When we hear the term ‘offshore company’, our first reaction is one of scepticism. And, why wouldn’t it be? We have always heard of them in connection with fraud, money laundering or other such activities. This has given way to misunderstandings that all offshore companies partake in wrongful behaviour. But, this is not entirely true!
It is important to understand that an offshore company is incorporated in a foreign land to benefit from liberal tax regulations and the legal and financial structure of that country, which are not available in the company’s home country where it is registered. Sometimes, some companies misuse this leniency to hoard money or make unaccounted transactions.
Wondering how offshore companies are used and sometimes misused? Allow Nutty, the Squirrel, to explain the concept of offshore companies with a story. The story narrates how Nutty and his friends tried to save some acorns and get some benefits.
Nutty the squirrel lived in a big oak tree with his friends Quill and Murphy. They loved to collect acorns. Everyday, Nutty and his friends would go in search of acorns and add their find to their acorn pile.
An old monkey, Bonzo, owned the oak tree and pretty much ran things around there. Bonzo thought that it was only right that he monitor the acorn pile and take a certain amount as payment for all the services he was providing at the big oak.
No one was exactly pleased about this, but there was nothing they could do. Then, Nutty had an idea! What if he moved his acorn pile to his grandma’s house? Grandma lived on a hill and no one would ever look there, especially not Bonzo.
Grandma was her usual kind self and was more than happy to keep Nutty’s acorn pile for him. She didn’t take anything out and let Nutty collect and save all the acorns he wanted, even those that he collected on her hill. It didn’t end there – being Grandma, she also plied him with chocolate-coated acorns. Life was good!
Now, Nutty continued to pay Bonzo his share of acorns that he found near his home oak tree. The ones he found on the hill where grandma’s lived were all his as Grandma never asked him for any. Because of this, Nutty’s acorn pile grew very high.
Others started to find out about Nutty’s ‘alternate’ acorn storage and pretty soon everybody was storing their acorn pile at Grandma’s.
Nutty’s friend Quill also started saving acorns at grandma’s storage. Quill had plans to gift a big pile of acorns to her family in winter when food was sparse. It would have been impossible for her to collect a huge pile at home before winter, if she were to make all those payments to Bonzo!
Even guys like Bongo and Billy, who were actually stealing acorns, were hiding them at Grandma’s place. They were able to do this because Grandma never asked any questions.
Nutty’s other friend Murphy had also moved his acorn pile to grandma’s storage because he just felt it was safer. Once Murphy had gone acorn hunting and somebody had stolen from his acorn pile at home. He didn’t want to take any chances.
One day, Bonzo found out about ‘Grandma’s place’ and the game was up. Since Nutty was paying his dues to Bonzo, he was spared. But all others who were moving acorns from their home oak tree and lying to Bonzo had to pay everything they owed plus some more as punishment.
That was the end of the safe acorn haven. Storing your acorns at Grandma’s isn’t necessarily a bad thing, but not paying your dues and hiding stolen acorns certainly is!
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