Tax Haven

Have you ever daydream about going to a Tax Free Country?

Meaning

A tax haven is a state, country or territory where certain taxes are levied at a low rate or not at all.

According to Geoffrey Colin Powell, “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.”

According to Sinclair Davidson, “Any country which modifies its tax laws to attract foreign capital could be considered a tax haven.”

According to OECD, the tax havens have three characteristics:

• Nil Tax or only Nominal taxes
• Protection of personal financial information
• Lack of Transparency

There are many major corporations in tax havens, such as Apple, Microsoft, Bank of America, Cisco and many more.

Consequences

In 2007 the OECD estimated that capital held offshore* amounted to between US $5 trillion and US $7 trillion, making up approximately 6-8% of total global investments under management.

*Capital held offshore means keeping of money in a jurisdiction other than one’s country of residence. They are generally adopted by investors as a mean of reducing the taxes.

In 2012 the Tax Justice Network estimated that capital held offshore amounted to between US $21 trillion and US $32 trillion, making up approximately 24-32% of total global investments under management.

The Tax Justice Network also claimed that Global Tax Revenues lost due to tax havens is between US $190 Billion and US $225 Billion per year.

List of Top 10 Tax Havens Countries [Source: TheRichest.Com]

1. Switzerland

The Country implements an extremely high level of secrecy when it comes to the financial assets of its clients.

2. Cayman Islands

No Personal Income Taxes, Capital Gains, Corporate Taxes, and Payroll Taxes. The Country does not even withhold tax on foreign clients.

3. Luxembourg

In the Tax Justice Network Report, the country got a Financial Secrecy Index Value of 1,621.

4. Hong Kong

No Sales Taxes, Capital Gains, and Payroll Taxes.

5. USA

No Corporate Taxes, Inventory Taxes, Unitary Taxes, Gift Taxes, Estate Taxes, Personal Income Taxes, Franchise Taxes, and Inheritance Taxes.

6. Singapore

Almost anyone can open such a bank account without experiencing any hassle.

7. Jersey

Houses a Great Number of Banks offering Offshore Accounts to foreign Clients.

8. Japan

Many of the Offshore Banks in Japan do not subject the deposits made by their clients to interest rate standards and regulations.

9. Germany

Easy for people to open Offshore Bank Accounts. But the country is now trying to control this problem.

10. Bahrain

There are plenty of Financial Institutions offering offshore banking services and bank accounts in the island, but its client financial secrecy is the lowest of all the other nations included in this list.

Roughly 15% of Countries are tax havens; these countries tend to be small and affluent.