Offshore Financial Centers

Table of contents

Introduction………………………………………………..…………………...………1

1. Global financial market………………………………..…………..…….................3

1. Global financial market and international flows of finance…………………...3
2. Roles of financial centers in the global financial market…….……………..11

2. Low tax jurisdictions and offshore financial centers……….……………………....21

2.1.The rise of offshore financial centers ……………………………………….21

2.2.Offshore zones as the instrument for attracting and concentrating global  capital……………………………………………………………………………...25

2.3. The role of offshore zones in the global financial System.....................................................................................................................34

3. Advantages and disadvantages of offshore financial centers……………………...39

3.1.Advantages of offshore financial sector……………………………………...39

3.2.Disadvantages to the real sector………………………………………………45

3.3.Outlook for offshore financial centers ………………………………….......51

Conclusions……………………………………….……………...…………………...58

References…………………………..………………………...………………............61

TABLE INDEX …………………..……………………………..……………………66

TABLE OF FIGURES………………………….…………………………………….66

Introduction

The focus of the research is on global offshore financial centers, which exist within the current structure of the global financial market. The research explores various issues and problems related to the organizational and legal forms of international offshore business, the specialization of offshore zones and territories, and how offshore companies are practically applied. Currently, there is a growing need to address the issues arising from the internationalization and globalization of the world economy. In the past few decades, a new independent supranational financial segment has emerged - the world financial market - which combines the markets of individual countries in unique ways. This phenomenon is a fundamental sign of the globalization of the world economy and plays a significant role in the movement of financial flows worldwide. The world financial market creates a tight network of permanent and stable ties between participants, and supply and demand are interdependent on a global scale.

The emergence of offshore financial centers is closely related to the globalization of the world economy and the evolutionary development of the world financial market. Globalization relies heavily on the financial resources of the world financial market, and the market itself evolves due to globalization trends. The globalization process has made the formation of financial centers relatively independent of the economic development level of the country in which they are located, the state of the national credit and banking system, and the position of the local currency. However, a more critical factor is the absence of state control over financial transactions, liberal currency legislation, low taxes, and operating expenses. Overall, a growing portion of the world financial market's international financial operations occur between financial centers, including offshore ones.

Over the course of recent decades, offshore financial centers have grown to massive proportions as a sector within the global financial market. The offshore industry has now become a distinct part of the global economy. Its primary purpose is to reduce tax obligations both in the country of operation and in the nation where the business is permanently located. This objective is achieved by lawfully deducting some or all income, turnover, and property from the tax jurisdiction of high-tax nations. In recent years, the growth rates of turnover implemented through offshore zones have exceeded the growth rates of general turnover in foreign economic activity.

During the research, a variety of economic and statistical analysis methods were utilized along with various concepts from schools of economics and finance, as well as scientific methods such as analysis, induction, deduction, and formalization. The study also applied historical, dialectical, normative legal base, and system-structural methods of research. In order to fully understand the topic, quantitative and qualitative analyses of offshore importance for the world economy were performed. This includes defining offshore, assessing the scope of their activities, and examining the role of offshore financial centers in the global financial market. The main focus of the research identifies the offshore mechanism and analyzes both its positive and negative aspects. The reasons why companies and private individuals utilize this financial mechanism and support the offshore business are also extensively examined.

To analyze the emergence of world offshore financial centers and offshore business, the research will evaluate their organizational and legal structures and the extent of their international activities. Additionally, the study will assess the various offshore zones and territories and their unique specializations. Understanding the use of offshore financial centers in international economic relations is important for companies engaged in foreign economic activity, as well as for macroeconomic tax planning and investment climate improvement. However, many states have implemented stricter budget policies and launched international campaigns to combat money laundering and tax evasion, leading to increased financial flow control and the introduction of measures to disclose tax information. As a result, the future of offshore zones is uncertain.

To write this work, I utilized legislative acts, scientific research on offshore zones, economic and financial books, reports from reputable organizations such as FATF and OECD, and various online resources as the foundation for my information.

1. Global financial market

1. Global financial market and international flows of finance

International financial flows can be characterized as the transfer of capital between different nations, facilitating the movement of goods, services, and currencies. These flows are facilitated by banks, specialized financial institutions, and stock exchanges. Essentially, international financial flows represent a series of financial transactions involving monetary capital. These transactions are carried out through various channels, including: