A tax haven, or secrecy jurisdiction, refers to a nation, state, or territory that offers low or no taxes and maximum confidentiality to foreign investors and businesses seeking to minimize their tax liabilities.
Key Attributes of Havens:
- No or nominal income, corporate, capital gains, or other taxes on most earning types
- Lack of information exchange with other countries impedes identification of account holders
- Low or no compliance requirements regarding financial activity reporting
Example:
Wealthy individuals have sheltered assets in Swiss bank accounts and Caribbean havens for decades to avoid domestic taxation.
Takeaways:
While legal, havens deprive some countries of rightful revenue and facilitate illicit flows. However, they also bolster some economies. Ongoing reforms like automatic information exchange balances economic and criminal priorities among sovereign nations.