Inoffshore literature, tax haven definitions reflect different points ofview ontax havens. Above, the first definition oftax haven gives the primary position ofinstitutions such asthe Organisation ofEconomic Co-operation and Development (OECD), the Financial Action Task Force (FATF), the U.S. Government Accountability Office and Tax Justice Network. The OECDis anorganisation based inParis and has been actively involved inEuropean concerns such asregional, social, political and economic integration within Europe. Increasing Europe”s wealth and political stability, while countering the effects oftax havens and international tax competition onthe EU”s economy have always formed amajor part ofthe OECD”s international ventures.
Likewise, the FATF isactively engaged incombating money laundering and terrorist financing throughout the world. The FATF”s attention has been focused onoffshore financial centres and tax havens which are identified asone ofthe main channels for the movement offunds derived from activities such asillegal substance trafficking, terrorism, organised crime and contraband trade. The Financial Stability Forum (FSF), which was convened in1999 collaborates both with the OECD and FATF inpromoting international financial stability, information exchange and international co-operation inmatters involving financial surveillance and supervision such asdue diligence, risk management, internal controls, disclosure practices, auditing standards and securities inconjunction with the International Organisation ofSecurities Commissions (IOSCO).
Meanwhile, the U.S. Accountability Office isthe investigative body responsible for auditing and evaluating the United States Congress. Infulfilling its functions, the Accountability Office has paid attention totax havens and the offshore activities ofU.S residents and companies. Like theEU, the U.S. authorities view tax havens asmotivators oftax evasion and channels for criminal finance. One ofthe most recent organizations formed inthe fight against tax havens isthe Tax Justice Network, which was registered inNovember 2006 and consists ofseveral organizations and agencies from countries including Germany, Ghana, Mozambique, Switzerland and the United States.
Tax havens include countries such asAndorra, Antigua and Barbuda, the Bahamas, Cayman Islands, British Virgin Islands, Monaco, Isle ofMan, Guernsey, Samoa, Bermuda, Cyprus, Gibraltar, Dominica, Belize, Panama and Vanuatu. Other offshore centers such asBarbados are considered low tax jurisdictions and not tax havens due tothe taxes that are levied onthe profits ofoffshore companies registered inBarbados, although legislative provisions for corporate discretion and privacy are established and regular offshore financial operations are conducted.
Many authors ontax havens frequently tend toclassify tax havens asformer British colonies that promote unfair tax practices inorder todevelop their economies through the provision ofoffshore companies and bank accounts. Inthis regard, since the main income from offshore activities isgenerated through annual fees that offshore entities pay tothe local governments oftax havens, harmful tax competition isundertaken byoffshore tax havens asameans offinancial assistance. Arecent report published bythe Tax Justice Network, “How tax havens cause poverty and undermine welfare states”, explains that “their (tax havens) role became politically visible for the first time with concerns over terrorist finance after September 11th, which led tothe founding ofaFinancial Action Task Force within the IMF. Additionally their role isregarded asbeing central incorruption, drug trafficking and illegal capital flight”.
This statement gives the TJN”s position ontax havens. Italso complements the OECD”s tax haven perspective; but underlines the reasons presented indefense ofcountries and territories that were labeled astax havens and against which sanctions were placed bythe FATF subsequent tothe OECD”s Report onharmful tax competition. However, the TJN tries tosympathize with tax havens. Anexample ofthis issummarized inastatement bythe TJN, inwhich itrecognises the heavy dependence ofsmall islands onhosting harmful tax practices and the possibility oflosing investment and economic growth form efforts totackle the abuses. The TJN also indicates that the biggest culprits are financial centres such asBritain, Switzerland and the United States.
Over the years, tax haven definitions emerged toexplain and describe the principle roles and characteristics of “tax havens”. However, ascatchy, upbeat and attractive the expression “tax haven” may sound, many proponents ofthe tax haven industry tend tofavor the term “offshore jurisdiction”, which isneutral interms ofreferring tothe “offshore” nature ofservices (offshore financial services) provided byacountry, rather than “tax haven”, which makes direct reference to “tax” and hence can bepejorative with regards toharmful international tax competition and the underground economy. Moreover, although the terms “tax haven” and “offshore jurisdiction” are often synonymously used inthe marketing and promotion ofoffshore financial centres, the grounds onwhich tax haven definitions were originally formulated bythe OECD inreferring primarily toharmful international tax competition and tax evasion caused several countries topromote themselves as “low tax jurisdictions” rather than tax havens.
Despite all ofthis, however, asfinancial services become more advanced and diverse asaresult oftrade liberalisation and technology, the concept oftax haven shifted from the traditional emphasis oftax avoidance and has expanded toencompass abroad spectrum offinancial services, transactions and judicial entities such asoffshore companies, offshore foundations, offshore LLC’s, offshore banks and investment practices (mutual funds, securities trading, holdings, hedge funds, etc).
This also includes tailored and specialized financial and legal services such asrisk management, asset management, asset protection, tax planning, succession and estate planning, insurance and establishing investment and trade platforms through offshore banks and agencies. The role oftax havens thus extends far beyond just taxes.
Tax havens allow for doing business discreetly, undertaking new ventures and achieving privacy and confidentiality when handling family and business matters. The modern tax haven allows for the simplest and most complex ofpeople and businesses toprotect their wealth, plan their future and save for rainy days.
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Tax Haven Countries – Offshore Tax Havens of the World …