{"id":31833,"date":"2021-06-29T07:34:41","date_gmt":"2021-06-29T03:34:41","guid":{"rendered":"http:\/\/www.mauritiustimes.com\/mt\/?p=31833"},"modified":"2021-06-29T07:34:41","modified_gmt":"2021-06-29T03:34:41","slug":"what-are-tax-havens","status":"publish","type":"post","link":"https:\/\/www.mauritiustimes.com\/mt\/what-are-tax-havens\/","title":{"rendered":"What are tax havens?"},"content":{"rendered":"

\"\"<\/h4>\n

<\/h4>\n

The G-7 wants to set a minimum global tax rate, which would make it harder for countries to act as tax havens<\/span><\/h4>\n

\"\"<\/span>Not all tax havens come with fancy resorts and sun-drenched beaches. Westend61\/Getty Images<\/a><\/span><\/span><\/p>\n

Close your eyes and imagine a tax haven. Does a Caribbean island come to mind? Sand, surf and thousands of post office boxes housing shell corporations?<\/span><\/p>\n

Some tax havens, like the Cayman Islands or Bermuda,\u00a0fit that description.\u00a0Many others do not.<\/span><\/p>\n

The key to a tax haven\u00a0is the taxes, not the tan. Any place that allows a taxpayer \u2013 whether an individual or a company \u2013 to get a lower tax bill overseas than at home is a tax haven. Thus, depending on the taxpayer\u2019s jurisdiction and business, many places turn out to be tax havens, even the United States.<\/span><\/p>\n

A recent agreement by the Group of Seven wealthy nations\u00a0seeks to eliminate corporate tax havens\u00a0by imposing a global 15% minimum corporate tax rate. However, as a\u00a0tax expert, I find the effort hard to take seriously.<\/span><\/p>\n

3 things that make a tax haven a tax heaven<\/strong><\/span><\/p>\n

Put simply,\u00a0tax havens\u00a0are jurisdictions that offer low or even no taxes in a bid to attract foreign investment.<\/span><\/p>\n

From a taxpayer\u2019s perspective, the first sign of a good tax haven is that it\u2019s completely legal. While there may be a perception that people who use tax havens to lower their tax bills are breaking the law, that\u2019s rarely the case.<\/span><\/p>\n

A taxpayer who is comfortable doing that\u00a0does not need a tax haven. Instead, a dishonest accountant and a less honest banker\u00a0are all that\u2019s required.<\/span><\/p>\n

The second sign of a good tax haven is transparency, political stability and rule of law. If it costs more in lawyers, accountants and bribes to avoid taxes overseas than it costs to pay the tax at home, there is no point to a tax haven.<\/span><\/p>\n

The third sign is privacy. For many years, Swiss banks provided the gold standard in that regard by\u00a0refusing to reveal anything about their depositors to anyone. That changed in 2008, when Swiss banks\u00a0agreed to report on their depositors\u00a0to 43 European countries.<\/span><\/p>\n

The\u00a0loss of the complete secrecy\u00a0that Switzerland once provided\u00a0has made shell companies\u00a0\u2013 and the countries that make them easy to set up \u2013 much more attractive.\u00a0Shell companies\u00a0are basically companies without active business operations or significant assets that are stacked one on top of the other to make it harder to trace ownership.<\/span><\/p>\n

In the eye of the beholder<\/strong><\/span><\/p>\n

Identifying a tax haven isn\u2019t as simple for the governments intent on controlling them as it is for the taxpayers who seek them out. This is mainly because governments and international organizations tend to think a tax haven is somewhere other than where they live.<\/span><\/p>\n

For example, the European Union\u00a0produces an annual list of tax havens\u00a0that contains no EU member countries, even though\u00a0many\u00a0other\u00a0lists\u00a0identify Ireland, Luxembourg and a host of other European countries as tax havens.<\/span><\/p>\n

And while\u00a0several groups have described\u00a0the United States as a tax haven \u2013\u00a0Forbes even calls it the best in the world\u00a0\u2013 the U.S. government\u00a0would never do so, even though it fits all the key criteria, such as\u00a0providing legal ways to avoid virtually all taxation\u00a0and\u00a0strong taxpayer privacy.<\/span><\/p>\n

The race to the bottom<\/strong><\/span><\/p>\n

This is why the\u00a0G-7 global corporate minimum 15% tax agreement\u00a0is unlikely to work.<\/span><\/p>\n

Of course, I applaud the effort. Without a minimum tax, countries are stuck in a never-ending\u00a0race to the bottom, whereby every time one government cuts its corporate tax rates, another soon follows with even lower rates.<\/span><\/p>\n

The problem is the G-7 has to get more than 130 other countries to go along with its minimum tax rate. Many countries, including Ireland and China,\u00a0seem unlikely to give up something\u00a0that has brought them so much economic advantage.<\/span><\/p>\n

Beverly Moran<\/strong><\/span>
\nProfessor Emerita of Law, <\/span>
\nVanderbilt University<\/span><\/p>\n

\n

* Published in print edition on 29 June 2021<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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