Offshores

OECD sets global tax policy

Low-income countries have been barred for decades from making decisions about global tax rules - many of them since independence. For more than sixty years, a small club of rich countries in the OECD has effectively defined global tax rules for the rest of the world behind closed doors. Moreover, this club includes most offshore jurisdictions.

For 2023, the OECD is often criticized for the global tax policy that this organization forms. The essence of this policy is that tough tax legislation is being promoted for developed countries, which contributes to high tax collection. While in low-income countries, a softer model of tax legislation is being promoted.

As a result, the resources of low-income countries are offshore. There they fall under the management of investment funds owned by TNK, are spent on premium goods and services, and some are simply plundered by the unscrupulous management of local asset management companies.

On December 1, 2023, a resolution was adopted at the UN to create a framework convention on taxes. In theory, this was supposed to be a tool for combating offshore companies. But in practice, it's just a game of populism about low-income countries. G20/OESR countries continue to play a key role in shaping global tax policy.

List of offshore companies

There is no single list of offshore zones, both the International Monetary Fund (IMF) and central banks of various countries of the world are working to control offshore zones.

Below is an incomplete list of offshore zones.

• Andorra
• Anguilla
• Antigua and Barbuda
• Aruba
• Bahamas
• Barbados
• Belize
• Bermuda shorts
• Brunei
• Vanuatu
• Guernsey
• Gibraltar
• Grenada
• Jersey
• Cayman Islands
• Costa Rica
• Mauritius
• Marshall Islands
• Monaco
• Cook Islands
• Isle of Man
• New Zealand
• Panama
• Seychelles
• Singapore
• Turks and Caicos
• Trinidad and Tobago

Losses of countries from outflow of corporate profits to offshore companies

2023: About $480 billion a year goes offshore

According to data available at the end of 2023, about $480 billion disappears annually in tax havens. These are only direct losses from tax abuses, which can be found in data collected by the Tax Justice Network on multinationals and banks. The IMF estimates that indirect losses from tax abuses can be at least three times greater than direct losses.

In developed countries, about $433 billion is lost annually on tax evasion. In developing countries, about $47 billion goes offshore.

2019

As of September 2019, 40% of transnational profits move to tax havens each year.

Corporate profits losses due to tax havens by country:

• Germany - 29%
• France - 24%
• Britain - 21%
• Italy - 19%
• USA - 17%
• Spain - 13%
• Brazil - 10%
• Australia - 7%
• Canada - 8%
• Russia - 6%
• Turkey - 5%
• China - 3%
• Japan - 2%

Источник: The University of California, Berkeley and the University of Copenhagen

2012: China, Russia and Korea lead offshore capital outflows

From Russia since 1990. $798 billion was withdrawn to offshore. This is stated in the report of the former economist of the consulting company McKinsey & Co James Henry, prepared for the organization Tax Justice Network (July 2012).

"We tried to look as far into the past as possible, but the data of international organizations allowed us to take only the period since 1990," the economist said in an interview with the RBC daily newspaper.

According to J. Henry, a significant part of the funds withdrawn from Russia were obtained as a result of the privatization of state assets in the 1990s. "At the same time, the contribution to this indicator from the hidden profit received for investments of previously withdrawn funds remains," he said. However, part of the funds previously withdrawn from Russia to offshore accounts returns to the country in the form of investments that officially pass as "foreign."

"You need to understand that the money did not melt like smoke, they simply changed the" home port, "and it would be fair for some of it to be returned in the form of taxes," explained J. Henry. In this regard, he considers interesting the initiative of Vladimir Putin announced before the elections to introduce a tax on privatization, which, however, after his election as president, was not developed.

Globally, China's result is more - $1.189 trillion, but these funds were withdrawn in 40 years. Korea is in third place in terms of capital outflow to offshore accounts with $779 billion. This is followed by:

• Brazil ($520 billion),
• Kuwait (496),
• Mexico (417),
• Venezuela (406) and
• Argentina (399).

From Ukraine after 1990. $167 billion was transferred to offshore accounts, $138 billion from Kazakhstan^[1].

Amount of funds in offshore

Offshore accumulations of IT companies

Main article: Offshore accumulations of IT companies

2012:10 million people hide $21 trillion to $32 trillion from offshore taxation

For 2012, wealthy citizens around the world hide from taxation from $21 to $32 trillion. This is stated in the report of the former economist of the consulting company McKinsey & Co James Henry, prepared for the organization Tax Justice Network (July 2012).

For comparison: as of July 22, 2012 the world's largest public debt - the US national debt - is only $15.86 trillion.

Tax fees from $32 trillion can reach up to $280 billion annually. When assessing the funds sheltered from taxation, J. Henry took into account only financial assets. Real estate, luxury goods, yachts and so on were not taken into account.

The study notes that about 10 million people around the world use offshore accounts. At the same time, 100 thousand people own half of the total amount of $32 trillion. John Christensen, a spokesman for the Tax Justice Network, which opposes offshore accounts, said he was shocked by the amounts received.

"But what's really shocking is that the world's biggest banks are deeply complicit in helping their wealthy customers get away with tax and moving funds offshore. We are talking about well-known brands - HSBC, Citigroup, Bank of America, UBS, Credit Suisse. And they are most often fully aware that they help customers evade taxes, "said J. Christensen. He added that often the activities of banks in this direction are illegal

For the study, official data from the IMF, the World Bank, the UN and central banks of various countries of the world were used. "From an economic perspective, the private sector represents a black hole," the report concluded.

Disclosure of Company Beneficiaries

2020:8 offshore companies will open data on company owners

In July 2020, eight overseas territories Great Britain agreed to disclose by 2023 information about the beneficiaries of companies registered in their jurisdictions, which are tax harbors.

Among those intending to publish the names of the firm's ultimate owners are: Anguilla, Bermuda, Cayman Islands, Falkland Islands, Montserrat, Pitcairn Islands, Saint Helena, Ascension and Tristan da Cunha, and Turks and Caicos Islands, there are also negotiations with the British Virgin Islands government.

The British authorities in 2018 initiated a bill that would have obliged the overseas territory authorities to disclose the identities of beneficiaries of companies that keep money there. Thus, Britain intends to fight money laundering under the flag of the United Kingdom.

Offshore companies in Russia

2022: Ministry of Finance of the Russian Federation presented a list of countries undesirable for the creation of companies

In January 2022, the Ministry of Finance of the Russian Federation published a list of states and territories used for intermediate (offshore) ownership of assets in Russia. Russian companies, 25% or more of whose capital belongs to owners from these countries, will not receive support from the state from 2023. The corresponding law in November 2021 was signed by Russian President Vladimir Putin.

The list contains 57 countries, including Cyprus and Malta. In addition, it included the Swiss Confederation, with which the Ministry of Finance of the Russian Federation negotiated for an agreement on the avoidance of double taxation.

At the same time, the new list does not include Luxembourg, with whom Russia previously revised the tax agreement, and the Netherlands, with whom the corresponding agreement was denounced in May 2021. Probably, these countries were not included in the list, since they have long changed tax legislation and are no longer such attractive tax havens as Cyprus, said Yana Semenyaka, head of the International Law and Taxes practice at the Lemchik, Krupsky and Partners law firm, in an interview with Vedomosti.

According to the publication, Cyprus retains the status of one of the most popular jurisdictions for structuring asset ownership in Russia. A number of large Russian companies are structured through this country. In particular, NLMK is 79.3% owned by Fletcher Group Holdings Limited, Norilsk Nickel is 35.95% indirectly controlled by Interros Ltd, and Tinkoff Bank is 100% owned by TCS Group Holding.

By January 10, 2022, state support is not due to companies that are 50% and more owned by owners from offshore. The new law is designed to minimize the negative impact of sanctions due to the vulnerability of the exercise of the rights of owners of intermediate offshore ownership to production assets in the Russian Federation in the event that the owners of an offshore company are blacklisted by the US Treasury.^[2]

2021: Russian and Belize Prosecutor's Office Cooperation Agreement

On August 30, 2021, the Prosecutors General of Russia and Belize Igor Krasnov and Marine Magali Young signed a program of joint events for 2022-2023. It provides for the active exchange of information on cyber crime, corruption and other crimes related to the withdrawal of funds to the offshore of this country in Central America. Offshore companies in Belize were also used to withdraw funds from the bankrupt BFG-Credit bank, which became the basis for the arrest in Moscow of his former deputy chairman Denis Puresev.

2014: Taxes for Russian citizens on ownership of offshore companies

In 2014, Russia adopted a law on controlled foreign companies (CFCs), which entered into force on January 1, 2015. The law obliges individuals and legal entities to report to the tax authorities about participation in the capital of foreign companies. So the state began to fight with companies that withdraw income to more comfortable tax jurisdictions - offshore.

At the same time, a mechanism for taxing the profits of offshore commercial structures was created. In accordance with the new law, Russians must notify the tax authorities of their share in such a company of more than 10%. If the share is more than 50%, and the company's profit is more than 50 million rubles (from January 1, 2016 - if more than 25% and 30 million rubles), you will have to pay additional taxes: 20% for companies and 13% for fizlits.​

Registration of the site with an offshore company

Main article: Registration of the site with an offshore company

Notes