It’s fair to say that this isn’t a golden era for the reputation of the offshore financial industry.
There’s an international and EU crackdown on tax avoidance and the Paradise Papers leaks have led to further scrutiny of influential public figures using offshore instruments to tweak their tax arrangements.
But there are legitimate reasons to use offshore banks that are not as well known.
Here are three alternative reasons you might bank offshore.
One reason that not all offshore funds are bad is that they allow pension fund managers to locate their funds in territories where the set-up cost is low — savings costs that would be passed on to ordinary investors.
Offshore regimes also allow fund managers to pool their resources with other funds, further reducing costs and gaining access to a wider range of profitable investments.
Without this flexibility ordinary people’s pensions might be worth less by the time they retire — meaning they might feel they’ve worked and saved for very little.
So the industry doesn’t only benefit the wealthy elites.
The Foreign Account Tax Compliance Act 2010 requires high street banks abroad to report US customers who use their services to authorities and the UK has a similar regime for its citizens.
But the administration costs associated with these requirements mean that setting up accounts for non-nationals is often financially prohibitive for local banks.
And if you’re employed legitimately abroad and don’t have a local bank account it can make life difficult. Your local employer will have nowhere to pay your wages and might not agree to making cash payments. It also makes setting up direct debits for things like rent and utilities impossible.
Offshore bank facilities for individuals can overcome these hurdles — so an offshore bank account can be a simple way to make life easier for immigrant workers trying to integrate into local economies.
Being unable to set up a bank account abroad might lead to you losing a good job and the local economy losing out on your expertise and tax contribution. So in this situation taking advantage of an offshore account is the best option.
Protecting against litigation
Groundless or frivolous litigation is fairly common and fighting a case against it can be extremely expensive.
But arranging to store funds securely offshore can provide a layer of protection that provides peace of mind.
Smaller organisations that don’t take this step might find that the legal fees involved in fighting off litigants are so expensive that they threaten the firm’s future viability — even if the judgement eventually goes in their favour.
And as well as providing employment, these organisations might perform functions that have wider benefits for society — so it’s a shame if they ceased to exist.
These three alternative reasons you might bank offshore aren’t as exciting as revelations on the rich and famous.
But a balanced picture of the offshore sector is only achieved by considering that, if used ethically, it might work for the common good.