Offshore Banking in Labuan

In: Business and Management

Submitted By meera
Words 4453
Pages 18
1.1 INTRODUCTION
Offshore bank is a bank that located outside the country of residence of the depositor. Offshore banking has often been related with the underground economy and organized crime, via tax evasion and money laundering; though legally offshore banking does not prevent assets from being subject to personal income tax on interest. Even though, offshore banks may decide not to report income to other tax authorities, and have no legal obligation to do so as they are protected by bank secrecy, this does not make the non-declaration of the income by the tax-payer or the evasion of the tax on that income legal.
September 11, 2011 onwards there were many calls for more regulations on international finance, in particular concerning offshore banks, tax havens, and clearing houses such as Clear stream, based in Luxembourg, being possible crossroads for major illegal money flows. These attempts have been criticized at regulation by defenders of offshore banking. They claim the process is provoked not by security and financial concerns but by the desire of domestic banks and tax agencies to access the money held in offshore accounts. They mention the fact that offshore banking offers a competitive threat to the banking and taxation systems in developed countries, suggesting that Organization for Economic Co-operation and Development (OECD) countries are trying to stamp out competition.
There are many advantages as well as disadvantages of offshore banking. Offshore banks provide access to politically and economically steady jurisdictions. The banks also may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. It also can help developing countries source investment and create growth in their economies, and can help reallocate world finance from the…...

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