Nov 26

Advantages of Offshore Banking

Offshore Banking1 Offshore banks provide access to politically and economically stable jurisdictions. This may be an advantage for those resident in areas where there is a risk of political turmoil who fear their assets may be frozen, seized or disappear. However, developed countries with regulated banking systems offer the same advantages in terms of stability.

2 Some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of governement intervention. Advocates of offshore banking often characterise government regulation as a form of tax on domestic banks, reducing interest rates on deposits.

3 Offshore finance is one of the few industries, along with tourism, that geographically remote island nations can competitively engage in. It can help developing countries source investment and create growth in their economies, and can help redistribute world finance from the developed to the developing world.

4 Interest is generally paid by offshore banks without tax deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed, or who feel that they can illegally evade tax by hiding the interest income.

5 Some offshore banks offer banking services that may not be available from domestic banks such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities not available elsewhere.

6 Offshore banking is often linked to other services, such as offshore companies, trusts or foundations, which may have specific tax advantages for some individuals.

Offshore Account7 Many advocates of offshore banking also assert that the creation of tax and banking competition is an advantage of the industry, arguing with Charles Tiebout that tax competition allows people to choose an appropriate balance of services and taxes. Critics of the industry, however, claim this competition as a disadvantage, arguing that it encourages a “race to the bottom” in which governments in developed countries are pressured to deregulate their own banking systems in an attempt to prevent the offshoring of capital.

Disadvantages of Offshore Banking

A Offshore banking has been associated with the underground economy and organized crime, through money laundering. Following September 11, 2001, offshore banks and tax havens, along with clearing houses, have been accused of helping various organized crime gangs, terrorist groups, and other state or non-state actors.

B The existence of offshore banking encourages tax evasion, by providing tax evaders with an attractive place to deposit their hidden income.

C Offshore jurisdictions are often remote, so physical access and access to information can be difficult. Yet in a world with global telecommunications this is rarely a problem. Accounts can be set up online, by phone or by mail.

D Developing countries can suffer due to the speed at which money can be transferred in and out of their economy as “hot money”. This “Hot money” is aided by offshore accounts, and can increase problems in financial disturbance.Worldwide Banking

E Offshore banking is usually more accessible to those on higher incomes, because of the costs of establishing and maintaining offshore accounts. The tax burden in developed countries thus falls disproportionately on middle-income groups. Historically, tax cuts have tended to result in a higher proportion of the tax take being paid by high-income groups, as previously sheltered income is brought back into the mainstream economy.

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written by Chris

12 Responses to “Advantages & Disadvantages of Offshore Banking”

  1. offshorecashNo Gravatar UNITED STATES Says:

    I’ve added your website to mine.

  2. Aidan PrydeNo Gravatar GERMANY Says:

    Yeah very nice! I did not know that Ressource! Thank u for it!

    Have a nice day!

  3. geminaNo Gravatar SPAIN Says:

    Offshore banking will be suitable for international trading (export/import)and asset protection. We recommend to study the matter with local accountants and attorneys and be carefull with some web-sites promoting offshore structures with no sense.

  4. Rahul DewdhaneNo Gravatar not found Says:

    Anyone can benefit from the often greater returns to be derived from offshore investments, simply by choosing to invest offshore rather than onshore. But to benefit from the low individual taxation regimes available offshore, one of two things has to be true: either the individual must have residence offshore, or, for a resident in a high-tax area, there must be an effective offshore structure which to some extent distances offshore gains from the onshore tax net.

  5. Swiss DudeNo Gravatar UNITED STATES Says:

    Hey! Nice blog posting about . I would have to agree with you on this one. I am going to look more into offshore bank. This Saturday I have time.

  6. Swiss DudeNo Gravatar UNITED STATES Says:

    Hey! Nice blog posting about . I would have to agree with you on this one. I am going to look more into offshore bank. This Thursday I have time.

  7. Boojahwon SanjuNo Gravatar not found Says:

    yea talkin about offshore bankin rahul i agree with you..the advantages are many and its wise to go for it

  8. China OffshoreNo Gravatar CHINA Says:

    Nice article, will share it with clients of mine who wants to know more about offshore banking.

  9. MTNo Gravatar UNITED KINGDOM Says:

    Thank you, this was useful though you could add a little extra ‘meat on the bone’ seeing as you know this area fairly well for instance what someone has to pay to a country if he travels the world and has an offshore bank account. Do they not have to pay a certain amount because they have carried out work in that country to that country. I suppose this would be a question for an accountant… Its hard for me to look someone in the face especially when they are giving me advice and they have not done it themselves… Like bank managers tell you how to run your business but have no idea how to do it properly as they have not done it themselves…

  10. Gyim RnceNo Gravatar not found Says:

    i would like you to publish more information of your client to read and also more handouts to most of your banks in Africa especially Ghana

  11. OBINo Gravatar INDIA Says:

    I agree with the above post. There are more advantages compared to disadvantages of off shore banking. One important advantage is most offshore banking services take care of the fact that assets in the off shore bank accounts are secured.

  12. Avocat BucurestiNo Gravatar ROMANIA Says:

    I think if the amount of money is high, it’s better to have money in offshore banks. I said that just in some countries (Romania, for example), the taxes are very high and you cannot win almost nothing if you keep your money in a local bank.

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