Tax haven is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment. 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 provide many facilities.
Tax havens provide little or no financial information to foreign tax authorities. 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. However, pressure from foreign governments that want to collect all the tax revenue they believe they are entitled to have caused some tax haven countries to sign tax information exchange agreements (TIEAs) and mutual legal assistance treaties (MLAT) that provide foreign governments with formerly secret information about investors’ offshore accounts. There are many countries who act as tax havens.
Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, Hong Kong, the Isle of Man, Mauritius, Lichtenstein, Monaco, Panama, Switzerland and St. Kitts and Nevis are all considered tax havens. Most of these countries have been under the spot light after the global financial crisis due to profit shifting by large multi- national corporations. Experts say that some of the companies who were at the centre of GFC dodged taxes in various countries by channelling some parts of their profits through such places. A consensus is now starting to emerge among world leaders that financial laws of such places need to be tightened in order to safe guard against future problems.