You wouldn’t be alone. When it comes to stashing wealth like the swashbucklers of old, there are no end of modern financial pirates. Many wealthy Americans find ways to move their money around to avoid paying taxes; in fact, many can afford accountants and tax attorneys whose only jobs are to find ways of paying the legal minimum taxes required.
The problem, of course, is that avoiding taxes with these techniques sometimes exists in a legal gray area.
This tax evasion tactic is done with the use of offshore accounts, also known as “pirate banks,” and with good reason. These accounts help the wealthy shield their assets, avoid taxes and pass the cost on to the average citizen.
In honor of “Talk Like a Pirate Day,” we’ve taken a close look at these pirate banks — and broken down exactly what people have to do if they want to turn buccaneer for that extra buck.
Photo credit: DUCKofD3ATH
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 away from the prying eyes of the IRS and law enforcement.
According to a recent report from the Federation of State Public Interest Research Groups, every year as much as $150 billion is lost in tax revenue due to the use of offshore savings accounts. The same report found that 83 of the country’s 100 biggest publicly traded corporations dodge paying taxes through these means — a feat that averages out to a toll of $1,026 per taxpayer.
Pirate banks are hard to track and essentially establish a complicated series of firewalls around depositors’ money. Here’s a typical scenario: 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 when it comes to pirate banks. Libertarians and conservatives are generally quick to say that offshore savings accounts have purposes other than hiding money from the IRS. The question is — what are these purposes?
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 caught (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 for 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.
Photo credit: Good Eye Might