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Offshore private banking, so often written off as dead, is looking as if it is rising from the grave, helped by the EU's deeply flawed savings tax directive and a flight of money out of Europe, John Evans reports. Money is also being drawn to the expanding Asian offshore centres by opportunities in thriving economies
The European Union (EU) directive on savings which took effect at the beginning of July is expected to be quickly reinforced as private banks help investors circumvent the new rules through relocation of their funds to a variety of offshore tax havens or to financial vehicles specially designed to avoid the tax.
Most of the 'offshore' funds held by EU residents - estimated by Boston Consulting Group at $2.4 trillion by end-2003 - will easily escape the tax, bankers say privately. Thomas Schlueter, spokesman for the Association of German Banks, describes the new regime as a "fishnet with big holes".
Under the directive, interest income on deposits in previously tax-free offshore bank accounts will be levied at a rate of 15 percent a year, increasing to 35 percent in 2011.
The EU has now publicly admitted that the current system, based...