Tax haven

A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing.

Tax Haven

A country that has a low tax liability compared to other countries or no taxes at all. Some countries deliberately set themselves up as tax havens in order to encourage international corporations to register themselves there. Some countries that are not tax havens have loopholes in their tax codes in order to allow certain persons and companies to place some of their assets in an account in a tax haven.

tax haven

A country or other political entity that offers outside businesses and individuals a climate of minimal or nonexistent taxation. In some cases, the low taxes apply not only to those levied by the tax haven itself but also to the possibility of reducing or avoiding taxes levied in the investor's home country.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

tax haven

a country which imposes low rates of personal and corporate TAXES, and which as a consequence tends to attract wealthy individuals, MULTINATIONAL ENTERPRISES and FINANCIAL INSTITUTIONS seeking to minimize their taxation liabilities. At the present time, countries operating low-taxation systems include Bermuda, Jersey and the Cayman Islands. An OECD report published in 2000 listed 35 ‘offshore financial centres’ which it classed as ‘tax havens that harm trade and investment’. The OECD defined harmful jurisdictions as those that offered zero or low tax rates but fell short in legal and administrative transparency. The latter factor makes it difficult for other countries ‘tax authorities’ to detect and observe the complex financial transactions undertaken by criminals and MNEs (MULTINATIONAL ENTERPRISES) to ‘hide’ their tax liabilities.

There are two main types of tax haven arrangements:

tax exempt companies beneficially owned by non-residents of a country which pay a small annual administration fee (under £2000) in return for being exempt from income and withholding taxes; there are no capital gains or inheritance taxes. Tax haven countries themselves ‘gain’ from the creation of local employment and the extra income this creates, often in an impoverished country or a country lacking other resources (e.g. the Channel Islands and the Isle of Man);
international business companies that are ‘accommodated’ by ‘designer’ taxation, whereby tax havens ‘tailor’ rates of tax to help individual MNEs to minimize their ‘onshore’ tax liability. MNEs negotiate low tax rates which in turn allows them to meet thresholds for tax exemptions in onshore jurisdictions. See also TRANSFER PRICE, MIXER COMPANY, MONEY LAUNDERING.

tax haven

a country that imposes low rates of personal and corporate TAXES, and as a consequence tends to attract wealthy individuals and MULTINATIONAL COMPANIES seeking to minimize their taxation liabilities. See MIXER COMPANY. See also TRANSFER PRICE.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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So how can it be that South Korea, a member of the OECD, is now considered a tax haven? When contacted by DW, the organization said it did not want to comment yet.

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However, the general public harbors deep-rooted suspicions that "a small number of the rich as well as big business are using tax havens to benefit improperly." The tax haven issue is particularly prone to serve as the catalyst for an increase in public suspicion regarding the fairness of the tax burden in many countries against the background of growing income disparities.

Fairness of the Tax Burden in the Age of Globalization: the Panama Papers

Both tax evasion and tax avoidance, whether via an offshore tax haven or an anonymous establishment, undermine a tax system's ability to meet its three most important goals: (i) revenue generation; (ii) fair distribution of tax services burden across tax payers though not equally; and (iii) promote growth and equity.

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