Tax havens refer to all those countries which attract either low rate of taxes or no taxes at all.General features of a tax haven are:
Lowest taxes or no taxes;
Non-disclosure of tax information with any alien tax authority;
Minimal transparency about legal/administrative clauses and processes;
Tax havens have grown a lot during this era of globalization due to offshore banking by Swiss banks and such others. All those countries called tax havens have designed their own tax regimes. The essential elements of a tax havens are political stability of the government and economic stability along with a well built network of communication channels. The main attraction of tax havens is their Discretion to decide tax laws.
In the earlier times, the major tax havens of world were Argentina, Australia, Brazil, Canada, China, Czech, Republic, France, Germany, Greece, Ireland, Italy, Japan, Mexico, Netherlands, Poland, Russia, South Africa, South Korea, Spain, United Arab Emirates, United States, etc.But now most of them follow the international tax standards laid down by Organization for Economic Co-operation and Development (OECD).Very recently,during April,2007 at G20 Summit held in London, all members have agreed to prepare a blacklist for tax havens containing names of countries which do not follow the internationally agreed tax standards. The major 4 categories of the list four categories of the list are:
Countries with signficant implementation of the tax standard.
Countries that have made the commitment to follow but have not yet fully implemented tax rules.
Financial centres that have not yet implemented that tax centers.
Those that have not agreed to follow the tax standard.
Benefits/Advantages on being a Tax Haven
There are several incentives because of which a nation to become a tax haven. Usually when the economy is developing or is under-developed,it find easier to attract foreign capital and technology if it is a tax haven. Some nations feel that there is need to charge less than industrialized countries in order to flourish. Some of them offer to charge a lower tax rate from corporations, with a return in the form of employment of local resources.
Last Updated on : 5th July 2013