Problem Statement

The world's poorest countries lose the most when the super-rich
use tax havens to evade paying what they owe. Despite
governments efforts, tax havens are thriving and income is
draining out of these places. The governments are, therefore,
forced to raise taxes in response, continuing an endless vicious
cycle.
The Key Questions are 

1. What are Tax havens and can we make these tax havens
accountable ?
2. How to devise a mechanism that governments may opt to put
an end to the tax haven era.
Tax havens are at the heart
of financial, budgetary, and
democratic crises.
 Tax Haven
A place where people go to live and companies go to
operate in order to avoid paying high taxes1

1 https://www.britannica.com/dictionary/tax-haven

https://www.investopedia.com/terms/t/taxhaven.asp
A tax haven is a country that offers
foreign businesses and individuals
minimal or no tax liability for their bank
deposits in a politically and economically
stable environment 

They have tax advantages for

corporations and for the very wealthy,
and obvious potential for misuse in
illegal tax avoidance schemes2

https://www.investopedia.com/terms/t/taxhaven.asp
 The origins of avoidance,
concealment, and tax evasion can
Origins be traced to a very distant past.
of Tax Greek and Roman citizens were
Havens   adept  at  concealing their 
financial  assets  from  the 
authorities  

Tax Havens,Ronen Palan , Richard Murphy and Christian Chavagneux

 • The term 'tax haven' has been widely used since the 1950s4
• World War I, the main countries involved began to increase taxes on large fortunes 5
• Public debt exploded, the state vowed to compensate 
• 1920 top marginal income tax rate rose to 50%; 1924 it reached 72%.
• Banks cartel (the Swiss bankers association  established in 1912)
• In 1934, it became a crime for bank executives in Switzerland to disclose a customer’s identity.
• The industry of tax evasion was born.

4
https://www.historyandpolicy.org/policy-papers/papers/history-of-tax-havens
5
The Hidden Wealth Of Nations, The Scourge Of Tax Havens , Gabriel Zucman, The University Of Chicago Press, Chicago, 2015   
 How is a tax haven
identified
No or nominal tax 

Lack of effective exchange of information

Lack of transparency

No substantial activities

Capital is Abnormally Large *

Highly Abnormal Legal system *

Countering Offshore Tax Evasion, Oced, 2009

* Legalizing Theft , A short Guide to Tax Havens , Alain Deneault, Fernwood Publishing
 Categories 

Tax paradises  Tax shelters Tax resorts

•Tax paradises mainly refer •Tax shelters levy •Provide tax
to countries that have no
tax treaty regime with other
very low tax rates incentives to certain
countries and do not •Hong Kong companies.
impose any income tax.  •Liberia •Switzerland
•Bahamas
•Bermuda  •Panama  •Netherlands 
•Cayman Islands. •Costa Rica  •Luxembourg

Source :OCED / Finance Ministry

Why Tax Havens ?
• Low tax rates, attracting greater investment  
• Accommodating Jurisdictions offer impunity 
• Enables Individuals & multinationals and shareholders
to evade taxes
• To use capital actively , outside law
• Major Criminals carryout business
• 911, US and Bahamas private banks
• Specialized Services and field of action

• Help Corporation transfer capital ,delocalize assets

• Help in declaring profits in countries with low taxes
• Free Zones for factories not complying laws on
safety or unionization
• Free Ports to register ships without any obligation 
• Provide legal, financial and political protection
• Overall bypassing laws and cheating on demand
system

* Legalizing Theft , A short Guide to Tax Havens , Alain Deneault, Fernwood Publishing
How they Do it ?
Tax havens are generally small
and affluent

Most of the top tax havens are

islands nations like , the Cayman
islands, British Virgin island ,
Samoa , Malta ,Bahama, Malta,
etc​
 Major Tax Havens
Roughly 45 major tax Comprising just 0.8 Accounting for 2.3
havens in the world percent of world percent of world
today.  population,  income 

https://www.bus.umich.edu/otpr/WP2007-3.pdf
https://cthi.taxjustice.net/en/
How much is How much ?
• $21 to $32 trillion  ($36 trillion *)
• $427 billion is tax is lost every year to tax havens.
• $500 billion and $600 billion a year
• low-income economies account for some $200 billion
•  American 500 Corporates $2.6 trillion offshore in 2017
•  US tax reforms in 2018.
•  Individuals have stashed $8.7 trillion in tax havens
• More than 500 Billion USD from Pakistan 

Tax Justice Network 

*IMF.org
….......Papers !
 Published October 7, 2018

Tax havens refuse to cooperate with FBR

Analysis

• Higher Taxes and lead to Tax evasion, hence , Tax Havens 

• Mega flight of capital leads to  loss of Revenue , hence more taxes
• Tax Havens are unbridled and refuse to comply with laws of others
• The ratio of tax abuse of developed and developing countries 
• For United States losses are like a fly over an elephant
• For developing countries like Pakistan its inverse
• Terror financing etc. are the matter of concern 
Analysis

• Tax havens readiness to cooperate is higher when their economic

power is more limited
• Their readiness falls when the negotiating country is weaker
• Individual agreements are strengthening  the tax heavens
• Only minor advances have been made against secrecy mechanism
• Ray of Hope  
World Economic Forum/United Nations World Institute for Development Economics Research
 The Countries
Losing the Most to
Tax Abuse(2016)

Estimated annual losses due to tax

abuse as a share of total tax
revenue collected*

Tax Justice network

https://www.statista.com/chart/23563/countries-losing-most-to-tax-abuse/
Conclusion 
Can we Make
Tax Havens
Accountable and
Transparent ?
How to Control and Limit Tax Havens ?
Recommendations 

Establish a clear list of the worst tax havens

Financial and Commercial Sanctions

Automatic Information Exchange

Global Financial Register

National level action on instituting legislation 

END CORPORATE TAX SECRECY 

Mass awareness
Thanks