by Ronen Palan
Tax havens have been around for decades but they were viewed as marginal if not esoteric phenomena. Attitudes are changing. As new data on international financial flows becomes available, it is difficult to avoid the conclusion that tax havens are at the very heart of 'neoliberal' globalization, aiding and facilitating tax avoidance on a vast scale.
Tax havens exhibit three characteristics. First, they are jurisdictions with either low or no income or corporation tax, or which present certain facilities or legal 'loopholes' that allow non-residents to pay little or no tax. Second, jurisdictions that have created legal systems that ensure the secrecy of account holders' identities. Third, jurisdictions that allow easy incorporation with little or no due diligence imposed.
Among British Caribbean territories three 'classical' tax havens stand out: The
It is surprising, perhaps, that serious multilateral efforts to combat international tax abuses began in earnest only in the late 1990s. The publication of the OECD report,
The most significant development in the battle against tax havens is the enactment by the
FATCA does not attempt to negotiate with various jurisdictions to change their laws. Through FATCA, the US insists that any financial entity that seeks to have any business either in, or with, a US entity must provide extensive information on ownership and profits. Registration in a tax haven is no longer an excuse. Entities that do not wish to provide this information will not be able to do business in the US.
The combined effect of all these efforts is bound to change the fortune of these tax havens. Companies attracting unwelcome headlines over tax avoidance, such as
Yet despite the growing pressure on tax havens, the statistics mentioned above are not budging. Money is still flowing to these jurisdictions. It will probably take three years before we see the impact of FATCA. It appears that tax havens are not dead yet.