A tax haven or overseas economic hub is any state or territory providing international companies and individuals with limited tax liability. Tax havens often regarded as fiscal paradises do not allow companies to run outside their own country or individuals living in their own country to obtain financial benefits.
The Organization for Economic Cooperation and Development (OECD) provided several reasons in 1998 for recognizing tax havens which are: none or nominal income tax, successful information exchange, lack of accountability and no meaningful operation. So as per this definition, there are several tax havens present in the world among which top 3 are given below.
According to the global tax guides from PricewaterhouseCoopers and Deloitte, among the most luxurious places to live in, Bermuda has a 0 percent corporate tax rate, and even no federal income tax. U.S. multinationals have piled up large sums of money in Bermuda due to the absence of corporate taxation, especially reporting income of $104 billion in 2012, the ITEP study revealed. Nike is one of the businesses that used the zero corporate tax rate in the country to raise income. The Paradise paper shows that by launching a franchise labeled Nike International Ltd, Nike moved huge amounts of money to Bermuda from 2005 to 2014.
The Netherlands— also one of the cheapest healthcare countries, is the most common tax haven among the Fortune 500, with much more than fifty of these businesses recording at least one subsidiary in 2016, as per the ITEP research. Governments around the world have always used favorable tax treatment to attract corporations into investing in their region. However, tax incentives are often seen to be counterproductive, ineffective, and pricey as it is shown in a policy document from Oxfam in 2016 which listed the top business offshore accounts. Another such tax reduction, the Netherlands, cost approximately 1.2 billion euros in 2016. This is equal to 7.6 percent of the overall corporate tax revenue the Netherlands collects as of December 2016.
As with the Netherlands, Luxembourg is now one of the three Benelux states which have a status as tax havens. The tax shelter identity of Luxembourg stems from its market-friendly laws which allow multinational corporations to take benefit of tax avoidance schemes. Besides, based on the current ITEP survey, in 2016 over 35% of all Fortune 500 businesses had one or more affiliates in Luxembourg. It provides services such as incentives and withholding taxes by zero percent.
In the Cayman Islands, there is no individual income taxation, no investment income taxes, no local taxes, no business taxes and foreign companies are not exempted from the government. According to the ITEP report, American multinationals registered $46 billion in income in 2012 from entities located in the Cayman Islands. Whereas the GDP for the region is just $3 billion The Cayman Islands are providing “probably the greatest [tax] opportunity for both individuals and multinationals,” said Crystal Stranger, 1st Tax Inc. chairman. The Cayman Islands are coming in at No. 2 — alongside Bermuda — on the highest income tax havens list by Oxfam.