Tax Haven
IntermediateA tax haven is a country or territory with very low or zero taxes, often combined with secrecy and few requirements for real business activity, that attracts companies and individuals seeking to reduce tax elsewhere.
Tax havens typically offer some combination of low or no corporate or income taxes, limited disclosure of who owns companies and accounts, and easy registration of companies that do little actual business locally.
Multinational companies have used tax havens to shift profits away from the countries where they make sales or carry out operations. For example, a company might move the ownership of its patents to a subsidiary in a low-tax territory, which then charges other parts of the group large royalties, shifting profits there.
Wealthy individuals have also used tax havens to hide assets and income, sometimes illegally.
International efforts have significantly reduced secrecy and profit shifting. Many countries now automatically exchange information on financial accounts held by foreign residents. The OECD's global minimum tax rules aim to ensure that large multinational groups pay a minimum effective rate of 15% on profits in each country. Lists of tax havens differ between organisations, and the term is often disputed by the places labelled with it.
For worked examples and full lessons, visit notesbysara.org.