Offshore tax havens - now known by the more polite term “offshore financial centres” or OFCs–are today a deeply entrenched part of the global financial system. There are more than 70 OFCs in places such as the Cayman Islands, the Bahamas, Barbados, Jersey, the Isle of Man, Manaco, Cyprus, Luxembourg, Macao and a number of South Pacific Islands. Most but not all are small island states. Some of the banking facilities based in these tax havens are little more than a computer in a closet, but most are subsidiaries of mainstream banks headquartered in London,Zurich, New York and Toronto.
OFCs levy little or no tax on property, and provide minimal rules related to licensing and incorporation. Financial institutions and corporations can conduct their business without having a physical presence in these jurisdictions. Most importantly, OFCs guarantee anonymity so that their clients are beyond the scrutiny of tax authorities and regulators in their countries of residence.
These characteristics have attracted corporations and wealthy individuals to move their assets offshore. In the early 1990s, the Bank for International Settlements estimated that total offshore cash holdings were five times the sum available to the world’s central banks. In its 1998 World Wealth Report, Merrill Lynch estimated that one-third of the wealth of the world’s richest individuals, or US $11 trillion, was held offshore. Between 50% and 60% of all global trade is conducted through OFCs, and half the global monetary stock is estimated to pass through OFCs at somepoint.
OFCs levy little or no tax on property, and provide minimal rules related to licensing and incorporation. Financial institutions and corporations can conduct their business without having a physical presence in these jurisdictions. Most importantly, OFCs guarantee anonymity so that their clients are beyond the scrutiny of tax authorities and regulators in their countries of residence.
These characteristics have attracted corporations and wealthy individuals to move their assets offshore. In the early 1990s, the Bank for International Settlements estimated that total offshore cash holdings were five times the sum available to the world’s central banks. In its 1998 World Wealth Report, Merrill Lynch estimated that one-third of the wealth of the world’s richest individuals, or US $11 trillion, was held offshore. Between 50% and 60% of all global trade is conducted through OFCs, and half the global monetary stock is estimated to pass through OFCs at somepoint.
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