Why Tax Havens Should Be Legal

Why Tax Havens Should Be Legal

ICIJ investigations have focused on various tax havens, often depending on the origin and content of the documents. Panama Papers, for example, revealed how Mossack Fonseca, one of the world`s largest offshore law firms, sold thousands of shell companies in the British Virgin Islands to clients around the world. Mauritius Leaks investigated how companies used Mauritius to avoid taxes, while Paradise Papers revealed the secrets of Bermuda, the island where the law firm Appleby was founded. There is no shortage of demand for tax havens, but before you even think about looking for a tax haven, there are reasons to be cautious. Money. Tax havens generate significant revenues through fees paid by individuals and companies that set up and use letterbox companies. Tax havens also create work for lawyers, accountants and secretaries. Mauritius, for example, has said that 5,000 people will lose their jobs if the country ceases to be a tax haven. If we want to end extreme inequality, we must call on world leaders to end the era of tax havens and the secrecy that allows wealthy individuals and international corporations to avoid their fair share of taxes. Years after the Panama Papers, the International Consortium of Investigative Journalists continues to work to expose those who exploit tax havens – a long list that includes corrupt politicians, gangsters, drug dealers and other criminals who launder money and assets through offshore companies to deter law enforcement from sense.

The easy circulation of illicit money destabilizes governments and helps despots stay in power. Some of the most popular tax havens are countries that value secrecy. The Cayman Islands have some of the best secrecy laws, while other countries that also rank high in secrecy and have little to no taxes are the British Virgin Islands, Bermuda, Guam, Taiwan, and Jersey. And while several groups have described the U.S. as a tax haven — Forbes even calls it the best in the world — the U.S. government would never do that, even if it meets all major criteria, such as providing legal ways to avoid virtually all taxes and strong taxpayer privacy. A bearer share allows the person who owns the physical document (the “Share”) to be the rightful owner, which can make someone the owner of a shell company. The bearer share is not registered in a person`s name, which means that ownership is never registered.

Bearer shares have been banned in many countries because criminals have used the lack of property registration to hide crimes and property. From the taxpayer`s point of view, the first sign of a good tax haven is that it is completely legal. While there may be a perception that people who use tax havens to reduce their tax bills are breaking the law, this is rarely the case. As the name suggests, tax havens are essentially places that have a lower tax rate than the country where the account holder in question resides. “You can avoid taxes legally,” Lewellen said. “Tax law is very subjective. If you plan your business efficiently, you can legally pay less tax. “In addition to being able to dodge Uncle Sam when he comes to pick him up, another great advantage of a tax haven is that it protects your financial assets in case you are sued. A large number of people invest in offshore trusts to ensure that their assets are out of reach of judgment holders.

And that, ladies and gentlemen, is completely legal. Tax havens generally do not require external companies to have a substantial local presence. Such a concession could lead to interesting situations. For example, a 2008 report by the Government Accountability Office found that a building in the Cayman Islands housed 18,857 companies, mostly international. The leaks from Mauritius show that tax havens not only continue to exist, but thrive, despite the government`s promises to crack down on tax evasion. This briefing note lists five steps governments can take to combat tax avoidance and end the era of tax havens and the race to the bottom in corporate taxation. First and foremost, tax havens do not levy taxes or only minimal taxes. The tax structure varies from country to country, but all tax havens present themselves as a place where non-residents can escape high taxes by investing their assets or businesses in that jurisdiction. You see, there is a fine line between tax avoidance, which is legal, and tax evasion, which is not.

While individuals and companies can open offshore accounts in tax havens to avoid paying exorbitant amounts of tax in the United States, they must ensure that the assets are not traceable by the U.S. government. In other words, we must ensure that assets do not transit through the United States to go to the tax haven. Otherwise, it looks like you`re trying to rip off the IRS by pushing money out of the country. And this is tax evasion, which is undoubtedly illegal. A tax haven is typically an offshore country that offers little or no tax responsibility to foreign individuals and companies in a politically and economically static environment. Tax havens also share little or no financial information with foreign tax authorities. Tax havens generally do not require residency or commercial presence for individuals and businesses to benefit from their tax policies.

For example, the European Union compiles an annual list of tax havens that does not include EU member states, although many other lists identify Ireland, Luxembourg and a host of other European countries as tax havens.