Экономические науки / 3.Финансовые
отношения
Parkhomenko, supervisor: Ph.D.
A. Lastovenko
Donetsk National
University of Economics and Trade after M. Tugan-Baranovsky
Offshore Banking Advantages and Disadvantages
Offshore banking has become increasingly
common for individuals all over the globe. Although more places are enforcing
stronger restrictions, individuals still turn to banking overseas due to its
many advantages. While it is common to open a bank account in other countries,
there are also disadvantages to doing so. Below is an overview of some of the
pros and cons of opening an offshore bank account.
Table 1
Offshore
Banking pros and cons
|
Advantages
of Offshore Banking |
Disadvantages
of Offshore Banking |
|
·
Financial and Political Stability:
Individuals living a country where there is political and economic
instability might feel their assets are threatened and wish to open offshore
accounts in banks that provide more economically stable jurisdictions. This
is especially true for those who live in underdeveloped countries. ·
Lower Tax Rates, Higher Interest Rates: Depending
on the offshore bank, prospective account holders can get higher interest
rates than banks in their home country. This is due to less government
regulation and lower overheads. Furthermore, interest is paid without tax
deductions, which puts account holders at an advantage when it comes to being
taxed on worldwide income. Offshore banking is also appealing to those
seeking lower tax rates and even zeros taxation. ·
Privacy and Other Banking Services: Another
benefit of offshore banking is that individuals have access to banking
services that are not offered by domestic banks. These include anonymous bank
names, low rates on loans, and investment opportunities. Offshore Banks also
provide more privacy, especially for personal matters such as divorce,
bankruptcy and taxes. ·
Access to Accounts: Offshore
bank account holders have access to their deposits at anytime. Individuals
can get debit cards and credit cards for further ease of access. One can
travel to any part of the globe and still be able to obtain funds from an
offshore account. |
·
Limited Financial Security:
Financially speaking, offshore bank accounts are less secure. In the event of
an economic crisis, natural disaster or political turmoil, those who have
deposited funds in an offshore account are at risk for losing their money. In
some countries, accounts are only insured up to a certain amount. ·
Inflexibility and Travel: Most
people prefer banking locally due to convenience and the ability to visit the
bank as needed. Although offshore banking matters can be handled via
telephone or e-mail, this can be inconvenient and inflexible for the average
person. Travel costs extra money and access to information may be difficult
to obtain. ·
Favorable to Higher Income: Offshore
banking is generally catered to the wealthier individual. There are certain
costs for setting up accounts and maintenance of account that may be
impractical for some people. However, a basic savings account can be opened
by anyone with the same fees as a domestic bank account. |
There are represented the directory of
offshore, private banks by country: Alderney, Andorra, Anguilla, Antigua,
Aruba, Austria, Bahamas, Barbados, Belgium, Belize, Bermuda, BVI - British
Virgin Islands, Cape Verde, Cook Islands, Cayman Islands, Cayman Islands, Costa
Rica, Cyprus, Dominica, Dubai – UAE, Gibraltar, Grenada, Guernsey, Hong Kong,
Isle of Man, Jersey, Labuan – Malaysia, Liechtenstein, Malta, Mauritius,
Monaco, Nevis, Netherland Antilles, North Cyprus, Panama, Samoa, San Marino,
Seychelles, Singapore, St. Vincent, St. Lucia, Switzerland – Swiss, Turks &
Caicos Islands, Uruguay, Link Juice.
According to Ukraine, it is really
amazing that our country joined to the list of countries that are most suitable
for conducting offshore business. The list which was made by the Gartner
Company includes 30 most attractive developing countries. So, the best 30
countries for offshore services in 2010 (distributed by geographic): Argentina,
Brazil, Chile, Colombia, Costa Rica, Mexico, Panama, Peru, Bangladesh, China,
India, Indonesia, Malaysia, Philippines, Sri Lanka, Thailand, Vietnam,
Bulgaria, Czech Republic, Hungary, Egypt, Mauritius, Morocco, Poland, Romania,
Russia, Slovakia, South Africa, Turkey and Ukraine.
As noted, the rating years 2010-2011
includes eight new members. Five of them were in it for the first time,
including Bangladesh, Bulgaria, Colombia, Mauritius and Peru. Panama, Sri Lanka
and Turkey were included in the list again. Meanwhile, seven developed
countries - including Australia, Canada, Israel and Singapore - left the TOP
30. According to analysts Gartner, in 2010-2011 the most interest for
management of offshore developments represent the Asia-Pacific region.
To be exact, the undisputed leader is
India, second place belongs to China. Top offshore company Gartner based on
such criteria as the level of government support, infrastructure, educational
system, economic and political situation, international recognition and legal
maturity of the country, the level of security of intellectual property.
The research results of the International
Association Network Tax Justice show that the highest level of closeness with
the American financial system Delaware, offshore Luxembourg, Switzerland, the Cayman
Islands and the City of London. Characteristic features of offshore - opacity
in identifying beneficial owners of a companies, trusts and registers lack of
funds, availability of powerful political and financial ties.
From the latest news are known that
Deputy Prime Minister of Ukraine Serhiy Tyhypko made offer to denounce the
agreement between Ukraine and the Republic of Cyprus for the avoidance of
double taxation.
Cyprus has become the largest investor of
Ukrainian economy: from the country invested over 8.5 billion dollars. But from
Ukraine to Cyprus, according to official statistics, only direct investments –
6.3 billion dollars. It is clear that these investments - funds of Ukrainian
enterprises to avoid taxation. In his view, Ukrainian government should cut off
channels budget losses through offshore companies.
Our offshore aristocracy in 2010 withdrew
from the Ukraine in offshore companies $ 25 billion. Therefore, objectively
overdue urgent need for sound legal regulatory legislation, that would have
defined the concept of offshore and its characteristics. And of cause effective
control program and control the penetration of the shadow economy activities in
offshore areas.
The sense of offshore business for
domestic business is abroad that there is a new, «independent» business entity,
which is fully under the control of Ukrainian businessmen. In most cases, an
offshore company looks like an independent foreign partner of the Ukrainian
company. Despite the supposed simplicity, all details of such schemes require
careful consideration, because tax regulations and exchange controls are
constantly changing.
Inform-sources:
1.
http://www.world-offshore-banks.com/
2.
http://www.ua-offshore.com/useful/links/9-links/27-linkedcontrol
3.
http://www.experts.in.ua/inform/smi/detail.php?ID=49144&phrase_id=983342
4.
http://www.chesni-podatky.org/archives/6130