Offshore investment has become a lucrative savings venture for wealthy individuals. More than half of the world's assets are held in offshore jurisdictions to take advantage of tax breaks and better return on investments.
In its recent wealth management report, Boston Consulting Group revealed that the total offshore wealth of the world grew to $8.9 trillion in 2013, about 10.4 percent more than the figures of 2012.
The report also revealed top places in the world where offshore wealth was kept. See the top five below:
1. Switzerland - $2.3 trillion of total offshore wealth
2. Hong Kong and Singapore - $1.4 trillion of total offshore wealth
3. Caribbean and Panama - $1.2 trillion of total offshore wealth
4. Channel Islands and Dublin - $1.1 trillion of total offshore wealth
5. United Kingdom - $1 trillion of total offshore wealth
The report also emphasized that by 2018, Hong Kong and Singapore would replace Switzerland as the top offshore wealth booking destination given the pace of wealth creation in the regions.
"Assets booked in Singapore and Hong Kong are projected to grow at CAGRs of 10.2 percent and 11.3 percent, respectively, through 2018, and are expected to account collectively for 20 percent of global offshore assets at that point in time," the report stated.
According to MarketWatch, the 2012 BCG report stated that offshore wealth booking "remains viable" among High Net Worth individuals as they "continue to seek diversification, along with broad private-banking capabilities, specialized expertise, high-quality service, discretion, and domiciles with relatively high levels of economic and political stability."
The previous year's report also noted that "offshore wealth management as an industry remains under intense and increasing pressure, particularly from tax authorities in the U.S. and Western Europe."
Indeed, these offshore investment options have become huge tax evasion havens. Wealthy individuals hide their wealth in tools like transferable shares, legal personality or Limited Liability companies.
Tax evasion costs the global government more than $3.1 trillion in annual revenue. In an earlier report, The Guardian explained how tax evasion can cost the country its Gross Domestic Product growth in percentage. The higher the tax rate, the bigger the black market gets in a region.
The publication found that Europe's tax rate was about 39 percent of the country's GDP, a long way from the 28 percent global average.
