Tax Avoidance

and Offshore Tax Havens

Jenny Lee (A Block)

Summary of Issue

Tax avoidance is finding legal ways to pay the lowest rate of tax using tax regime

It is often high income earners or large companies that take part in tax avoidance

The problem of tax avoidance is that governments collect less tax revenue than
expected, which leads to a shortfall in tax revenue

One major example of tax avoidance is tax haven

Summary of Issue

A tax haven is a state or country that exempts foreign investors who hold bank
accounts or companies in territory from tax.

Individuals or companies use offshore banking or offshore corporations to avoid

tax in their home state or country.

Some tax havens include: British Virgin Islands,

Cayman Islands, Hong Kong and Switzerland

the

Summary of Issue

Tax havens provide little or no financial information to foreign tax authorities,

which allows individuals or companies that use tax havens to be kept unknown.

Tax authorities are limited to power only in their own countries, there is a massive
loss of tax revenue and massive budget shortfall

Some U.S. companies that use offshore revenues

include: Nike, Pfizer, Google, Microsoft and Apple

Economic Impact

According to U.S. PIRG Education Fund and Citizens For Tax Justice, about 70
percent of Fortune 500 companies maintain subsidiaries in offshore tax havens as
of 2013.

Tax Justice Network estimate that $255 billion is lost each year to governments
around the world because of offshore centers

This widens the gap between rich and poor

Economic Impact

Potential Remedy

Require individuals and companies to provide transparent country-by-country

accounts.

Publicly shared information of individuals or companiess profit and proper

taxation on the income

Restrict qualification for offshore and residency statuses.

Wheelans Position

Although tax avoidance is harmful to the economy, it is understandable for

corporates to avoid tax. However this is something that should be stopped.

High taxes lower a firms return on investment, thereby providing less

incentive to invest in plants, research, and other activities that lead to
economic growth. (pg.50)

If tax rates get high enough, individuals and firms may slip into
underground economy where they opt to break the law and avoid tax
entirely. (pg.50)