Tax havens

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A tax haven is a territory, sovereign or independent, with a fiscal or legal regime offering exemptions from generally accepted practices: banking secrecy, low or non-existent taxation, shell companies, simplified administrative requirements, etc. Some tax havens offer a comprehensive range of services; others specialize in a particular area: banking secrecy (Switzerland), flags of convenience (Liberia), wealth management (Jersey), low corporate tax rates (Netherlands, Ireland), etc. All are opaque and reluctant to cooperate with foreign tax authorities.

Financial secrecy index, 2018

Source: The Tax Justice Network,

Comment: Because they are too linked to political issues, inter-state actors (OECD, EU, etc.) do not produce independent data on the most problematic tax havens. Tax Justice Network (TJN) is an NGO campaigning for more transparency in finance. Every two years it analyzes financial secrecy from two aspects: 1/ the weight of various countries in offshore finance (the top ones being the United States and the United Kingdom followed by Luxembourg, which between them account for more than half of global offshore finance); and 2/ the level of secrecy (the worst countries being Vanuatu, Antigua and Barbuda, the Bahamas, Paraguay, Brunei and the United Arab Emirates). When the two are combined (weight and opacity), TJN considers Switzerland to be the top tax haven, ahead of the United States, the Cayman Islands, and Hong Kong.

These regimes enable multinational corporations (MNCs), corrupt politicians, entrepreneurs, star athletes and entertainment celebrities, mafia groups and so on to avoid taxes in their own countries via financial arrangements that are either legal (exploiting tax loopholes – tax optimization) or illegal (tax evasion). Supported by major banks and law firms, MNCs locate their profits in countries with the lowest tax rates in order to avoid paying tax in markets where they are actually operating. According to the economist Gabriel Zucman, more than 40% of MNCs’ global profits and 8% of personal financial wealth are located in tax havens. The resulting loss of tax revenue for states (€350 billion per year, including €120 billion in the European Union and €20 billion in France) can lead to over-taxation of those with middle-incomes and the loss of public services.

Despite the danger tax havens represent for global economic and financial stability, and for the survival of the social contract (solidarity principle), they have long been effectively protected by major states which have maintained close ties with them (beyond their own tax breaks) some even being under their control (Delaware in the United States, Hong Kong in China, etc.). However, following revelations arising from journalists’ investigations into leaked confidential documents (Offshore Leaks, 2013; Panama Papers, 2016; etc.), the United States (under Obama) and the European Commission were able to force some tax havens to end financial secrecy, to participate in automatic data exchange and even to end some tax optimization practices. In May 2018, the UK announced its intention to require greater financial transparency from its island dependencies (Jersey, Isle of Man, Virgin Islands, etc.).

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" Tax havens " World Atlas of Global Issues, 2019, [online], accessed on Mar 15 2021, URL:

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