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Many myths follow the tax haven such as lots of tax evasion, higher tax, bad policies, and burden of tax towards the poor and away from the rich. Also, at present tax haven are considered the doorway to international drug running and money laundering (countries such as Singapore, Hong Kong, Switzerland, and Luxembourg). But there is no evidence to prove this. The United States is the world's largest tax havens for foreigners (invested more than a decade of trillions). Being a tax haven has facilitated the economic growth and flow of capital to the American economy. But, the European Commission, United Nations and Organization for Economic Co-operation and Development (OECD) argued that tax havens are bad for economic growth. However, OECD was found discriminating among smaller and less powerful nations to powerful ones. United States, United Kingdom, Austria, Belgium, Switzerland, Luxembourg werent blacklisted in OECDs Tax haven blacklist despite the fact that they were tax havens as being OECDs own member nations. Also, OECD bureaucrats enjoyed tax free salaries and instead demanded tax havens to close and tax rates to be increased by other nations. Ironically, people completely insulated from taxation are persecuting nations for free-market tax systems. Tax havens: It is any jurisdiction that satisfies two criteria: 1. Attractive tax laws for global investors and entrepreneurs 2. Protects fiscal sovereignty by not putting foreign tax law above domestic tax law Tax havens are determined by factors such as jurisdiction imposes no or only nominal taxes, lack of transparency. It has a jurisdiction that may be attempting to attract investment and transactions that are purely tax driven. Tax havens promote fair tax competition between nations. Countries with the more constructive tax regimes attract prosperous people to move there. Thus, it changes the balance of power away from the overbearing established powers that would seek to form a global cartel/monopoly of high-tax countries. Countries are encouraged to become tax haven as it: 1. Encourages investment and brings capital: The worlds economic growth has grown more than the 1970s since the introduction of tax havens. Tax haven promotes tax competition which forces greater fiscal responsibility and affords taxpayers the ability to enjoy more of what they earn. This in turn draws savings, investment, and skilled labor into the economy. It reduces tax bias towards saving and investments.1Capital investment is a key to long run prosperity and rise in living standards.
Submitted by: Mamita Shrestha(10118)/ MBA Fall 2010/ Reviewed by: Ashish Singh(10102)
Which countries become tax havens?-Dhammika Dharmapala, James R. Hines Jr. Do tax havens divert economic activity?- B. Mihir A. Desai a. , C. Fritz Foley b. , James R. Hines Jr. c,T a Harvard Business School
Submitted by: Mamita Shrestha(10118)/ MBA Fall 2010/ Reviewed by: Ashish Singh(10102)
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Source: Aldty and Jensenz, December 2007 Congressional Research Service memo, July 23 2001 6 OECD Economic Outlook,IV. Forces Shaping Tax Policy June, 1998
Submitted by: Mamita Shrestha(10118)/ MBA Fall 2010/ Reviewed by: Ashish Singh(10102)
UN for drugs control and crime prevention- Financial havens , Banking secrecy and Money laundering, 1998
Submitted by: Mamita Shrestha(10118)/ MBA Fall 2010/ Reviewed by: Ashish Singh(10102)
Submitted by: Mamita Shrestha(10118)/ MBA Fall 2010/ Reviewed by: Ashish Singh(10102)
Table no. 1.1 Nine out of thirteen richest jurisdictions are tax havens S.N 1 2 3 4 5 6 7 Nations uxembourg Bermuda Liechtenstein United States Norway Channel Islands Switzerland S. N 8 9 10 11 12 13 Nations Hong Kong Denmark Iceland San Marino Netherlands United Kingdom
Table no. 1.2 Nations and their tax adopted year Nation France Germany Italy Year 1911 1920 1864 Nation England Sweden Belgium Year 1842 1902 1922
Submitted by: Mamita Shrestha(10118)/ MBA Fall 2010/ Reviewed by: Ashish Singh(10102)