The phrase “tax haven” usually is associated with the islands of the Caribbean, the Alps of Switzerland, or a developing nation looking to improve its economy by encouraging businesses to come there, a place where the wealthy and multi-national enterprises can hide away their wealth from home states. They are seen as corrupt states, willing to help the already corrupted, but is the full truth? Could it be that tax havens play a key part in the development of not only a state, but the furthering of the international economy as well? The answer, while a complicated one, can be found. Through understanding key definitions and examining the effects that a tax haven can have on a state in which the haven is located and those around it, it will be seen that tax havens do play both a negative and a positive role within the international economy through the means of foreign direct investment.
Definitions
The first definition to explore will be tax havens. As defined by the Organization for Economic Co-operation and Development (OECD) a tax haven is a state or territory in which taxes are either not levied or at a rate below the majority of other states. Furthermore, they identify three characteristics that define whether or not a state is a tax haven. The first of these is the ability to offer non-residents and/or foreign companies a financial system in which to hold their money with little to no taxes on income. Second, states may have laws or administrative practices in place that ensure the anonymity of personal financial information. Lastly, a lack of transparency in the operation of laws and a lack of consistency in how they are enforced. This may include secret dealings, negotiated tax rates, or off the book deals given to one ind...
... middle of paper ...
...rrounding states could benefit as these corporations look to expand and invest within them. Something that would not be possible if they were required to operate in a non-tax haven state.
Conclusion
Using Delaware as a case to study tax havens and whether or not its effects are positive or negative is not a simple question to answer. Within the international economy there are many moving parts and it is difficult to be able to examine them all at one instance. Tax havens do divert fdi away from non-tax havens in the short run, of which could have a negative impact on non-tax havens GDP and economy, and at the same time the ability to lower cost could cause an increase in fdi to non-tax havens in the long run, thus aiding economic and GDP growth. All that can fully be known and understood is tax havens, like Delaware, do have an effect on the international market.
When you’re rich and you don’t want to pay taxes, how about you go to a Swiss Bank near you. The Swiss, have one of the most secretive banking systems around the world. The Cause and effects of banks in Switzerland are positive for the person and the country of Switzerland but negative for other country’s losing people from using their banks they avoid paying taxes. Switzerland was founded in 1291, but was officially considered a country in 1977.They didn’t however become an official United Nations member until 2002. Formally considered a confederation but, similar in structure to a federal republic. Switzerland has one of the most competitive economies in the world according to, https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html. There unemployment rate is among lowest around the world, and the labor force has a lot of highly skilled workers.
Taxes in the United States include payroll taxes, property taxes, sales taxes, and a multitude of others. These taxes may be imposed on individuals, business entities, estates, trusts, or other forms of organizations. In general, there is a lot of inquiry on the current tax system. With endless loopholes, a regressed economy, and corruption there has been widespread anger on the current structure of taxation. Consequently, the wealthy have managed to become even richer despite the economic crisis. Furthermore, many taxpayers in the upper class have found loopholes to avoid substantial taxation or otherwise known as tax evasion. (Stewart 2013) Tax evasion has only grown over the years and with the national debt has become a major issue. What is more, is the intense complexity of the entire taxation process. Addressing all the issues and problems regarding the taxation structure is a meticulous and arduous process. With this in mind, politicians from both parties have tried to address individual issues within the taxation paradigm. Being that the United States has the highest corporate tax in the globe, politicians have tried to change policy regarding taxation on businesses. (Sullivan 2013) How...
For this assignment I have chosen two states to compare their tax systems and how effective they are. As Dr. Timothy Kersey stated, “Ever-changing economic conditions and citizen demands place continuous pressure on state leaders to develop effective tax systems, but not all states are up to the task.” The two states I have chosen are Nevada and Oklahoma. Yet random, I chose these states because I’d like to inform not only myself but others as well on how their tax systems work.
A tax haven is a country that offers foreign corporations and individuals relatively low corporate and income tax rates, with a politically and economically stable environment. Some tax havens are Switzerland, Hong Kong, Bermuda, Ireland, and the Cayman Islands. The United States government has been fighting against the movement of corporations because it is not collecting taxes from these corporations that it could have used to reduce government debt. However, corporations have found loopholes that exempt them from United States tax laws. Companies are moving their headquarters across seas for tax benefits to keep their shareholders content. The United States government needs to reduce its corporate tax system so the country does not lose more companies, jobs, and money to foreign entities.
The four types of taxes this paper will discuss are income tax, sales tax, property tax, and user fees. Income tax was not permanently established until the 16th Amendment was passed in 1913. Most federal taxes had been previously derived from excise taxes on tobacco and alcohol and other consumer goods. The US Constitution, when written and still continues to, legitimize taxation in the United States through Article I, Section 8, that Congress has the power to lay and collect taxes, duties et al, pay the debts or provide for the common defense and general welfare of the United States (Cornell Law LII). Investopedia defines income tax as ‘a tax government(s) impose on financial income generated by all entities within their jurisdictions (Investopedia, 2014). Businesses and individuals are required to file an income tax return every year to determine if they owe taxes or qualify for a refund. That is determined by measuring the total income one earns to a designated tax rate, calculating one’s taxable income, which are some or all items of income reduced by other adjustments or expenses in that tax year. There are different subcategories of income tax; there is a federal income tax that is set by the federal government, apart from a few states, there is a state income tax that is imposed on their respective residents, as well as the possibility of there being local income tax ...
In today’s international politics, many factors play a part in the decisions states make. One might think those factors were all intergovernmental, but that is not always the case. The factors that will be discussed in this paper are MNCs, IGOs, and NGOs. MNCs, or Multinational Corporations are privately owned corporations whose headquarters are in one state, but make deals and produce goods in other states as well. IGOs, or Intergovernmental Organizations, are organizations like the UN whose main purpose is to build bridges and keep peace between states. NGOs, or Nongovernmental Organizations, are groups that use funding to solve international issues, but don’t have an obligation to a state.
From 1971 to 1980, the author worked as an ‘Economic Hitman’ (EHM) for the consulting firm Chas. T. Main, Inc. (MAIN). His role was “to cheat countries around the globe out of billions of dollars... to encourage world leaders to become part of a vast network that promotes U.S. commercial interests. In the end, those leaders become ensnared in a web of debt that ensures their loyalty” (p17). This was accomplished by the production of economic projections that would persuade the World Bank and other international organisations to lend money to these countries. After this money was spent on developing infrastructure in the countries in question – the contracts for which went to U.S. companies – they were left with large amounts of debts which they could not hope to repay. This in turn left these countries beholden to the United States’ economic and political interests, creating a ‘global empire’ controlled by “corporations, banks and governments” (Preface, p xiii). Perkins refers to this collusion of interests as the ‘corporatocracy’, and it is they who devised and carry out this strategy. The goal is not only to increase economic growth, both for the U.S. and the corporations themselves, but “to perpetuate and continually expand the system” (Preface, p xiii).
corporate income tax rate. Statistics estimate that American companies keep sixty percent of their cash overseas and untaxed, some $1.7 trillion, according to a U.S. Senate HSGAC Permanent Subcommittee on Investigation (Hickey 1). Tax haven countries are recognized for having lower corporate income tax rates, making them extremely desirable locations for MNCs to have their foreign holding companies. What’s more, these holding companies are known for holding intellectual property rights in the tax haven countries that do not abide by U.S. tax
Why all this secrecy? Well, the shocking amount of hidden money in in type of accounts is thought to be no less than $21 trillion. Much of this money is acquire through assets that raise their value and to even farther benefit avoid taxes in what is called tax havens. According to Leona Helmsley, a female that ran a chain of luxurious hotels and famous for once saying and quote “only the little people pay tax”. What do the predominantly wealthy people do to avoid taxes? Owners of offshore accounts found a different path that allowed them to keep their money, the idea of tax havens which is known to be promoted by those experts whose expertise are off the charts but nonetheless are still experts at using the flexibility of the system to their advantages. Offshore banking is a two-sided game in which white collar criminal camou...
...ed to the promotion of tyrannical governments and the reduction of social welfare programs. In order to mitigate these negative consequences of the profit making ideology, global governance and treaties that aim at helping developing countries advance without undermining their democratic principles are needed. Finally, as all three authors mention that politics and economics must be separated in such way as to not give corporations power over the government.
Schemes that produce profit such as” prostitution, drug dealing, pyramid schemes and the sale of counterfeit goods” (Zyl, 2011) have existed everywhere throughout the years. Demands on asking for more money and additionally the use of the “Value Added Tax” on certain business deals has developed into a quarrelsome concern. In a legal dispute over the high court of appeal MP Finance Group CC in Liquidation versus CSARS governed that the money invested taken by a taxpayer in against the law will be subject to tax on the taxpayers’ plate. Where the main points appear, nevertheless, whether the choice that in the MP Finance case can further be used to decide the amount produced Value Added Tax liability of the Value Added Tax merchants. In addition, does the choice in the MP Finance have the extensive effect that “enterprises” administering their companies by illegal matters should in-list as Value Added Tax merchants? Conclusively, should a prostitute or an illegal drug trafficker in counterfeit goods in list as a Value Added Tax merchant and later record the amount produced in Value Added Tax. Thus, can the prostitute or an illegal drug trafficker in counterfeit goo...
“In many developing countries, unofficial economic activity (that conducted by unregistered firms or by registered firms but hidden from taxation) accounts to between a third and a half of the total. This share declines sharply as the economy develops. Despite the sheer magnitude of this unofficial activity, little is understood about its role in the process of economic development, and in particular about how important “officializing” these hidden resources might be for economic growth.” (Rafael La Porta and Andrei Shleifer pg 1)
Globalization has effect the role of the state immensely; as the process of present’s challenges to state sovereignty and autonomy. In spite of borders becoming more ill-defined and fluid in as a result of the process of globalization (Weiss 2000, 2-3). The state will remain relevant and necessary because citizens need a place to cast their votes, taxes have to be paid to particular authorities, which can be held accountable for pub...
Extractive institutions are used throughout this book to explain that the upper class extracts resources and goods from the lower class. They don’t allow growth or competition, but rather they just exploit the rest of society into doing their labour. It’s used to please a few, rather than the majority, and can still be seen in most places in the world. Whereas, inclusive institutions are the ideal way nations should be run, allowing for fair economical systems, property ownership, educational facilities and allowing all citizens to participate in the growth of the economy. Acemoglu and Robinson argue that this is the main factor in distinguishing the rich countries from the poor and, moreover, how they treat their citizens. This system is relatively used in North America and Western Europe.
There is an undeniable fact that there has been a rise in globalization. It has become a hot topic amongst the field of international politics. With the rise of globalization, the sovereignty of the state is now being undermined. It has become an undisputed fact that the world has evolved to a new level of globalization, the transferring goods, information, ideas and services around the globe has changed at an unimaginable rate. With all that is going on, one would question how globalization has changed the system that is typically a collection of sovereign states. Do states still have the main source of power? What gives a state the right to rule a geographically defined region? It is believed by many that due to the introduction of international systems and increasing rate of globalization, the sovereignty of the state has been slowly eroded over time. My paper has two parts: First, it aims to take a close look at how globalization has changed the way the economy worked, specifically how it opened doors for multinational corporations to rise in power. Second, to answer the question, is it possible for it to exist today? And even so, should it?