Offshore Banking Research Paper

Offshore banking system and its impact on economy.

Comparative banking

Kliti Celniku & Kristi Nico

2/4/2017

Table of Contents

DEFINITION OF OFFSHORE BANK 2

OFFSHORE FINANCIAL CENTERS LIST 2

ADVANTAGES OF OFFSHORE BANKING 3

DISADVANTAGES OF OFFSHORE BANKING 3

OFFSHORE BANK’S IMPACT ON ECONOMY 4

COUNTRIES WITH THE LARGEST TAX EVASION 4

TOP 10 COUNTRIES LOSING FROM TAX EVASION 5

THE PANAMA PAPERS 5

MOSSACK FONSECA 6

CONCLUSION 6

Definition of offshore bank

An offshore bank is a bank located outside the country of residence of its depositors, with most of its account holders being non-residents of the jurisdiction. An account held in a foreign account, especially in a tax haven country, is often described as an offshore account.

Offshore

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

Disadvantages of offshore banking

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

2. Association with criminal organizations. 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. Offshore banking has been associated in the past with the underground economy and organized crime, through money laundering.

3. Difficult access. Offshore jurisdictions are often remote, so physical access and access to information can be difficult.

4. Problems in financial disturbance. 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