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Transcript of TAX HAVENS
Corvinus University of Budapest
In contrast, tax avoidance is the legal use of tax laws to reduce one's tax burden. Both tax evasion and avoidance can be viewed as forms of tax noncompliance, as they describe a range of activities that intend to subvert a state's tax system, although such classification of tax avoidance is not indisputable, given that avoidance is lawful, within self-creating systems
A tax haven is a state, country or territory where certain taxes are levied at a low rate or not at all.
There are several definitions of tax havens. The Economist has tentatively adopted the description by Geoffrey Colin Powell : "What ... identifies an area as a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance."
Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions.
An offshore company is a legal entity established in a tax haven or offshore financial center, being protected by specific legislation which guarantees a status of partial or full tax exemption.
Shareholders and directors of an offshore company may enjoy generally a high level of privacy.
Andorra, a tiny European nation neighboring France and Spain, has enjoyed a longstanding reputation as a tax haven. However, the country recently announced plans to view foreign investments with "total openness," effectively ending its tax haven status.
Lichtenstein is also trying leave its tax shelter reputation behind and become more transparent. In fact, its new openness has already ensnared one high-profile casualty: Deutsche Post head Klaus Zumwinkel got hit with a million-Euro fine for sticking a million Euros into an account at Lichtenstein LGT bank.
The Seychelles, an island archipelago located in the Indian Ocean off Madagascar, recently made news as the honeymoon choice for Prince William and the Duchess of Cambridge. However, foreign investors know it as one of the world's leading tax havens. In fact, offshore companies don't have to pay taxes at all, as long as they don't actually do business in the Seychelles.
Bermuda has been known as a tax haven for decades, but Google helped turn that little factoid into headlines when reports surfaced in 2012 that the tech giant had saved $3.1 billion since 2007 by shifting its profits to Bermuda. The island's 2.4 percent corporate tax rate may have had something to do with it.
Panama has been considered one of the world's leading tax havens, but double taxation agreements with several G20 nations have helped the Central American country get off the OECD "grey list.
In Jan. 2012, the tiny island nation made news again when reports surfaced that Republican presidential candidate Mitt Romney had hidden millions in offshore accounts there.
Thank you for watching