4 THE CHANGING WORLD OF TAX HAVENS
In a perfect world, you wouldn’t need this book. Life is not so, but
the good news is that there are many interesting aspects of going
offshore, and many benefits to gain.
There are also some pitfalls to avoid, and these can be circumvented
by knowing what to look out for, and applying yourself and
your knowledge to the challenge.
The world of tax havens has changed since its earliest beginnings,
around the time the first tax dollar (or drachma, etc.) was collected.
And, as the concept of safe havens from taxes has evolved and received
more attention, more people have recognized the advantages.
So, over time, the havens have become a threat to the emerging firstworld
nations and their greedy hunger for tax revenue.
Interestingly, as the big powers have pressured offshore venues
into becoming more transparent, many now call themselves “International
Financial Centers” (IFCs), instead of offshore financial centers
or tax havens. And other first-world powers like Switzerland and Austria
are not pure tax havens as we know them, but are important banking
centers and safe and stable havens for money and assets. Aha!
And anyway, taxes should be only one of the many good reasons
for going offshore.
The two oldest tax havens in the world are Liechtenstein and
Panama, each dating back to the 1920s, and both have been two of my
favorite tax havens for years. In fact, both are still at the top of my list.
The real development in tax havens got underway in the 1960s and
1970s, when tax haven legislation in these countries was still light but
was quickly evolving under the fire of the venues and their individual
self-governments. In the 1980s, foreign governments and international
agencies started applying real pressure, which they then increased throughout the 1990s in the hope of legislating these jurisdictions off
the planet. However, many tax havens weathered the turmoil well, a
few simply became more determined not to be bullied, and a handful
of these stand today as some of the best choices.
A few once important havens, like the Bahamas and the Cayman
Islands, were hit the hardest. In the case of the Bahamas, this former
headliner among tax havens can today no longer be considered even
useful as it has allowed itself to be gutted by the influence of its huge
and powerful neighbor, the United States. And anyway, there are too
many other better places to go.
The individual country profiles in this book provide complete information
on the status of each important tax haven available in these
interesting times. I have profiled only the most significant ones.
Places not mentioned (e.g., Nauru in the Central Pacific), do not register
on my radar screen for very good reasons and are not worth further
discussion. This applies to any other tax havens that are not
included, with the exception of some extraordinarily unique places
that might be useful under special circumstances, but would serve little
purpose for most readers.
But to return to the historical perspective, let’s look at the concept
of owning your own offshore bank. As an example of the lack of
internal legislation as recently as the 1960s and early 1970s, you could
still obtain an offshore banking license to start your own bank—a
topic and practice that is practically taboo today. In some tax havens,
you needed simply to provide some basic information about yourself
as the applicant, pay the fee for a local lawyer, cough up the nominal
government license fee, and voilà, you were in the banking business!
A couple thousand dollars could swing it. I know, because I have been
a student of tax havens since the earliest of those heydays. Today, the
requirements for conducting offshore banking are much stricter and
are better enforced for the sake of the depositors and the general wellbeing
of all.
Even the most casual observer knows that the subject of offshore
is, and always has been, a hot topic. When I wrote my first book on the
subject (Tax Havens, New York: McGraw-Hill, 1992), people I came
into contact with would still ask, “What is an offshore bank?” And
they weren’t sure if Vanuatu was a real country, or just a scam. Times
have changed immensely in just the past 15 years. With rapid developments
in the world today and the war on tax avoidance—a tactic that,
as mentioned, has always been accepted as legal—imagine what the prospects will look like in another decade if people don’t exercise
their rights and freedoms while they still have the options. Tax havens
are in part an interesting reflection of a rapidly changing world.
The key to benefiting from these changes is to recognize the excellent
choices and opportunities that still exist and capitalize on
them while they last. By acting now, a person can be more prepared,
and more secure, for an unknown future. The opportunities today
may not be viable alternatives tomorrow. Of course, the future may be
even better, but who knows for sure? The question should really be,
are we willing to speculate with everything we have and wait until it’s
too late? Remember, if you use tax havens correctly, you have nothing
to lose and much to gain.