Offshore bank
From The Art and Popular Culture Encyclopedia
|
Related e |
|
Featured: |
An offshore bank is a bank located in a jurisdiction different from that where its depositors reside. Countries that have a history and reputation as a haven for offshore banks can be referred to as offshore financial centres. An account held in a foreign offshore bank, especially in a tax haven jurisdiction, is often described as an offshore account. Typically, an individual or company will maintain an offshore account in a low-tax jurisdiction (or tax haven) for the financial and legal advantages it provides, including:
- Greater privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act)
- Little or no taxation (i.e., tax havens)
- Easy access to deposits (at least in terms of regulation)
- Protection against local, political, or financial instability.
While the term originates from the Channel Islands being "offshore" from the United Kingdom, and while most offshore banks are located in island nations to this day, the term is used figuratively to refer to any bank used for these advantages, regardless of location. Thus, some banks in landlocked Andorra, Luxembourg, and Switzerland may be described as "offshore banks".
Offshore banking has often been associated with the underground economy tax evasion and money laundering; however, legally, offshore banking does not prevent assets from being subject to personal income tax on interest. Except for certain people who meet fairly complex requirements (such as perpetual travelers), the personal income tax laws of many countries (e.g., France, Malaysia, and the United States) make no distinction between interest earned in local banks and that earned abroad. Persons subject to US income tax, for example, are required to declare, on penalty of perjury, any foreign bank accounts—which may or may not be numbered bank accounts—they may have. Although offshore banks may decide not to report income to other tax authorities and have no legal obligation to do so, as they are protected by bank secrecy, this does not make the non-declaration of the income by the taxpayer or the evasion of the tax on that income legal. Following the 9/11 attacks, there have been many calls to increase regulation on international finance, in particular concerning offshore banks, tax havens, and clearing houses such as Clearstream, based in Luxembourg, which are possible crossroadsTemplate:Citation needed for major illegal money flows.
Defenders of offshore banking Template:Who have criticized attempts at regulation,Template:Citation needed claiming that the attempts are prompted not by security and financial concerns, but by the desire of domestic banks and tax agencies to access the money held in offshore accounts.Template:Citation needed They cite the fact that offshore banking offers a competitive threat to the banking and taxation systems in developed countries, suggesting that the Organisation for Economic Co-operation and Development (OECD) countries are trying to stamp out competition.
See also
- Bank secrecy
- Banking in Singapore
- Banking in Switzerland
- Corporate haven
- List of finance topics
- Private bank
- Tax haven
- Dominica
- Citibank IPB Singapore
- Panama Papers
