Myth: Offshore jurisdictions have harmful tax practices

Fact: This opinion is based on offshore legislation that allows for asset protection through fair tax competition. Embedded in the tax code of high tax jurisdictions are numerous tax deferral and tax reduction provisions for income earned offshore or expenses paid offshore. For example: the US gives tax deductions for insurance premiums paid to offshore captive insurance companies.

In a global economy, taxes are another variable in the free market system and the tax payer will rightfully move their income in search of the best return on it. The father of the free market system, Adam Smith, in his book "An Inquiry into the Nature And Causes of the Wealth of Nations", documented this natural economic behaviour when he said "The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was (...) assessed to a burdensome tax, and would remove his stock to some other country where he could either carry on his business, or enjoy his fortune more at his ease".1

The Tax Justice Network, an international group opposed to tax avoidance, in a report released in 2005, estimated that over US$1.6 trillion in North American wealth alone was held offshore. This exhorbitant amount is just a fraction of the movement in global wealth and is very telling. It is a wake up call by the citizenry of high tax jurisdictions that rather than introduce more restrictive and burdensome taxation legislation and policies, they should review their taxation policies towards a more efficient utilization of tax dollars.

1. 1. Smith, Adam: An Inquiry into the Nature And Causes of the Wealth of Nations, 1776; Book Five: Of the Revenue of the Sovereign or Commonwealth; Chapter II: Of the Sources of the General or Public Revenue of the Society; Article II: Taxes on Profit or Upon the Revenue Arising From Stock.