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A |
| What are tax havens? |
- Tax havens come in all shapes and sizes.
- Nevertheless, they have some common characteristics such as ease of setting up companies/trusts/foundations, minimal disclosure requirements, the possibility to hide beneficial ownership, and low or no effective taxation on income or wealth.
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| Examples of tax havens |
- Panama, Mauritius, Cayman islands etc
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| How are tax havens used? |
- Tax havens are the routes through which half of international trade now takes place.
- Apart from high-net-worth individuals, tax havens are liberally used by multinationals and their army of accountants and lawyers for tax planning and transfer pricing.
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| Threats posed by tax havens? |
- Tax Havens deprive governments of tens of billions of dollars of annual revenue.
- Tax Havens threaten free markets by enabling fraud, concealing insider trading and helping banks and corporations side-step rules and regulations designed to prevent financial meltdowns.
- Tax Havens launder dirty money for organized crime, drug cartels, and white-collar criminals and hide their assets from police.
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| How to deal with tax havens? |
- Action against them works only if there are credible sanctions, which he proposes in the form of trade tariffs.
- We need to create a global finance register of all financial securities in circulation.
- Since 2011, India has a provision in the Income Tax Act in Section 94A to deal with jurisdictions that do not effectively exchange information. So far, only Cyprus has been notified. There are reports that perhaps Panama will also be put on that list. But considering that in almost all collusive international deals at least one tax havens is involved, there needs to be a review of all tax havens and the provision used effectively.
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