Tax Haven

Tax Haven or the place in which certain taxes are imposed either at a low rate or not at all is the best possible way out for those interested in reducing their tax rates.

In some countries, high tax rates can lead to economic incentives for the taxpayers to relocate to areas with comparative lower tax rates and this phenomenon creates tax competition among different governments. There are many Tax Haven specified for different types of taxes as well as for different groups of people and companies. Tax Haven has the potentiality to transform the tax structure of any nation. As a result, there are also some effective tax laws regulating the protections of the Tax Haven such that there are no revolutionary changes within the economy.

There are some specific characteristics as being identified by the Organization for Economic Co-operation and Development or the OECD to decide the tax structure of any nation to be denoted as Tax Haven. These are -

• Regarding the situations when there is either payment of no/only nominal taxes. In special cases, Tax Haven creates such conditions to offer themselves as shelters for the non-residents to evade high taxes in their respective residential countries.
  
  
• Tax Haven generally emphasizes protecting the personal financial information of the taxpayers. They have specific laws for the benefit of corporate houses and individuals that can protect them from the scrutiny and other strict laws of the foreign tax authorities.
  
  

However, there occurs a lack of transparency in the functioning of the different provisions of the Tax Haven. As per the OECD, the tax laws should be open and consistent such that any information on the individual taxpayer required by the foreign tax authorities is easily available. The OECD decides whether every jurisdiction can be allowed to impose direct taxes and to determine the required tax rate. Among the oldest Tax Haven in the world stands the Channel Islands and the Isle of Man. As per the modern concept of Tax Haven, Bermuda is the first Tax Haven creating the first offshore tax companies of Conyers Dill and Pearman. This view is contested as according to some the first Tax Haven in its truest sense was Switzerland and then Liechtenstein. Nevertheless, the emersion of the modern Tax Haven is difficult to decide.

The Tax Havens do not project always a success story, as they are associated with some significant failures. For instance, in the Middle East it was only Beirut that was the only tax haven. However, after the economic and political turmoil of the year 1966, this stable Tax Haven was destroyed. Other tax havens like Liberia, some Pacific based tax havens, and Tangier have reached similar fate.

Among the best Tax Haven, Dubai is very important. This is because of its strategic location catering to billions of consumers in Europe, Asia, Middle East, and Africa. Moreover, Dubai also has the largest international free-trade zones and high graded infrastructure along with the provision for zero taxes. Among other tax havens Hong Kong, which is the major gateway to China, is very significant for its dependable legal system to the offshore companies and trusts. Similar other popular Tax Havens of the world are Switzerland, the Republic of Panama, and Liechtenstein.

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