Offshore Accounts

Written by Mike

Topics: Banking, Investing

There has been a considerable amount of attention geared towards offshore banking of recent, and the ethics surrounding international personal banking. A great example is the recent battle to score political points in the U.S., as Democrat, Mitt Romney found himself in the firing line over his use of offshore bank accounts. The question put to him – do you have a Swiss bank account to conceal what you are doing, or is it because you think that the Swiss franc is stronger than the American dollar? So why is it that the long accepted practice of offshore banking, now finds itself under such scrutiny?

It is all clearly due to the wider implications of tax avoidance, and the clear impact that it is having on the worldwide economy. And whilst it might not be illegal to practice overseas banking, whether it is through international online banking or more traditional means of managing offshore accounts, there are ethical implications that are being brought into question with an ever-growing sense of pervasiveness.

Whilst earning money in a number of different currencies is not a crime, in the regular criminal sense of the word, it may well start to be viewed as a crime against one’s country or fellow person, should the world continue to see a widening of the wealth gap and a continuation of the economic instability that has taken austerity to an almost unbearable level.

There is a strong argument for diversification when it comes to offshore banking, just as there is a strong argument for financial privacy. But many, and particularly those that fit into the ‘squeezed middle’ demographic, will argue that financial privacy is nothing more than a shroud within which those ‘in the know’ and those with sufficient funds can conceal both their actions and their wealth. The very fact that financial activities such as international personal banking are so poorly understood, is even more reason for those with offshore accounts and similar ‘obscure’ modes of investment to explain what they are doing, and why they are doing it.

An understanding of tax competition is imperative to ensuring that the wealthy do not find themselves harangued into an eventual and inevitable public burning. As long as everything stays in what’s viewed more and more as an opaque elitist clandestine condition, people are going to want to probe, and people are going to want to label any form of shrewd economy as tax avoidance. If the proletariat, en masse, is made to suffer through an ongoing austerity binge that has not been forecast to end any time soon, and the colourable catalyst for this is tax avoidance on the part of the super-wealthy, then offshore banking is going to come under fire.

The tough battle for people who champion low tax jurisdictions, is the clarity with which arguments for a contrary approach are put forward – it is essentially the difference between understanding everything, and understanding nothing. It is hard for a member of the ‘squeezed middle’ to listen to the reasoning of bureaucracies such as the Organisation for Economic Cooperation and Development (OECD), who offer a simplified rationale for a worldwide tax system that levels the tax system by offering no real ‘escape route’, without looking upon the function of offshore banking with utter disdain.

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