On Sunday (3), an international coalition of journalists published reports on financial transactions involving people associated with political leaders, business owners and celebrities involving offshore companies, in the case known as “Panama Papers. “
Based on more than 11 million documents from the Panamanian law firm Mossack Fonseca, investigations show how the company “helped clients to launder money, escape sanctions and avoid taxes.”
According to ICIJ, the firm is one of the leading offshore companies that can be used to hide asset ownership. The consortium says that most of the service provided by the fund industry is legal, but that the documents obtained point to frailties.
Offshore activities are those carried out outside the country of the owner’s domicile. Generally, companies and offshore accounts are used to avoid paying taxes and keep the identity of their owners confidential. Many of them are opened in “tax havens”, that is, countries that charge lower taxes or even offer tax exemption. Offshore activities are widely criticized for facilitating money laundering for illegal and criminal activities, such as terrorism.
Most countries that offer low-cost, stealthy financial services are located on islands such as Seychelles, Cayman, and Bermuda, hence the name offshore (literally, offshore, offshore). However, continental countries such as Switzerland and Luxembourg also do so.
ARE THEY ILLEGAL?
Not necessarily. Avoiding the payment of taxes is not the same as tax evasion. Some investors open accounts and offshore companies to pay fewer taxes on financial income and also for business acquisition and merger operations.
However, many tax havens work with front companies and under the trust system, which facilitates the concealment of the actual ownership of accounts and offshore companies, favoring illegal operations such as money laundering.
The trust is an entity created to administer financial operations and assets for the benefit of others. With this, the identity of the real owner of accounts and companies is safeguarded, since in all the paper of financial movement, is the name of the trust, not of the proprietor, that appears.