Offshore wealth totaling 13.2 trillion dollarsincreased by 5.3% in the last 12 months, is “hidden” in the largest “offshore cross-border centers” on the planet, according to research published a few days ago by the Boston Consulting Group (BCG). The wealth in the “top 10 offshore centers” alone is in the range of 11.5 trillion. dollars, of which 2.6 trillion are located in Switzerland, whose offshore banking mainly attracts capital from Western Europe, but also from the Middle East, which by 2028 will lose the first place to Hong Kong (today 2.4 trillion dollars are located there ), which is expected to attract 3.2 trillion offshore wealth against 3.1 trillion of Switzerland respectively.
In the past 12 months, however, capital inflows to Hong Kong from China have been limited, increasing the chances of it being challenged in the long term by Singapore, which is also expected to benefit from rising wealth in Asia-Pacific countries and from its role as gateway of cross-border capital for Asia, attracting 2.4 trillion offshore funds until 2028 from 1.7 trillion. dollars today.
The “new Switzerland”
The USA with 1.3 trillion dollars currently occupy the 4th place, while for some they constitute the “new Switzerland”, which is evident e.g. with shadowy shell companies in Delaware and South Dakota State trusts, which attracts significant offshore capital mainly from Latin America. Today one can create a tax “haven” for businesses in Delaware (which is also a pole of attraction for the establishment of start-up companies), which does not oblige the traders to pay the state corporate income tax, when no commercial activity is carried out in said State. However, a franchise tax is imposed, regardless of transactions within or outside the borders of the State, which for new companies amounts to approximately 300 dollars per year. The federal income tax is calculated as a percentage of the company’s annual revenue.
In 5th place, with 900 billion offshore wealth, is the Mainland, the largest island of the United Kingdom’s Orkney complex, while in 6th place, with 700 billion dollars, are the Channel Islands and the Isle of Man, which are expected to lose their position until 2028 from the United Arab Emirates which, after increased inflows from Saudi Arabia and other Middle Eastern countries, currently occupies the 7th place with $600 billion. The “top 10” is completed by Luxembourg with $500 billion, the Cayman Islands with $400 billion and the Bahamas with $400 billion as well.
The offshore ecosystem is, as they say, by design, fiendishly complex. Since the 1960s, however, when there were only 12 offshore destinations, the global offshore wealth industry has expanded dramatically, with today estimated to be over 100 offshore capital destinations, which also act as communicating vessels through networks that help money flows, while based on calculations by the Tax Justice Network, the losses from the offshore wealth of the rich in tax revenue for governments range at 4.8 trillion. dollars over a 10-year horizon.
On the other hand, from informal surveys that have been carried out from time to time by the wealth management departments of Swiss banks, but also according to professors Gabriel Zukman (University of Berkeley), Anete Alstadsetter (Norwegian University of Life Sciences – NMBU), Nils Johansen (University of Copenhagen ), the unregistered funds of Greek interests located in various powerful offshore centers amount to €140 billion.
The AADE list
It is noted that the list of “tax havens” of the Independent Public Revenue Authority (AADE) currently includes 42 states, which practically means that any transaction with them comes under the “microscope” of the tax audit mechanism every time cases of black money are sought.
In particular, the said list is as follows:
- Agios Efstathios,
- Albania,
- East Timor,
- anguilla,
- Andorra,
- Vanuatu,
- Bermuda,
- North Macedonia,
- Bosnia and Herzegovina,
- Bulgaria,
- British Virgin Islands,
- Gibraltar,
- guernsey,
- United Arab Emirates,
- Ireland,
- Qatar,
- Kyrgyzstan,
- Kosovo,
- Cyprus,
- Liechtenstein,
- Macau,
- maldives,
- Montenegro,
- Moldova,
- Mongolia,
- Monaco,
- Barbados,
- bahamas,
- Bahrain,
- belize,
- Bonner,
- Cayman Islands,
- Marshall Islands,
- Turks and Caicos Islands,
- isle of man,
- Hungary,
- Paraguay,
- Samba,
- Saudi Arabia,
- jersey,
- Turkmenistan.
The de-Russification of the Cypriot economy
The debate on the de-Russification of the Cypriot economy and the way in which the economic footprint of Russians and Russian-speaking citizens in Cyprus has been drastically transformed was the subject of a study recently presented by the PACE (Center for Analysis and Strategies in Europe) think tank. In Cyprus, the historical imprint of the Russian communities goes back to the early 1990s, when they flooded the island due to its tax peculiarities and the offshore nature of the economy, characterizing it as the most “Russianized” state in the EU, where in terms of numbers 6 almost % of the population is of Russian origin.
The report points out that former companies of Russian interests, linked to Russian oligarchs or directly to the Kremlin, are no longer operating or have effectively repatriated to the offshore economic zones, which the Russian president created after 2020 in order to control Russian economic activity in abroad. He refers specifically to companies such as FixPrice, United Medical Group, Etalon Group and TCS Group Holding, which for many years had a strong footprint in Cyprus through local companies, which have now closed and concludes that the trend now in Cyprus is the establishment of technology companies that have a “healthier” profile.
The study analyzes the transformation of part of the Cypriot economy after 2022 and the Russian invasion of Ukraine into a hub for technology, IT and communications services and the increasing trend of attracting Russian and Russian-speaking professionals. Russia’s invasion of Ukraine was decisive for the repatriation of Russian, Ukrainian and Belarusian companies to Cyprus, with a 63% increase in Russian technology professionals in Cyprus and a 76% increase in their counterparts from Belarus in 2022. The success of the model of attracting Russian technology “residents”, due in large part to the pivotal role played by a healthier incentive framework, has resulted in the Republic of Cyprus gaining in terms of GDP growth (5.1% for 2022 and 2, 5% for 2023, with these rates being a record within the eurozone), while the outlook for 2024 is even more optimistic.
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