Mr Ward says. It depends on the structure used, how it is set up, what it is used for and the rules of the jurisdiction(s) where the so-called beneficial owner of the assets lives and/or operates in. They then have to embark on a difficult, expensive and often fruitless chase around the world to find out what you do really own to try to get their money back. When your creditors come knocking at the door, you say I don't own anything. So, for example, if you ran a business that owed people a lot of money that you know you cannot repay, you might move some of the assets into an offshore structure. It is extremely difficult - and expensive - in many of these locations for the people owed money to even find out what assets the person or company who owes them money owns, let alone to get their hands on the cash. "An artificial creation that's designed to avoid taxation where profits are earned," he says.Īs noted earlier, these offshore structures can be used to protect assets from creditors. Jason Ward from the Centre for International Corporate Tax Accountability and Research (CICTAR) says they are most often created to minimise tax bills. ![]() These companies and trusts will not, generally, engage in day-to-day business activities but, instead, transactions will flow through them or they will be the registered owners of valuable assets. Usually, the registered office will be an accountancy or legal firm in one of the secrecy jurisdictions, with that firm often providing the directors or trustees for the shell. Generally they are "shell" companies or trusts, which means that they don't really employ people or carry on business themselves, they are like a wrapping around actual corporate or individual activities or assets. So what exactly are these offshore structures? How do they work? Why are they used? Are they legal? And why don't more of us set up our finances this way? What are 'offshore structures'? Three major data drops via the International Consortium of Investigative Journalists - the so-called Pandora, Paradise and Panama Papers - as well as smaller leaks, have shed some light on the sorts of dealings that take place. These structures - set up in so-called "tax havens" or "secrecy jurisdictions" - are used by many of the world's wealthiest and most powerful people and corporations to shift and store money internationally. The Pandora Papers leak of nearly 12 million documents has shed further light on the secretive, mysterious world of offshore companies and trusts. ![]()
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