Tax havens

zoom

Historically the ‘tax haven' label was applied to countries, usually small, with little exportable produce, who opted to open their doors to foreign companies in order to reap the financial benefits.

More recent times have seen the increase in the number of Free Zones and tax-free enclosures, especially in developing economies, implemented by governments worldwide seeking to offer tax incentives to international businesses to relocate - without wanting to run the risk of appearing on any international ‘watch lists'. (The biggest ‘scalp' claimed so far being the (in)-famous - depending on which side of the Atlantic one sits - declaration by Halliburton earlier this year that they were moving their headquarters to the Gulf, a move that unleashed a media furore in the US).

What are they?

The exact definition of a tax haven is difficult to pin down as certain criteria could easily include countries such as the UK, or some states in the USA, while excluding others that are more traditionally associated with expatriate economic exoduses.

The most widely-accepted benchmark is set by the Organisation for Economic Cooperation and Development (OECD), a group of 30 nations which quantifies its mission as "to achieve sustainable economic growth and employment and to raise the standard of living in member countries while maintaining financial stability - all this in order to contribute to the development of the world economy".

Its key criteria are threefold: The state imposes no, or only nominal, taxes and is, or is perceived by non-residents to be, a place that can be used to escape taxation in their country of origin (although this is not enough in itself or a jurisdiction to be labelled a tax haven): Legal or administrative practices that prevent the effective exchange of information about taxpayers, therefore allowing individuals and businesses to benefit from secrecy rules: A lack of transparency in legal, legislative or administrative provisions that hinders other tax authorities from getting information or a lack of consistence in a jurisdiction's application of taxation laws.

This is taken in the context of individual relocation; the founding of Trusts or Holding Companies based in low-tax areas either for the holding of group assets or day-to-day trading; or the use of financial intermediaries to transfer or hold funds (the reason behind many high street banks touting the benefits of ‘offshore' accounts).

Print | Email | Discuss this article |

READERS' COMMENTS

View all comments (0)

Have your say

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM