Recent news reported that data has been leaked from offshore banks revealing who is hiding money in banks outside their native countries.
What is the big deal about offshore banking?
Offshore banks are banks located outside of the depositor’s country and typically in a tax haven or low-tax jurisdiction. People put their money and gold in such banks for various reasons: (1) privacy and secrecy, started in 1934 [Swiss Banking Act]; (2) low or no taxation; (3) easy access to deposits in terms of regulation; (4) protection against local, political, or financial instability.
In some cases, it is a means to launder ill-gotten wealth.
As previously stated, offshore banking has also been used by underground criminal activities to evade taxes and launder money. However, offshore banking interest accrued is still subject to income tax according to the IRS in the United States. International associations have tried to regulate these banks as other banks in order to collect tax revenue for their countries.
The major disadvantage of offshore bank accounts is that it is less financially secure, unless its a Swiss bank. For example, in 2008 when the world was caught up in a banking crisis, the only people that lost money were those who had deposited their funds in offshore branches of Icelandic banks. However, the Isle of Man authorities in 2009 reported that 90% of depositor funds were paid.
The second disadvantage is that offshore banks are remote and costly to visit; but in a world with global telecommunications, this is rarely a problem for customers. Accounts can be set up online, by phone, or by mail.
Offshore private banking is usually more accessible that those of higher incomes. The Bank Secrecy Act specifies that accounts must file a Department of the Treasury Form 90-22.1 in a calendar year that exceeds $10,000.
If you open an offshore banking account you can expect financial services like corporate administration, credit, deposit taking, foreign exchange, fund management, investment management, letters of credit and trade finance, trustee services, and wire/electronic funds transfers.
Quatloos advises people not to get an offshore bank account because of the chance of fraud or just losing your money because of no regulations. I believe that many are doing so not so much because of high tax rates, but because they worry about economic collapse in the United States and lose their money.
When the financial crisis took place and our government initiated the bailout, banks and financial institutions and even auto industry came out to the good, but investors, folks with retirement funding, and those that pay taxes got screwed. That was in the United States, sponsored by the government whose present leadership falsely promised change. GW Bush, toward the end of his term initiated bailout programs and Obama continued them. The only difference that Obama brought was deeper national debt and a policy of economic suicide with the idea that America can spend its way out of debt and make up for it by “taxing the rich more heavily”. Reality is sinking in, which did so before Obama even swore in officially as a second-term president, that everyone would see a tax hike as they watched there net pay lessen in a time when money goes less farther because of continual rise in the cost of products and services. Obama’s life matches his political career, a constant charade. If the American banking system [Federal Reserve] would back up printed money with gold, like Swiss banks, it would be more stable. The Federal Reserve is operated by private banking moguls, yet the Constitution states:
Reputable websites that have good advice and do not recommend or condone tax evasion through offshore banking would be Q Wealth Report. It is for those who are concerned that economic collapse will, like a vacuum, suck up their money. All in all, it seems the backbone of foreign/offshore banking is still Switzerland. In the Far East, an equivalent of Switzerland would be Singapore.
Having money in a Swiss bank is best for privacy, and if a bank violates that privacy, they are susceptible to six months in prison and a fine up to $50,000 Swiss francs. You can sue the Swiss bank for damages. The only exception is if your money has been procured or involved with drug trafficking, insider trading, or organized crime.
However, before you get excited about having a Swiss bank account, remember that the best banks in Switzerland are what would be called “stuffy” and only deal with possible customers who have a hefty amount to deposit. This is because some banks are private and some are retail banks. The “private” bank only deals with large assets, usually with depositors with liquid assets of over $1 million. Many private Swiss banks require a special invitation or referral by current customers and focus on wealth management services like investments, tax concerns, and estate planning. Many Swiss retail banks offer investment services, but on a smaller scale, working with local branches of larger commercial banks.
The success of Switzerland falls back upon their premium currency, the Swiss franc which historically is backed by at least 40% gold reserves. Swiss banks have sophisticated investment services and Internet banking. The Swiss banks should be the model for which the American banking and federal system should be emulating.
If you have money in Swiss banks you do not pay the 35% withholding tax on interest and dividends unless those interests are received from Swiss business assets, like the Nestlé or Novartis corporations. The same applies if you purchase bonds issued by a Swiss company. If you are a Swiss taxpayer, you can claim the tax back is you are being double taxed, such as income tax in your home country and in Switzerland.
Switzerland does not have an inheritance tax, or as Americans call it – the death tax. This tax is probably the most hated, but it involves people that have assets set at a certain amount of money, so has been hard to get rid of because the public outcry is not fierce enough. But it is a clear testament of the ruthless income tax system and its strong-arm department that collects it [IRS], which Americans have called the American Gestapo. Of all the government agencies, the IRS is most hated, and for good reason. They violate the Constitution by not standing on the principle of innocent until proven guilty by putting a legal lock on your financial accounts and liquid assets before you see a day in court with your lawyer. Repeal the 16th Amendment, pass the Fair Tax Act, and there will be no more annual nightmare of tax computation and paperwork bureaucracy that even the IRS does not understand fully.
Oddly, the proposed Fair Tax Act that has languished in Congress as a bill since 2002 has been ignored, which would greatly change the tax system for the benefit of both the government and the people. It has been researched and approved by top American economists, but difficult to be initiated because being an enormous change as well as the fact that at least 40% of Americans pay little or no income tax so do not care if it gets changed or not. All they can see is that they will not get an annual refund check, but do not realize that the Fair Tax Act would provide a monthly reimbursement for people with a certain annual income [or less] and there would be NO deductions and far less complicated because it is based upon consumption, not income. That means what you earn in wages, salaries or investments is YOURS. As usual, the people remain ignorant about it because of politicians against it and the mainstream corporate media does not promote it. A good source to review recent estate tax laws is the Heritage organization.
I guess, if you have just won a big lottery amount, it might be good to open a Swiss account or other safe offshore account with at least 25% of the amount after taxes. In fact, with the present economic situation in America, it might be prudent to do so. My choice would be a bank in Switzerland. Our nation’s banking system certainly should use Swiss banks as a good role model. It wouldn’t hurt to scrutinize their homeland defense military system as well.