Tax Haven
A tax haven is a country or territory
where certain taxes are levied at a low rate or not at all.
Individuals and/or corporate entities can find it attractive to move
themselves to areas with reduced or nil taxation levels. This creates a
situation of tax competition among governments. Different jurisdictions
tend to be havens for different types of taxes, and for different
categories of people and/or companies.
There are several definitions of tax havens. The Economist has
tentatively adopted the description by Geoffrey Colin Powell (former
economic adviser to Jersey): "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 points out that this
definition would still exclude a number of jurisdictions traditionally
thought of as tax havens. Similarly, others have suggested that any
country which modifies its tax laws to attract foreign capital could be
considered a tax haven. According to other definitions, the central
feature of a haven is that its laws and other measures can be used to
evade or avoid the tax laws or regulations of other jurisdictions.
In its December 2008 report on the use of tax havens by American
corporations, the U.S. 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; and
5.self-promotion as an offshore financial center.
Related words wiki:
Tax
Haven
Offshore financial centre
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