Essay on The Consequences Of Tax Havens

1213 Words 5 Pages
Tax havens are described as countries that offer foreign individuals and businesses an avenue to pay little or evade taxes completely. Along with the benefits of low or no taxes, the identity of the account owners are kept confidential through banking secrecy laws and banking practices. In addition, tax havens have the ability to operate outside the reach of national and international control which makes these offshore financial centers so popular. Some of the most well-known tax havens include Cayman Islands, Switzerland, Netherlands, Ireland, Singapore, Luxembourg, the Bahamas and Jersey (Raposo and Mourao 2013). The illicit flows of capital to tax havens in order to avoid paying taxes by multinational companies (MNCs) undermine the ability of developing countries to provide food security, education, and healthcare to their citizens. Not only tax havens put local businesses at a financial disadvantage, stifle economic growth and higher unemployment, but also facilitate tax evasion, money laundering, bribery, and corruption. In this paper, I will discuss the aforementioned consequences induced by tax havens and possible methods to combat the illicit flows of capital.
One of the biggest challenges for a developing country is to develop a comprehensive tax system to include multinational enterprises. Administrations are often staffed by poorly trained and low-paid officials whom are vulnerable to bribes. The absence of a strong government with legitimacy will…

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