THESE days, it seems no two words can conjure up perceptions of malfeasance, tax dodging, money laundering or fraud better than "offshore companies".
Suitably piqued, many in Singapore combed the online searchable database released last week from the confidential documents dubbed the "Panama Papers", expecting familiar names to jump out on their screens.
Within the over 360,000 names of people and corporations behind secret offshore structures across 21 jurisdictions, a search by country yielded 5,869 offshore entities, 6,116 officers, 1,315 intermediaries and 5,728 addresses, some involving well known, and well-regarded, corporations in Singapore.
Think Boustead Singapore and Singapore banking stalwarts DBS Group, OCBC and UOB. Even GIC turned up in the list, although that was a result of an earlier leak three years ago.
All have since cleared the air on the matter.
Amid the public furore and suspicion that these revelations may have stirred up, one should take note of the dry but necessary disclaimer from the International Consortium of Investigative Journalists (ICIJ): that there are legitimate uses for offshore companies and trusts and that it does not intend to suggest wrongdoing.
To label as black hats all corporations or individuals that have set up offshore structures would be simplistic and unfair. It would also undermine the gargantuan work the ICIJ has done in crunching a leaked trove of over 11.5 million financial and legal records from Panamanian law firm Mossack Fonseca. After all, it is hoped that this will ultimately spark a global move towards better governance with the overarching goal of combating corruption.
Morgan Lewis Stamford lawyer Daniel Chia puts it succinctly: "It's more the politics of it all that has caught the imagination and is damaging to those associated with offshore structures."
Indeed, Singapore's Ministry of Finance and Monetary Authority of Singapore have said they will review the information and will not hesitate to take action if there is evidence of wrongdoing by any individual or entity. This due process needs to take its course before any conclusions are drawn.
But beyond the shadow play that offshore tax havens have come to be associated with, there are valid and legitimate factors that drive the appeal of such offshore structures.
Chief among them are the financial, tax or legal benefits. Tax avoidance is quite a world apart from tax evasion.
Singapore's low taxes - it has one of the lowest effective tax rates in the world - suggest that there are other (perfectly valid and legal) reasons offshore structures are sought by Singaporean corporations and individuals. These include the facilitation of acquisitions, easier disposal or liquidation of firms, wealth planning, asset protection, business risk mitigation and so forth.
Post-global financial crisis and with intense lobbying and rising awareness, there is now an enormous shift globally to crack down on tax havens and financial secrecy.
Most significantly, tax authorities are banding together to swap data to detect tax evasion or crimes carried out through cross-border holdings. Singapore, which is ranked fourth in the world on the 2015 financial secrecy index by an independent British lobby group - after Switzerland, Hong Kong and the US - plans to begin sharing financial account information by 2018 under the framework of the Common Reporting Standard (CRS), which has so far drawn commitment from over 100 countries, including Switzerland and Panama.
Indeed, the days of concealing identities through offshore structures aided by a huge network of professional service providers may be coming to an end. And with that, what will be left will be genuine reasons for creating offshore firms.
Till then, one should be careful about tarring all offshore account holders with the same brush.
This article was first published on May 19, 2016.
Get The Business Times for more stories.