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On his 2008 Presidential campaign trail, Barack Obama made his hostility toward “offshore” jurisdictions very clear:

“There’s a building in the Cayman Islands that houses supposedly 12,000 U.S.-based corporations. That’s either the biggest building in the world or the biggest tax scam in the world, and we know which one it is.”

I know that building well; several of my (non US) clients have corporations registered there. Guess what – they are doing nothing illegal and neither are any US citizens who have connections to Ugland House (for that is the building in question). Of course none, or only a very few, of the corporations registered at that building have a physical presence there. That’s not illegal either.

The fact is that there is a similar building – actually a slightly smaller one – in Wilmington, Delaware, home to Mr Obama’s vice president, Joe Biden, which houses more than 50,000 corporations. None (or very few) of which have any physical presence in Wilmington either, but they enjoy tax breaks. In fact there are many office buildings in Delaware like the one shown above which together “house” as Mr Obama would have it, hundreds of thousands of Delaware corporations.

The fact is that the world’s biggest “offshore” financial centre is Delaware. Not only that but because Delaware is part of the US it doesn’t have to adhere to the international anti money laundering regulations that all those other (“dodgy”) jurisdictions have to comply with (at the insistence of the USA of course – don’t do as we do, do as we say).

When I was in business as a licensed fiduciary setting up structures in the Isle of Man, the Caymans, the BVI, Jersey, Guernsey or any other number of “tax havens” I had to have detailed evidence as to who the beneficial owners of any company or trust I managed were. Banks and regulators demanded a rash of information – none of which a dedicated criminal or terrorist could not have provided quite easily. However if I were to set up a corporation in Delaware (or any other US state) I wasn’t even asked for the name of the beneficial owner. Hmmmm.

The political Left – in the US, UK or elsewhere – never misses a chance to put forth new explanations as to why individuals and businesses (be they American, British or whatever) which invest or engage in financial activity offshore(and that simply means via a country in which they don’t live – it’s nothing to do with water as many “offshore” countries are, like Switzerland landlocked) must be suspected of crimes and tax evasion, notwithstanding that it is entirely legal to conduct all such activities.

Despite what President Obama says, it still is legal to:

  • Use an offshore bank or other financial account.
  • Create and donate assets to an offshore asset protection trust or family foundation.
  • Form and operate an international business corporation (IBC).
  • Acquire dual citizenship and a second passport. 
  • Purchase offshore life insurance and annuities that allow deferred taxes.
  • Invest in offshore mutual and hedge funds, precious metals and real estate.

Offshore banks are – for the overwhelming majority – still solvent and functional. You can’t say the same for European or American banks. However, The U.S. Congress is already planning to help President Obama fulfil his campaign promise to “shut down the tax havens.”

Does that mean Delaware? (Not to mention several lesser US states.) I doubt it but if Mr Obama doesn’t include his own “offshore tax havens” then he will be guilty of the very political double-dealing which he campaigned against. Any guess what will happen?

See Also:

Category: Taxation

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