What Makes a “Secrecy Jurisdiction?”

offshore taxesAs attitudes and regulations around tax havens change, so does the language we use for addressing offshore tax holdings.


Due to the growing gap between wealth and poverty, more attention is paid to the mechanisms of inequality. Racial, geographic, political, and financial, the polarization of wealth across the globe is not a recipe for peace or stability. With the rise of rampant economic insecurity, the landscape is ripe for ripping to pieces fragile agreements between countries and civility between neighbors over who has how much of what.


Owing to the unease, and to greater data sophistication, the hidden places around the world where wealth is stored have garnered greater attention. Our tax attorneys work regularly with high-asset individuals and companies to plan and structure shelters that best protect investments and assets.  Tax havens are legal and form part of a smart strategy—except when they don’t.


Tax Havens vs. Security Jurisdictions

According to the Tax Justice Network (TJN), there is not a lot of difference between the terms tax haven and secrecy jurisdiction. A "tax haven," though lacking a universally accepted definition, is generally understood as a country or jurisdiction where multinational corporations and individuals can use legal loopholes to minimize their tax obligations in their home countries. This often results in these entities paying significantly less tax than they would under normal circumstances. However, the term "tax haven" doesn't solely encompass tax avoidance; it also encompasses evading criminal laws, bypassing transparency requirements, evading financial regulations, and more.


On the other hand, a "secrecy jurisdiction" is a term used to describe jurisdictions that specialize in helping individuals conceal their wealth and financial affairs from legal scrutiny, rather than primarily focusing on facilitating corporate tax avoidance. For example, while Ireland can be considered a corporate tax haven, it doesn't prioritize secrecy to the same extent as countries like Switzerland and Luxembourg, which not only offer corporate tax benefits but also provide secret banking services.


As we discussed earlier, based on a number of factors, the Tax Justice Network (TJN) ranks the United States second in its global list of secrecy jurisdictions. That said, the ranking is based on the influence that each jurisdiction has on the global financial and economic market. When influence is removed, the U.S. ranks 79th, and the top ten secrecy jurisdictions include:

  1. Vanuatu
  2. Antigua and Barbuda
  3. Bahamas
  4. Paraguay
  5. Brunei
  6. United Arab Emirates
  7. Maldives
  8. Bolivia
  9. Kenya
  10. Thailand


The TJN uses the following definition of a secrecy jurisdiction:


"A secrecy jurisdiction provides facilities that enable people or entities escape or undermine the laws, rules and regulations of other jurisdictions elsewhere, using secrecy as a prime tool."


TJN finds a tendency for secrecy jurisdictions to be “captured states,” which means regions where the offshore tax services are firewalled from local enforcement and regulation.  If the civil authorities are involved, it is usually only to process or certify incoming or outgoing transactional documents without significant verification or reporting. 


As could be expected, secrecy jurisdictions are areas that seek comfortable profit by offering shady services and shelters for global clients with a desire or need to remain anonymous. It is an age-old game of “where’s the money,” with a new name.


Speak with an experienced criminal tax defense attorney in Chicago


If you have an offshore account that you have not disclosed or are noticed up for an IRS audit, contact Robert J. Fedor, Esq., LLC for a confidential consultation.  From offices in Cleveland, Ohio, and Chicago, Illinois, we provide local, national, and international legal service to resolve tax issues and criminal tax matters.  Contact us or call 800.579.0997 today.


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