Tax haven

taxes, municipal real estate taxes, ...) can not be avoided

or reduced, as these are levied by the country the real
estate you own is in, and hence need to be paid just the
same as any other resident of that country. The only thing
that can be done is picking a country that has the smallest
rates on these taxes (or even no such taxes at all) before
you buy any real estate.[3]
Individuals or corporate entities can nd it attractive to
establish shell subsidiaries or move themselves to areas
with reduced or nil taxation levels relative to typical
international taxation. This creates a situation of tax competition among governments. Dierent jurisdictions tend
to be havens for dierent types of taxes, and for dierent categories of people or companies.[4] States that are
sovereign or self-governing under international law have
theoretically unlimited powers to enact tax laws aecting
their territories, unless limited by previous international
treaties. There are several denitions of tax havens. The
Economist has tentatively adopted the description by Georey Colin Powell (former economic adviser to Jersey):
What ... identies 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 denition would still exclude a number
of jurisdictions traditionally thought of as tax havens.[5]
Similarly, others have suggested that any country which
modies its tax laws to attract foreign capital could be
considered a tax haven.[6]

A global map of tax havens, using the list in the proposed 2007
"Stop Tax Haven Abuse Act", US Congress.

The ratio of German assets in tax havens in relation to the total

German GDP.[1] The Big 7 shown are Hong Kong, Ireland,
Lebanon, Liberia, Panama, Singapore, and Switzerland.

A tax haven is a state, country, or territory where, on a

national level, certain taxes are levied at a very low rate
or not at all.[2]
It also refers to countries which have a system of nancial
secrecy in place. It should be noted that, nancial secrecy
can be used by foreign individuals to circumvent certain taxes (such as inheritance tax on money, and income
tax of the interest on the money you have on your bank
account). Because the requirement of paying taxes on
these funds cannot be transmitted, as the funds themselves are invisible to the country the individual is from,
such taxes can be avoided. Earnings from income generated from real estate (i.e. by renting houses you own
abroad) can also be eliminated this way. Despite this
occasional abuse, the countries themselves stand in their
right to have a system of nancial secrecy in place, and
it is up to the individual to ll in the required paperwork
(i.e. double taxation forms). If the proper double taxation forms are lled in, and taxes are paid, companies
can avoid much taxes, even if they hence pay their taxes
legally. This is because the tax rates on income can be
much lower than the tax rate in their own country. It
should be noted that some taxes (such as inheritance tax
on the real estate, VAT on the initial purchase price of the
real estate -aka Transfer tax-, annual immovable property

According to other denitions,[7] 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,[8] the U.S.
Government Accountability Oce was unable to nd a
satisfactory denition of a tax haven but regarded the following characteristics as indicative of it: nil or nominal
taxes; lack of eective exchange of tax information with
foreign tax authorities; lack of transparency in the operation of legislative, legal or administrative provisions;
no requirement for a substantive local presence; and selfpromotion as an oshore nancial center.
A 2012 report from the Tax Justice Network estimated
that between USD $21 trillion and $32 trillion is sheltered from taxes in unreported tax havens worldwide.[9]
If such wealth earns 3% annually and such capital gains
were taxed at 30%, it would generate between $190 billion and $280 billion in tax revenues, more than any other
tax shelter.[10] If such hidden oshore assets are consid1

1 DEFINITIONS

ered, many countries with governments nominally in debt

are shown to be net creditor nations.[11] However, despite
being widely quoted, the methodology used in the calculations has been questioned,[12] and the tax policy director of the Chartered Institute of Taxation also expressed
skepticism over the accuracy of the gures.[13] Another
recent study estimated the amount of global oshore
wealth at the smaller - but still sizeable - gure of US$7.6
trillion. This estimate included nancial assets only: My
method probably delivers a lower bound, in part because
it only captures nancial wealth and disregards real assets.
After all, high-net-worth individuals can stash works of
art, jewelry, and gold in 'freeports,' warehouses that serve
as repositories for valuablesGeneva, Luxembourg, and
Singapore all have them. High-net-worth individuals also
own real estate in foreign countries.[14] A study of 60
large US companies found that they deposited $166 billion in oshore accounts during 2012, sheltering over
40% of their prots from U.S. taxes.[15]

Denitions

have low or zero taxes and ring fencing for certain favored
groups). Its later work has therefore focused on the single
aspect of information exchange. This is generally thought
to be an inadequate denition of a tax haven, but is politically expedient, because it includes the small tax havens
(with little power in the international political arena) but
exempts the powerful countries with tax haven aspects
such as the USA and UK.[17]
In deciding whether or not a jurisdiction is a tax haven,
the rst factor to look at is whether there are no or nominal
taxes. If this is the case, the other two factors whether or
not there is an exchange of information and transparency
must be analyzed. Having no or nominal taxes is not
sucient, by itself, to characterize a jurisdiction as a tax
haven. The OECD recognizes that every jurisdiction has
a right to determine whether to impose direct taxes and,
if so, to determine the appropriate tax rate.

1.1 Classication

Corporations, in order to achieve eective tax avoidance,

The Organisation for Economic Co-operation and Devel- use multiple types of tax havens. Three types of tax haven
opment (OECD) identies three key factors in consider- types form a Dutch Sandwich:[18]
ing whether a jurisdiction is a tax haven:[16]
1. Nil or only nominal taxes. Tax havens impose nil or
only nominal taxes (generally or in special circumstances) and oer themselves, or are perceived to offer themselves, as a place to be used by non-residents
to escape high taxes in their country of residence.

1. Primary tax havens: the location where nancial

capital winds up. Subsidiary shell companies there
have obtained rights to collect prots from corporate intellectual property (IP) by transfers from their
parent.

2. Protection of personal nancial information. Tax

havens typically have laws or administrative practices under which businesses and individuals can
benet from strict rules and other protections against
scrutiny by foreign tax authorities. This prevents the
transmittance of information about taxpayers who
are beneting from the low tax jurisdiction.

2. Semi-tax havens: locations that produce goods for

sale primarily outside of their territorial boundaries and have exible regulations to encourage job
growth, such as free trade zones, territorial-only taxation, and similar inducements.

3. Lack of transparency. A lack of transparency in

3. Conduit tax havens: locations where income from
the operation of the legislative, legal or administrasales, primarily made outside their boundaries, is
tive provisions is another factor used to identify tax
collected, and then distributed. Semi-tax havens
havens. The OECD is concerned that laws should
are reimbursed for actual product costs, perhaps
be applied openly and consistently, and that inforwith a commodity markup. The remaining prots
mation needed by foreign tax authorities to deterare transferred to the primary tax haven, because it
mine a taxpayers situation is available. Lack of
holds rights to prots due to the corporate IP. By
transparency in one country can make it dicult,
matching outow to income they do not retain capif not impossible, for other tax authorities to apply
ital and their role, while crucial, remains invisible.
their laws eectively. Secret rulings, negotiated tax
rates, or other practices that fail to apply the law
openly and consistently are examples of a lack of
transparency. Limited regulatory supervision or a Large multinational corporations may have dozen of such
governments lack of legal access to nancial records tax haven entities interacting with each other. Each haven
can claim that it does not satisfy denitions that attempt
are contributing factors.
to place all tax havens into a single class.[19] Even inHowever, the OECD found that its denition caught cer- creased transparency does not change the eectiveness
tain aspects of its members tax systems (some countries of corporate tax avoidance.

2.2

Lost tax revenue

Extent

2.1

Capital held oshore

While incomplete, and with the limitations discussed

below, the available statistics nonetheless indicate that
oshore banking is a very sizable activity. The OECD estimated in 2007 that capital held oshore amounted to between $5 trillion and $7 trillion, making up approximately
68% of total global investments under management.[21]
A more recent study by Gabrial Zucman of the London
School of Economics estimated the amount of global
cross-border wealth held in tax havens (including the
Netherlands, Ireland and Luxembourg as tax havens for
this purpose) at US$7.6 trillion, of which US$2.46 trillion was held in Switzerland alone.[14] The Tax Justice
Network (an anti-tax haven pressure group) estimated
in 2012 that capital held oshore amounted to between
$21 trillion and $32 trillion (between 24-32% of total global investments),[22][23][24] although those estimates
have been challenged.[12]
In 2000, the International Monetary Fund calculated
based on Bank for International Settlements data that
for selected oshore nancial centres, on-balance sheet
cross-border assets held in oshore nancial centres
reached a level of $4.6 trillion at the end of June 1999
(about 50 percent of total cross-border assets). Of that
$4.6 trillion, $0.9 trillion was held in the Caribbean,
$1 trillion in Asia, and most of the remaining $2.7 trillion accounted for by the major International Finance
Centres (IFCs), namely London, the U.S. IBFs, and the
Japanese oshore market.[25] The U.S. Department of
Treasury estimated that in 2011 the Caribbean Banking
Centers, which include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama, held almost $2
trillion dollars in United States debt.[26] Of this, approximately US$1.4 trillion is estimated to be held in the Cayman Islands alone.[21]
The Wall Street Journal in a study of 60 large U.S. companies found that they deposited $166 billion in oshore
accounts in 2012, sheltering over 40% of their prots
from U.S. taxes.[15] Similarly, Desai, Foley and Hines in
the Journal of Public Economics found that: in 1999,
59% of U.S. rms with signicant foreign operations
had aliates in tax haven countries, although they did
not dene signicant for this purpose.[27] In 2009, the
Government Accountability Oce (GAO) reported that
83 of the 100 largest U.S. publicly traded corporations
and 63 of the 100 largest contractors for the U.S. federal government were maintaining subsidiaries in countries generally considered havens for avoiding taxes. The
GAO did not review the companies transactions to independently verify that the subsidiaries helped the companies reduce their tax burden, but said only that historically
the purpose of such subsidiaries is to cut tax costs.[28]

3
McKinsey & Company, in his report for the Tax Justice
Network gives an indication of the amount of money that
is sheltered by wealthy individuals in tax havens. The report estimated conservatively that a fortune of $21 trillion is stashed away in o-shore accounts with $9.8 trillion alone by the top tierless than 100,000 people
who each own nancial assets of $30 million or more.
The reports author indicated that this hidden money results in a huge lost tax revenuea black hole in the
economyand many countries would become creditors
instead of being debtors if the money of their tax evaders
would be taxed.[22][23][24]

2.2 Lost tax revenue

The Tax Justice Network estimated that global tax revenue lost in 2012 to tax havens is between USD $190
billion and $255 billion per year, assuming a 3% capital
gains rate, a 30% capital gains tax rate, and $21 trillion to
$32 trillion hidden in tax havens worldwide.[10] The Zucman study uses dierent methodology, and estimates lost
global tax revenue at US$190 billion.[14] If such hidden
oshore assets are considered, many countries with governments nominally in debt are shown to be net creditor
nations.[11]
However, the tax policy director of the Chartered Institute of Taxation expressed skepticism over the accuracy
of the gures.[13] If true, those sums would amount to
approximately 5 to 8 times the total amount of currency
presently in circulation in the world. Daniel J. Mitchell of
the Cato Institute says that the report also assumes, when
considering notional lost tax revenue, that 100% money
deposited oshore is evading payment of tax.[29]
In October 2009, research commissioned from Deloitte
for the Foot Review of British Oshore Financial Centres (London is a tax haven for much of Europe, Asia,
and South America, it should be noted) said that much
less tax had been lost to tax havens than previously had
been thought. The report indicated We estimate the total UK corporation tax potentially lost to avoidance activities to be up to 2 billion per annum, although it could be
much lower. An earlier report by the U.K. Trades Union
Congress, concluded that tax avoidance by the 50 largest
companies in the FTSE 100 was depriving the UK Treasury of approximately 11.8 billion.[30] The report also
stressed that British Crown Dependencies make a signicant contribution to the liquidity of the UK market.
In the second quarter of 2009, they provided net funds
to banks in the UK totalling $323 billion (195 billion),
of which $218 billion came from Jersey, $74 billion from
Guernsey and $40 billion from the Isle of Man.[30]

The Tax Justice Network reports that this system is basically designed and operated by a group of highly paid
specialists from the worlds largest private banks (led by
UBS, Credit Suisse, and Goldman Sachs), law oces,
James Henry, former chief economist at consultants and accounting rms and tolerated by international or-

3 EXAMPLES

ganizations such as Bank for International Settlements,

the International Monetary Fund, the World Bank, the
OECD, and the G20. The amount of money hidden
away has signicantly increased since 2005, sharpening
the divide between the super-rich and the rest of the
world.[22][23][24]

Examples

See also: List of oshore nancial centres and Tax rates

around the world
The U.S. National Bureau of Economic Research has suggested that roughly 15% of the countries in the world are
tax havens, that these countries tend to be small and auent, and that better governed and regulated countries are
more likely to become tax havens, and are more likely to
be successful if they become tax havens.[31]
Switzerland
Luxembourgprimarily a conduit tax haven[32]

administration the IRS has proposed collecting information on these depositors to share with their home countries as a regulation; these regulations were eventually nalized in April 2012.[43]
In September 2013 British Prime Minister David
Cameron said I do not think it is fair any longer to refer to any of the Overseas Territories or Crown Dependencies as tax havens. They have taken action to make
sure that they have fair and open tax systems. It is very
important that our focus should now shift to those territories and countries that really are tax havens.[44] Mr
Camerons comments were interpreted as a direct reference to Jersey, Guernsey, Isle of Man, the British Virgin
Islands and the Cayman Islands, and followed a period
of negotiations with those (and other) British territories
during which those jurisdictions had made a number of
concessions relating to tax transparency and sharing of
information.[45] Anti-tax haven pressure groups immediately accused the Prime Minister of taking leave of his
senses, and commenting sarcastically It was Camerons
fathers tax haven activities that are repotted [sic] to have
paid for his Eton education. Was it ever realistic to think
he'd change his spots?".[46]

Other sovereign countries that have such low tax rates and 3.1 Former tax havens
lax regulation that they can be considered semi-tax havens
Beirut, Lebanon formerly had a reputation as the
are:[33]
only tax haven in the Middle East. However, this
changed after the Intra Bank crash of 1966,[47] and
Ireland[34]
the subsequent political and military deterioration
[32]
of Lebanon dissuaded foreign use of the country as
Netherlandsprimarily a conduit tax haven
a tax haven.
Non-sovereign jurisdictions commonly labelled as tax
havens include:
Jersey[35]
Isle of Man
British Overseas Territory
Bermuda[36]
British Virgin Islands

[37][38]

Cayman Islands[39]
Delaware, United States[40]
Puerto Rico (United States)

[41]

Some tax havens including some of the ones listed above

do charge income tax as well as other taxes such as capital
gains tax, inheritance tax, and so forth. Criteria distinguishing a taxpayer from a non-taxpayer can include citizenship and residency and source of income. For example, in the United States foreign nonresidents are not
charged various taxes[42] including income tax on interest
on U.S. bank deposits by income tax; since the Clinton

Liberia had a prosperous ship registration industry.

The series of violent and bloody civil wars in the
1990s and early 2000s severely damaged condence
in the jurisdiction. The fact that the ship registration business still continues is partly a testament to
its early success, and partly a testament to moving
the national shipping registry to New York, United
States.
Tangier had a brief but colorful existence as a tax
haven in the period between the end of eective
control by the Spanish in 1945 until it was formally
reunited with Morocco in 1956.
A number of Pacic based tax havens have reduced
their eectiveness to operate as tax havens in response to OECD demands for better regulation and
transparency in the late 1990s. Vanuatu's Financial
Services commissioner announced in May 2008 that
his country would reform its laws so as to cease being a tax haven. We've been associated with this
stigma for a long time and we now aim to get away
from being a tax haven.[48]
As of March 2013, major Cyprus banks have sustained severe damage from Greek bond defaults and

5
(at least temporarily) closed their doors in an attempt to stem a ight of capital from the island. Depositors are expected to incur heavy losses.[49]

28. Seychelles (FSI 293,4)

29. Brazil (FSI 283,9)
30. Uruguay (FSI 277,4)

List of tax havens and countries

of nancial secrecy

The list includes the Financial Secrecy Index (FSI) according to Tax Justice Network. The higher FSI, the
larger inuence on world economy in terms of economical secrecy or tax avoidance.

31. Saudi Arabia (FSI 274,2)

32. India (FSI 254,5)
33. Liechtenstein (FSI 240,9)
34. Isle of Man (FSI 237,2)
35. Bahamas (FSI 226,8)
36. South Africa (FSI 209,7)

1. Switzerland (FSI 1765,2)

2. Luxembourg (FSI 1454,4)
3. Hong Kong (FSI 1283,4)
4. Cayman Islands (FSI 1233,5)
5. Singapore (FSI 1216,8)
6. United States (Mainland) (FSI 1212,9)
7. Lebanon (FSI 747,8)

37. Philippines (FSI 206,6)

38. Israel (FSI 205,9]
39. Netherlands (FSI 204,9)
40. Belgium (FSI 199,2)
41. Cyprus (FSI 198,9)
42. Dominican Republic (FSI 193,7)
43. France (FSI 190,9)

8. Germany (FSI 738,3)

44. Australia (FSI 168,1)

9. Jersey (FSI 591,2)

45. Vanuatu (FSI 164,9)

10. Japan (FSI 513,1)

46. Costa Rica (FSI 157,6)

11. Panama (FSI 489,6)

47. Ireland (FSI 155.5)

12. Malaysia (Labuan) (FSI 471,6)

48. New Zealand (FSI 151,4)

13. Bahrain (FSI 461,1)

49. Gibraltar (FSI 147,8)

14. Bermuda (FSI 432,3)

50. Norway (FSI 142,7)

15. Guernsey (FSI 419,3)

51. Guatemala (FSI 142,7)

16. United Arab Emirates (Dubai) (FSI 419,0)

52. Belize (FSI 129,8)

17. Canada (FSI 418,5)

53. Latvia (FSI 128,1)

18. Austria (FSI 400,8)

54. Italy (FSI 118,9)

19. Mauritius (FSI 397,8)

55. Aruba (FSI 113,3)

20. British Virgin Islands (FSI 385,4)

56. Spain (FSI 111,3)

21. United Kingdom (Mainland) (FSI 361,3)

57. Ghana (FSI 109,9)

22. Macao (FSI 360,4)

58. Curacao (FSI 106,4)

23. Marshall Islands (FSI 329,6)

59. US Virgin Islands (FSI 102,8)

24. South Korea (FSI 328,7)

60. Botswana (FSI 98,9)

25. Russia (FSI 325,2)

61. Anguilla (FSI 96,7)

26. Barbados (FSI 317,4)

62. St Vincent and the Grenadines (FSI 85,1)

27. Liberia (FSI 300,8)

63. Turks & Caicos Islands (FSI 81,8)

METHODOLOGY

64. Malta (FSI 78,0)

5.2 Corporate residency

65. St Lucia (FSI 66,8)

Corporate persons, in contrast to natural persons, can

own subsidiary corporations in many countries. That allows them to take advantage of the variety of laws, regulations, and conventions in multiple countries, without
overtly engaging in any questionable activities. Only in
extreme cases will they move their formal corporate headquarters.[53]

66. Denmark (FSI 63,1]

67. Antigua and Barbuda (FSI 60,4)
68. San Marino (FSI 59,5)
69. Portugal (Madeira) (FSI 57.9)
70. Grenada (FSI 55,7)

5.3 Asset holding

71. Sweden (FSI 55,7)

Asset holding involves utilizing an oshore trust or

oshore company, or a trust owning a company. The
company or trust will be formed in one tax haven, and
will usually be administered and resident in another. The
function is to hold assets, which may consist of a portfolio of investments under management, trading companies or groups, physical assets such as real estate or valuable chattels. The essence of such arrangements is that by
changing the ownership of the assets into an entity which
is not tax resident in the high-tax jurisdiction, they cease
to be taxable in that jurisdiction.

72. Hungary (FSI 54,6)

73. Brunei (FSI 50,6)
74. Andorra (FSI 43,3)
75. Monaco (FSI 38,8)
76. Samoa (FSI 31,0)
77. Dominica (FSI 26,9)
78. Cook Islands (FSI 25,2)
79. Maldives (FSI 21,0)
80. St Kitts and Nevis (FSI 18,4)
81. Nauru (FSI 0,0)
82. Montserrat (FSI 0,0)
[50][51]

Methodology

Often the mechanism is employed to avoid a specic tax.

For example, a wealthy testator could transfer his house
into an oshore company; he can then settle the shares of
the company on trust (with himself being a trustee with
another trustee, whilst holding the benecial life estate)
for himself for life, and then to his daughter. On his death,
the shares will automatically vest in the daughter, who
thereby acquires the house, without the house having to
go through probate and being assessed with inheritance
tax.[54] Most countries assess inheritance tax, and all other
taxes, on real estate within their jurisdiction, regardless of
the nationality of the owner, so this would not work with
a house in most countries. It is more likely to be done
with intangible assets.

5.4 Trading and other business activity

At the risk of gross oversimplication, it can be said that

the advantages of tax havens are viewed in the following See also: Transfer mispricing
four principal contexts:[52]
Many businesses which do not require a specic geographical location or extensive labor are set up in tax
5.1 Personal residency
havens, to minimize tax exposure. Perhaps the best illustration of this is the number of reinsurance compaSince the early 20th century, wealthy individuals from nies which have migrated to Bermuda over the years.
high-tax jurisdictions have sought to relocate themselves Other examples include internet based services and group
in low-tax jurisdictions. In most countries in the world, nance companies. In the 1970s and 1980s corporate
residence is the primary basis of taxation see Tax res- groups were known to form oshore entities for the puridence. In some cases the low-tax jurisdictions levy no, poses of reinvoicing. These reinvoicing companies
or only very low, income tax. But almost no tax haven simply made a margin without performing any economic
assesses any kind of capital gains tax, or inheritance tax. function, but as the margin arose in a tax free jurisdiction,
Individuals who are unable to return to a higher-tax coun- it allowed the group to skim prots from the high-tax
try in which they used to reside for more than a few days jurisdiction. Most sophisticated tax codes now prevent
transfer pricing schemes of this nature.
a year are sometimes referred to as tax exiles.

5.7

5.5

Money and exchange control

Financial intermediaries

Much of the economic activity in tax havens today consists of professional nancial services such as mutual
funds, banking, life insurance and pensions. Generally
the funds are deposited with the intermediary in the lowtax jurisdiction, and the intermediary then on-lends or
invests the money (often back into a high-tax jurisdiction). Although such systems do not normally avoid tax in
the principal customers jurisdiction, it enables nancial
service providers to provide multi-jurisdictional products
without adding another layer of taxation. This has proved
particularly successful in the area of oshore funds.[55]

5.7 Money and exchange control

See also: Fixed exchange rate, Dollarization and Money
laundering
Most tax havens have a double monetary control system which distinguish residents from non-resident as well
as foreign currency from the domestic one. In general,
residents are subject to monetary controls but not nonresidents. A company, belonging to a non-resident, when
trading overseas is seen as non-resident in terms of exchange control. It is possible for a foreigner to create a
company in a tax haven to trade internationally; the companys operations will not be subject to exchange controls
as long as it uses foreign currency to trade outside the tax
haven. Tax havens usually have currency easily convertible or linked to an easily convertible currency. Most are
convertible to US dollars, euro or to pounds sterling.

This type of methodology has been used by Google and

came to light in the year 2010 when it was reported that
Google uses techniques called the "Double Irish" and
"Dutch Sandwich" to reduce its corporate income tax to
2.4%, by funnelling its corporate income through Ireland
and from there to a shell in the Netherlands where it can
be transferred to a "Bermuda Black Hole", which has no
corporate income tax. The search engine is using Ire- 6 Incentives for nations to become
land as a conduit for revenues that end up being costed to
tax havens
another country where its intellectual property (the brand
and technology such as Googles algorithms) is registered.
In Googles case this country is Bermuda.[56] The com- There are several reasons for a nation to become a tax
pany also uses an avoidance structure in Asia called the haven. Some nations may nd they do not need to charge
as much as some industrialized countries in order for
"Singapore Sling".
them to be earning sucient income for their annual budIn 2009, the internet giant made a gross prot of 5.5bn,
gets. Some may oer a lower tax rate to larger corporabut reported an operating prot of 45m after administions, in exchange for the companies locating a division of
trative expenses of 5.467bn were stripped out. In clastheir parent company in the host country and employing
sic economic analysis, if a company was spending 99.4%
some of the local population. Other domiciles nd this
of gross prots on administrative expenses, then the comis a way to encourage conglomerates from industrialized
pany would be considered to operating very ineciently.
nations to transfer needed skills to the local population.
Administrative expenses largely refer to royalties (or a
licence fee) Google pays its Bermuda HQ for the right Many industrialized countries claim that tax havens act
to operate. Google has uncovered a highly ecient tax unfairly by reducing tax revenue which would otherwise
structure across six territories that meant Google paid just be theirs. Various pressure groups also claim that money
launderers also use tax havens extensively,[62] although
2.4% tax on operations outside the US.[56]
extensive nancial and know your customer regulations in
tax havens can actually make money laundering more difcult than in large onshore nancial centers with signi5.6 Anonymity and bearer shares
cantly higher volumes of transactions, such as New York
City or London.[63] In 2000, the Financial Action Task
Bearer shares allow for anonymous ownership, and thus Force published what came to be known as the "FATF
have been criticized for facilitating money laundering and Blacklist" of countries which were perceived to be uncotax evasion; these shares are also available in some OECD operative in relation to money laundering; although sevcountries, such as in the U.S. state of Wyoming.[57]:7 In eral tax havens have appeared on the list from time to
2010, a study in which the researcher attempted to set- time (including key jurisdictions such as the Cayman Isup anonymous corporations found that 13 of the 17 at- lands, Bahamas and Liechtenstein), no oshore jurisdictempts were successful in OECD countries such as the tions appear on the list at this time.
United States and the United Kingdom while 4 of 28
attempts were successful in countries typically labeled
tax havens.[58] In 2011, an OECD peer review recom- 7 Regulation measures
mended that the United Kingdom improve its bearer
share laws.[59]
To avoid tax competition, many high tax jurisdictions
The Guardian wrote that there are 28 persons as directors have enacted legislation to counter the tax sheltering pofor 21,500 companies.[60][61]
tential of tax havens. Generally, such legislation tends to

7 REGULATION MEASURES

operate in one of ve ways:

the Hiring Incentives to Restore Employment Act (HIRE)

signed into law by President Obama in March 2010.

1. Attributing the income and gains of the company or

trust in the tax haven to a taxpayer in the high-tax
jurisdiction on an arising basis. Controlled Foreign
Corporation legislation is an example of this.

FATCA requires foreign nancial institutions (FFI) of

broad scope banks, stock brokers, hedge funds, pension
funds, insurance companies, trusts to report directly to
the Internal Revenue Service (IRS) all clients who are
U.S. persons. Starting January 2014, FATCA requires
2. Transfer pricing rules, standardization of which has FFIs to provide annual reports to the IRS on the name
been greatly helped by the promulgation of OECD and address of each U.S. client, as well as the largest acguidelines.
count balance in the year and total debits and credits of
[67]
3. Restrictions on deductibility, or imposition of a any account owned by a U.S. person. If an institution
withholding tax when payments are made to o- does not comply, the U.S. will impose a 30% withholding tax on all its transactions concerning U.S. securities,
shore recipients.
including the proceeds of sale of securities.
4. Taxation of receipts from the entity in the tax haven, In addition, FATCA requires any foreign company not
sometimes enhanced by notional interest to reect listed on a stock exchange or any foreign partnership
the element of deferred payment. The EU withhold- which has 10% U.S. ownership to report to the IRS the
ing tax is probably the best example of this.
names and tax identication number (TIN) of any U.S.
5. Exit charges, or taxing of unrealized capital gains owner. FATCA also requires U.S. citizens and green
card holders who have foreign nancial assets in excess of
when an individual, trust or company emigrates.
$50,000 to complete a new Form 8938 to be led with the
1040 tax return, starting with scal year 2010.[68] The deHowever, many jurisdictions employ blunter rules. For lay is indicative of a controversy over the feasibility of imexample, in France securities regulations are such that it plementing the legislation as evidenced in this paper from
is not possible to have a public bond issue through a com- the Peterson Institute for International Economics.[69]
pany incorporated in a tax haven.[64]
An unintended consequence of FATCA and its cost of
Also becoming increasingly popular is forced disclo- compliance for non-US banks is that some non-US banks
sure of tax mitigation schemes. Broadly, these involve are refusing to serve American investors.[70] Concerns
the revenue authorities compelling tax advisors to reveal have also been expressed that, because FATCA operates
details of the scheme, so that the loopholes can be closed by imposing withholding taxes on U.S. investments, this
during the following tax year, usually by one of the ve will drive foreign nancial institutions (particularly hedge
methods indicated above.[65] Although not specically funds) away from investing in the U.S. and thereby reduce
aimed at tax havens, given that so many tax mitigation liquidity and capital inows into the US.[71]
schemes involve the use of oshore structures, the eect
is much the same.
Anti-avoidance came to prominence in 2010/2011 as
nongovernmental organizations and politicians in the
leading economies looked for ways of reducing tax avoidance, which plays a role in forcing unpopular cuts to social
and military programs. The International Financial Centres Forum (IFC Forum) has asked for a balanced debate
on the issue of tax avoidance and an understanding of the
role that the tax neutrality of small international nancial
centres plays in the global economy.[66]

7.1
7.1.1

Modern developments
U.S. Legislation

7.1.2 Bank data leak 2013

Details of thousands of owners of oshore companies
were published in April 2013 in a joint collaboration between The Guardian and the International Consortium of
Investigative Journalists.[72] The data was later published
on a publicly accessible website in an attempt to "crowdsource" the data.[73] The publication of the list appeared
to be timed to coincide with the 2013 G8 summit chaired
by British Prime Minister David Cameron which emphasised tax evasion and transparency.
7.1.3 Liechtenstein banking scandal

Main article: Foreign Account Tax Compliance Act

Main article: 2008 Liechtenstein tax aair

The Foreign Account Tax Compliance Act (FATCA)

was passed by the US Congress to stop the outow of
money from the country into tax haven bank accounts.
With the strong backing of the Obama Administration,
Congress drafted the FATCA legislation and added it into

Germany announced in February 2008 that it had paid

4.2 million to Heinrich Kieber,[74] a former data
archivist of LGT Treuhand, a Liechtenstein bank, for a
list of 1,250 customers of the bank and their accounts
details. Investigations and arrests followed relating to

9
charges of illegal tax evasion. The German authorities
shared the data with U.S. tax authorities, but the British
government paid a further 100,000 for the same data.[75]
Other governments, notably Denmark and Sweden, refused to pay for the information regarding it as stolen
property.[76] The Liechtenstein authorities subsequently
accused the German authorities of espionage.[77]
However, regardless of whether unlawful tax evasion was
being engaged in, the incident has fuelled the perception among European governments and the press that tax
havens provide facilities shrouded in secrecy designed
to facilitate unlawful tax evasion, rather than legitimate
tax planning and legal tax mitigation schemes. This in
turn has led to a call for crackdowns on tax havens.[78]
Whether the calls for such a crackdown are mere posturing or lead to more denitive activity by mainstream
economies to restrict access to tax havens is yet to be
seen. No denitive announcements or proposals have yet
been made by the European Union or governments of the
member states.

7.1.4

German legislation

7.1.6 G20 tax haven blacklist

At the London G20 summit on 2 April 2009, G20 countries agreed to dene a blacklist for tax havens, to be segmented according to a four-tier system, based on compliance with an internationally agreed tax standard.[83]
The list as per April 2 of 2009 can be viewed on the
OECD website.[84] The four tiers were:
1. Those that have substantially implemented the standard (includes most countries but China still excludes Hong Kong and Macau).
2. Tax havens that have committed to but not yet fully
implemented the standard (includes Montserrat,
Nauru, Niue, Panama, and Vanuatu)
3. Financial centres that have committed to but
not yet fully implemented the standard (includes
Guatemala, Costa Rica and Uruguay).
4. Those that have not committed to the standard (an
empty category)
Those countries in the bottom tier were initially classied
as being 'non-cooperative tax havens. Uruguay was initially classied as being uncooperative. However, upon
appeal the OECD stated that it did meet tax transparency
rules and thus moved it up. The Philippines took steps
to remove itself from the blacklist and Malaysian Prime
Minister Najib Razak had suggested earlier that Malaysia
should not be in the bottom tier.[85]

Peer Steinbrck, the former German nance minister, announced in January 2009 a plan to amend scal laws.
New regulations would disallow that payments to companies in certain countries that shield money from disclosure
rules to be declared as operational expenses. The eect
of this would make banking in such states unattractive and In April 2009 the OECD announced through its chief Anexpensive.[79]
gel Gurria that Costa Rica, Malaysia, the Philippines and
Uruguay have been removed from the blacklist after they
had made a full commitment to exchange information to
the OECD standards.[86] Despite calls from the former
French President Nicolas Sarkozy for Hong Kong and
7.1.5 U.K. Foot report
Macau to be included on the list separately from China,
they are as yet not included independently, although it is
In November 2009, Sir Michael Foot, a former Bank
expected that they will be added at a later date.[83]
of England ocial and Bahamas bank inspector, delivered a report on the British Crown Dependencies and Government response to the crackdown has been broadly
Overseas Territories for HM Treasury.[80] The report in- supportive, although not universal.[87] Luxembourg Prime
dicated that while many of the territories had a good Minister Jean-Claude Juncker has criticised the list, statstory to tell, others needed to improve their abilities ing that it has no credibility, for failing to include varto detect and prevent nancial crime. The report also ious states of the USA which provide incorporation instressed the view that narrow tax bases presented long frastructure which are indistinguishable from the aspects
term strategic risks and that the economies should seek of pure tax havens to which the G20 object.[88] As of
2012, 89 countries have implemented reforms sucient
to diversify and broaden their tax bases.[81]
to be listed on the OECDs white list.[89] According to
It indicated that tax revenue lost by the UK government
Transparency International half of the least corrupted
appeared to be much smaller than had previously been
countries were tax havens.[90]
estimated (see above under Lost tax revenue), and also
stressed the importance of the liquidity provided by the
territories to the United Kingdom. The Crown Dependencies and Overseas Territories broadly welcomed the 8 Criticism
report.[81] The pressure group Tax Justice Network, unhappy with the ndings, commented that "[a] weak man, Tax havens have been criticized because they often result
born to be an apologist, has delivered a weak report.[82] in the accumulation of idle cash[91] which is expensive

10

and inecient for companies to repatriate.[92] The tax

shelter benets result in a tax incidence disadvantaging
the poor.[93] Many tax havens are thought to have connections to fraud, money laundering and terrorism.[94] While
investigations of illegal tax haven abuse have been ongoing, there have been few convictions.[95][96] Lobbying
pertaining to tax havens and associated transfer pricing
has also been criticized.[97]
Some politicians, such as magistrate Eva Joly, have begun
to stand up against the use of tax havens by large companies. She describes the act of avoiding tax as a threat
to democracy.[98] Accountants' opinions on the propriety
of tax havens have been evolving,[99] as have the opinions of their corporate users,[100] governments,[101][102]
and politicians,[103][104] although their use by Fortune 500
companies[105] and others remains widespread.[106] Reform proposals centering on the Big Four accountancy
rms have been advanced.[107] Some governments appear
to be using computer spyware to scrutinize some corporations nances.[108]

8.1

Eect of developing countries

See also: Transfer mispricing

Illicit capital ight from the developing world is estimated
at ten times the size of aid it receives and twice the debt
service it pays.[109] About 60 per cent of illicit capital
ight from Africa is from transfer mispricing, where a
subsidiary in a developing nation sells to another subsidiary or shell company in a tax haven at an articially
low price to pay less tax.[110] An African Union report estimates that about 30% of sub-Saharan Africas GDP has
been moved to tax havens.[111] One tax analyst believes
that if the money were paid, most of the continent would
be developed by now.[112]

History

The use of diering tax laws between two or more countries to try to mitigate tax liability is probably as old as
taxation itself. In Ancient Greece, some of the Greek
Islands were used as depositories by the sea traders of
the era to place their foreign goods to thus avoid the twopercent tax imposed by the city-state of Athens on imported goods. It is sometimes suggested that the practice rst reached prominence through the avoidance of
the Cinque Ports and later the staple ports in the twelfth
and fourteenth centuries respectively. In 1721, American
colonies traded from Latin America to avoid British taxes.
Various countries claim to be the oldest tax haven in the
world. For example, the Channel Islands claim their tax
independence dating as far back as Norman Conquest,
while the Isle of Man claims to trace its scal independence to even earlier times. Nonetheless, the modern

HISTORY

concept of a tax haven is generally accepted to have

emerged at an uncertain point in the immediate aftermath of World War I.[113] Bermuda sometimes optimistically claims to have been the rst tax haven based upon
the creation of the rst oshore companies legislation in
1935 by the newly created law rm of Conyers Dill &
Pearman.[114] However, the Bermudian claim is debatable when compared against the enactment of a Trust Law
by Liechtenstein in 1926 to attract oshore capital.[115]
Most economic commentators suggest that the rst
true tax haven was Switzerland, followed closely by
Liechtenstein.[116] Swiss banks had long been a capital
haven for people eeing social upheaval in Russia, Germany, South America and elsewhere. However, in the
early part of the twentieth century, in the years immediately following World War I, many European governments raised taxes sharply to help pay for reconstruction eorts following the devastation of World War I.
By and large, Switzerland, having remained neutral during the Great War, avoided these additional infrastructure
costs and was consequently able to maintain a low level
of taxes. As a result, there was a considerable inux of
capital into the country for tax related reasons. It is dicult, nonetheless, to pinpoint a single event or precise date
which clearly identies the emergence of the modern tax
haven.
The use of modern tax havens has gone through several
phases of development subsequent to the interwar period.
From the 1920s to the 1950s, tax havens were usually referenced as the avoidance of personal taxation. The terminology was often used with reference to countries to
which a person could retire and mitigate their post retirement tax position.[117]
From the 1950s onwards, there was signicant growth in
the use of tax havens by corporate groups to mitigate their
global tax burden. This strategy generally relied upon
there being a double taxation treaty between a large jurisdiction with a high tax burden (that the company would
otherwise be subject to), and a smaller jurisdiction with
a low tax burden. Thus, corporations, by structuring the
group ownership through the smaller jurisdiction, could
take advantage of the double taxation treaty, thereby paying taxes at the much lower rate. Although some of these
double tax treaties survive,[118] in the 1970s, most major
countries began repealing their double taxation treaties
with micro-states to prevent corporate tax leakage in this
manner.
In the early to mid-1980s, most tax havens changed the
focus of their legislation to create corporate vehicles
which were "ring-fenced" and exempt from local taxation (although they usually could not trade locally either).
These vehicles were usually called exempt companies
or "international business corporations". However, in the
late 1990s and early 2000s, the OECD began a series of
initiatives aimed at tax havens to curb the abuse of what
the OECD referred to as "unfair tax competition". Under

11
pressure from the OECD, most major tax havens repealed
their laws permitting these ring-fenced vehicles to be incorporated, but concurrently they amended their tax laws
so that a company which did not actually trade within the
jurisdiction would not accrue any local tax liability.[119]

10

See also

Asset protection
Association for the Taxation of Financial Transactions and for Citizens Action
Bank secrecy
Corporate haven
Corporate inversion
Foreign Account Tax Compliance Act
Free port

11 References
[1] Shak Hebous (2011) Money at the Docks of Tax
Havens: A Guide, CESifo Working Paper Series No.
3587, p. 9
[2] Dharmapala, Dhammika und Hines Jr., James R. (2006)
Which Countries Become Tax Havens?
[3] Global Property Guide. Belgium. Global Property
Guide. Retrieved 29 July 2015.
[4] Moran Harari, Markus Meinzer and Richard Murphy
(October 2012) Financial Secrecy, Banks and the Big 4
Firms of Accountants Tax Justice Network
[5] Doggart, Caroline. 2002. Tax Havens and Their Uses
(originally published 1970), Economist Intelligence Unit,
ISBN 0-86218-163-1
[6] Davidson, Sinclair (2007-10-15). The Truth About Tax
Havens - retrieved 28 December 2007. Melbourne:
Theage.com.au. Retrieved 2011-03-22.
[7] The Truth About Tax Havens - retrieved 28 December
2007 (PDF). Retrieved 2011-03-22.

International business company

[8] "International Taxation: Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed
as Tax Havens or Financial Privacy Jurisdictions GAO:
GAO-09-157". Government Accountability Oce. December 18, 2008. Retrieved 2009-01-21.

International taxation

[9] http://www.bbc.com/news/business-18944097

Free economic zone

List of foundations established in Vaduz

List of countries by tax rates
Luxembourg leaks
Money laundering
Oshore bank
Oshore company
Oshore nancial centre
Oshore trust
Pirate haven
Tax avoidance and tax evasion
Tax exile
Tax exporting
Tax Justice Network
Tax shelter
Vulture fund

[10] Tax Justice Network (July 22, 2012) Revealed: Global

super-rich has at least $21 trillion hidden in secret tax
havens
[11] Canadian Broadcasting Co. (July 22, 2012) Wealthy hiding $21 trillion in tax havens, report says
[12] Gordon, Richard; Morriss, Andrew (20 October 2013).
Moving Money: International Financial Flows, Taxes &
Money Laundering. Hastings International and Comparative Law Review 31 (1). Retrieved 13 June 2014. "such
claims rest on poor data and analysis, and on mistakes
about how nancial transactions, international taxation,
and anti-money laundering rules actually work" (abstract)
[13] John Whiting, tax policy director at the Chartered Institute of Taxation commented There clearly are some signicant amounts hidden away, but if it really is that size
what is being done with it all?" and If the suggestion is
that such amounts are actively hidden and never accessed,
that seems odd - not least in terms of what the tax authorities are doing. In fact, the US, UK and German authorities
are doing a lot, and noting that if the gures were accurate
you would expect the havens to be more conspicuously
wealthy than they are. However, he also admitted that I
cannot disprove the gures at all, but they do seem staggering Tax havens: Super-rich 'hiding' at least $21tn.
2012-07-22. Retrieved 2012-10-03.
[14] Zucman, Gabriel. Taxing across Borders: Tracking
JourPersonal Wealth and Corporate Prots.
nal of Economic Perspectives 28 (4):
121148.

12

11

doi:10.1257/jep.28.4.121.
2014.

Retrieved 20 November

[15] Scott Thurm; Kate Linebaugh (March 10, 2013). More

U.S. Prots Parked Abroad, Saving on Taxes. Wall Street
Journals. Retrieved 19 March 2013.
[16] Tax Haven Criteria - retrieved 26 February 2008 Tax
Haven Criteria. Oecd.org. Retrieved 2011-03-22.
[17] Hay, Towards a level playing eld - regulating corporate
vehicles in cross border transactions,
[18] Jesse Drucker (2010): The Tax Haven that is Saving
Google Billions; Bloomberg Business Week, 21 Oct. 2010.
[19] Gio Wiederhold (2013): Valuing Intellectual Capital,
Multinationals and Taxhavens; Management for Professionals, Springer Verlag
[20] James S. Henry (2012): http://www.taxjustice.net/cms/
upload/pdf/The_Price_of_Offshore_Revisited_Presser_
120722.pdf
[21] Places in the sun, The Economist, February 22, 2007.
This may be a slight underestimate: according to the
Cayman Islands Monetary Authority, Caymanian licensed
banks held US$1.725 trillion in deposits as of September
2011Banking statistics. Retrieved 2013-02-14.
[22] 13 trillion pounds in oshore tax havens: Report. The
Times of India. July 22, 2012. Retrieved July 22, 2012.
[23] Super rich hold $32 trillion in oshore havens. Reuters.
July 22, 2012. Retrieved July 22, 2012.
[24] Tax havens: Super-rich 'hiding' at least $21tn. BBC.
July 22, 2012. Retrieved July 22, 2012.
[25] Oshore Financial Centers, International Monetary
Fund background paper, June 23, 2000
[26] U.S. Banking Liabilities to Foreigners.. Treasury.gov.
Retrieved 2011-03-22.
[27] Desai, Foley and Hines, The demand for tax haven operations, Journal of Public Economics 90 (2006), page
514.

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[32] Kevin S. Markle and Douglas A. Shakelford (2009): Do

Multinationals or Domestic Firms Face higher Eective
Tax Rates; University of North Carolina Univ., June 2009
[33] Unites Notes On The Front: Tax Haven Dictionary.
Notesonthefront.typepad.com. 2013-05-27. Retrieved
2013-07-03.
[34] Treasure Ireland | Robert Nielsen.
Robertnielsen21.wordpress.com. Retrieved 2013-07-03.
[35] Nicholas Shaxson (2011): Treasure Islands, Tax Havens
and the Men Who Stole the World; The Bodley Head,
London, 2011
[36] Dan Nakaso: U.S. tax shelter appears secure; San Jose
Mercury News, 25 Dec. 2012, p.1,5
[37] Top tax haven got more investment in 2013 than India
and Brazil: U.N. Reuters. Retrieved 29 July 2015.
[38] Guardian US interactive team. Chinas princelings storing riches in Caribbean oshore haven. the Guardian.
Retrieved 29 July 2015.
[39] William Brittain-Catlin (2005): Oshore The Dark Side
of the Global Economy; Farrar, Straus and Giroux, 2005.
[40] Leslie Wayne (2012): How Delaware Thrives as a Corporate Tax Haven; The New York Times, 30 Jun.2012.
[41] Reuven S. Avi-Yonah (2012): Statement to Congress;
University of Michigan School of Law, Permanent
Subcommittee on Investigations, U.S. Congress, 20
Sep.2012.
[42] Nonresident Aliens - Exclusions From Income. Irs.gov.
[43] Daily Tax Update - April 17, 2012: Final Regs Requiring
Reporting of Bank Deposit Interest Paid to Non-Resident
Aliens Issued. Steptoe & Johnson LLP.
[44] International Adviser (12 September 2013). Jersey,
Guernsey, IoM revel in Camerons not tax havens
comments.BBC News (10 September 2013). David
Cameron: Crown dependency tax haven banner 'not fair'".
[45] BBC News (15 June 2013). "'Tax havens agree to clampdown on tax avoidance and evasion.

[28] Carol D. Leonnig (January 16, 2009). Report Finds Major U.S. Companies Have Oshore Tax Havens. Washington Post.

[46] Tax Research UK (10 September 2013). David Cameron

takes leave of his senses as he declares the UK has no tax
havens left.

[29] Fighting Anti-Tax Haven Demagoguery on CNN.

2012-07-30. Retrieved 2012-10-03.

[47] Election Under Fire. Time Magazine. 1976-05-17. Retrieved 2006-12-23.

[30] The Times (2009-10-30). Tax haven report lays emphasis

on vital role of Crown Dependencies. London. Retrieved
2009-11-02.

[48] Vanuatu to ditch tax haven, Anthony Klan, The Australian, May 6, 2008

[31] Working paper 12802, . The paper implicitly adopts

the smaller tax haven approach, i.e., disregarding larger
countries which have either low taxes rates (for example, Russia), or systems of taxation which permit them to
be used to structure tax avoidance schemes (for example,
the United Kingdom). It also excludes non-sovereign tax
havens (for example, Delaware or Labuan).

[49] Kambas, Michele. Cyprus closes in on EU bailout, Uturn on levy. Reuters. Retrieved 2013-07-03.
[50] Introduction. Retrieved 29 July 2015.
[51] Financial Secrecy Index - 2013 Results. Retrieved 29
July 2015.
[52] Tolleys Oshore Service (2006), ISBN 1-4057-1568-5

13

[53] Reuven S. Avi-Yonah (2002): For Havens Sake: Reections on Inversion Transactions; University of Michigan
Law School, Tax Notes, Vol.95 no.12, June 17, 2002.

[70] Spiegel Online (2011-12-14). European banks stop serving American customers. Retrieved 2011-21-31. Check
date values in: |access-date= (help)

[54] This is a simplistic example; in most sophisticated tax

codes there are extensive provisions for catching gifts
(such as a declaration of trust) made for a specied time
preceding death.

[71] Another approach would involve some global funds

avoiding American assets entirely. That can hardly be
what Congress had in mind. The Economist (2011-1126). Scratched by the FATCA. Retrieved 2012-07-16.

[55] It has been estimated over 75% of the worlds hedge funds
(probably the riskiest form of collective investment vehicle) are domiciled in the Cayman Islands, with nearly $1.1
trillion US AUM - Institutional Investor, 15 May 2006, although statistics in the hedge fund industry are notoriously
speculative.

[72] Yahoo! News (2013-04-05). Tax haven data leak names

names, raises questions.

[56] Drucker J. (2010). The Tax Haven Thats Saving Google

Billions. Business Week.
[57] Gravelle JG. (2013). Tax Havens: International Tax
Avoidance and Evasion. CRS.
[58] Sharman JC. (2010). Shopping for Anonymous Shell
Companies: An Audit Study of Anonymity and Crime in
the International Financial System. Journal of Economic
Perspectives.
[59] Bearer shares and delays blot UK record on information
exchange. Tax Journal.
[60] HS 27.11.2012
[61] Leigh, David; Frayman, Harold; Ball, James. Oshore
secrets revealed: the shadowy side of a booming industry. The Guardian. Guardian News and Media Limited.
Retrieved 12 June 2015.
[62] Such as ATTAC and the Tax Justice Network. See for
example: Oshore watch
[63] See for example the views expressed in The Guardian in
2001.
[64] Companies incorporated in tax havens are often used as
bond issuing vehicles in securitisations for tax reasons.
[65] The United Kingdom is one country that has strict forced
disclosure rules. Hmrc.gov.uk. 2011-06-28. Retrieved
2013-07-03.
[66] Statement on tax avoidance debate. IFC Forum (PDF).
Retrieved 18 March 2011.
[67] U.S. Internal Revenue Service (2011-07-14). Treasury
and IRS Issue Guidance Outlining Phased Implementation of FATCA Beginning in 2013. Retrieved 2011-0825.
[68] For most individual taxpayers, this means they will start
ling Form 8938 with their 2011 income tax return to
be led this coming tax ling season.U.S. Internal Revenue Service (2012-01-25). Do I need to le Form 8938,
Statement of Specied Foreign Financial Assets"?". Retrieved 2012-07-03.
[69] Gary Clyde Hufbauer: The Foreign Account Tax Compliance Act: Imperial Overreach. 2011-07-22. Retrieved 2011-08-25.

[73] The Guardian (2013-06-15). Oshore Leaks app puts

secret users of tax havens in the public eye.
[74] Mr Kieber seems to be an unlikely hero for law enforcement authorities. A convicted fraudster, reports indicate
that after initially stealing the information, he blackmailed
the Liechtenstein authorities into reducing and dropping
criminal charges against him relating to property fraud
in Spain. However, before returning the disks he made
copies which he later sold to foreign governments after he
left the country. Further reports indicate that he now lives
under a new name in Australia.
[75] Nick Mathiason. A journey from haven to hell. the
Guardian. Retrieved 29 July 2015.
[76] Denmark's tax minister, Kristian Jensen, said: I think
its a moral problem to reward a criminal for some information that he stole... I don't like this and I don't think
this ethic is the best way to ensure that taxes are paid correctly.
[77] Harry de Quetteville 12:01AM GMT 20 Feb 2008 (200802-20). "''The Daily Telegraph'', 26 February 2008.
London: Telegraph.co.uk. Retrieved 2011-03-22.
[78] Germany to call for tax haven crackdown. Retrieved 29
July 2015.
[79] Der Spiegel (2009-01-17). Steinbrck forciert Kampf
gegen Steuerparadiese (in German). Retrieved 2009-0117.
[80] Michael Foot publishes nal report.
2009-10-29. Retrieved 2009-11-05.

HM Treasury.

[81] Governor and Premier Welcome Michael Foot Review

Conclusions. 2009-10-30. Retrieved 2014-01-27.
[82] The Foot Report: a setback. Tax Justice Network.
2009-10-29. Retrieved 2009-11-05.
[83] G20 declares door shut on tax havens, The Guardian,
April 2, 2009
[84] OECD List as per 2009-04-02 (PDF). Retrieved 201103-22.
[85] OECD names and shames tax havens. BBC News.
2009-04-03. Retrieved 2009-04-04.
[86] BBC (2009-04-07). OECD removes tax havens from
list. BBC News. Retrieved 2009-04-07.
[87] Butler, Eamonn (2009-04-12). Save the tax havens we
need them. London: The Times. Retrieved 2009-04-14.

14

12 FURTHER READING

[88] Clark, Andrew (2009-04-10). Welcome to tax-dodge [109] Kristina Froberg and Attiya Waris (2011). Introduction.
city, USA. London: The Guardian. Retrieved 2009-04Bringing the billions back: How Africa and Europe can end
14.
illicit capital ight (PDF). Stockholm: Forum Syd Forlag.
ISBN 9789189542594. Retrieved 26 July 2012.
[89] Tax haven clampdown yields cash but secrecy still
[110] Sharife, Khadija (18 June 2011). "='Transparency' hides
thrives. Reuters, 26 July 2012.
Zambias lost billions. Al-Jazeera. Retrieved 26 July
2011.
[90] Transparency Hyvt veljet kahvilla Voima April 2013
[91] Idle cash piles up: David Cay Johnston Reuters, July 16, [111] Mathiason, Nick (21 January 2007). Western bankers
and lawyers 'rob Africa of $150bn every year'". The
2013
Guardian (London). Retrieved 5 July 2011.
[92] Repatriating Oshore Funds U.S. Senate Committee on
Homeland Security and Governmental Aairs, Permanent [112] Africa losing billions in tax evasion. aljazeera.com. 16
January 2012. Retrieved 18 May 2013.
Subcommittee on Investigations, October 11, 2011
[113] "[T]he tax haven is a creature of the twentieth century,
and began to be used extensively because of the high levels
of tax which prevailed after the First World War at para
26.1, Tolleys International Tax Planning (2002), ISBN 0[94] These Islands Arent Just a Shelter From Taxes New
7545-1339-4
York Times, May 5, 2012
[93] Picking Up the Tab U.S. Public Interest Research Group,
April 2012

[95] Super Rich Tax Cheats American News Project, January

8, 2009

[114] See generally Introduction to Tolleys International Initiatives Aecting Financial Havens (2001), ISBN 0-40694264-1

[96] "'A green light to tax evasion': Super-rich tax dodgers [115] The Personen- und Gesellschaftsrecht of 20 January 1926
given immunity from prosecution Daily Mirror, Novem[116] Tolleys Tax Havens (2000), ISBN 0-7545-0471-9
ber 3, 2012
[97] If you want to know whos really keeping billions in [117] A usage which was still being echoed to some degree in
the special report of The Economist in 1990, Tax Havens
poverty, then the answer is the partners in the Big 4 rms
and Their Uses, ISBN 0 85058 292 X, Special Report No.
of accountants Tax Justice Network, April 5, 2012
1191. The report helpful includes indications of quality of
life in various tax havens which future tax exiles may wish
[98] Tax Free documentary by Marije Meerman. Topdocuto consider.
mentarylms.com. 2009-10-25. Retrieved 2013-07-03.
[99] Tax avoidance: fair or foul?" Accountancy Age Debates, [118] For example a double taxation treaty still exists between
Barbados and Japan, and another between Cyprus and
January 14, 2013
Russia. Mauritius has a double taxation treaty with India
that is used for tax mitigation, although India is seeking to
[100] Google will not oppose clampdown on tax avoidance,
renegotiate the treaty,India to push for change in tax treaty
chairman says Guardian, January 28, 2013
with Mauritius
[101] Tax avoidance isn't a left or right issue, its a cancer eating
[119] For example, the British Virgin Islands repealed the
our democracy New Statesman, June 21, 2012
International Business Companies Act (Cap 291) (which
had prohibited such companies from trading locally) and
[102] Helsinki Boycotts Tax Havens, Inter Press Service, Ocenacted the BVI Business Companies Act 2004 (which
tober 6, 2012
permitted this) in its place. Contemporaneously it var[103] David Cameron: Tax avoiding foreign rms like Staried its tax laws by amending the Income Tax Act (Cap
bucks and Amazon lack 'moral scruples" The Telegraph,
206), which amended the rate of income tax for individuJanuary 4, 2013
als and corporations to zero, along with the Payroll Taxes
Act 2004 which imposed a (new) payroll tax on person
[104] Germanys Merkel calls for G8 ght against tax havens
employed by businesses within the British Virgin Islands.
Reuters, February 13, 2013
[105] Which Fortune 500 Companies Are Sheltering Income in
Overseas Tax Havens?" Citizens for Tax Justice, October
17, 2012
[106] Speaker Biographies Networking Seminars, February
2013
[107] Britain could end these tax scams by hitting the big four
The Guardian, December 10, 2012
[108] Did the Bounds of Cyber War Just Expand to Banks and
Neutral States?" The Atlantic, August 17, 2012

12 Further reading
Baker, Raymond W. (August 2005). Capitalisms
Achilles Heel: Dirty Money, and How to Renew the
Free-Market System. Hoboken, New Jersey: John
Wiley & Sons. ISBN 978-0-471-64488-0.
Foremny, D., & Von Hagen, J. (2012). Fiscal federalism in times of crisis, CEPR Discussion Papers
9154, C.E.P.R. Discussion Papers.

15
Henry, James S. (October 2003). The Blood
Bankers: Tales from the Global Underground Economy. New York, NY: Four Walls Eight Windows.
ISBN 978-1-56858-254-2.
Morriss, Andrew P. (2010). Oshore Financial
Centers and Regulatory Competition. Washington:
The AEI Press. ISBN 978-0-8447-4324-0.
Scevola, Carlo; Sneiderova, Karina (January 2010).
Oshore Jurisdictions Guide. Geneva, Switzerland:
CS&P Fiduciaire. ISBN 978-1-60594-433-3.
Shaxson, Nicholas (April 2011). Treasure Islands:
Uncovering the Damage of Oshore Banking and
Tax Havens. New York, NY: Palgrave Macmillan.
ISBN 978-0-230-10501-0.

13

External links

International Financial Centres Forum (IFC Forum)

Oshore Banking directory of providers
IMF - Oshore Banking and Financial Centers
Oshore Financial Centers -- IMF Background Paper
Congressional Research Service (CRS) Reports regarding tax havens
Tax Justice Network
Treasure Islands - Nicholas Shaxsons book on tax
havens
Global Forum on Transparency and Exchange of Information for Tax Purposes, OECD
Global Financial Integrity
Task Force on Financial Integrity & Economic Development
An OECD Proposal To Eliminate Tax Competition
Would Mean Higher Taxes and Less Privacy Heritage Foundation: Washington D.C.
The Moral Case for Tax Havens
The Economic Case for Tax Havens
Why tax havens are a blessing the Cato Institute
Proting from corruption: The role and responsibility of nancial institutions - U4 Anti-Corruption
Resource Centre

New Bank Leak Shows How Rich Exploit Tax

Haven Loopholes (2014-07-08), Hidden in Plain
Sight: New York Just Another Island Haven (201407-03), Sun and Shadows: How an Island Paradise
Became a Haven for Money (2014-06-09), Leaked
Records Reveal Oshore Holdings of Chinas Elite
(2014-01-21), and Secret Files Expose Oshores
Global Impact (2013-04-03), International Consortium of Investigative Journalists
Tax Havens Explained With Maps (Documentary)

16

14

14
14.1

TEXT AND IMAGE SOURCES, CONTRIBUTORS, AND LICENSES

Text and image sources, contributors, and licenses

Text

Tax haven Source: https://en.wikipedia.org/wiki/Tax_haven?oldid=689780987 Contributors: Bryan Derksen, Roadrunner, Edward,

Gabbe, Tregoweth, Kaihsu, Danbirchall, Coren, Dysprosia, Jay, Timc, Itai, Topbanana, Robbot, TomPhil, Korath, Psb777, Connelly,
DocWatson42, Patrick-br, Cantus, Niteowlneils, Steggall, Wmahan, Pinnecco, Gadum, 159753, Beland, OverlordQ, Piotrus, CaribDigita,
RetiredUser2, Marc Mongenet, Salvadors, Neutrality, Damieng, D6, Rich Farmbrough, Quiensabe, ESkog, Kaszeta, Tom, Juppiter, Art
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Henry W. Schmitt, Panchurret, Ekem, Forejtv~enwiki, Commander Keane, Turnstep, Scratchy, Mandarax, Rjwilmsi, Coemgenus, Bob A,
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Rwalker, Sandstein, Silverhorse, BorgQueen, Pablo2garcia~enwiki, GraemeL, Silverhelm, Contaldo80, Ordinary Person, Airodyssey, Bob
Hu, RG2, John Broughton, GrinBot~enwiki, Flix2000, Jsnx, SmackBot, K-UNIT, Midway, KVDP, Eskimbot, Kintetsubualo, Mauls,
PeterSymonds, Rearden Metal, Chris the speller, Simon123, Dolive21, Thumperward, Radhaknkr, Sadads, Aridd, Modest Genius, Famspear, Nixeagle, NoExec, Gibnews, Byelf2007, Kuru, Nitjanirasu, Tazmaniacs, Dumelow, Pawe ze Szczecina, Canuckistani, Grapetonix,
Shangrilaista, TastyPoutine, Michael Dinolfo, Hu12, Levineps, Iridescent, Joseph Solis in Australia, Tmangray, JHP, Trade2tradewell,
CmdrObot, Mkc842, Comrade42, Green caterpillar, Future Perfect at Sunrise, Dusty relic, Avashnirvana, Legis, Sweikart, Thijs!bot,
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Nkkenbuer, KasparBot, Fred Swuitwerd, Rolandi+, Hundr, Argeniae and Anonymous: 342

14.2

Images

File:Circa_1907_Western_Australia_impressed_duty_stamp.png Source: https://upload.wikimedia.org/wikipedia/commons/2/25/

Circa_1907_Western_Australia_impressed_duty_stamp.png License: Public domain Contributors: Circa 1907 Western Australia impressed duty stamp.gif Original artist: Government of Western Australia
File:German_GDP_in_tax_havens.png Source: https://upload.wikimedia.org/wikipedia/commons/a/af/German_GDP_in_tax_havens.
png License: Public domain Contributors: Money at the Docks of Tax Havens: A Guide, CESifo Working Paper Series No. 3587, p. 9
Original artist: Shak Hebous, Goethe University Frankfurt, Faculty of Economics and Business Administration
File:Tax_havens.svg Source: https://upload.wikimedia.org/wikipedia/commons/4/48/Tax_havens.svg License: CC BY-SA 3.0 Contributors: Own work by uploader, using Image:BlankMap-World6,_compact.svg Original artist: Arkyan
File:Wiktionary-logo-en.svg Source: https://upload.wikimedia.org/wikipedia/commons/f/f8/Wiktionary-logo-en.svg License: Public
domain Contributors: Vector version of Image:Wiktionary-logo-en.png. Original artist: Vectorized by Fvasconcellos (talk contribs),
based on original logo tossed together by Brion Vibber

14.3

Content license

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