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Challenges of Globalization and Offshorization of the World Economy

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Challenges of Globalization and Offshorization of the World Economy saerTaSoriso biznesi da mewarmeoba - INTERNATIONAL BUSINESS AND ENTREPRENEURSHIP globalizaciis problemebi da msoflio ekonomikis gadaxra (struqturul-funqcionaluri midgoma) CHALLENGES OF GLOBALIZATION AND OFFSHORIZATION OF THE WORLD ECONOMY (STRUCTURAL-FUNCTIONAL APPROACH) natalia mudraki, NATALIIA MUDRAK, saerTaSoriso biznesis kaTedris aspiranti, post-graduate student, Department of taras SevCenkos saxelobis kievis erovnuli International Business Institute of International universitetis saerTaSoriso urTierTobebis Relations of Taras Shevchenko National instituti, kievi, ukraina University of Kyiv ANNOTATION dasaxado darRvevebis CadenisaTvis erTnairia, The article analyzes the approaches to the definition of an axlos dganan erTmaneTTan. statiaSi ganx- offshore jurisdictions, the reasons for their occurrence and the orcielebulia gansazRvrebebis „ofSori’-s, main characteristics. The most typical motives for the use of „ofSoris iurisdiqciis“, „ofSoruli kompaniis“ offshore and the economic effects of their operation in the sistematizacia struqturul - funqcionaluri conditions of globalization are considered. The reasons of midgomis gamoyenebis . using offshore by companies, turnover dynamics and main sakvanZo sityvebi: ofSori, ekonomikis of- directions of genesis of offshore business are analyzed. On So rizacia, ofSoruli politika, dabegvris op- the basis of the structural-functional approach, the classifi- timizacia, dabregvris minimizacia, kapitalis cation of subjects of offshore business was proposed, which gadineba, saeWvo operaciebi. made it possible to determine the positive synergetic effect of combining traditional and offshore tax optimization schemes. INTRODUCTION The concept of the development of an international Keywords: offshore, economy offshorization, offshore “offshore industry” was traditionally based on differences policy, tax optimization, tax minimization, double tax avoid- in territorial and resident tax approaches; moreover, these ance agreement, capital flight, suspicious transactions. differences allowed countries that apply different tax re- gimes to receive real benefits. With the development of the anotacia global offshorization of the world economy, and in par- statiaSi gaanalizebulia im kompaniebis allel with it, the regulation of offshore entrepreneurship saqmianoba, romlebic ofSorul iurisdiqciebSi evolved at the level of both developed countries and in- daregistrirebuli arian rogorc arareziden- ternational organizations. The versatility of economy off- tebi, aseve im afilirebuli (kontrolirebadi) shorization is due to the complexity of obtaining specific ofSoruli kompaniebis funqcionirebis princi- results in the medium-term perspective, while, according pebi, romlebic gardaiqmnen efeqturi samewarmeo to existing publications of specialists working in this area, saqmianobis warmarTvis mniSvnelovan instrumen- many provisions and proposals raise doubts about the tad. dasabuTebulia, rom rom bevri kompanias, possibility of their practical implementation. In the mod- romelTac aqvT urTierToba ofSorul iuris- ern domestic and Western theory and practice, the use of diqciebTan da cdiloben Tavi aaridon maT xelT preferential regimes of economic activity lacks a unified arsebuli msxvili ofSoruli aqtivebis flo- approach to the definition of offshore jurisdictions; there bis gaxmaurebas ama Tu im sameurneo saqmiano- are numerous differences in the terminology used both in bidan, sagadasaxado optimizaciis gamoyenebiT, scientific literature and in normative legal acts. In addi- ofSorul iurisdiqciebs borotad iyeneben. tion, the principled methods of using offshore jurisdictions naCvenebia, rom gadasaxadebze arakanonierad for tax planning purposes and for tax evasion are similar Tavis arideba sagadasaxado optimizaciidan ga- or identical. momdinare, sakmaod rTulia, vinaidan ofSoruli LiteratureReview. Among the studies of Ukrainian iurisdiqciis principuli sqemebis gamoyeneba scientists in this area, we will note developments of I. sagadasaxado dagegmvis miznebisaTvis da saga- Burakovsky, V. Dergachev, O. Plotnikov, A. Filippenko, inovaciuri ekonomika da marTva/ INNOVATIVE ECONOMICS AND MANAGEMENT #3, 2018 221 saerTaSoriso biznesi da mewarmeoba - INTERNATIONAL BUSINESS AND ENTREPRENEURSHIP which are devoted to theoretical issues of offshore busi- in this offshore jurisdiction and using offshore legislation, ness organization, peculiarities of regulatory of offshore the attention of national and international regulators is companies and tax optimization, problems of counteract- highlighted. ing abuses carried out using offshore companies. From The term “offshore” includes not only legal but also Western authors, it should be noted works of T. Neal [1], economic and geographical concepts, since it first ap- H. McCann [2] and A. Zomer [3], in which authors assess peared in one of the publications in the United States in the impact of offshore business on the countries of origin the late 50’s of the XX century, devoted to a fundamen- of investments and explore the benefits of using offshore tally new financial organization, which contributed to the for the investor, as well as work J. Henry [4], who em- avoidance of government control by geographic selectivi- phasize the quantitative assessment of the role of offshore ty. Gradually offshore jurisdictions were transformed into in the global financial system. Despite the existence of a more complex forms (offshore centers) due to the follow- large number of scientific works, there is no clear idea of​​ ing main factors. First one is proximity to the centers of the economic substance of offshore jurisdictions and their business activity in the industrialized countries - the USA, impact on macroeconomic stability. Canada, the UK, the Netherlands, Switzerland, Singapore, The purpose of the article is to analyze the modern etc. The other one is the lack of internal resources for de- characteristics of offshore processes in the globalized velopment in the island states of the Atlantic and Pacific economy in the context of the formation of modern world Ocean, which deliberately went for the adoption of leg- financial architecture. islative acts promoting the attraction of foreign capital. The Research Objective and Results. The term “off- In addition, for some countries (Cyprus, Virgin Islands, shore” is a symbolically simplified interpretation of the Vanuatu, etc.) the incomes from offshore business are the phenomenon that appeared in the early 2000’s in the re- main source of financial resources in the context of the ports of international organizations such as the OECD, the introduction of the latest information technology that al- IMF, the FATF, the Forum for Financial Stability [5; 6; 7; lows to establish and maintain a 24-hour real-time con- 8]. In the scientific literature, the terms “offshore zone”, nection between the leading financial centers of the world. “offshore jurisdiction”, “offshore business”, “offshore fi- The main customers of the financial industry of offshore nancial center”, “tax haven”, “tax paradise”, “tax oasis” centers are TNCs and TNBs, investment funds, insurance and others were used. However, in this article, in the anal- companies, trusts, legal, consulting and accounting firms ysis of offshore jurisdictions as a financial instrument for in almost all countries [9]. international tax optimization, the author will not combine, The mentioned indicators represent a significant off- firstly, the categories “offshore” and “offshore zone”, since shorization of the world economy at the present stage of it is customary to call offshore companies operating out- its development. So today, according to the OECD, 1/3 side the country of registration - in offshore zones, that of world’s bank deposits are kept in the largest centers of is, countries with zero or simplified taxation for business offshore business, even though capital flight does not stop, entities registered in these states. Secondly, the definition and a significant part of it comes back from offshore as of “offshore” as a legal and economic entity with “offshor- “foreign” investments (for example, about 40% of capital ing” as a process of transferring production abroad in or- assets from Russia, Ukraine and Kazakhstan are kept in der to increase profits by cutting taxes, using cheaper labor offshore and “reinvested” in the indicated form, while in force, approximation of production to the consumer, and the USA and Japan this share does not exceed 2%, and overcoming high import duties on finished products. in the EU - 10%). [10]. According to the estimates of the Therefore, in our opinion, only certain criteria (the leading non-governmental organizations of the United ability to significantly reduce tax and other payments, a States - Center for Tax Justice and the US Public Interest comfortable legal environment for the organization and Research Group Education Fund, ¾ from the list S & P doing business, including simplified administrative and 500 largest US corporations have subsidiaries in offshore financial supervision, the ability to anonymously con- areas in the Bermuda, Ireland, Luxembourg and the Neth- duct financial transactions, hiding the real beneficiaries erlands and are stored on offshore accounts more than of offshore companies) are the basis for the formation of $2.1 trillion. Using such a scheme, they pay only 6% of various offshore jurisdictions. Moreover, to the latter, as tax revenues abroad, whereas in the United States they well as to specific corporate structures (companies,
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