From the history of the creation of offshore zones
From the very beginning, taxpayers being unwilling to pay tax to the treasury and rulers striving to encourage business and trade were the driving force behind the creation of the unique economic institute of the offshore zone.
Ancient Phoenician and Greek cities, medieval Northern Italian trading republics, pirate outlaws in the Caribbean at the Age of Discovery — they all have features typical of classic offshore zones of modern times.
It is interesting that the ‘offshore status’ of many of them survived literally through the centuries. The record in this imaginary competition belongs to the Isle of Man. Halfway between Great Britain and Ireland, this tiny rocky piece of dry land used to be one of the centres of the Empire of the Vikings, the early medieval pirates. The Isle of Man, being a British Crown Dependency, retains its offshore law to the present day and is the “accepted face of offshore”.
Needless to mention the Caribbean, which is home to 70% of the world’s offshore zones, where every third island nation has a very liberal tax law, and in the 16th-18th Centuries every single island was in one way or another connected with pirates or privateers of various nationalities. Even Peter Island, which is believed to have inspired the Stevenson’s Treasure Island, now forms part of the British Virgin Islands, the world’s most popular offshore zone.
Modern offshore zones owe their rebirth to the disintegration of colonial empires in the 1960s – 1980s when the economically developed European and American countries were forced to ‘free-float’ a number of their former dominions which they subsidised. The colonies were advised to stimulate the economy with an inflow of foreign investment by introducing offshore legislation.
Are these modern offshore zones going to last?” will ask a reader concerned by the attacks that economically developed countries have been making in recent years. “Definitely during our lifetime!” we answer. “The battle is against the drawbacks of offshore territories that do not prevent the illegal operations of national and international organised crime and not against the advantages of free economic zones that encourage business and economic growth.”
The most common examples of the use of offshore companies in business
It is difficult to give the most common examples, although offshore territories are estimated to account for up to 30% of the world’s financial turnover. Take the world’s major financial institutions for example: banks, funds, investment and insurance companies – they all have branches in at least one offshore zone, such as Switzerland, Luxembourg, Liechtenstein, Guernsey and Jersey of the Channel Islands, the Netherlands Antilles, the Cayman Islands and Bermuda, Hong Kong and Singapore. This is not surprising as these countries levy little or no tax on securities transactions.
Another popular way for a large business to ‘go offshore’ is to form a holding, i.e. to create an ownership structure which puts the offshore in the main position (usually the top position).
If you look at the publicly available information on the ownership structure of a large production or trading holding, you will almost always see companies registered in Cyprus, Gibraltar or the British Virgin Islands at the top.
In order to get a personal feel of ‘the presence of offshore in our lives’ you would simply need to take a closer look at the goods and products you buy. It is then that you will see the paper produced in the Isle of Man (where nothing but juniper has ever grown), strawberries from the British Virgin Islands (which makes you wonder how they have not gone off being transported through 8 time zones) and sunflower oil from the State of Delaware.