Diplomarbeit

DIPLOMARBEIT Titel der Diplomarbeit “Offshore Financial Centers. Objective Economic Reasons of Existing, Mechanisms of Functioning and Future of OFCs” Verfasserin Lidiya Eickmeyer angestrebter akademischer Grad Magistra der Sozial- und Wirtschaftswissenschaften (Mag. rer. soc. oec.) Wien, im Februar 2008 Studienkennzahl lt. Studuenblatt: A 157 Studienrichtung lt. Studienblatt: Internationale Betriebswirtschaftslehre Betreuer: Prof. Dr. Erich W. Streissler Eidesstattliche Erklärung: „Ich erkläre hiermit an Eides Statt, dass ich die vorliegende Arbeit selbständig und ohne Benutzung anderer als der angegebenen Hilfsmittel angefertigt habe. Die aus fremden Quellendirekt oder indirekt übernommenen Gedanken sind als solche kenntlich gemacht. Die Arbeit wurde bisher in gleicher oder ähnlicher Form keiner anderen Prüfungsbehörde vorgelegt und auch noch nicht veröffentlicht.“ 2 CONTENTS INTRODUCTION ……………………………………………… ………………………………….8 SECTION 1: OFFSHORE FINANCIAL CENTERS ……………………………………………….10 Part 1: The Real Growth Scale of the Offshore Centers ………………………………………11 The Number of Offshore Entities ……………………………… ……………………………… ...10 Volume of assets ……………………………………………… ……………………………..…..12 Part 2: Definition of the Offshore Centers……………………………………………………….14 Part 3: Objective Reasons of Existing OFCs………………………………………………… ....15 Part 4: Classification of OFCs…………………………………………………………………..….20 Geographical Classification…………………………………………………………………………...20 Classification, based on the financial power, scale and common image of the OFC………….. 22 Classical OFCs…………………………… …………………… …………………… ……..…23 International Financial Centers (IFCs)………………………………………………….….. 24 Regional Financial Centers (RFCs)………………………… …………………… ……..…..25 Part 5: The Main Fields of Business Activity of the Offshore Companies………………….26 Offshore Banking Licenses………………………………………………………………………..….26 Intermediate Offshore Corporations or International Business Corporations…………….……....27 Insurance Companies…………………………… ………………………………………………..…..29 Special Purpose Vehicles……………………………………………………………………….…….29 Tax Planning…………………………………………………… …………………… …...…………….29 Holding Companies……………………………… ……………………………………………..……..32 Asset Management and Protection………………………………………………………….............33 Patent, Copyright and Royalty Companies………………………………………………………….36 Professional Services……………………………………………………………………….…………37 Shipping Companies…………………………………………… …………………… ………………..38 Money Laundering………………………………………………… …………………………………..39 Tax Evasion and Tax Avoidance………………………………………………………………… …..42 3 Part 6: Brief History and Main Factors of Foundation and Development of OFCs……......47 Origin………………………………………………………………………………………………… ....47 Development……………………………… …………………… …………………… ……………..…..48 International Financing Today…………………………………………………… …………………..49 Failures………………… ………………………………………… …………………… ……………….54 Part 7: The Government Policy of Highly Developed Countries Concerning OFCs….…...54 Part 8: Example of Usage of OFCs in Modern Russian Economy…………………..…….…63 The Russian Corporate Taxation System…………………………………………………….……..65 Russians Investing Overseas…………………………………………………………………..…….66 Foreign Investors In Russia…………………………………………………………………….…….67 Creation of Special Economic Zones in the Russian Federation………………………..…….…. 68 Conclusion……………………………………… ……………………………… …………….………70 Zusammenfassung………………………………………… ………………………………….………72 LIST OF LITERATURE…………………………………… ……………………… …………………..75 SECTION 2: APPENDIX. MAIN ECONOMICAL DATA OF THE EUROPEAN OFCs …………78 Andorra………………… ………………………………………… …………………… ………..……...78 Austria …………………………………………………………………………………………………..79 Cyprus……………………………………………………………………………………….……….....88 Gibraltar ……………………… ………………………………………………………………………...91 Guernsey…………………………………………………………………………………..……………95 Dublin (Ireland) ……………………………………………… …………………………...……………99 Isle of Man………………………………… …………………… …………………… ……...…………101 Italy……………………………… ……………………………… …………………… ……..………….104 Jersey……………………………… …………………………………………………….……………..106 Liechtenstein……………………………… …………………… …………………… ...………………110 Luxembourg………………………………………………………………………….…………………113 Madeira……………………………………… ………………………………………...……………….117 4 Malta……………………………………………… ……………………………………………….……119 Netherlands………………… …………………………………………………………………….……122 Switzerland………………………………………………………………………………………..……125 U.K, London.…………………………………………………… …………………… …………………128 Curriculum Vitae………………………………….………………………………………….………70 LIST OF FIGURES........................................................................................................................6 LIST OF TABLES……………………………………………………………………………….….……7 5 LIST OF FIGURES Figure 1: OFCs, identified by Financial Stability Forum, Mai 2000 ……………………………….21 Picture 2: Domestic ownership of inventions made abroad, 1999 – 2001 …………………...….36 Picture 3: Activities in OFCs …………………………………………………………………………50 Picture 4: Banks’ Net Cross-Border Assets ……………………………… ………………………...52 6 LIST OF TABLES Table 1: List of the Top 20 - Countries ranked by GDP per capita ………………………………10 Table 2: Geographical Classification of OFCs…………………………………………………… …20 Table 3: Comparative Characteristics of the Types of Offshore Jurisdictions……………………25 Table 4: Direct Investment flows to and from OECD countries 2001 – 2004…………………….57 Table 5: Cumulative FDI flows in OECD countries 1995 – 2004…………………………………..58 Table 6: Corporate Tax Rates, all countries 1993-2007…………………………………………….59 Table 7: Corporate Tax Rates, EU 1993-2007………………………………………...…………….60 Table 8: Cost reduction for organizations in the Russian SEZ…………………………… ………..68 Table 9: Financing of creation of engineering, transport and social infrastructure of the Russian SEZ…………………………………………………… …………………… …………………68 7 Introduction At the beginning of writing my diploma paper it was rather alluring for me to investigate the topic that has been never discussed at the university, is completely veiled behind the mystery as a harbor for drug money and shadowed financial schemes, but not as a real working instrument, that is widely used by every more or less globally present company. And as usual there should have been two completely different points of view, concerning our topic of investigation: from the institutions, that make a huge profit out of this phenomenon, and from the organizations that – logically – suffer losses. Some quotations could perhaps make more effect on the mind of the reader than my personal reflections: "No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow - and quite rightly - to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue."1 "There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; all do right. Nobody owes any public duty to pay more than the law demands; taxes are enforced exactions not voluntary contributions!"2 "Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes"3. "Few people are enthusiastic about paying taxes. However, most people understand that taxes provide the funds required for the delivery of essential community services and the infrastructure that households and firms rely on, in research, healthcare, education, security and more. Non-compliance with tax laws reduces the funds available to government for such services. Also, it is blatantly unfair to the majority of law-abiding taxpayers who must, as a result, bear more than their fair share of the tax bill. National revenue bodies, meanwhile, have found themselves stranded at the border, as the rise in international tax non-compliance has made it more difficult for them to apply the law in an efficient and fair manner".4 1 http://www.offshoresimple.com/offshore_companies.htm Law Lord Clyde, (Ayrshire Pullman Motor Services v Inland Revenue Comrs [1929] 14 Tax Cas 754, at 763,764). 2 http://www.offshoresimple.com/offshore_companies.htm 3 Helvering v. Gregory, 69 F.2d 809, 13 A.F.T.R. 806 (2d Cir. 1934), aff'd, 293 U.S. 465 (1935). 4 http://www.oecdobserver.org/news/printpage.php/aid/1945/Tax_in_a_borderless_world.html Tax in a borderless world Jeffrey Owens, Oct 2006 8 In reality, there are many facts, numbers, points of view, concerning the world of offshore. But my target has always been to find objective factors of a formation, extremely fast growing and actual global existing of such economic “wonder” as an offshore world. As a practical assistance in order to come to the truth at the beginning let’s point out the following questions that should be finally answered: • What scale has the offshore economy already got? Is it possible to stop the growth with the help of economic levers but not with political sanctions? • Why did the phenomenon of the offshore economy arise at all? • Are tax havens really a disaster for a whole world economy or are they only an objective answer to the economy of the highly developed heavy-taxed countries? • In what kind of business activity are the offshore centers mainly involved? • Are they really suitable for money laundering? So, the paper is divided in 8 parts. The first part focuses on the scale of the offshore economy

Load more