Tax heaven


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Tax heaven

  1. 1. 15 Of The World’s Most Significant Tax HavensAs long as there have been taxes, there have been taxavoiders. And as long as there have been tax avoiders, therehave been tax havens. Broadly speaking, any country that isknown for helping individuals or businesses avoid taxes canbe described as a tax haven. Some are very forthcoming andproudly advertise the tax advantages of living there, whileothers are more discreet. In either case, tax havens have along and enduring legacy in civil society (with an estimated$11.5 trillion currently stashed in offshore accounts) and eachone offers something different to aspiring tax dodgers. LuxembourgLuxembourg is an attractive place for foreigners to stashexcess wealth, as the entire country (said to be among therichest in the world – in per capita terms) seems to have arather lax attitude toward tax collection. According to onewebsite that profiles tax havens: “although they have taxes,nobody seems to work too hard on collecting them.”Amenities: No tax on bank interest, investment dividends, orcapital gains for non-residents. Cook IslandsThe Cook Islands have much to offer prospective tax dodgers,including the sheer natural beauty of its beach climate.Combined with the tax advantages discussed below, it‟s nowonder shamed Australian entrepreneur Alan Bond stashedhis money here before it all came crumbling down on top ofhim. Not everyone has such a rosy view of the Cook Islands,however. describesseveralinstances where Cook Islands-based trusts were successfully
  2. 2. invalidated by foreign judges and attorneys, some of whomactually specialize in going after trusts that are based there.Amenities: No capital gains taxes, income taxes, or deathtaxes levied on investors. Cayman IslandsHedge fund managers and investors have grown particularlyfond of the Cayman Islands, which relies solely on indirectmethods of taxation like import duties, tourist fees, andlicensing fees to sustain its government and operations. TheCaymans got major press during the 2008 Presidentialdebates when Barack Obama slammed their tax havenstatus, declaring “there‟s a building in the Cayman Islandsthat houses supposedly 12,000 US-based corporations.That‟s either the biggest building in the world or the biggesttax scam in the world, and we know which one it is.”Amenities: No income, capital gains, gift, or estate taxes onindividuals or offshore corporations. Channel IslandsInvestors with real estate-based investment trusts (or REITs)in their portfolio will find the Channel Islands much to theirliking. A 2007 Telegraph article notes that UK-based REITinvestors are flocking to the Channel Islands (located betweenthe shores of France and England) where their investmentincome is taxed at far lighter rates than the mainland UK. Inaddition to REIT investors, the Channel Islands are alsoapparently attracting their fair share of of e-commerce firmsand web companies (including UK retailer Low taxes on property investment income, lowincorporation costs.
  3. 3. BermudaWhat could be better than floating in these crystal-clearwaters and sipping an exotic drink with the knowledge thatyour business profits are completely shielded from taxation?These and other benefits help explain why entire companies(such as Tyco) have moved their operations to Bermuda. Andwhile other tax havens are coming under intense legalscrutiny, a 2002 Seattle PI article notes that “what theseAmerican companies are doing in Bermuda appears tobe perfectly legal under the tax code.”Amenities: While Bermuda does not currently offer much inthe way of tax benefits for individuals, businesses enjoya total exemption from income and capital gains taxes. DubaiDubai is the tax haven of choice for those seeking to dobusiness with Russian companies and investors. It is alsohome to a sizable pool of job talent and business contacts ofall kinds. According to one website, Dubai is blossoming into“leading UAE commercial gateway to more than 1.5 billionconsumers in Asia, Africa, Europe, India and the Middle East.”Amenities: No taxes of any kind, no tax audits, noinformation shared with prying government agencies. LichtensteinLichtenstein is rumored to be one of history‟s earliest taxhavens, and it has a well-deserved reputation among taxdodgers. Unfortunately, the success of evading taxes inLichtenstein may be leading to its own undoing!Forbes recently reported that German spies have been
  4. 4. dispatched to the country to hunt down suspicious activityfrom its own citizens.Amenities: Very easy for foreigners to set up trusts (just usea locally-hired attorney or nominee.) British Virgin IslandsAccording to a Yahoo! News article, „More than 400,000companies share a few local addresses” on the British VirginIslands, despite having no employees there and often evadingtaxes in their native countries as well. Indeed, offshoring is sointegral to the local economy that it provides over half of allgovernment revenue.Amenities: Business owners are attracted to the British VirginIslands for, among other things, the extremely lowincorporation and trust maintenance fees that the Islandshave to offer. AndorraThose who are looking for a “basic” tax shelter to avoid taxeson personal income (versus sophisticated tax avoidanceschemes for hedge funds, corporations, or investmentvehicles) will find what they have been looking for in Andorra,a small, landlocked country in Western Europe that is one ofonly three countries remaining on OCED‟s blacklist of“uncooperative” tax havens. While Andorra recently instituteda small capital gains tax, the overall tax savings still faroutweighs it‟s liability.Amenities: No personal income tax.
  5. 5. SwitzerlandNo list of tax havens would be complete without the one thatpaved the way for them all: Switzerland. Famously utilized bycelebrities and rich people around the world, Switzerland isbest known for its “Swiss bank accounts”, which offeranonymity and protection from prying eyes of all kinds.An eye-opening article at Tax Justice USA describes howcelebrities hide their money in Switzerland. It‟s well worth alook!Amenities: High level of secrecy and confidentiality, no taxeson money saved. GibraltarThe UK colony of Gibraltar has a proud and distinguishedhistory as a tax shelter and today, an onlinegambling epicenter. But as with many successful tax havens,Gibraltar‟s reputation is landing it in hot water with countrieswho frown upon tax evasion. Most recently, Spain pleadedwith OCED to blacklist Gibraltar as “uncooperative”, as aresult of Spanish efforts to investigate financial corruptionand, allegations that Gibraltar “shelters corrupt businesses.”The EU has also recently pressured the UK to stop offeringtax breaks to offshore companies based in Gibraltar, but thisyet too have resulted in any significant changes.Amenities: Low gambling tax (1% on all winnings), low taxeson offshore corporations
  6. 6. BelizeNot all countries are eager to advertise their coziness with taxdodgers, but Belize has nothing to hide. According to ShelterOffshore, Belize openly writes its laws with an eye toward taxavoidance, further noting that Belize “learned from thesuccesses and mistakes of other tax havens around the worldand designed its legislation carefully so that it would becomeTHE most attractive tax haven globally.”Amenities: Names of directors & shareholders of offshorecompanies are concealed, very fast incorporation time (1-3days) VanuatuAn important consideration in choosing a tax haven is whetherthe country in question will share information withgovernments or investigators. This is where the MicronesianPacific island of Vanuatu shines, as it shares no accountinformation whatsoever with law enforcement.Amenities: Highest level of secrecy, no income, capital gains,or inheritance taxes. GrenedaAnother tax haven with exceptional climate and culturalappeal beyond its tax advantages is Greneda, a favorite ofbanking trust investors around the world. But be careful! Asrecently as 2001, Grenada was entangled in a scandal thatsaw roughly $150 million stolen from some six thousandoffshore American depositors. It was also reported that while
  7. 7. many tax havens were beginning to clean up their act,Grenada “has proved a particularly poor regulator.”Amenities: Strict confidentiality of offshore corporations andaccounts, bank trust laws among the bestin existence. CyprusNamed in a recent survey as “one of the most attractive taxhavens in Europe”, Cyprus has almost unprecedented supportfrom the local civilian and business community regarding itstaxation practices. In all of Europe, no other country‟s citizensare as happy with the level of taxation currently in effect thanthose living in Cyprus. It is also described as an ideal countryin which to form an offshore corporation.Amenities: Low corporate tax rate (10%), no capital gainstax, no withholding tax on offshore companies