Modern offshoring of business in the construct of national fiscal security

The paper investigates the economic content, nature and evolution of offshoring (formation of offshore system), identifies the main factors, mechanisms of functioning and features of structural changes in the offshore system, the determinants of development and formation of offshore centres, identifies the main directions and factors for the future of offshore centres/zones, territories (jurisdictions) in the world economy and investigates the volume and structure of capital outflow to offshore zones, jurisdictions; analyses the scheme of money laundering, identifies global trends in offshoring of financial services and investigates the progress and problems in financial services offshoring development in Ukraine. According to the authors, the advantages of the offshore zones at the microeconomic level turn out to be shortcomings that compromise the stability of the global economic space. The prerequisites for the emergence and evolution of offshore business at each stage of development are investigated. The authors believe that the main purpose of the emergence and development of offshore jurisdictions is discrepancy between the desire of the state to fully control the financial situation in its territory and the reluctance of citizens to be controlled and give up their profits in the form of taxes. The modern network of the offshore financial centres is generated due to the significant mobility of financial assets in general, as well as the fact that the growth rate of the global financial market significantly exceeds the growth rate of the real economy. The world trends of offshoring of financial services are analysed and the reasons for their rapid growth are revealed. The analysis of the global financial flows shows * This article was translated from its original in Ukrainian. 1 Lutsyshyn Zoriana Orestivna — Doctor of Economics, Professor, Deputy Director of the Scientific and Methodical Centre of Educational Process Organization at Kyiv National Economic University named after Vadym Hetman. Honoured Worker of Education of Ukraine (2015). Sphere of scientific interests: financial globalization, international monetary and financial relations, financial mathematics in international business, geo-economics, conjuncture of the international financial market (including technical and fundamental analysis), international economic security, in particular financial. E-mail: zor_lu@ukr.net. Frolova Tetiana Oleksandrivna — Doctor of Economics, Professor, Deputy Head at the Department of International Finance, Director at the Centre for Education Quality Management and Monitoring at Kyiv National Economic University named after Vadym Hetman. Sphere of scientific interests: financial globalization, corporate strategies of global investment business, finance of international corporations, international financial management, development and economic substantiation of international investment project decisions. E-mail: frol_7@ukr.net. Yuzhanina Nina Petrivna — Chairman of the Verkhovna Rada of Ukraine Committee on Tax and Customs Policy. Honoured Economist of Ukraine. Sphere of scientific interests: taxes, financial security, international financial and fiscal security, offshores, de-offshorisation. E-mail: yuzhanina.nina@rada.gov.ua Mazur Mykola Ihorovych — Master degree student at educational and professional training program «International Finance», major — «Finance, Banking and Insurance» at Kyiv National Economic University named after Vadym Hetman. Sphere of scientific interests: international monetary and financial relations, international trade, financial globalization, international economic security, incl. financial, geopolitics, geo-economics, offshore, de-offshore, international financial market conditions. E-mail: k.mazur1997@gmail.com. Perebyinis Dmytro Serhiiovych — Master degree student at educational and professional training program «International Finance», major — «Finance, Banking and Insurance» at Kyiv National Economic University named after Vadym Hetman. Sphere of scientific interests: financial globalization, financial mathematics in international business, international economic security, geopolitics, international political activity, public administration. E-mail: dmytro.perebyinis@gmail.com. IEP, No 30, (2019) pp. 70–111 © Zoriana Lutsyshyn, Tetiana Frolova, Nina Yuzhanina, Mykola Mazur, Dmytro Perebyinis, 2019 «All rights reserved» ISSN 1811-9832/2019/No 1 (30) ZORIANA LUTSYSHYN, TETIANA FROLOVA, NINA YUZHANINA, MYKOLA MAZUR, DMYTRO PEREBYINIS 71 MODERN OFFSHORING OF BUSINESS IN THE CONSTRUCT OF NATIONAL FISCAL SECURITY certain pattern of individual jurisdictions or entire zones being attracted to each other and creating a single complex global financial network. The evolution of global offshore wealth, its volume in tax havens are investigated. The place of Ukraine in the global offshore network is determined. The article focuses on the offshore zones where the Ukrainian capital is fleeing and contains comparison between tax havens, free zones and other varieties of the offshore jurisdictions. The «Ukrainian» and the most common international schemes of withdrawing capital to the offshore zones are analysed. One of the issues raised is deoffshorization policy and fiscal security of Ukraine. The need of ensuring financial (including fiscal) security is becoming even more important in view of the economy globalization processes that are accompanied by imbalanced competition, market monopolization by individual states, and affect the global competitive environment. Threats to fiscal security and structural components of fiscal policy are investigated. The possible and most appropriate measures to improve the level of financial security of Ukraine and its component – tax policy – are outlined; the main directions and principles of deoffshorization; measures to reduce the outflow of capital from Ukraine are recommended.