- As usual, the matter is more complicated and has to be judged more nuanced than most of the press and politicians do. Just like nearly everything, offshoring is neither good nor bad, but the circumstances make it so.
- There is clearly a “dark side” of the matter: Funds of criminal origin or such that have illegally avoided justified taxation are hidden through offshore structures. This is just another form of ordinary crime and needs to be investigated and punished accordingly.
- A considerable number of cases are probably completely “white”: Transparent and fully taxed structures with purposes such as procedural or administrative matters, cash pooling, neutral legislation in international transactions etc. It is a basic and unsolved problem of this “Panama Papers” kind of journalism that persons or institutions are shamed and blamed publicly together with criminals, causing them potentially big reputation and other damages.
- Most delicate are the “grey zone” cases which I guess are the majority, for example:
- Funds are hidden from criminal corrupt systems. There are still many countries where the funds from taxations go to a big extent into private pockets instead of serving public purposes. Is this better than having them offshore, in particular under the aspect that a part of the offshore funds is re-invested into productive activities in their countries of origin?
- Funds are hidden from political and similar risks. Some countries have often political turmoil that leads to expropriating belongings of political, geographical, ethnical or religious minorities. Of course, such hidden funds cannot be declared and taxed; this would destroy the protection.
- Funds were offshored in a legally correct way, but became illegal later. Under some (also big) legislations, it is possible, that statutes or even court decisions make behaviour retroactively illegal, even criminal. In Switzerland, this would break constitutional principles, and it is arguable, that funds should be protected from this kind of “legal” problems.
- Another very delicate aspect of the matter and of this kind of journalism is, that it is obviously misused for purposes that are in direct contradiction to those that are used to justify them (i.e. the theft involved in getting the information). Whilst already since 1977 all Swiss banks agreed to money laundering rules (which require identification of beneficial owners and forbid active support of tax evasion), it seems that an (increasing?) number of e.g. US states do until today not even register beneficial owners. This leads to the fact that only few Americans are mentioned in the Panama Papers: Unlike Panama and most other offshore legislations, these states do not even know, whose money they hide. The effect of disclosure journalism such as the Panama Papers will be, that more funds of any kind will go to places where the money laundering defence is considerably lower!
The consequence for persons who want to protect their funds in a legal way is to be very diligent where and how they do it and get good advice instead of just choosing simple and cheap solutions that bring them into the same pot together with a lot of clients from the dark side of the business.
Jürg Martin, email@example.com