Top 10 calamitous offshore jurisdictions – tax havens or battlefields?

27 January 2017

For years, offshore financial centers (OFCs) have played a key role in the global financial arena by offering favorable fiscal conditions for business development and investment. Also known as tax havens, these low-tax jurisdictions come as a smart choice for corporate and individual customers seeking for substantial tax advantages.

Initially founded as an instrument to attract foreign capital and boost economic activity, today’s OFCs attract increased attention of international regulatory authorities.


The financial world was entirely shocked about the release of the Panama Papers in April 2016. A domicile for more than 400,000 corporations and funds, having favorable incorporation regulations and a tempting fiscal platform for offshore companies – that used to be a public image of Panama.

That image was ruined by the unprecedented leak of 11.5m confidential files and records from Mosaack Fonseca & Co., a law firm that helped the world’s leaders hide their money offshore. Criminals and notorious politicians, corruption and money laundering – all this was demonstrated to the general public.


The Bahamas

For decades, the Bahamas has been on radar of U.S. authorities investigating tax-evasion cases. In 2016, a popular Caribbean offshore jurisdiction widely used by U.S. and European residents, hit the headlines with another offshore scandal.

The Bahamas leaks resulted in revelation of 175,000 companies and trusts, their directors and owners. The leaked files shed the light to offshore activities of some well-known politicians, including ministers and prime ministers, as well as other super-rich and famous.


Bermuda was ranked #1, according to the Oxfam rating of world’s worst tax havens. The factors considered during the research included unfair tax incentives, zero or very low corporate tax, and failure to co-operate with media and investigators to combat tax abuse.

The recent news says that Bermuda has joined the Organisation for Economic Cooperation and Development as part of the Base Erosion and Profit Shifting to automatically exchange country-by-country reports. This way, secrecy, one of the priority values for offshore players, appears to be in question.

The Cayman Islands

One of the most favorable offshore zones was also hit by the scandal. The corruption scheme with FIFA officials made Cayman central in this dirty story.

According to the 2015 Financial Secrecy Index, Cayman’s score is 65, showing a great improvement in recent years. But just like in many other tax havens suffered from money-laundering scandals, the government officials react immediately.

This way, Cayman, just like Bermuda and other major offshore jurisdictions, signed the Multilateral Competent Authority Agreement for automatic exchange of tax information.


In the tax haven’s world, Ireland is known for its double Irish arrangement, a strategy allowing shifting income from a high-tax country to a jurisdiction with a low or no corporate tax.

By using this loophole, Apple managed to lower its tax rate to 1%, while in Ireland it amounts to 12.5%. The European Union ordered the Irish government to recover almost €13 billion in unpaid taxes. No wonder Oxfam also named Ireland by giving it a sixth position in its world’s worst tax havens rating.

The Netherlands

According to Oxfam, the Netherlands is a true leader among European countries when it comes to corporate tax avoidance. The analysis conducted by the European Commission showed that 17 out of 33 damaging tax practices were identified in the Netherlands.

Ranked #3 in the Oxfam blacklist of offshore jurisdictions, the Netherlands was also mentioned in a number of serious scandals.


Another European banking hub is also accused by the European Commission for its shady tax treaties. And once again the revelations are not very welcoming for this offshore zone.

Hundreds of European and world’s multinational corporations participated in deals allowing them avoiding taxes in their countries. The said companies often used Luxembourg in combination with other secrecy havens, which is a common practice in such schemes.


Singapore and Hong Kong

Generally considered as business rivals when it comes to doing offshore business in Asia, today they are facing the same challenges. These financial hubs can boast first-class infrastructure and excellent customer service. Meantime, the recent news show that the offshore market conditions are rapidly changing for all players.

Under the new tax-evasion rules, all financial companies in Singapore are required to establish the tax residency status for their account holders. In addition to that Hong Kong and Singapore are considered as the next target for U.S. officials seeking for its fugitive tax payers. Not so tempting for potential offshore banking customers.


One of the biggest offshore jurisdictions holding trillions of dollars in asset management, Switzerland, also ended up in huge scandals: UBS tax evasion scandal in 2009, Swiss Leaks in 2015.

The U.S. penetration has seriously affected the Swiss banking system. In 2013, Wegelin, the oldest high-profile Swiss bank, was closed after paying $57.8 million in fines to the United States. In 2015, Switzerland signed the agreement for automatic exchange of financial information, meaning Swiss bank customers could no longer enjoy their anonymous benefits.

In view of the above-mentioned, the future of Switzerland and other tax havens seems quite uncertain and not really bright for potential offshore bank customers.

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