British Virgin Islands: Onshore vs Offshore – Is There Really A Battle?

Over the past few months the issue of offshore jurisdictions and the role they play in the global economy has come under extreme scrutiny, especially from onshore governments seeking to increase tax revenues. The recent Panama Papers Leak has only served to fuel the flame and has resulted in more people who know very little or nothing at all about offshore jurisdictions calling for their demise.

Those who understand offshore jurisdictions however, understand that the issue is not offshore jurisdictions per se, but rather entities and individuals who seek to use offshore structures for illicit gains or criminal behavior.

Offshore is legitimate

In fact, if one were to have a look at the Panama Papers and the recently released searchable database of company information (and not just digest a one minute clip of the evening news), you would realize that on almost every page on the International Consortium of Investigative Journalists' website dealing with the Panama Papers, there is a statement which reads:

"There are legitimate uses for offshore companies and trusts. We do not intend to suggest or imply that any persons, companies or other entities included in the ICIJ Offshore Leaks Database have broken the law or otherwise acted improperly."

That statement cannot be taken lightly. It is a fact that there are many legitimate uses for offshore companies and trusts, and that a majority of the persons who use offshore entities come with clean hands and have good intentions. It is only the few that have unlawful motives which tarnish the good reputation of many offshore jurisdictions. Unfortunately, even with good rules and regulations some of those entities and individuals will continue to fall through the cracks and cause damage.  It is therefore imperative that regulators in offshore jurisdictions continue to do more to minimize the likelihood of abuse.

Abuse of regulated systems globally

The Bernie Madoff Ponzi scheme, which originated in the U.S., clearly shows that even with the best intentions, and what was thought at the time to be adequate regulations, regulators can be conned. A view of the enforcement page of the U.S. Securities and Exchange Commission's website shows that there are numerous cases of entities and individuals who have tried to violate rigid and strict rules and regulations put in place by the SEC. Like the SEC, offshore jurisdictions must deal with those entities and individuals who seek to violate their rules and regulations, particularly in relation to ownership information and declarations (tax or otherwise). The current state of affairs is not entirely the fault of offshore jurisdictions, but offshore jurisdictions can and should do more to protect themselves.

Offshore and Onshore Regulators must join forces

It is clear that offshore and onshore regulators must join forces to battle those who are intent on breaking laws across borders. Onshore jurisdictions, especially G20 nations, have the upper hand and a call for a level playing field by offshore jurisdictions is not unreasonable. The Common Reporting Standard is seen as a move towards a level playing field but it needs to be more widely accepted, especially by major onshore players like the U.S.

Offshore jurisdictions such as the BVI have signed multiple tax exchange information agreements, signed on to FATCA and FATCA-like regulations, and now CRS. They are making beneficial ownership information more readily available via new mechanisms with the aim of improving transparency, efficiency and accountability. Although there may be a perceived battle between onshore and offshore jurisdictions, ultimately, the battle should be against those who seek to abuse both onshore and offshore rules and regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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