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What are tax havens and where are the main ones?

2021-10-05T16:25:51.940Z


What are tax havens, where are the main ones, and how much do they cost countries for foregone taxes?


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(CNN Spanish) -

The appearance of the Pandora Papers, the most recent investigation carried out by the International Consortium of Investigative Journalists (ICIJ, for its acronym in English) on tax havens, has once again shaken the financial world.

The report, carried out together with 150 media outlets, is based on 11.9 million documents, images and other confidential files leaked from 14 companies around the world "dedicated to setting up shell companies and trusts in different tax havens," according to to the ICIJ.

  • The Pandora Papers: The "off shore" companies, a legal instrument with a bad reputation

The work mentions more than 330 politicians - including 35 heads of government - in 90 countries, and more than 130 billionaires in 45 countries.

In most countries of the world, having secret assets in tax havens or using companies abroad with tax advantages is not illegal, but the opacity of these structures has the potential to hide irregularities.

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What, then, are tax havens, where are the top destinations for the world's secret money, and how much does it cost states?

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What is a tax haven?

The Organization for Economic Cooperation and Development (OECD) identifies as tax havens those jurisdictions that comply with four factors:

  • minimal or no income taxes

  • lack of a system for the exchange of information

  • lack of transparency

  • absence of substantial economic activities in the destination

Initially, the OECD had identified 40 jurisdictions that met these criteria in 2000, but in the following years most of them began to take action to solve these problems, for which they were removed from that list.

In 2009 the OECD removed the last three territories from its payroll: Andorra, Liechtenstein and Monaco.

The ICIJ, responsible for research on tax havens Panama Papers (2016), Papeles del Paraíso (2017) and the most recent Pandora Papers, points out that there is no universal definition for offshore tax havens or financial centers.

The bad reputation of 'off shore' companies 2:47

"They are generally countries or places with low or non-existent taxes that allow foreigners to easily establish their businesses there. Tax havens also tend to limit the disclosure of public information about companies and their owners," he says on his website.

The impact of tax havens

Financial researcher Nicholas Shaxson has pointed out that "until about a decade ago, there were few political brakes on the expansion of tax havens," but it is now clear that, far from being an exotic phenomenon, tax havens have a much greater impact than believed in the global economy.

"After the 2008 crisis, however, governments came under pressure to cut large budget deficits and placate voters angered by bank bailouts, rising inequality, and the ability of multinationals and the wealthy to evade. taxes, "he said in an investigation published by the International Monetary Fund (IMF) magazine Finance & Development.

Shaxson noted that each year tax havens cost the world's governments between $ 500 billion and $ 600 billion in lost revenue, depending on the estimate used.

And US $ 200 billion of this total would come from low-income countries, which is a larger share of their respective GDP compared to high-income countries.

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Other estimates vary: Oxfam speaks of losses of $ 100 billion a year for low-income countries alone;

researcher Gizela Lénártová estimates US $ 190,000 million worldwide;

while Petr Janský, in Routledge's Applied Economics magazine, cites an estimate of between $ 100 billion and $ 600 billion.

Where are the main tax havens?

The payroll of tax havens is continually changing, as some jurisdictions take steps for normalization under international pressure, and others begin to emerge as new tax havens.

A list of top destinations considered tax havens published in June by Oxfam includes countries and territories such as Bermuda, the Cayman Islands, Ireland and the Netherlands.

Oxfam's ranking was made based on the tax rates in these jurisdictions, the unfair tax incentives they might offer, and their cooperation with international efforts to curb tax evasion.

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The Bermuda Business Development Agency, which leads the list, reacted at the time by noting that the Oxfam report was based on a “faulty understanding of the economy and a lack of consideration”: “We think it is a vague attack, wrong informed and worryingly prejudiced ”.

Here are the top 15 tax havens, according to Oxfam:

  • Bermuda

  • Cayman Islands

  • Netherlands

  • Switzerland

  • Singapore

  • Ireland

  • Luxembourg

  • Curacao

  • Hong Kong

  • Cyprus

  • Bahamas

  • sweater

  • Barbados

  • Mauricio

  • The British Virgin Islands

Not all are small countries

Although the UK is not considered a tax haven, Oxfam highlights that there are four of its territories on the list: Cayman Islands, Bermuda, Jersey and the British Virgin Islands.

The Tax Justice Network offers a similar list of the main tax havens: British Virgin Islands, Cayman Islands, Bermuda, Netherlands, Switzerland, Luxembourg, Hong Kong, Jersey, Singapore and United Arab Emirates.

And in the index of financial secrecy prepared by the same source, the United States appears as the second country in the world with the most facilities, behind the Cayman Islands and ahead of Switzerland.

Panama rejects its inclusion in the list of tax havens of the EU 0:36

"The United States is among the largest tax havens in the world due to the magnitude of assets held in the country and owned by non-residents who benefit from financial secrecy, including through shell companies," says Shaxson.

The list of tax havens of the European Union

Since 2017, the European Union (EU) has produced its own list of jurisdictions that are characterized by a lack of cooperation in tax matters.

"(The list) lists non-EU countries that encourage abusive tax practices, which erode the corporate tax revenues of member states," the block notes on its website.

There are a total of 12 countries and territories included in the 2021 list: American Samoa, Anguilla, Dominica, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands, Vanuatu and Seychelles.

Pandora Papers Tax Havens

Source: cnnespanol

All news articles on 2021-10-05

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