Introduction of Tax Havens

Introduction of Tax Havens: Part 1.

When someone says tax havens or offshore banking, the first thought that pops into mind is illegal financial transactions and money laundering, followed very closely by dons and mafia heads. These are just stereotypes promoted by the media and moviemakers , but then one might ask, what exactly is a tax haven? Simply put, a tax haven is an offshore jurisdiction with lower tax rates, which attracts corporations to register with them as legal entities and benefit from lower tax rates of zero tax rates on certain types of income.

As tax havens as a term, sometimes have negative connotations, the emerging trend is to call them corporate tax havens. The nomenclature is different but the purpose is the same. It is an offshore financial center which has tax friendly legislature, that allows companies registered within it to operate at greater profits by paying lower or zero taxes.

Unlike common misconceptions not all offshore corporate tax havens are glamorous islands with bikini clad babes! Yes quite a few of them are islands in warm locations but there are other locations like Delaware in USA and Isle of Man which are considered to be tax havens too. These offshore financial centers offer comparable levels of tax to more exotic offshore locations and, in some cases, offer far greater benefits. Unsurprisingly, the Offshore Financial Centers friendly to corporate also include the famous tax havens of the Cayman Islands and Bermuda.

Why would a country want to declare itself as a tax haven? Because by offering a number of tax benefits enticing corporations to register in their domicile, the government of the country benefits from increased local employment and naturally taxation of the employees upon their income, which would not have occurred otherwise.

Despite being seen by the OECD as ‘harmful to the global economy’, one could argue that offshore tax havens actually promote business and revenue. An illustrative example would be :If a company is just breaking even, it is unlikely to prosper and grow. The business owner may well give the business up and move on to a different venture. If the company is domiciled in a corporate tax haven, then the owners have to pay less tax. This makes the business substantially more viable and more likely to grow and develop and become a prosperous business in time. Therefore, it could be argued that tax havens and corporate offshore financial centers actually help businesses to keep making money and employing staff and, consequently, becoming successful.

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Introduction of Tax Havens: Part 2

The term of the tax haven has link with several factors like unsavory, immoral and may even illegal activities in the brains of numerous people. Moreover the firm and the coverage of the constant negative media and propaganda of the government have all reasoned the public to concern tax havens along deals of the shady business various characters of the questionable nature. As a result, there are many people who seem to wonder that what is the reason that anyone would want to drag their money offshore.

A tax haven is a foreign country or dependency that has an embodiment of novel characteristics, the primary one being comparatively less tax rates as compared with other countries. It can never be denied that, there are several tax havens which charges no taxes at all on the earning of the income by the individuals of foreign. The most significant point is that, secrecy of the banks as well as the privacy laws are other authentic and these are the major characteristics of the tax havens. In fact, in few tax havens there is existence of the prison sentences for anyone expressing private financial information.

Especially, In the United States the IRS agents are going to define tax haves as a chain that usually connotes any foreign country that may either a prominent low tax or there is no tax at all on the various types of the income. There are several jurisdictions defined by IRS, Accordingly there are thirty jurisdictions existing all over the world as tax havens which consist on the different places like Austria, Hong Kong, the Cayman Islands, Panama e.t.c.

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Read this article on Forbes.com Tax Informants Are On The Loose

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