Offshore And The Euro
Jeremy Hetherington-Gore Unleashed
16 May, 2010
This is a scary moment in international finance, with predictions of the collapse of the euro vying with apocalyptic visions of multiple national bankruptcies. As expected, the price of gold is shooting up, and the dollar, for all its underlying problems, is having a good war. But what about offshore?
First, shed a tear for those low-tax countries which joined the eurozone: Ireland, Cyprus, Luxembourg, Malta and Monaco. Not many investors will be beating a path to their doors while the euro remains in crisis. At least they are not vulnerable to debt default: Ireland comes closest, but bit the bullet of its public finances last year and has accepted serious pain as the price of its fiscal health. Cyprus is exposed to Greece through its banks and shares some of the same problems, but is not seriously threatened, while Luxembourg and Malta have pursued a more conservative path than the likes of Spain or Portugal. Monaco is an exception to most rules, and is really just a property play. Once the crisis is over, these five countries will still have their lowtax regimes and will have a devalued currency which should encourage exports and attract FDI. Well, in the case of Monaco, the price of apartments will reach even more stratospheric heights, as expressed in euros.
What about the rest of offshore? Much of it is tied to the dollar in one way or another, although the UK's offshore dependencies use the pound, something they must be regretting right now, given that their 'protector' is just a whisker away from default itself. Switzerland, like gold, acts as a magnet for investment at times likes these. Then there is a slew of low-tax territories with their own currencies, or at least those of their 'host' nations; into this category fall such jurisdictions as Dubai, Mauritius, Vanuatu, Andorra, Botswana and Labuan.
It is safe to predict that in any scenario short of a complete international implosion, 'offshore' will inhabit the silver lining of the current fiscal storm-clouds. In some jurisdictions this is because the special circumstances which breathed life into them still obtain (Hong Kong as a home for footloose Chinese money; Botswana as one of the world's biggest diamond exporters; Dubai as a Middle-Eastern trading entrepot; the Cayman Islands as the home of choice for hedge funds). In other cases, it's a case of 'any port in a storm'. The UK's offshore dependencies will do well, in spite of their exposure to sterling, because they offer assets in multiple currencies and run extremely tight fiscal ships, unlike the UK itself. And they have been highly innovative in terms of structure in a wide range of sectors from insurance to aircraft finance.
There are too many Caribbean low-tax islands for their own good, perhaps, but even there most of them have their own specialities, and at least those jurisdictions which have installed transparent, well-regulated financial supervisory regimes, such as the Bahamas, should attract international money looking for a safe home during times of trouble.
So before you put your dollars into a shoe-box under the bed, give a thought to offshore. Somewhere in the world there is a low-tax jurisdiction which is right for you, even, or especially, at this moment of financial trauma.
This has been a party political broadcast on behalf of The World Of Low-Tax.
« Go Back to Blogs