What are tax havens? What are the reasons behind some people in other countries opposing them? What are some of the reasons free people should support them, especially against international bureaucracies such as the IMF and the OECD?
First, let’s define a tax haven.
From Wikipedia: A tax haven is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically static environment. Tax havens also share limited or no financial information with foreign tax authorities. In other words, a tax haven is a place which offers financial security to foreigners.
What makes tax havens really attractive?
1. Low (or zero) taxes that attract businesses and investments.
2. Repudiation of foreign tax laws, i.e., financial privacy for clients.Both these points make oppressive governments and advocates for higher taxes fume through their noses.
Especially #2. When oppressive tax regimes can’t collect the money that businesses/individuals store there, they can’t satiate their big appetite and greed.
Who are the ones opposing tax havens?
1. Genocidal/dictatorial regimes: Turkey under Recep Tayyip Erdoğan, Iran, Cuba and Venezuela stand out.
2. High tax jurisdictions: The European Union and India stand out.
3. International bureaucracies/bodies like IMF, OECD and UN. Indeed, the UN has even set up an international body in order to combat tax avoidance!
4. Almost all Left wingers everywhere.
5. Interest/lobby groups that rely on governments to get their way(s).
As you can see, opposition to tax havens is heavy.
Now let’s move on to the final part: What are some valid reasons to support tax havens? Why should lovers of freedom and prosperity support tax havens that apparently help some people fail in their patriotic duties by evading taxes? Why is it more than essential today?
From an economic perspective:
1. Tax havens take away all investments, jobs, etc., from high tax jurisdictio ns. As you can see, investors will more likely invest in Switzerland or Luxembourg than France or Greece. Smart governments will reduce taxes in order to avoid losing out. Smart governments will make it easier for investors and businesses to set up shop in their nations so that they don’t lose out to tax havens. This is a win-win for every side: citizens and businesses/investors. Governments also gain credibility. Spending and debt will be low.
2. Tax havens help improve living standards. The richest countries are tax havens. Be it Hong Kong, Liechtenstein, the US, the UK, Switzerland, Channel Islands, Bermuda or Luxembourg. All of them are tax havens and they’re very rich. They outnumber others at the top.
3. Tax havens help improve the quality of govt. Property rights, rule of law, regulations, sound money and freedom to trade internationally are important parameters apart from taxes that determine a nation’s prosperity. More countries would work towards improving themselves.
4. Tax havens help even those in high tax jurisdictions. For instance, Indians hide their money in Mauritius. That money comes back to India in the form of FDI. Would it be possible without Mauritius? I don’t think so. Mauritius is the global gateway to India. To be sure, Mauritius-India is not a very good example due to cronyism (cronies/bureaucrats are the main investing parties). Jersey-United Kingdom are a better example. Apply the same logic to Monaco-France and Hong Kong-China. In other words, tax havens are sustaining high tax jurisdictions.
Furthermore, poor nations in the developing world that adopt tax haven policies become richer over time. They attract multinational companies and investors.
The best recipe for eliminating poverty is economic growth, not govt backed redistribution, welfare, etc. Tax havens by providing financial security to clients prevent greedy politicians in high tax jurisdictions from taxing their citizens to death and destroying their economies. Without these jurisdictions, the global economy would collapse and people would be poorer.
What’s even more annoying is that IMF/OECD bureaucrats receive tax-free salaries!
Now let’s go to the final and (in my view) the most important part:
Moral reasons to support tax havens:
Imagine yourself as an ethnic Chinese person somewhere in the Philippines or Indonesia with a lot of wealth. What would the governments in those nations do?As is, both nations are quite hostile to minorities not of their race. Wouldn’t they try to confiscate the wealth of their ethnic Chinese citizens? Apply the same logic to:
Tamils in Sri Lanka.
Hindus in Pakistan/Bangladesh.
Indians in Fiji Islands.
Rohingyas (if there are).White farmers in Zimbabwe and South Africa.
Papuans in Indonesia.
LGBT in Iran.
Entrepreneurs in Venezuela/Cuba/Zimbabwe.
Jews in the Middle East.
Christians in North Korea and Cuba.
Political dissidents in Russia, China and Venezuela.
Families under the threat of kidnappings in countries like Mexico.
These people will especially be targeted if they have money. For persecuted communities, tax havens are a matter of life or death.
But then some people would have doubts: Wouldn’t tax havens be used for money laundering? Shouldn’t we consider this fact?
Yes but let me explain.To be sure, tax havens are very strict when it comes to storing money. They don’t want their credibility sabotaged so money laundering for terror is out of question.
Here’s a map showing money laundering hot spots.
There are no tax havens in this list except Antigua & Barbuda.
Indeed, Cayman Islands has very strict laws against corrupt officials and terrorist proxies laundering money.
So in this scenario, the Mallu/North Indian bureaucrat in India who would’ve looted money for 3-4 generations would actually find it very hard. No wonder high-tax jurisdictions oppose tax havens!
Persecuted communities could also invest in their host nations thus making themselves and the host population richer. This is a win-win for all sides. There’s no bigger defense of human rights than tax havens.
This is the reason I’m a big fan of Switzerland, Hong Kong, Bermuda, Luxembourg, Cayman Islands, etc., and all other jurisdictions that offer financial privacy and security.
This is the end of my take on tax havens.
Thank you all for reading. Have a good day.