Tax Haven Law and Legal Definition
Tax haven refers to an area where certain taxes are levied at a low rate or they are not levied at all. Tax haven attracts individuals and corporate entities, as they can move themselves to areas with reduced or nil taxation levels. This creates tax competition among different countries.
Some nations find that they do not need to impose tax as much as some industrialized countries in order for them to be earning sufficient income for their annual budgets. The U.S. National Bureau of Economic Research has estimated roughly, that 15% of countries in the world are tax havens because these countries tend to be small and affluent.
The Organization for Economic Co-operation and Development (OECD), identifies certain characteristics to decide the tax structure of any nation to be denoted as Tax Haven. These are the following :
1.When a nation grants either payment of nominal taxes or no tax. In special cases, Tax Haven creates such conditions to offer themselves as shelters for the non-residents to evade high taxes in their respective residential countries.
2.Tax Haven generally emphasizes protecting the personal financial information of the taxpayers. Tax haven provides specific laws for the benefit of companies and individuals by protecting them from the scrutiny and other stringent laws of the foreign tax authorities.
