TAX HAVENS Flashcards
(10 cards)
What is a tax haven?
Territory with a nil or low rate of income or corporation tax
Tax havens are often used for tax avoidance rather than evasion.
What are common uses of tax havens?
- Tax avoidance
- Hiding wealth
- Criminal activities (e.g., money laundering)
- Reducing business operational costs
Tax havens are particularly attractive for those looking to minimize tax liabilities.
What are the advantages of tax havens for small countries?
- Charging business registration fees
- Attracting foreign investment
- Boosting economic growth
These countries can generate revenue through fees while offering tax incentives.
What is the estimated yearly loss in corporation tax due to tax havens?
$600 billion
This loss impacts human development and social spending significantly.
What activities are often associated with the misuse of tax havens?
- Tax evasion
- Money laundering
- International drug trafficking
These activities raise concerns among governments and organizations.
What was the purpose of the 2012 law in Puerto Rico regarding tax decrees?
To allow individuals to pay 4% income tax by organizing business affairs lawfully and residing in Puerto Rico for 6 months yearly
This law aimed to attract more businesses and individuals to the territory.
What is the corporation tax rate for businesses in Luxembourg when transferring money?
1%
This low rate serves as a significant incentive for businesses to save on taxes.
What are some reasons TNCs may choose not to relocate to tax haven countries?
- Brand authenticity
- Corporate responsibility
- Public perception
- Security concerns
Companies may prioritize reputation and the safety of their assets over tax benefits.
True or False: Tax evasion is a legal use of tax havens.
False
Tax evasion is illegal, while tax avoidance is legal.
Fill in the blank: Tax havens can be used to hide _______ from others.
wealth
This is often done to avoid scrutiny and taxation.
