"Don`t believe everything you read in the media," Lewellen urges readers. "The next time you pick up a Wall Street Journal and read about how bad tax havens are, think twice about whether it`s still true." Experts call this a "fiscal mantra." This allows companies to appear as good corporate citizens, but does not contradict the fact that many of these companies use loopholes (some of which later turn out to be illegal) to avoid taxes. Tax havens generally do not require a significant local presence of external companies. 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. According to a recent OECD report, these efforts, in particular the automatic exchange of information, have reduced bank deposits in tax havens by 20-25% over the past decade, an early indicator that tax havens may have become less attractive to anti-tax avoidance measures. However, given that some BEPS measures are still being implemented, it remains to be seen to what extent they will hamper tax avoidance. The opaque nature of tax havens and the use of foreign bank accounts attract those looking for a discreet place to park money in the short or long term. However, this opacity leads to disturbing practices by which the offshore world is now widely known. Apologists insist that tax havens protect individual freedom. They promote capital accumulation, fair competition between nations, and better tax laws in other parts of the world. They also promote economic growth.
But even if all of this were true—and it isn`t—does it outweigh the ethical damage they cause? The numbered bank accounts of tax havens are notoriously safe havens for looting, fraud, corruption, terrorism, drug trafficking, illegal gambling, money laundering and looting by Arab despots such as Gaddafi, Mubarak and Ben Ali, who had frozen all Swiss accounts. 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. And let us not forget the inhabitants of failed states, where crime, expropriation, kidnapping, corruption, extortion and economic mismanagement are pervasive. These people also need sanctuaries where they can invest their money safely and confidentially. A recent agreement by the Group of Seven rich countries aims to eliminate corporate tax havens by introducing a global minimum corporate tax rate of 15%. As a tax expert, however, I find it difficult to take this effort seriously. Finally, two other videos on tax havens. These are economic issues. If lying is immoral, it is a quick black spot for Mr Vallely and not for tax havens. I once stated in an article that eviscerated an empty senator from North Dakota that a company`s home is just where it is chartered for legal purposes.
The legal domicile of a company has nothing to do with the place where it carries on its activities or where it has its registered office. 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. It depends on where you live. As a general rule, keeping offshore secrets is not as easy as it used to be. Many governments, including the United States, can automatically obtain information from tax havens and other countries through the foreign bank accounts of their own citizens. Other countries, particularly developing countries, must submit individual requests for information to tax havens.
Many jurisdictions, including the state of Delaware, refuse to create public registries that would identify the beneficial owners of shell companies. Being the self-proclaimed defender of so-called tax havens has led to some rather bizarre episodes. Tondo slum in Manila, Philippines, 2014. Tax havens cost poor countries at least $100 billion in lost tax revenue each year. A 2018 paper by Duke University economist Juan Carlos Suárez Serrato shows that eliminating tax havens can have a negative impact on high-tax economies. The author considered the repeal of section 936 of the United States Internal Revenue Code in 1996. Section 936 provided for a tax credit equal to the total amount of U.S. tax on income earned in U.S. possessions such as Puerto Rico. Since this foreign-source income was completely exempt from U.S. tax, it provided an incentive for U.S. multinationals to shift their profits to Puerto Rico to take advantage of the loan.
Serrato noted that companies affected by the repeal of Section 936 have reduced global investment and displaced investment abroad, reducing U.S. investment by 38 percent and employment by 1 million jobs. In fact, there are many people who have very compelling reasons to keep their money in ports, and only a tiny minority of them escape a heavy tax burden. What about it: 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. Unfortunately, while the world is replete with evidence that a smaller government is good for prosperity (and even more evidence that a big government is bad for growth), statism is not weakening. Tax havens have quickly become a global economic problem.
Interested investors should speak to an experienced tax lawyer to understand compliance and other issues surrounding offshore banking. Effective measures to combat tax evasion are still in their infancy and others will follow. Tax havens are an important part of the global tax evasion game.