The Real Reasons the General Public Does Not Like Tax Haven Countries
It has never been easier to have a bank account in a tax haven country or owning an offshore company ever before. Nowadays it is only needed a simple and very cheap fiscal structure that legally allows people to own these kind of business holdings.
I can say that, mainly, because from the information given from the Falciani list, the Papers of Panama and other initiatives such as Wikileaks. It seems that it is becoming easier and scarily common for powerful people to have hidden money.
So far, we have seen top-level political figures as prime ministers of Iceland, the UK, Russia, China, Korea, Brazil, Argentina, Spain and a large list of rich people, all owners of the major corporations of all kind appearing in those lists.
The World’s Favorite New Tax Haven Is the United States – Bloomberg
Governments don’t seem to be acting against it because they are the most interested in having those tax havens available to do their secret deals in a “protected zone” away from the public eye.
But what is exactly a tax haven country?
Tax havens emerged mainly in the 60s, with decolonization. Small states are no longer subject to the laws of the colonial powers, and find a niche in the market by providing certain tax benefits to attract large amounts of money.
Many of these tax haven countries are islands. Some of these islands were used by pirates as shelters for their ships, waiting there for Spanish ships filled with gold and trying to board those boats. Although possibly we can say that the idea predates nowadays in these places because they are still used for the same purpose.
Normally the idea we have tax haven is a small country, typically a Caribbean island or a small European state with low tax laws. In fact, a tax haven is somewhat a bit more complicated. For most developed countries it is generally considered that a state is a tax haven if it meets one or more of the following conditions:
- No nominal taxes (or very low), so that you can save money by declaring the residence in it.
- Protection of personal financial information, so often banks or financial services companies can not disclose the financial information of its customers, even if they try.
- Lack of transparency, limiting the ability of other states to apply their tax laws effectively.
The problem arises when these criteria are rather vague, so that depending on the country you live in, some other countries can be considered tax havens or not.
For example, there was a period of time where Brazil considered Spain a tax haven for some unfair tax laws implemented by the Spanish Government. Usually when Governments pass some laws that benefit the top richest people in the country so these people will pay less in relative terms, there can be some international reactions as introducing Spain in the Brazilian list of tax haven countries.
Fewer and fewer tax havens
The number of tax havens are declining, for example by the agreements that are made between countries and their jurisdictions. For example, as much as we could hear on Switzerland, it is not considered a tax haven by most of the countries.
We can think about Switzerland as a serious and big country which is the first interested in being reliable in the international community, but what Liechtenstein, Monaco, Andorra, and many more?
Since 2009 all these countries are not in the list of tax havens by the the EU, although experts warn that money laundry hasn’t been completely stopped in these countries.
What Makes Panama a Tax Haven? – The Atlantic
So despite the roles of Panama or Falciani list, the number of countries considered tax havens is slowly decreasing through bilateral agreements. However, that does not mean that the use of tax havens is decreasing, but the opposite.
Just how are tax havens used?
Here is an important point, even if the number of tax havens is decreasing, that does NOT mean there is less money in them.
This point is quite difficult to prove with accurate numbers, mainly because of the secrecy mentioned above, it is difficult to have an assessment of the amounts deposited in tax havens, but it is sure that before a Andorra or Monaco where going to convert towards a more transparent countries banks told their clients what to do to maintain their fortunes in a safe place.
For example according to a study by the Tax Justice Network in 2014, the amounts understood that the super-rich had in tax havens, ranged between 18 and 21 trillion dollars. This amount was calculated using data from the OECD the United Nations and the IMF. This would mean an increase of between seven and nine billion between 1970 and 2010.
Approximately from what it has been released by the press, the richest 10,000 people caught in all scandals until now had about 9.8 trillion dollars offshore.
Finally, need to remember that many places within large blocks of jurisdiction (like the European Union and the United States mainly) there are places with more favorable legislation.
For example in the U.S are cases of states like Nevada or Delaware. In the EU have Luxembourg or the commonly called the “Dutch sandwich”, which allows many large companies save taxes.
