Offshore Banking: Legal Or Not?

An often-asked question about offshore banking, the answer is indeed, YES, offshore banking is legal. It is so legal that it will always be so. Offshore banking benefits all sections of society and is almost indispensable. To use offshore banking to avoid paying taxes is illegal and this is usually what gives offshore banking a bad name, as this is what most people associate with it. Offshore banking is also associated with criminal activities such as money laundering, adding to the misconceptions. This article will address these issues and explain why offshore banking will remain legal.

The tax haven of the Channel Islands located just offshore to the United Kingdom is where offshore banking first made its appearance. Today, whether it is located in an island or not, offshore banking refers to all countries offering this facility. Technically, just transferring your deposits from a country of residence to any other country is considered to be offshore banking, whether the latter offers a tax haven or not. How can this be considered as illegal when all that is done is a transfer of deposits from one country to another? This is why offshore banking will always remain legal.

Some time or the other, individuals, businesses and even governments need to transfer funds around the world. If this process was illegal, the global economy will be in shambles and this cannot be allowed to happen. People order goods from eBay and other online marketers around the world. Paypal accounts to effect payments for e-trade is used extensively. Governments are involved in balance of payment considerations as global trade takes place and payments have to be made. Under the circumstances, transfer of funds from one country to another cannot be stopped, it is legal, and an everyday occurrence and it will remain so.

What is illegal is offshore banking for tax avoidance. Depending on your country of residence, it is illegal to transfer funds out of the country or earning overseas, without proper legal sanction and declaration to the authorities. This varies from country to country. The federal government of the United States for instance, requires that its citizens declare all taxable income irrespective of the country where it is earned and where the citizen is located. Failing to do so is criminal. There are of course ways of working around this requirement such as remitting at intervals to save on taxes. Multinational companies also can reduce their tax liabilities through an efficient network of offshore bank accounts and IBCs. Many countries do not levy tax on income earned overseas nor on income earned as interest from deposits out of such income and brought in.

Thus if citizens of the USA, UK and European citizens can save on tax through offshore banking, how can it be illegal?

There are some more advantages of offshore banking beside tax saving. These are:

*Total privacy of accounts and transactions

*Protection from aggressive litigations

*More competitive accounting structures and interest rates

*Global access to your money

*Ability to bank in multiple currencies

*Access to global business opportunities and other benefits.

Moreover, offshore banking offers an economically and political stable environment for citizens of countries suffering from corruption and instability.