The economy of the Cayman Islands, a British overseas territory located in the western Caribbean Sea, is mainly fueled by the tourism sector and by the financial services sector, together representing 50–60 percent of the country's gross domestic product (GDP). The Cayman Islands Investment Bureau, a government agency, has been established with the mandate of promoting investment and economic development in the territory.
A corporate haven, corporate tax haven, or multinational tax haven, is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly due to favourable tax regimes, and/or favourable secrecy laws, and/or favourable regulatory regimes.
Banking in Switzerland dates to the early eighteenth century through Switzerland's merchant trade and has, over the centuries, grown into a complex, regulated, and international industry. Banking is seen as emblematic of Switzerland, along with the Swiss Alps, Swiss chocolate, watchmaking and mountaineering. Switzerland has a long, kindred history of banking secrecy and client confidentiality reaching back to the early 1700s. Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of the landmark federal law, the Federal Act on Banks and Savings Banks. These laws, which were used to protect assets of persons being persecuted by Nazi authorities, have also been used by people and institutions seeking to illegally evade taxes, hide assets, or generally commit financial crime.
An offshore bank is a bank regulated under international banking license, which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. Due to less regulation and transparency, accounts with offshore banks were often used to hide undeclared income. Since the 1980s, jurisdictions that provide financial services to nonresidents on a big scale can be referred to as offshore financial centres. OFCs often also levy little or no corporation tax and/or personal income and high direct taxes such as duty, making the cost of living high.
Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable by means that are within the law. A tax shelter is one type of tax avoidance, and tax havens are jurisdictions that facilitate reduced taxes.
A shell corporation is a company or corporation that exists only on paper and has no office and no employees, but may have a bank account or may hold passive investments or be the registered owner of assets, such as intellectual property, or ships. Shell companies may be registered to the address of a company that provides a service setting up shell companies, and which may act as the agent for receipt of legal correspondence. The company may serve as a vehicle for business transactions without itself having any significant assets or operations.
An offshore fund is generally a collective investment scheme domiciled in an offshore jurisdiction. Like the term "offshore company", the term is more descriptive than definitive, and both the words 'offshore' and 'fund' may be construed differently.
An international business company or international business corporation (IBC) is an offshore company formed under the laws of some jurisdictions as a tax neutral company which is usually limited in terms of the activities it may conduct in, but not necessarily from, the jurisdiction in which it is incorporated. While not taxable in the country of incorporation, an IBC or its owners, if resident in a country having "controlled foreign corporation" rules for instance can be taxable in other jurisdictions.
A financial centre (BE), financial center (AE), or financial hub, is a location with a concentration of participants in banking, asset management, insurance or financial markets with venues and supporting services for these activities to take place. Participants can include financial intermediaries, institutional investors, and issuers. Trading activity can take place on venues such as exchanges and involve clearing houses, although many transactions take place over-the-counter (OTC), that is directly between participants. Financial centres usually host companies that offer a wide range of financial services, for example relating to mergers and acquisitions, public offerings, or corporate actions; or which participate in other areas of finance, such as private equity and reinsurance. Ancillary financial services include rating agencies, as well as provision of related professional services, particularly legal advice and accounting services.
A tax haven is a jurisdiction with very low "effective" rates of taxation for foreign investors. In some traditional definitions, a tax haven also offers financial secrecy. However, while countries with high levels of secrecy but also high rates of taxation, most notably the United States and Germany in the Financial Secrecy Index ("FSI") rankings, can be featured in some tax haven lists, they are not universally considered as tax havens. In contrast, countries with lower levels of secrecy but also low "effective" rates of taxation, most notably Ireland in the FSI rankings, appear in most § Tax haven lists. The consensus on effective tax rates has led academics to note that the term "tax haven" and "offshore financial centre" are almost synonymous.
An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy."
The Global Forum on Transparency and Exchange of Information for Tax Purposes was founded in 2000 and restructured in September 2009. It consists of OECD member countries as well as other jurisdictions that have agreed to implement tax related transparency and information exchange. The forum works under the auspices of the OECD and G20. Its mission is to "implement the international standard through two phases of peer review process". It addresses tax evasion, tax havens, offshore financial centres, tax information exchange agreements, double taxation and money laundering.
The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding financial accounts on a global level, between tax authorities, which the Organisation for Economic Co-operation and Development (OECD) developed in 2014.
Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to "shift" profits from higher-tax jurisdictions to lower-tax jurisdictions, thus "eroding" the "tax-base" of the higher-tax jurisdictions. The Organisation for Economic Co-operation and Development (OECD) define BEPS strategies as "exploiting gaps and mismatches in tax rules".
The Panama Papers are 11.5 million leaked documents that were published beginning on April 3, 2016. The papers detail financial and attorney–client information for more than 214,488 offshore entities. The documents, some dating back to the 1970s, were created by, and taken from, former Panamanian offshore law firm and corporate service provider Mossack Fonseca.
In 2010, the United States implemented the Foreign Account Tax Compliance Act; the law required financial firms around the world to report accounts held by US citizens to the Internal Revenue Service. The US on the other hand refused the Common Reporting Standard set up by the Organisation for Economic Co-operation and Development, alongside Vanuatu and Bahrain.
The Republic of Panama is one of the oldest and best-known tax havens in the Caribbean, as well as one of the most established in the region. Panama has had a reputation for tax avoidance since the early 20th century, and Panama has been cited repeatedly in recent years as a jurisdiction which does not cooperate with international tax transparency initiatives.
Conduit OFC and sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres (OFCs) and tax havens.
Ireland has been labelled a tax haven or corporate tax haven in multiple reports, an allegation which the state rejects. Ireland is on all academic "tax haven lists", including the § Leaders in tax haven research, and tax NGOs. Ireland does not meet the 1998 OECD definition of a tax haven, but no OECD member, including Switzerland, ever met this definition; only Trinidad & Tobago met it in 2017. Similarly, no EU–28 country is amongst the 64 listed in the 2017 EU tax haven blacklist and greylist. In September 2016, Brazil became the first G20 country to "blacklist" Ireland as a tax haven.
James R. Hines Jr. is an American economist and a founder of academic research into corporate-focused tax havens, and the effect of U.S. corporate tax policy on the behaviors of U.S. multinationals. His papers were some of the first to analyse profit shifting, and to establish quantitative features of tax havens. Hines showed that being a tax haven could be a prosperous strategy for a jurisdiction, and controversially, that tax havens can promote economic growth. Hines showed that use of tax havens by U.S. multinationals had maximized long-term U.S. exchequer tax receipts, at the expense of other jurisdictions. Hines is the most cited author on the research of tax havens, and his work on tax havens was relied upon by the CEA when drafting the Tax Cuts and Jobs Act of 2017.
