- Jonathon Clifton, the Asia managing director for Offshore Incorporations, is trying to change perceptions of offshore jurisdictions.
- Offshore Incorporations
The word “offshore” to many people is synonymous with criminality and tax evasion. That, perhaps, should come as little surprise, given that large companies and wealthy investors have long used such jurisdictions to hide money and avoid taxation at home, a practice the U.S. in particular has been cracking down on in recent years. The U.S.’s enactment in 2010 of the Foreign Account Tax Compliance Act , or Fatca, sent a jolt through the offshore industry. A leak last year of millions of records from offshore jurisdictions brought another set of ripples, exposing the private dealings of hundreds of politicians and some of the world’s wealthiest people.
Jonathon Clifton, the Asia managing director for Offshore Incorporations, is taking on the gargantuan task of trying to change perceptions of offshore jurisdictions. His company has a lot of skin in this game: it helps people set up offshore companies. He spoke to The Wall Street Journal on a recent visit to Dubai.
WSJ: Many people see offshore jurisdictions as tax havens for the wealthy. But you say they serve legitimate purposes in the global economy. If that’s the case, what is the industry’s legitimate role?
Mr. Clifton: What the offshore industry does is act as a facilitator of cross-border trade. Say you’re a U.S. company and 20 years ago you want to invest and set up a factory in China and make something. The U.S. company didn’t want to set up a local Chinese company. They didn’t understand the laws. They may not trust the laws. The Chinese were looking for a neutral jurisdiction, which is what these offshore jurisdictions provide. It has nothing to do with tax. It just provides a jurisdiction that the American side and the Chinese side both trust. There’s a robust court system in place. That’s one way in which the offshore industry plays a role in enabling globalization.
WSJ: If the offshore industry plays this important go-between role, presumably along with other legitimate roles, why is concern about its use for not-so-legitimate purposes so widespread?
Mr. Clifton: The offshore industry historically has done a very poor job at being able to articulate the legitimate role it plays, and so because negative perceptions have be left unchecked, years go by and all of the sudden perception becomes reality. Many people in the West automatically have a negative perception of the offshore industry. It’s become pretty politicized in the last few years, and tax is becoming a moral issue these days. …
We’re the plumbing of globalization. We’re the wiring that enables a lot of this cross-border flow. No one can deny the industry hasn’t done a good job in terms of articulating that, but also people need to be honest and say it has been abused in the past. People have used it for nefarious activities. How do you move away from that? Better regulation, more regulation, more transparency can only assist with the overall positive image.
WSJ: We’ve seen a lot of new regulation recently, with the introduction of Fatca and other guidelines on transparency. Where do you draw the line? At what point does new regulation become too onerous, in your view?
Mr. Clifton: A lot of the pushback the industry has had is, “You’re unregulated, you’re selling secrecy.” That isn’t necessarily the case. The offshore industry is in fact pretty well regulated, far more regulated than many onshore jurisdictions. As an industry, if we can embrace some of the new regulations coming through, embrace transparency to a point, I think what it does is it takes a lot of the oxygen from a lot of the opponents of the industry.
Where is the line? I think if we got to the stage where we had public registries of beneficial ownership of all companies, I think that would be something that would be very difficult to digest for the industry. I don’t think as an industry there would be too much concern if there was a private registry of ownership, but having this in the public domain I think creates a huge amount of risks around data security, data protection, individual privacy. That to me is where the line is.
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(via WSJ Blogs)
