The wonderful world of offshore has been used for many years by many people for legitimate asset protection purposes – fact! Those who have assets and wealth that they would quite legitimately like to shield from possible litigation or from a spouse, family member or business partner have used offshore structures such as trusts and companies to secure themselves and their wealth in the past.
However, is the offshore asset protection advantage now being eroded by the actions of the OECD and the G20 who are seeking to have tax information exchange agreements in place between all offshore financial centres?
The organisations involved in pressuring for this exchange of information would categorically say ‘no,’ for if you have nothing to hide and are using your offshore structures correctly, then you will never come under scrutiny. However, many offshore experts disagree, and they believe that those who are offshore perfectly legitimately could have their own confidentiality and privacy breached as a result of the new rules that are being enforced.
Since 1996 when the Organisation for Economic Cooperation and Development (OECD) introduced its ‘harmful tax practices’ project, there has been increasing pressure placed on all offshore financial centres to comply with this heavyweight organisation’s demands for compliance. The G20 has relatively recently added its collective voices to the argument, and now offshore financial centres are under pressure to have at least 12 TIEAs (tax information exchange agreements) in place if they want to appear on the OECD’s ‘white list’ of cooperative countries.
Naturally enough, all offshore financial centres would prefer to be on this white list so that they are not sanctioned against and do not lose their business competitiveness – and so they really are between a rock and a hard place. On the one hand you might think that the TIEAs are a fair requirement, after all surely they will only be enforced when another nation thinks one of its taxable residents is attempting to evade taxation. However, in reality it may well be that nations such as the US and the UK that have massive influence will squeeze offshore jurisdictions so hard that they cough up whatever information the larger country demands, whenever it demands it.
The ‘protections’ in place against this happening are weak according to offshore financial experts such as Howard Bilton, Chairman of the Sovereign Group. In his words: “it seems to me that all these “safeguards” may amount to very little.” Therefore the general consensus of opinion seems to be that yes, the offshore asset protection advantage is being eroded. What’s more, if you’re in any doubt about the legitimacy of your offshore structures, now is absolutely the time to speak to an international financial expert to make sure you are not flouting any laws. If you’re worried about your offshore status and want to speak to someone in confidence, get in touch, we may well be able to put you in touch with specialist individuals in the offshore financial and business marketplace who can help you.
