The Top Tax Havens
By: Tina Samuels
A tax haven is a location that offers taxes breaks or lower taxes in that area. It can either be a state, territory or country, with most being offshore locations, but a few in the United States as well. There are many benefits to putting your money in a bank located in a tax haven, which investors and corporations have done repeatedly. In the past, they were somewhat of a mystery, where corporations wanted to keep it unknown so the government wouldn’t be aware of it. However in recent years, the exact locations of tax havens, like the Cayman Islands, Nevada and Monaco, have been very well known. There are even major corporations in tax havens, such as Apple, Microsoft, Bank of America, Cisco and many more.
OECD Rules for Tax Havens
The Organization for Economic Co-operation and Development (OECD) is in charge of defining tax havens. They base their distinctions on three main factors: the amount of taxes, protecting financial information and not having transparency.
The Amount of Taxes
This factor is for countries or states that either don’t have taxes or very minimal taxes, also known as nominal taxes. It often includes lack of personal income, gift, inheritance or capital gains taxes.
Protecting Financial Information
The location must also offer protection of the investor’s personal financial information, to be identified as a tax haven. They will have some sort of practice or law that keeps their financial information safe, not be shared with outside governments or authorities.
The final factor for tax havens is to have a lack of transparency. This is transparency in legal, administrative or legislative provisions. The OECD wants to be sure the nation has laws that are applied consistently for everyone and that foreign tax authorities have no say in the matter.
Here is a list of the top 10 tax havens in the world, according to Daily Intel. Each of them has their own benefits and drawbacks.
Switzerland is one of the most well known tax havens in the world, known as a “neutral” country. But since they are known for their tax haven status, they are also a bigger target.
Although Austria signed an agreement in 2009 to get removed from the Organization for Economic Co-operation and Development’s list resulting in sharing banking information, they still have a place on the list. Austria doesn’t have inheritance tax, and they provide tax breaks for citizens.
Singapore is rising quickly in popularity as a tax haven, even drawing the attention of co-founder of Facebook, Eduardo Saverin. There is no capital gains tax in Singapore, which is one of the reasons it has become such a popular location.
British Virgin Islands
The British Virgin Islands have no inheritance tax, capital gains tax, sales tax or gift tax, making them one of the most popular tax havens. Unfortunately this also means the government is aware of their existence, putting investors at risk.
Monaco has strict laws in relation to tax evasion, but if you can connect with a bank there, you have multiple perks. Any investor wanting to avoid tax and get into a tax haven will find benefits to choosing Monaco.
Hedge funders are particularly fond of putting their money in the Cayman Island, which is why the name is used so often in movies and television shows. Celebrities, investors and even politicians like Mitt Romney choose the Cayman Islands as their go-to tax haven.
Not all tax havens are located outside the U.S., in fact two states have tax havens in the U.S.: Delaware and Nevada. Delaware is the local corporate tax haven and hold more than 50 percent of corporation funds in the U.S. that are incorporated in Delaware. Companies like Bank of America and apple that have addresses in Delaware, take full advantage. In Nevada, there are no personal income taxes and is another great place in the U.S. for tax breaks.
Tax havens are a safe alternative to paying high taxes in the U.S., U.K. or other countries where they are known for their rising taxes and strict regulations. It is something for investors, individuals, and corporations to explore.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.