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The economy of tax havens - Pros and cons

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  1. The harmful consequences of tax havens
  2. Positive aspects of tax havens

Tax evasion and tax avoidance that are more easily achieved thanks to the internationalisation of the economy are also often considered as plagues against the creation of a fair international economic environment, preventing countries from accessing essential financial resources for their development and/or growth. The number of tax havens has grown dramatically since the 1970's, most of the governments being unable or unwilling to go against this tendency (Escario Diaz-Berrio, 2011). Nonetheless, this situation seems to be about to change, as an increasing number of measures are taken worldwide in order to take those havens down and get that money back to their home nations. But what makes those low-tax countries, so appreciated by companies and some individuals, the target of other countries in the world? Ultimately, are those arguments reasonable enough to justify why a lot of countries try to eradicate such practices?

[...] Commonwealth Secretariat Combating Money Laundering and Terrorist Financing: A Model of Best Practice for the Financial Sector, the Professions and Other Designated Businesses. 2nd edition 3. Escario Diaz-Berrio, J The fight against tax havens and tax evasion: progress since the London G20, summit and the challenges ahead. [e-book] http://www.google.be/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=5&ved =0CEoQFjAE&url=http%3A%2F%2Fwww.falternativas.org%2Fcontent%2Fdownload% 2F17693%2F493362%2Fversion%2F1%2Ffile%2FThe%2Bfight%2Bagainst%2Btax%2Bh avens%2Band%2Btax%2Bevasion.pdf&ei=WY2gUqy1Ja2M7Aa144GoAg&usg=AFQjCNHb1 CaRGArD7cddcaWuQD1exW3RxA [Accessed: 05 Dec 2013] 4. Miller, A. and Oats, L Principles of international taxation. Haywards Heath, West Sussex: Tottel Pub Mitchell, D The Economics of tax competition. [e-book] http://www.adamsmith.org/sites/default/files/images/stories/tax- competition.pdf [Accessed: 03 Dec 2013] 6. Raab, S Mafia-Aided Scheme Evades Millions in Gas Taxes. [...]


[...] Teather, R Tax Competition: How tax havens help the poor. book] Available through: http://www.adamsmith.org/sites/default/files/images/stories/teather- tax-comp.pdf [Accessed: 03 December 2013] 11. The European Commission (2013) Unemployment Statistics, available at: http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemplo yment_statistics [accessed on 5 December 2013] 12. Van Dijk, M. and Weizig, F The Global Problem of Tax Havens: The case of the Netherlands. [e-book] http://www.google.be/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=4&ved =0CFAQFjAD&url=http%3A%2F%2Fsomo.nl%2Fpublications- en%2FPublication_3463%2Fat_download%2Ffullfile&ei=3- adUu6kI8GmhAeu_4Fg&usg=AFQjCNEStGrWpXVQUWL0VATaxjGyaCVBPA&bvm=bv.571554 69,d.bGQ [Accessed: 03 Dec 2013] 13. Yilmaz, Y Tax Havens, Tax Competition and Economic Performance. [...]


[...] Nothing is totally black or white, hence, the question is not about, should tax havens be allowed or not? But more about which degree of tax havens may be acceptable, a possible answer being that tax havens should be given more incentives to provide information about the criminal activities they hide from the rest of the world and that highly contribute to their non-ethical reputation. References: 1. Cia.gov The World Factbook. [online] Available at: https://www.cia.gov/library/publications/the-world- factbook/rankorder/2004rank.html [accessed on 3 December 2013] 2. [...]


[...] A great example is the economic gap existing between the tax havens of the Caribbean region and the rest of the countries in that part of the world. The estimated GDP per capita in the Cayman Islands and the British Virgin Islands were almost equivalent to the Swiss GDP according to the CIA. On the opposite, numerous Caribbean nations like Jamaica or the Dominican Republic had very low GDP's, not even reaching the quarter of the Cayman Islands' one (CIA.gov, 2013). Other benefits for tax havens are the creation of jobs that are required to sustain the financial activities of the country. [...]


[...] The first advantage brought by the existence of tax havens is the tax competition that occurs between those low-tax countries and the high-tax countries. As already mentioned, this competition forces the latter to diminish their tax rates what is profitable for both companies and people. Indeed, governments in high-tax jurisdictions perfectly understood that in order to receive the most revenues out of their taxation systems, they should remain competitive against other high-tax nations but also and especially against countries applying lower tax regimes (Regjeringen.no, 2013; Yilmaz, 2006). [...]

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