The sovereign states that act primarily as large tax havens for companies are: Tax havens are countries with low tax rates, especially for foreign investors, making them attractive places for people to put their money. Hong Kong is considered a leading tax haven because of its laws that restrict taxation of the island`s wealthy foreign residents and companies. Double Irish was the largest BEPS instrument in history, protecting more than $100 billion in profits of predominantly US corporations from US tax in 2015. When the European Commission fined Apple €13 billion for using an illegal Irish hybrid dual structure, its report revealed that Apple had been using the structure since at least 1991. [224] Several Senate and congressional surveys in Washington have cited public knowledge of the Irish Dual from 2000 onwards. However, it was not the United States that finally forced Ireland to close the structure in 2015, but the European Commission; [225] and existing users had until 2020 to find alternative arrangements, two of which (e.g. a single malt arrangement) were already in effect. [226] [227] The U.S. inaction, similar to its position vis-à-vis the OECD MLI (above), has been attributed to the U.S. as the largest user and beneficiary of tax havens. However, some commentators point out that the fundamental reform of U.S.
corporate tax law by the TCJA 2017 could change that. [228] Zucman followed his 2015 book with several co-authored articles on corporate use of tax havens, entitled The Missing Profits of Nations (2016-2018),[14][15] and The Exorbitant Tax Privilege (2018),[88][89] which showed that corporations protect more than $250 billion annually from taxes. Zucman has shown that nearly half of them are U.S. companies,[131] and that this has been the driving force behind how U.S. companies have accumulated between $1 trillion and $2 trillion in offshore cash deposits since 2004. [132] Zucman`s (et al.) analysis showed that global GDP figures were significantly skewed by multinational BEPS flows. [133] [31] A controversial area of research on tax havens is the suggestion that tax havens actually promote global economic growth by solving perceived problems in the tax systems of heavily taxed countries (e.g., the discussion above on the “global” U.S. tax system as an example). Important academic leaders in research on tax havens, such as Hines,[147] Dharmapala,[37] and others,[148] cite evidence that, in some cases, tax havens appear to promote economic growth in higher-tax countries and can support advantageous hybrid tax systems that include higher taxes on domestic activities.
but lower taxes on capital or related income internationally: However, Hong Kong refused to and was placed on the EU`s blacklist of non-cooperating tax havens around the world. Hong Kong still lags behind Switzerland in the ranking of secrecy, but has become a serious contender. In 2020, Hong Kong ranked fourth in the Financial Secrecy Index, behind Switzerland, the United States and the Cayman Islands. Hong Kong received a score of 66, which is considered a high score and reflects the region`s commitment to the privacy of those who store their money there. In several research papers, James R. Hines Jr. has shown that tax havens are generally small but well-governed nations, and that a tax haven has brought significant prosperity. [24] [25] In 2009, Hines and Dharmapala suggested that about 15% of countries are tax havens, but they questioned why more countries had not become tax havens given the observable economic prosperity this could bring. [4] Below are the most cited articles on “tax havens” listed in the Federal Reserve Bank of St. Louis` IDEAS/RePEc database. [42] There are countless things to say about Hong Kong.
Instead of thinking of Hong Kong as a tax haven like the British Virgin Islands, Belize or Seychelles, it would be more accurate to link this city in the image of a low-tax jurisdiction with a business-friendly environment. Hong Kong`s favorable tax structure makes it an attractive place for foreigners to deposit their money, as well as a place for companies to do business. Hong Kong`s tax structure and its ongoing commitment to maintaining investor secrecy have helped it become a popular tax haven that has helped establish it as one of the world`s leading financial centers. Hines refined his definition in 2016 to include research on § incentives for tax havens on governance, which is widely accepted in the academic lexicon. [10] [40] [44] Traditional tax havens such as the Caribbean or Channel Islands ports are often aware that their status is tax-exempt for individuals and businesses. For this reason, however, they are not able to sign comprehensive bilateral tax treaties with other high-tax jurisdictions. Instead, their tax treaties are restricted and limited to avoid the use of tax havens (e.g., withholding tax on remittances at the port). To address this issue, other tax havens maintain higher corporate tax “policy rates,” but instead offer complex and confidential BEPS tools and EPRs that bring the “effective” corporate tax rate closer to zero.
They all play a leading role in major IP law jurisdictions (see chart).