The wealthy are able to move their money around to avoid paying taxes; in fact, many can afford accountants and tax attorneys whose jobs are to find ways of paying the legal minimum taxes required. The problem is that avoiding taxes with these techniques sometimes exist in a legal grey area.Recently, the media investigated Mitt Romney’s offshore accounts. These offshore savings accounts are also known as “pirate banks” and with good reason. They help the wealthy shield their assets, avoiding taxes and passing the cost on to the average citizen.
What is a Pirate Bank?
A pirate bank is an offshore bank account updated for the digital age. It’s a virtual banking system that allows anyone with enough cash to hide as much as they want from the prying eyes of the IRS and law enforcement.
MSNBC reported that as much as $280 billion is being lost in tax revenue every year due to the use of offshore savings accounts. The United Nations point to a figure somewhere between $21 and $32 trillion — that’s trillion with a “T”. In fact, the world’s 50 largest banks are estimated to have about $12 trillion of these assets.
Pirate banks are hard to track and essentially establish a complicated series of firewalls around depositors’ money. This can have those tracking the accounts chasing their tails in a sense. One bank account is in the name of a corporation in another country, which is in turn owned by a trust in yet another country, then owned by several corporations in many different countries.
Avoiding Taxes with Banks
Of course, not everyone is of one mind on the question of pirate banks. Libertarians and conservatives are generally quick to say the offshore savings accounts have purposes other than hiding money from the IRS. The question is — what other purpose do they have?
It turns out that offshore accounts are the preferred investment instrument of drug kingpins, illegal arms dealers, money launderers and mafiosi. This isn’t just because they can hide basically any amount of money they want, without a realistic chance of being found out (many offshore accounts aren’t even numbered). It’s also because the secret, anonymous nature of the accounts makes them perfect for money laundering.
Opening an Offshore Bank Account of Your Own
Chances are pretty good that you have no reason to open an offshore account at a pirate bank. Still, if all this Lifestyles of the Rich and Possibly Criminal talk has you itching for new ways of avoiding taxes,opening an offshore bank account might be on the agenda.
Rules on opening an offshore bank account vary from one country to another, and one bank to another. The good news, for those who don’t have the money to jet set to the Cayman Islands to make a deposit, is that you rarely, if ever, have to show up in person to start your account.
Simply create a fake LLC and you’ve got that extra layer of protection you’re going to want when the IRS comes knocking.
DON’T MISS: 25 brilliant ways to hack IKEA furniture >
Business Insider Emails & Alerts
Site highlights each day to your inbox.