A tax shelter is a territory with very low taxation, compared to what is regarded as “  normal  ” in the spirit of that which is expressed. In English, the concept corresponding is that of tax haven (“  harbor fiscal  ”)   ; in German one employs the term of “  oasis fiscale  ” ( Steueroase ). The opposite is a tax Enfer.

The term of tax shelter takes its direction only in comparison with other countries (or other areas of the same country) with higher taxation (a given country is always the tax shelter of another country, at least in certain fields or for certain activities). Thus, a report/ratio of OECD of 1987 relating to the international taxation specified as of its introduction that “  there does not exist single criterion, clearly and objective making it possible to identify a country as being a paradise fiscal  ”.

Relativity of the definition

This vision is that retained by the tax authorities even if in the majority of the Member States of OECD, there does not exist in the legislation or the jurisprudence of precise definition. Thus, one can notice that in the precis of taxation established annually by the French Head office of the taxes , the term “  paradise fiscal  ” is used only once and in an Instruction of the ministry for Finances of the May 18th 1973, the tax shelter was defined like a country “  who applies a derogatory tax mode such as it abnormally leads to a level of imposition bas  ”. However, in the reference which constitutes the French General Tax Code, the article 238  Has prefers speech of “  country with tax mode privilégié  ”, the term “  paradise fiscal  ” not appearing even in the alphabetical index of the code. This euphemism, which goes back to article 14 of the finance law of 1974, indicates the States or territories where the taxpayers are taxable or taxable people with income taxes or the incomes notably less low than in France, which shows the quite relative side of the definition. A country can be regarded as a tax haven taking into consideration particular operation or situation certain; certain legislative measures (free zones) can also create a kind of tax shelter inside a country with strong taxation.

Characteristics of the tax shelters

The interest of the tax shelters does not lie only in their tax quality, but also in other such essential advantages. The Gordon report/ratio of the tax authorities American as well as work of OECD retains a beam of characteristics common to the majority of the tax shelters:

  • absence or low level of imposition for reduced public expenditure

  • economic stability and political
  • freedom of the exchanges accompanied by a liquid currency
  • commercial secret and Bank secrecy inébranlable (one speaks sometimes about “  banking Paradise   ”)
  • financial sector very developed compared to the size of the country or the dimension of its economy
  • good infrastructures of communication and transport
  • grid of tax conventions weak or non-existent.

With these criteria one can relative add legal impunity to the circumvented national laws which make say to ONG Survie, founding member of ATTAC, which the tax shelters are in fact of the tax shelters and legal.

The tax shelters are in general of all small territory, often of the islands, which can release from the sufficient tax resources on their scale because the low level of imposition is compensated by the enormous volume of operations (the resource being of world level). To become a tax shelter is a solution which perhaps adopted by states without other resources, whose very weak economy in addition would not support a taxation with the height of the needs.

However, these criteria remain relative: the Suisse is a banking paradise, but is in general not regarded as a tax shelter; the the United Kingdom or the the United States is not in general regarded as tax shelters although in practice they can offer the same advantages to the private individuals (statute of resident not domiciled in the United Kingdom) as with the companies (companies nonresident in the United States); Andorre is a tax shelter with infrastructures of communication and transport limited because of its geography, etc

History

The history of the tax shelters is parallel to that of the Fiscalité. Thus, 2  000 years before J. - C., the first tradesmen Greek sent already emissary in certain ports so that salesmen and purchasers, at the time of a transaction, find themselves at a point agreed to tranship the goods and to thus escape the already existing harbor taxes (one would speak today about operations Offshore). But it is during the Années 1930 and especially during the Glorious Thirty that the tax shelters will take their true rise.

Since the beginning of the Years 1980, the movement did not slow down. The report/ratio of OECD of April 1998 specifies thus that “  the direct foreign investment of the countries of the G7 in a certain number of countries of the the Caribbean and Island states of Asia generally considered as countries with taxation relatively low, has more than quintuplet between 1985 and 1994 to be established with some 200  billion Dollar S, which represents an increase quite higher than the growth in incur current direct foreign investment   ”.

In the first quarter 2004, the ministry for the Chinese Trade worried that 20  % of the direct foreign investments in China came from the Virgin Islands, the Cayman Islands and the Samoa. In a total way, in 1997, the amount of the credits managed by 65 tax shelters would rise with the sum of 4  497  billion Euro S, according to the journalists of the newspaper the Expansion . 3 years later, the March 8th 2000, the French daily newspaper Libération published an investigation evaluating the whole of the funds invested in the tax shelters with close to: 6000  billion euros, with a rise of 12  % per annum.

The tax shelters thus became a wheel impossible to circumvent of the international companies in their tax strategy.

Attempts at regulation of the tax shelters

The intergovernmental organization Action group financial (GAFI) drew up a list with precise criteria. Currently, a collective of ONG and associations, of which Attac, lance with the international plan a campaign intended to fight for the installation of inspecting of the bank secrecy and a sanction device of unfair tax competition of certain countries leading to deprive of others of resources which could have been affected with social projects. The platform “  Tax shelters and judiciaires  ” thus a plate general public showing wrote how the opacity of the transfers of capital coming from corruption and the misuses of public money deprive the States of the South of receipts which could have been affected with their development.

Stakes represented by the tax shelters

The existence of the tax shelters raises several type of distinct questions:
  • tax competition
  • economic competition, between companies resulting from countries different
  • the fight against the Money laundering and financing from criminal organizations
  • the stability of the international financial system
These questions nevertheless are often mentioned together (with more or less in good faith, insofar as to communicate in connection with the money laundering is easier and more carrier, that simply to complain about a loss of tax re-entries to the profit of a nearby microphone-state)

tax competition and economic competition

By the favorable conditions which it offers, a tax shelter attracts the companies so that they install to them Head office there. These companies thus reduce the amount of their tax S on the benefit compared to their country of origin, escaping from this manner from a taxation which they consider excessive.

But this profit for the companies of is lost as much for the states, to the great displeasure of the partisans of industrial relations policies, and with the great satisfaction of the partisans of tax competition who see a means there of limiting the tendency natural of the states to be always more taxed (a result of this competition is for example that the saving of the non-residents is imposed in no European country) and to respect the Droit individuals to “  to organize their businesses in way such as they have to discharge only the minimum of taxes envisaged by the loi  ” (according to the terms of the Canadian Minister for Finance in February 1985, in its declaration of the rights of the taxpayer).

One notes that all the large countries have, in their vicinity and under their dependence de facto even of swears , a tax shelter which enable him to attract the currencies and the overseas investments, like avoiding a too large export of capital of the nationals: Monaco for France, the Channel Islands for the United Kingdom, the Bahamas for the United States, Lichtenstein enters Switzerland and Germany, etc). It is easier to them to vary the level of tolerance applied to these satellites and their national companies, to make evolve/move their tax system, with all that implies of public debate and times.

Thus, the tax shelters appear like valves in the tax systems, with the risk to see them transforming itself into important escapes. Risk worsened by average modern technologies, transport finance: in August 2006, with the the United States of America a judicial enquiry reveals that many billionaires would divert money via the tax shelters, making lose with the tax department a total of 70  billion dollars per annum among the tax shelters used. For that, bogus companies established their seat with the Cayman Islands or the British Virgin Islands. Accounts were also discovered in various islands of the Caribbean and on the island of Man.

Bonds with the legal questions

The tax shelters are often confused with the financial Paradis S or banking Paradis S and the legal Paradis S.

On the question of the Money laundering, these countries cooperate: much adopted standards on the matter more strict than the controlled countries. These centers in fact are massively integrated into the international financial system, like showed it the accounting scandals Enron or Parmalat.

Certain tax shelters, in the name of the Bank secrecy , cooperate only little with the investigations of the foreign judges, making them-even controls financial delinquency and banking and financial risks to them. This would support the opacity of the financial circuits used by the companies which are established there, by terrorist or gangster of all the countries of the world, by corrupted contractors or politicians, etc These considerations lead some to think, often by amalgamating financial paradises, legal paradises and tax shelters, which the latter can amplify the financial crises in the world (it is estimated that in 2000, more than 50% of international financial flows forward by financial paradises).

In 1996, various European magistrates had launched the “  Call of Geneva   ” to obtain a fiscal harmonization and legal European of which lifting of the bank secrecy allowing to fight against the tax evasions and the money laundering resulting from criminality.

Some examples of territories known as “tax shelters”

Various organizations, organizations, States, draw up lists of tax shelters (co-operative or not). Here some examples of lists.

Not-co-operative tax shelters according to OECD

OECD establishes each year a list of the nonco-operative tax shelters .

OECD applies enough restrictive criteria to determine the character of tax shelter of a country. In the foreground, the fact that the jurisdiction concerned applies non-existent or unimportant taxes, but this criterion is not sufficient because OECD recognizes that any jurisdiction has the right to decide to apply or not direct taxes and, in the affirmative, to determine the suitable tax rate. The other factors necessary so that a jurisdiction is regarded as a tax shelter by OECD are an absence of transparency in the application of the tax law, the absence of exchange of information at tax ends with the other administrations and the fact that the absence of substantial activities is allowed.

Since OECD installed tools for fight against the tax shelters, 33 jurisdictions pledged transparency effective exchange of information and were withdrawn from the list.

The jurisdictions which did not pledge yet transparency effective exchange of information are:

Europe

  • Andorra
  • Liechtenstein
  • Monaco
  • San Marino

Tax shelters according to ATTAC

Africa

  • Seychelles
  • Maurice
  • Tunisia

America

  • Anguilla
  • Antigua-and-Barbuda
  • the Bahamas
  • Barbados
  • Belize
  • Bermuda
  • Costa Rica
  • Grenade
  • Honduras
  • Montserrat
  • Panama
  • St. Bartholomew's Day Massacre (Guadeloupe)
  • Saint-Vincent-and-Grenadian St Lucia
  • Aruba
  • Delaware (the United States)

Asia

  • Singapore
  • HongKong
  • Hainan (China)

Europe

  • Andorra
  • Cyprus
  • Campione (Italy)
  • Gibraltar
  • Ireland
  • Guernesey
  • Jersey
  • Luxembourg
  • Liechtenstein
  • Monaco
  • Netherlands
  • Principality of Swiss Seborga
  • Sealand

The Middle East

  • Oman

Oceania

  • Nauru
  • Pitcairn
  • Tonga
  • Vanuatu

Others

Certain territories can in an unexpected way being qualified of paradise fiscaux :

  • the French Polynesia, where exists neither income tax, neither STF, nor Death taxes. Valid also for Wallis and Futuna, most secret of the French offshore oil rig paradises.
  • Belgium: although having a taxation considered as rather heavy, the country does not have a STF, nor of capital gains tax movable, an advantageous statute of “  center coordination  ” for the multinationals, etc
  • Lebanon is also regarded as a tax shelter, even if current political instability can reject the companies or the investors to be settled in this country.
  • Canada is regarded as a tax shelter for the religious movements. Indeed, in this country, any movement in religious matter can receive many tax incentives (exception of municipal taxes and income tax, possibility of emitting tax receipts with the givers. It is relatively easy with: 15000 religious organizations based with the Quebec to be entitled to these tax incentives.
  • the United Kingdom according to the newspaper Humanity .

See too

External bonds

  • Site brought up to date permanently on the " tax shelters and Judiciaires"

  • OECD: Definition of the tax shelters
  • ATTAC: Atlas, tax shelters or finance without laws, Of the Tax shelters to the Offshore oil rig Delocalization
  • Memory on the tax shelters, study undertaken by an accountant
  • Release: “'' Tax shelters, from now on essential with the companies ''”
  • Memory on the tax shelters, by students of Sciences Po
  • the offshore oil rig anti legislation in France

Works

  • the tax shelters , the Discovery, Christian Chavagneux and Ronan Hoist, 2007
  • Chambost Guide of the tax shelters (reference book)
  • ATTAC, to finish of It with economic and financial criminality
  • ATTAC, the Tax shelters
  • Thierry Godefroy and Pierre Lascoumes, clandestine Capitalism, illusory offshore oil rig regulation of the places , ED. The Discovery, 2004,

References

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