The Great Offshore Argument

As long as relevant disclosure and reporting action is taken and taxation is not illegally evaded, investing, banking, doing business and protecting assets offshore are legitimate actions and practices that many of us can potentially benefit from - and each action or practice can potentially bring many layers of privacy and taxation benefits to individuals and corporations alike.

However, the great offshore argument about whether the utilization of tax havens is actually fair, or whether it means taxation revenue is reduced thus affecting the poorest nations in the world who would otherwise benefit from greater funding for development still rages, and the argument has been reawakened this week by a report from the Tax Justice Network.

The Tax Justice Network aims to be a non-politically aligned pressure group; it is made up of accountants and economists who are against unfair tax mitigation practices and who want to prevent those who can afford the best tax advice utilizing what they see as the unfair advantages offered through offshore structures and offshore tax havens. 

Their recent report is entitled “Closing the Floodgates: Collecting Tax to Pay for Development” and in it they castigate the four largest global accountancy firms for their legitimization of offshore tax havens.

KPMG, Deloittes, Ernst & Young and PriceWaterhouseCoopers are all cited in the report as having a strong presence in many of the world’s most active offshore jurisdictions and whilst the authors of the report do not go so far as to suggest the firms are knowingly involved in illegal tax reduction strategies, the report does focus on the fact that many financial scandals involving global corporations in recent years have involved one or other of the accountancy firms.

KPMG was quick to respond to the comments and suggestions made in the Tax Justice Network’s report…they highlight the fact that their company calls for and aims to work towards taxation transparency; and what’s more, they advise the report’s authors that they support the work of the OECD which strives for effective exchange of information between all countries when it comes to taxation matters.

So, the debate rages on – is the legitimate utilization of tax efficient offshore structures fair?  It’s certainly legal and those who are able to offset their taxation burden will likely to continue to do so – after all, they’d be mad not to!  However, as the Tax Justice Network points out, it is the poorer countries in the world who suffer most from a reduction in global tax funds being made available…

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