Tax Haven

Summary of Tax Haven

A legal jurisdiction that levies no, or very low, taxes on the income of firms organized under its laws or operating within its borders. Often the exemption is limited to firms organized in, but not operating in, the country.

(Main Author: William J. Miller)

Other Popular Tax Definitions in the World Legal Encyclopedia

• Adjusted Gross Income (sometimes, including Tax Haven)
• Ad Valorem Tax (sometimes, including Tax Haven)
• Alternative Minimum Tax (sometimes, including Tax Haven)
• Big Four (audit firms) (sometimes, including Tax Haven)
• Black Market (sometimes, including Tax Haven)
• Capital Gain (sometimes, including Tax Haven)
• Capital Gains Tax (sometimes, including Tax Haven)
• Carbon Tax (sometimes, including Tax Haven)
• Church Tax (sometimes, including Tax Haven)
• Corporate Tax (sometimes, including Tax Haven)
• Corporate Tax (sometimes, including Tax Haven)
• Customs (sometimes, including Tax Haven)
• Deferred Tax (sometimes, including Tax Haven)
• Depreciation (sometimes, including Tax Haven)
• Dividend (sometimes, including Tax Haven)
• Employer Identification Number (sometimes, including Tax Haven)
• Estate Tax (sometimes, including Tax Haven)
• Excise (sometimes, including Tax Haven)
• Fiscal Policy (sometimes, including Tax Haven)
• Fiscal Year (sometimes, including Tax Haven)
• Flexible Spending Account (sometimes, including Tax Haven)
• Government Spending (sometimes, including Tax Haven)
• Gross Income (sometimes, including Tax Haven)
• Health Savings Account (sometimes, including Tax Haven)
• History of Taxation (sometimes, including Tax Haven)
• Income Tax (sometimes, including Tax Haven)
• Income tax (sometimes, including Tax Haven)
• Income Tax (sometimes, including Tax Haven)
• Income Tax Law (sometimes, including Tax Haven)
• Indirect Tax (sometimes, including Tax Haven)
• Inheritance Tax (sometimes, including Tax Haven)
• Offshore Bank (sometimes, including Tax Haven)
• Payroll Tax (sometimes, including Tax Haven)
• Progressive Tax (sometimes, including Tax Haven)
• Property Tax (sometimes, including Tax Haven)
• Public Finance (sometimes, including Tax Haven)
• Rate Schedule (Federal Income Tax) (sometimes, including Tax Haven)
• Real Estate Investment Trust (sometimes, including Tax Haven)
• Regressive Tax (sometimes, including Tax Haven)
• Sales tax (sometimes, including Tax Haven)
• Sales Tax (sometimes, including Tax Haven)
• Subsidy (sometimes, including Tax Haven)
• Tariff (sometimes, including Tax Haven)
• Tax (sometimes, including Tax Haven)
• Taxation (sometimes, including Tax Haven)
• Taxation and Customs Union (sometimes, including Tax Haven)
• Taxation Definition (sometimes, including Tax Haven)
• Taxation (in different countries) (sometimes, including Tax Haven)
• Taxation in the European Union (sometimes, including Tax Haven)
• Taxation Office (sometimes, including Tax Haven)
• Taxation Principles (sometimes, including Tax Haven)
• Taxation without representation (sometimes, including Tax Haven)
• Tax Bracket (sometimes, including Tax Haven)
• Tax Code (sometimes, including Tax Haven)
• Tax Code (sometimes, including Tax Haven)
• Tax Deducted at Source (sometimes, including Tax Haven)
• Tax Evasion (sometimes, including Tax Haven)
• Tax exemption (sometimes, including Tax Haven)
• Tax Forms (sometimes, including Tax Haven)
• Tax Haven (sometimes, including Tax Haven)
• Tax Law (sometimes, including Tax Haven)
• Tax Law Careers (sometimes, including Tax Haven)
• Tax Law Jobs (sometimes, including Tax Haven)
• Tax Rate (sometimes, including Tax Haven)
• Transfer Pricing (sometimes, including Tax Haven)
• Types of Taxation (sometimes, including Tax Haven)
• Types of Taxes (sometimes, including Tax Haven)
• Value Added Tax (sometimes, including Tax Haven)
• VAT Identification Number (sometimes, including Tax Haven)
• Withholding Tax (sometimes, including Tax Haven)

Tax Haven in International Trade

Meaning of Tax Haven, according to the Dictionary of International Trade (Global Negotiator): A country, state or territory that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment. Tax havens also provide little or no financial information to foreign tax authorities. Individuals and businesses that do not reside a tax haven can take advantage of these countries’ tax regimes to avoid paying taxes in their home countries. Tax havens do not require that an individual reside in or a business operate out of that country in order to benefit from its tax policies. Related to international business, tax havens can be classified in three types:

Primary tax havens: the location where financial capital winds up. Subsidiarythere have obtained rights to collect profits from corporate Intellectual Property Rights by transfers from their parent.

Semi-tax havens: locations that produce goods for sale primarily outside of their territorial boundaries and have flexible regulations to encourage job growth, such as free trade zones, territorial-only taxation, and similar inducements.

Conduit tax havens: locations where income from sales, primarily made outside their boundaries, is collected, and then distributed. Semi-tax havens are reimbursed for actual product costs, perhaps with a commodity markup. The remaining profits are transferred to the primary tax haven, because it holds rights to profits due to the corporate IP. By matching outflow to income they do not retain capital and their role, while crucial, remains invisible.

Large multinational corporations may have dozen of such tax haven entities interacting with each other. Each haven can claim that it does not satisfy definitions that attempt to place all tax havens into a single class. Even increased transparency does not change the effectiveness of corporate tax avoidance.