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The technology and the telecommunications revolution of the present day have brought about the huge and still increasing popularity of the offshore industry. Today, offshore industry has developed into a major global business, involving nearly half of the world’s financial transactions. |
There are several attractions of the offshore industry that have lured many towards these centers. They are popularly deemed as an excellent alternative for protection of assets and wealth and avoidance of taxes. The offshore industry provides for protection of wealth and assets as it allows people to safeguard it from political instability, unnecessary taxation, extravagant heirs, or any other threat.
Offshore industry also helps in the legitimate avoidance of tax on financial and business affairs. People who travel the world and expatriates often find that their connections with foreign countries create uncertainties and undesirable consequences for their wealth on their death. The transfer of wealth to an offshore trust can avoid these difficulties. The wealth is protected in a stable environment, away from the attentions of the tax and inheritance laws of foreign jurisdictions.
Offshore industry at a glance
The last twenty years have seen a tremendous growth in the offshore industry. In 1997, some nearly 60,000 offshore companies were incorporated in the various Caribbean jurisdictions, where around 200,000 IBCs were incorporated within the last ten years in the British Virgin Islands alone. Some 35,000 IBCs were incorporated during the last year itself.
An estimate places the number of companies incorporated Hong Kong, for offshore purposes, at 15,000. Nearly 50,000 or more IBCs have been formed in the other offshore jurisdictions. This puts the figure of companies formed for offshore purposes at more than 130,000 per annum. This increasing demand for offshore facilities has consequently led to a growing number of financial services and competition amongst the existing centers.
Many factors led to this amazing popularity of the offshore industry. Political and economic instability in most onshore jurisdictions was one of the major driving forces that led people to seek the safety and privacy provided by the offshore. Market globalization and deregulation, spread of business across international borders, lifting of trade barriers, trends towards steady global economic growth, global relaxation of foreign exchange controls are some of the other factors to influence the growth of the offshore industry.
Role of the offshore industry
Besides these, global tax related factors also play a major role. High tax regimes, more effective tax recovery and the opportunities of utilizing double tax treaties are some factors that influenced the growth of the offshore industry.
The factors that came into play during the eighties and nineties shall continue to influence growth in the future two decades as well. The rate at which this industry is growing is indicative of not only of the huge popularity of the offshore as an excellent financial services alternative but also of the accruing benefits of incorporating an IBC that have been realized by many all over the world.
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