An Unstoppable Force Rather Than an Illegitimate Farce: Exploring the Role of Offshore Financial Centres Amid Renewed Criticism

Abstract:

Offshore financial centres, or OFCs, are commonly labelled "tax havens" due to the general misconception that they are used solely to avoid or evade tax. The British Virgin Islands ("BVI") and Cyprus are two prominent OFCs, regularly used throughout Europe and the rest of the world, that have been subjected to criticism in recent times.

In 2013, there were numerous reports that Cyprus was being used mainly by rich Russians to launder dirty money in local banks, and in April 2013 the International Consortium of Investigative Journalists publicised results of an investigation which suggested that the rich and famous and prominent political individuals use offshore companies to hide their financial interest in lucrative projects and trading entities.

The author worked for over five years as a lawyer in the BVI, and also has visited Cyprus twice in the past two years to interview leading lawyers and members of the financial services industry. Accordingly, with particular attention being given to the BVI (which remains the leading centre for the incorporation of offshore companies) and Cyprus (which has an unparalleled network of double taxation treaties), this article aims to debunk recently pronounced myths about the offshore world by focusing on the practical reasons why OFCs are used in international business.