Breaking the Taboo About Offshore Banking

Offshore banking has always carried an air of subversion about it, but following the release of the Panama Papers in 2016 the industry was catapulted into an entirely new and highly critical light. Since that stark revelation of hidden earnings and tax evasion, a shocking $1.2 billion in back taxes and penalties have been collected by governments around the world. The incident, which exposed politicians, celebrities and criminals alike, was indeed relevant enough to be adapted into a Hollywood movie featuring Gary Oldman and Antonio Banderas.

However, despite the apparent negative image associated with offshore banking, it offers several positive aspects that overshadow tax evasion. Offshore banking is commonly hosted by small nations, often islands, with low populations and favorable tax laws, like Luxembourg, Malta and Cyprus in Europe and the Caymans, Bahamas, and Bermuda in the Caribbean. These countries, with little other industry or means of income, often survive purely on the benefits of their tax haven status.

Many of the world's largest corporations still utilize offshore banking for large swathes of their capital, including Apple, Microsoft, and Google. While their intentions are undoubtedly for profit, a secondary effect is increased growth and additional job creation in both the company and offshore banking location.

The many advantages to offshore banking

While the ever-looming stigma of tax evasion hangs over offshore banking, there are many perfectly innocent reasons for companies to investigate this avenue:

• For many small, developing nations, having a business incorporated overseas can present your company in a far more professional light. In some cases, it is the only opportunity for some companies to open an official corporate bank account.

• Small businesses that would otherwise be unable to affordably operate may find an opportunity to succeed through the initial tax breaks. Countries with oppressive tax restrictions often suffer from a lack of innovative and entrepreneurial business.

• Offshore banking provides financial protection from regions with economic instability, and the ability to distance one's personal life from business issues like bankruptcy, seizures or lawsuits.

• Offshore banking is usually more attractive to overseas investors and comes with additional access to potential opportunities like foreign real estate or manufacturing.

How tax savings can drive job creation

While tax evasion remains a legal and ethical quandary, offshore banking is a far more complex and wide-reaching industry with significant advantages that go above and beyond simply saving money. It is widely accepted that the savings that high-income individuals accrue as a result of government tax cuts help to tide them over in times of recession. Removing the requirement for any additional income stream is estimated to free up as many as four jobs for every $1 million in cuts.

The tax savings that a company makes through offshore banking function in much the same way - by providing excess capital that can be reinvested into human resources and facilitate accelerated growth. With a fast-growing and innovative business sector comes a stream of international investment and the resultant boost to a countries overall GDP.

Companies like IBM, Amazon, and McDonalds are proof of this concept at work. Large corporations like these hold vast sums of capital offshore and as a result, can recruit an ever-increasing workforce while continuing to grow their business globally. 

When it comes to money there will always be those looking to abuse the system for profit. However, offshore banking in itself should not be seen as simply a tool for ethically-questionable accounting practices, as it offers a wealth of perfectly legal benefits that can help to grow a business of any size.