Financial markets in tax havens

  • Posted By : Admin
  • Tax havens
  • 14-09-2017
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Development of financial markets in tax havens helps avoid banking controls, increase assets protection and eliminate taxes for non-residents.

In order to understand the concept of the financial market, we have to analyze the concept of tax havens for non-residents: it would be a modality of financial centers, such as Belize, Saint Vincent and the Grenadines, Hong Kong, Vanuatu, which have emerged on the basis of financial globalization. Tax havens are territories with 0% taxation that have been perfectly linked to the international environment of finance throughout the world. Through fiscal and financial engineering operations, they hide tax evasion, the laundering of illicit capital and the looting of large and small countries, as for example, the cases of Africa and Russia in the 1990s. 

However, tax havens are not as immoral as they are painted as there are countries that suffer many restrictions in capital flow and these offshore financial centers help lift up and avoid all these barriers. What can an Argentinean or Venezuelan citizens do to when the government of their countries does not allow them to make a simple transaction in Euros or dollars to the United States or Europe? Possibly these governments only want the money to remain in the country and only large companies and corrupt politicians can do so and take advantage of the freedom to invest in tax havens. Today many countries, such as South America, Africa and Russia the population has many problems to invest abroad the money that was honestly earned in their country of residence and this is one of the most common reasons when a citizen resorts to the search for a Financial market that is outside of his own country and where he can protect his money. 

Another example that tax havens have integrated into our lives at the global level is the fact that 90% of the IBEX 35 companies have companies and subsidiaries registered in tax havens. A simple change in the direction of one of the offices of these companies allows them to save millions in taxes and take advantage of all the advantages of investments in the financial markets of tax havens. 

Tax havens cannot be understood without understanding first the development of offshore financing as a sector of the currency markets. An example of a leading offshore financial market would be Vanuatu. This privileged offshore is located in an advantaged time slot. Thanks to the fact that it can virtually present the closure of the New York markets and disposes of the quotes data, in addition it goes three hours through in front of the financial markets of Singapore and Hong Kong. Therefore, due to its advantageous location, Vanuatu has become one of the most important offshore financial markets in the world. 

Financial Markets 

When we refer to financial markets, we refer to the movement of capital in all its aspects. These are the FOREX currencies markets, stocks, bonds and futures that are negotiated in the diverse financial places like London, Paris, Frankfurt, New York and Tokyo. 

The main characteristics of financial markets in tax havens are: 

  1. Low regulation by central banks and freedom of movement of capital where there are no limits to the inflows and outflows of money. Greater financial deregulation and less control in tax havens, where banks normally do not ask about the origin of funds although with the last summits tax havens are becoming aware to have more regulated and increasingly transparent financial markets. A clear example of this would be Andorra, Gibraltar, Liechtenstein. 
  2. Internet, satellites and telephony have become perfect tools used between operators and financial markets. All financial markets operate in real time and can buy and sell currencies instantly between onshore territories and tax havens. 
  3. The development of new financial products such as exchange insurance offered by banks to their customers has caused much damage to the world economy. Well-known cases of its consequences in Spain are Bankia, Caixa Galicia, Banco Valencia etc. Speculation in the financial markets is presented as a main feature of the contemporary finances of tax havens. 
  4. The flows of finance that come and go quickly from one market to another where a security or currency is quickly bought and sold to avoid losses and benefit from its valuation among financial markets. This type of operations in tax havens lack international supervision and lead to the opacity of a large part of the financial markets. 
  5. Risk rating agencies such as Fitch, Standard & Poor, Moody's represent the most powerful and influential companies in the world for connecting financial markets in tax havens. In many cases, these risk classifications trigger numerous funds in the financial markets that condition the movement of capital, credit and the quality of indebtedness of countries such as Greece, Ireland, Portugal, Spain, etc. 
  6. Financial Markets create fiscal competition between the financial markets of the onshore territories and those of tax havens. Despite the pressure of more important financial markets, such as London, tax havens still do not commit to raise taxes and sign agreements of information exchange that can harm their image and erase forever the concept of a tax haven. 

Globalization in finance is the economic independence between countries, including countries with 0% taxation or the so-called tax havens that are increasingly connected with the financial markets all over the world. Thanks to this technological revolution, financial globalization is developing in all its aspects. With a simple click we can see the incoming and outgoing money transfers in our online banks, make purchases and sales of financial products and exchange currencies without moving from our residence.