Costco’s member magazine has this interesting discussion about offshore bank accounts in its July 2013 issue. (I also recommend this interview with noted author Tom Wolfe, which explores his life and writing.) They ask various members whether offshore bank accounts are ethical, should be legal, or should be taxed differently than American bank accounts. We know that many celebrities and politicians have offshore bank accounts – see this blog post for more details.
Ethical questions about offshore banking center on whether the account owner is paying a “fair” level of tax on the account. Complicating matters is that the IRS Code treats Americans’ investments abroad differently from other countries – the IRS collects tax on an American’s accounts or investments anywhere in the world, while many other countries only collect tax on accounts their citizens hold domestically (e.g. a Briton who holds an account in London and an account in New York would only pay British taxes on the London account).
Offshore banking may be unavoidable, even inevitable, for many professionals and business owners. If you have a factory or business colleagues or partners overseas or offices around the globe, you may have to use offshore banking accounts. And many companies, mutual funds, IRAs, and other investment vehicles have extensive overseas holdings, which can be a good thing to diversify accounts, invest in emerging markets, and collaborate with business partners around the world.
What do you think? Should offshore accounts and banking and tax havens be allowed or outlawed? Are they ethical? If so, when? Should they be taxed differently than American accounts or investments?
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(c) 2013, Stephen M. Johnson, Esq.