In connection with banking, the meaning of the word "offshore" is obvious. According to Wikipedia, "An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages". The term 'haven', meaning a harbour, has been mistranslated in French to produce the expression paradis fiscal, that is to say a heaven and not haven.
At its roots, the term offshore refers to a place that is located away from the mainland, an island for instance, or an oil platform. Used as an adverb, it can also describe a movement, e.g. the wind blowing or a boat moving away from the shore, or off the shore.
The term offshore bank has its origins in banks that were established on the British Channel Islands. However, many so called offshore banks are located onshore. The origin of low taxed financial jurisdictions can be traced back to the Middle Ages when trade wars arose between different countries and regions competing for economic dominance.
Reasons to locate banking centres on islands were quite simple: direct central control remained loose and weaker in terms of geography, law and historic allegiance than on the mainland. The offer of an offshore remedy of lower taxation and promises of anonymity and confidentiality as well as political stability were attractive to wealthier clients.
In the modern period, it is commonly accepted that the definition of offshore jurisdictions as tax havens was first formed after World War I. However, in the post-war years, companies became over-burdened by taxation. This is when corporate tax havens and the offshore tax industry were born. Companies were able to take advantage of tax treaties between their country and the offshore tax jurisdiction to reduce liabilities.
During the recent financial crisis, the word was used as a synonym for tax haven or tax shelter. Avoiding any logical reflection the term is used to describe foreign banks, corporations, investments, and deposits. Companies are moving offshore for reasons of tax avoidance or relaxed regulations. Banking transactions with non-residents are called offshore.
In recent years, a growing demand for regulated products and trends in tax harmonisation have further muddied the picture. The OECD has defined a set of terms that differentiate an International financial centre from a tax haven, and these terms are pretty clear. However, the definition of a tax haven often lies in the eye of the beholder.
At its roots, the term offshore refers to a place that is located away from the mainland, an island for instance, or an oil platform. Used as an adverb, it can also describe a movement, e.g. the wind blowing or a boat moving away from the shore, or off the shore.
The term offshore bank has its origins in banks that were established on the British Channel Islands. However, many so called offshore banks are located onshore. The origin of low taxed financial jurisdictions can be traced back to the Middle Ages when trade wars arose between different countries and regions competing for economic dominance.
Reasons to locate banking centres on islands were quite simple: direct central control remained loose and weaker in terms of geography, law and historic allegiance than on the mainland. The offer of an offshore remedy of lower taxation and promises of anonymity and confidentiality as well as political stability were attractive to wealthier clients.
In the modern period, it is commonly accepted that the definition of offshore jurisdictions as tax havens was first formed after World War I. However, in the post-war years, companies became over-burdened by taxation. This is when corporate tax havens and the offshore tax industry were born. Companies were able to take advantage of tax treaties between their country and the offshore tax jurisdiction to reduce liabilities.
During the recent financial crisis, the word was used as a synonym for tax haven or tax shelter. Avoiding any logical reflection the term is used to describe foreign banks, corporations, investments, and deposits. Companies are moving offshore for reasons of tax avoidance or relaxed regulations. Banking transactions with non-residents are called offshore.
In recent years, a growing demand for regulated products and trends in tax harmonisation have further muddied the picture. The OECD has defined a set of terms that differentiate an International financial centre from a tax haven, and these terms are pretty clear. However, the definition of a tax haven often lies in the eye of the beholder.
