TAX HAVENS DEFINING Tax Havens • Def 1:A tax haven is a country or territory where certain taxes are levied at a low rate or not at all. • Def 2: Tax haven or fiscal paradise are terms used to refer to a jurisdiction which enables its foreign residents or companies to reduce their tax liabilities from their homelands. • Def 3: “What … identifies an area as a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance. (The Economist – description by Geoffrey Colin Powell ) • Def 4: US Government Accountability Office was unable to find a satisfactory definition of a tax haven but regarded the following characteristics as indicative of a tax haven: 1) nil or nominal taxes; 2) lack of effective exchange of tax information with foreign tax authorities; 3) lack of transparency in the operation of legislative, legal or administrative provisions; 4) no requirement for a substantive local presence; 5) self-promotion as an offshore financial center. TYPES of Tax Havens ) Universal Tax Haven is a country’s offer to entrepreneurs and investors with a wide range of financial and tax benefits. Such havens include colonial territories and also mini countries. In order to attract both entrepreneurs and investors they offer attractive political, economic, fiscal and judicial arrangements. 2) Special Tax Haven allows for special types of activities. A result of such an orientation a situation may be created in which high taxes exist concurrently with the low fiscal rate for particular economic branches or tax payers.
BENEFITS and ADVANTAGES of tax havens • profit transfer is a term used to describe profits achieved from selling goods and services at cost. As a result profits are higher in the country where corporation tax is lower. • rotary company is a company which can be bought or set up in one of the tax havens. Registration procedure is simple: the company’s owner does not have to reveal his personal data and therefore can use fictional names. Such companies, often called rotary, are used for providing services, purchase transactions or particular joint stock companies sales. offshore company allows for income to accumulate in a low tax jurisdiction. and is used mainly by corporations and rich people from the world of art. • treaty shopping helps tax payers avoid barriers imposed on them by a double tax agreement, which aim is to prevent people from seeking tax benefits in third countries. • Personal residency • Asset holding • Trading and other business activity • Financial intermediaries DISADVANTAGES of Tax Havens • Some people worry about the inaccessibility of their money as it is located in a far away offshore tax haven.
However, in this day and technological age this is not an issue. With the advent of online banking, it is now possible and, indeed, expected in many offshore financial centres that their clients will conduct their transactions online. • The main disadvantage for offshore companies located in tax havens is that many government and governmental agencies will not accept tenders from these types of offshore entities. These contracts would include defence, civil engineering, education, health authority and other such civil contracts.
EXAMPLES of tax havens • The U. S. National Bureau of Economic Research has suggested that roughly 15% of countries in the world are tax havens, that these countries tend to be small and affluent, and that better governed and regulated countries are more likely to become tax havens, and are more likely to be successful if they become tax havens. The following are designated as offshore financial centres by the IMF(International Monetary Fund ) or the FSF (Financial Stability Forum):
Andorra ; Anguilla ; Antigua ; Aruba ; Bahamas ; Bahrain ; Barbados ; Belize ; Bermuda ; British Virgin Islands ; Cayman Islands ; Cook Islands ; Costa Rica ; Cyprus ; Djibouti ; Dominica ; Ghana ; Grenada ; Guernsey ; Hong Kong ; Isle of Man ; Israel ; Japan ; Jersey ; Labuan, Malaysia ; Lebanon ; Liechtenstein ; London ; Luxembourg ; Macau ; Malta ; Marianas ; Marshall Islands ; Mauritius ; Micronesia ; Montserrat ; Nauru ; Netherlands Antilles ; New Zealand ; Niue ; Palau ; Panama ; Philippines ; Puerto Rico ; Samoa ; Seychelles ; Singapore ; St Kitts and Nevis ; St Lucia ; St Vincent and the Grenadines ; Switzerland ; Tahiti ; Tangier ; Thailand ; Turks and Caicos ; United States (particularly, Delaware, but some other states have offshore characteristics) ; Uruguay ; Vanuatu OECD and Tax Havens: List of Uncooperative Tax Havens In a report issued in 2000, the OECD (Organisation for Economic Co-operation and Development ) identified a number of jurisdictions as tax havens according to criteria it had established. • Between 2000 and April 2002, 31 jurisdictions made formal commitments to implement the OECD’s standards of transparency and exchange of information. • Seven jurisdictions (Andorra, The Principality of Liechtenstein, Liberia, The Principality of Monaco, The Republic of the Marshall Islands, The Republic of Nauru and The Republic of Vanuatu) did not make commitments to transparency and exchange of information at that time and were identified in April 2002 by the OECD’s Committee on Fiscal Affairs as uncooperative tax havens. All of these jurisdictions subsequently made commitments and were removed from the list of uncooperative tax havens. • Nauru and Vanuatu made their commitments in 2003 and Liberia and the Marshall Islands in 2007. • In May 2009, the Committee on Fiscal Affairs decided to remove all three remaining jurisdictions (Andorra, the Principality of Liechtenstein and the Principality of Monaco) from the list of uncooperative tax havens in the light of their commitments to implement the OECD standards of transparency and effective exchange of information and the timetable they set for the implementation. • As a result, no jurisdiction is currently listed as an uncooperative tax haven by the Committee on Fiscal Affairs. THE END THANK YOU FOR YOUR ATTENTION
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