April 8, 2016 10:28 am
Offshore funds are usually money funds kept in a jurisdiction other than one’s country of residence. From time to time we hear in the news about leaks of papers proving that artists, football players or even politicians and companies have offshore assets hidden in tax havens.
The most recent affair is the Panama paper leak, where 11.5 million documents reached the press from a law firm called Mossack Fonseca. The leaked papers cover four decades of financial activity, up to the end of 2015. It shows how dark money flows under the international financial system, depriving governments of undeclared tax revenues. This is only the most recent scandal of this type, another one being the famous LuxLeaks.
The scheme is simple: the person/company who has some money after which he doesn’t want to pay taxes, goes to store them in a tax haven. Once the money reaches the fiscal paradise, it is completely lost for the country of origin. So far, there hasn’t been a case where the money was recuperated from an offshore fund. That is because the tax haven is in another jurisdiction than the country of origin. This means years of legal action and a lot of money needed to pay attorneys and legal fees. This alone discourages any legal pursuit, however if the case does go to court, there is a statute of limitations, the case must be opened and closed in 2 years, or it is thrown out. These are huge legal hurdles to overcome, and because of the time and cost implications and low odds of winning the assets are safe.
Written by Raluca Caranfil
Communication Trainee at TermCoord
Journalist & Student at the University of Luxembourg
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