The offshore world: Past, present and future?

The reputation of many jurisdictions, or so called ‘tax havens’, has been attacked by other nations, most which fail to apply the same policies that they advocate for others. 

Over the last two decades, International Financial Centers (IFCs) have made vast changes to their laws and their enforcement, aiming to prevent their systems from being used to hide profits from financial crime.

Actually, in many IFCs, opening a bank account is considerably more burdensome than in any of the OECD member countries, due to stricter regulations, focused primarily to prevent money laundering. Nowadays, “hiding” behind a U.S. Limited Liability Company, is much easier than doing so in any of the IFCs.

Professor J.C Sharman, from the Cornell University Press, made an interesting comparison in one of his studies between the Panamanian Corporation (“Sociedad Anónima”) and the Panamanian regulations governing such vehicles, with vehicles incorporated under the major OECD members and concluded that “Panamanian Corporate Service Providers are far more compliant with international standards than their counterparts in the United States, the world’s most important financial center and the largest incorporation jurisdiction.

A review of the proposed U.S. Incorporation Transparency and Law Enforcement Assistance Act supports the conclusion that the untraceable shell companies are more common in the U.S. than Panama. In sum, an objective consideration of Panama’s legal and material compliance with beneficial ownership standards indicates that this compliance is superior to that of the U.K. and U.S., notwithstanding Panama’s bearer share companies.”

In August 2010, Eduardo Morgan Jr., in his article “Panama, an example to the World,” wrote in reference to Panama´s growth: “This source of enormous wealth is in the sight of the main partners of the OECD Cartel, with the intent of eliminating Panama´s corporations against their corporations and LLCs.”

In 1998, with the OECD’s Harmful Tax Competition Report, a clear and organized launch of attacks were initiated by this group of technocrats who self-proclaim themselves as the worldwide policy makers for their member states and cynically also for non-member states, threatening them with harsh measures if they do not abide by their rules. These rules were strongly imposed especially on non-member states, differently to the “carrot strategy” applied to member states. A blame and shame list of 35 countries was produced, and the jurisdiction on the black list were deprecatorily called “tax havens.”

Subsequently, other reports and annexed shame lists were publicized by the OECD with the same objective towards listed jurisdictions. In 2009, a “multi-colored list” came out, classifying jurisdictions as per their “behavior” vis-à-vis the OECD’s guidelines. Furthermore, the OECD also decided that the IFCs must conclude at least 12 tax information exchange agreements or double taxation agreements with other countries, including the OECD’s standard exchange of information clause. Again, if the IFCs would not comply with said terms, they would be considered as “non-cooperative jurisdictions” and, quite certainly, further sanctions would be imposed on them.

Although many of the discriminated jurisdictions complied with the unexplained number of 12 treaties, the OECD proceeded to continue with new pressures under the so called “peer reviews,” whereby tests were to be applied to the corresponding internal regulations of the IFCs, again, based solely on the OECD’s criteria.

Along the whole process of OECD vs. IFCs, a “Global Forum” was created, where 91 members took seat in order to participate more in what the OECD already was basically imposing. However, in practice, the IFCs were not left with much space to maneuver.

We all remember by the end of the nineties a phrase, usually used by the IFCs, in response to the starting OECD pressures, which was: “Level Playing Field.” For some reason, it has lost some of its impetus and thus it is not heard much anymore. In my opinion, this concept gathers the basic principles under which we all should act; under the same rules and total fairness.

Unfortunately, we do not live in a world where the concept of justice and fairness that applies is the one found in the dictionary, but rather the one that results out of geopolitics. In an ideal world, you should follow what you preach. If the OECD would have promoted first a level playing field within its organization of elite countries and, once achieved, would then have recommended the same to non-members, the story would have been another one.

Yet, they continued to count the largest “tax haven” in the world as one of their members: the U.S.A. A milestone towards achieving a level playing field would be that the country with the highest amount of assets from non-residents would start exchanging information on those accounts and start to keep up with the minimum due diligence standards and corporate management in its LLC regimes.

It is about time to stand up and start asking for some changes within the OECD, towards the self-application of the measures pursued against non-members. Additionally, it is also about time to be recognized as bona fide parties in all respects. We should promote measures against the continuous discrimination of IFCs’ corporations, the application of unjustified withholding taxes and other harmful financial actions that are based solely on the basis of discrimination. The IFCs should also look out for economic actions to be applied to those countries discriminating against them, as retaliation and file claims before the World Trade Organization for unfair treatment.

Parallel to that, the IFCs should always remain open towards diversifying their financial services as part of a necessary plan to cope up with a changing world. Defending the past and the present, it is imperative to build the future on solid grounds and for that, we should be ready, if necessary, to make profound changes.


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Gabriel Tribaldos

Mr. Tribaldos specializes in tax and estate planning, as well as corporate services.  From 2005 to 2008, Mr. Tribaldos was the Head of the Trust Department, the group´s office in Zurich, Switzerland, a position he reached after serving as Legal Counsel of this company between 2004 and 2005.

Gabriel Tribaldos
Lawyer, LLM, TE
Morgan & Morgan
Rep. of Panama

T: +1 (507) 265 7777
E: [email protected]




Morgan and Morgan

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