Offshore Tax Havens meet a need

by Aaron A Day on February 19, 2013

Offshore finance has shown a “puzzling resilience”, confounding predictions of decline because of its supposed vulnerability to the regulatory clampdown imposed from outside. An academic study last year found that OFCs’ foreign-owned deposits had actually risen slightly in 2007-11. Experts attribute their staying power to a growing clientele in Asia and other emerging markets which has offset a decline in America and Europe.

Offshore operators put the havens’ endurance down to their legitimate uses, such as their “tax-neutral” role in mediating international financial flows (of which more later) and the protection they offer from unstable or capricious governments—though they believe these uses are poorly understood. Tax libertarians think the havens meet a need created by the complexity and punitive nature of some national tax codes. Their latest hero is Gérard Depardieu, who has taken Russian citizenship in protest against a proposed French supertax on the rich. Besides, they point out, OECD countries also compete on tax. Britain, for example, which has the second-lowest corporate-tax rate among the G8 (after Russia), recently cut it further.

Source: http://www.economist.com/

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