≡ Menu

Do Tax Havens Have a Place in the World Anymore?

There are a number of universal truths when it comes to taxation.  For example, if a country leverages taxation it will breed those who seek to avoid it, and subsequently there will always be those who enable tax avoidance, evasion or reduction for their own gains.  In other words, if it weren’t for taxation there would be no need for tax havens!

However, as everyone’s eyes cannot help but be focused on various critical economic factors affecting the world we live in and the lives we all lead, are tax havens actually losing their appeal almost universally?  Tax havens are having their competitiveness eroded, their credit ratings downgraded, and their opaqueness challenged – therefore, are offshore jurisdictions falling out of favour?

Ever since the concept of taxation was invented, the war has been on to combat tax avoidance, but it seems that never before has this war been fought on so many fronts and supported by so many organisations, nations, institutions and powerful individuals.  So do tax havens have a place in the world anymore?  It’s time for you to tell us what you think…

Tax Havens, Their Credit Ratings and Reputations

Certain tax havens like Guernsey, Jersey, the Isle of Man and Switzerland have always fought hard to retain an air of respectability.  Not for such havens the promotion of illegal activity!

Rather these jurisdictions have sought to portray their business environments as ‘competitive,’ and their attitudes towards illegal tax evasion as unequivocally non-condoning…

Some accept the façade presented; others challenge it on the basis that with their legislation to enable tax competitiveness and individual anonymity in place, such locations are complicit in tax avoidance – if only through enablement.

Yet one cannot deny that tax havens have enjoyed exceptionally lucrative business in the past, and profited from their tax-friendly environments.  A fact proven by the AAA grade credit ratings acquired by tax competitive countries and Crown Dependencies alike…

However, even the most appealing and successful tax havens have not managed to escape the contagion of fiscal cancer.  In the last week alone both the Isle of Man and Guernsey have seen their credit ratings downgraded for example.  In both cases the reasons for the downgrades were external factors rather than internal policies and issues…but it just goes to show that even affluent tax havens are not immune to the financial fallout of the global economic storm.

As an expatriate and therefore a potential offshore investor, does this fact worry you?  Are you concerned that tax havens’ economic strengths are being undermined, and that as a result they are becoming less of a safe haven for international funds?

Another tax haven that was dealt a substantial blow in the last week was Gibraltar.  This time it came in the form of a legal ruling…

The European Court of Justice determined that proposed changes to taxation in Gibraltar would result in selective advantages being enjoyed by offshore companies.  It therefore disallowed the changes on the basis that they would constitute a state aid scheme in violation with the internal market.

Meanwhile Expatra readers have spoken out against the promotion of the Isle of Man as a trustworthy and ‘safe’ haven for business in the past week, and even the most seemingly well-respected offshore jurisdictions are being regarded with some suspicion by those they would normally court for business and investment.

Transparency is the New Opaque

Tax havens are also being targeted on another front by the likes of the OECD (Organisation for Economic Cooperation and Development) and the EU.  Such establishments are seeking to encourage transparency in all global tax matters.

These bodies’ voices carry such significant weight, and as a result even the most secretive havens such as Switzerland are being forced to roll over and review privacy policy.  This has resulted in the British Revenue being given the powers to investigate resident Britons suspected of having funds in formerly highly secretive Switzerland for example.

IFAonline.co.uk reported today that HMRC will send out letters to resident British Swiss bank account holders this week, and demand that they come clean with their tax affairs.  They are expected to be given 30 days in which to report any tax irregularities, or face further investigation.

Previously this would have been impossible as Switzerland prided itself on protecting the privacy of its account holders and investors.  But transparency is the new opaque in the global clampdown on tax avoidance.

Global Bankruptcy – We’re All In It Together

Finally, as we’re forced to live our lives out against a backdrop of global bankruptcy, and as we discover that the only way out of the fiscal mire is if every citizen of each nation shoulders their share of their government’s economic failure and corruption, even the most laidback citizens are questioning the morality of those who seek to avoid their tax obligations.

Therefore, if it’s an unavoidable truth that ‘we’re all in it together’ there can be no room for the enablement of taxation reduction in many people’s minds.

But what do you think?  Do tax havens have a future in this rapidly changing financial world of ours?  Please feel free to voice your opinions below and encourage the debate.

Comments on this entry are closed.