A tax haven is a country where individuals and firms are able to save money on paying tax through low or zero rates of tax. Tax havens may also provide customers with the ability to hide their true identity – helping their activities to remain hidden from the government in questions
Countries considered to be tax havens include:
- Channel Islands (e.g. Jersey)
- San Marino
Tax havens have been criticised because
- It mean that governments find it difficult to raise revenue.
It encourages tax competition amongst governments as they seek to lower tax rates compared to other countries
- It is often the richest and most powerful individuals / corporations who are able to benefit the most from tax havens, increasing inequality
- Lost tax revenue means that average tax rates on people with low income have to be increases.
- Helps to facilitate financial crime and money laundering.