Tax havens are countries where foreign companies are subject to heavy taxes. Companies based in these countries establish so-called offshore corporations. Offshore corporations are mainly used in the fields of international trade, advertising services, and consulting services.
There are 35 tax havens in total, most of which are small countries with small land areas and small populations. However, these countries have high economic performance and control 1/10th of the financial assets. Often there are more foreign companies than residents. There are a total of 35 tax havens worldwide, the most important being Monaco, Liechtenstein, Luxembourg, the British Virgin Islands (where up to 700,000 companies are located), the Cayman Islands, the Seychelles, the Bahamas, and Bermuda.
Advantages of tax havens:
– Low or no taxes
– High level of banking secrecy and anonymity
– Excellent service
– Less corruption
– Money laundering possible ($2 trillion off the books annually)
– Duty-free importation of capital goods
For example, the British Virgin Islands has zero taxation and companies do not have to keep accounting books or undergo audits, as does the Seychelles. Liechtenstein, on the other hand, is well known for its sophisticated banking system, and Monaco is most popular with individuals because it does not have to pay income tax.
Disadvantages of tax havens:
– High cost (not everyone can have a company in a tax haven, especially large companies and those needing to launder money based there). The number of Czech companies based in tax havens is about 3%, but the number is increasing.