8.6B Acceptance of tax havens

• Different methods of tax avoidance offered by tax havens include:

  • Corporate profit-shifting - where a TNC's headquarters is located in a low-tax country
  • Wealthy people can move to a tax haven and live there or they can invest their money in a trust in a tax haven
• • tax havens offer a way of avoiding paying tax, but also reduces investment in LDEs and encourages corruption
  • Tax avoidance uses legal loopholes to reduce a company's or personal tax bill
• Advantages of tax havens:

  • Deliver economic boost and growth
  • tax havens offer a centralised tax centre
  • Tax havens can develop quickly and recover from recessions even quicker
  • Deregulation of capital markets has enabled growth of tax havens and other low-tax environments 
  • provide homes for wealthy expatriates with benefits for them and their employees
  • TNCs may use havens/low-tax financial centres to increase profits
• Disadvantages of Tax-havens:

  • TNCs pay very little tax, leaving the government with less money for domestic services
  • Investing abroad reduces money available to invest in their own country
  • Tax havens allow individuals to avoid declaring income to their home governments. This increases corruption in HDEs and LDEs
  • Some organisations have resisted this deregulation and globalisation and attempted to retain or regain control
  • nations are unlikely to take action to tackle tax havens
  • Growing inequalities