A tax haven is a nation that has no taxation policy or one that offers a low taxation to foreign companies. This is so as to attract the corporations to do business or reside in their country so as to avoid paying tax or pay the little tax. The tax havens are bad for the world economy since they affect the nations that have in place a strict taxation policy. With economic integration, some companies around the world see a chance to avoid taxation in the tax havens by moving their mobile taxable assets to those countries.
These tax havens take advantage of the increased capital mobility and attract this capital by offering favorable tax terms. Essentially, these tax havens are promoting tax competition which generally is very unhealthy for the global economies. Some nations have promoted tax competition by not disclosing the rules and taking fictitious domically positions and being governed by the so-called zero tax regimes.
Faced with the challenge of tax havens, the EU ministers have resolved not to close their eyes any longer on these tax havens. Instead, they have resolved to name and shame the drainers of capital that is organized by the cooperative governorships where secrecy in banking and impunity have taken over as taxation law. In the long list of the tax, haven includes:
- South Korea
- Trinidad and Tobago
- Marshall Islands
- Saint Lucia American Samoa
- Bahrain and Macau.
The EU ministers announced that the list will be updated every year. So what next for these nations?