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                              What Is a Tax Haven?

   by VOA News

   The International Consortium of Investigative Journalist's team,
   working with more than 11.5 million leaked documents from a Panamanian
   law firm, published some of its findings earlier this week into the
   offshore financial dealings of the rich and famous.

   The ICIJ analysis of the documents, known as the Panama Papers, showed
   the firm Mossack Fonseca helped thousands of individuals and companies
   from around the world set up shell companies and offshore accounts in
   low-tax havens. Such accounts are a favored tool to evade taxes,
   launder money or pay bribes, though they also have legitimate uses.

   What is a tax haven: A country or jurisdiction that offers foreign
   individuals and businesses little or no tax liability. Also known as
   secrecy jurisdiction or offshore haven.

   Other characteristics of a tax haven:
     * Laws that encourage financial secrecy and inhibit free exchange of
       information to foreign taxing officials.
     * Lack of transparency in legal and administrative dealings.
     * Lack of a requirement that a person live in or a business operate
       out of a country in order to benefit from its tax policies.

   Why do people use tax havens: Individuals and businesses can take
   advantage of a foreign country's tax policies to avoid paying taxes in
   their home country.

   What does offshore mean: To register or operate outside a person's or
   business' national boundary. The arrangement is often done for the
   purpose of financial, legal and taxation benefits.

   What is an offshore company: A company incorporated for the purpose of
   operating outside the country of its registration. Also known as a
   shell company.

   Legal vs. illegal: The idea of a tax haven -- a country that offers low
   taxes and high privacy -- is not illegal. A company may legitimately
   move offshore for the purpose of lower taxation.

   A tax haven becomes illegal when a person or business fails to report
   income from accounts in foreign countries if the taxpayer's national
   taxing authority requires them to do so, or an offshore financial
   institution is used for illicit purposes, such as money-laundering and
   tax evasion.

   Tax avoidance vs. tax evasion: Tax avoidance allows a person or
   business to lower the amount of income tax owed by legal means by
   claiming permissible deductions and credits. Tax evasion is illegal
   because it allows a person or business to intentionally avoid paying
   taxes.

   Well-known tax havens: the Bahamas, Bermuda, British Virgin Islands,
   Cayman Islands, Isle of Man, Luxembourg, Mauritius, Panama,
   Switzerland, as well as the U.S. states of Delaware and Nevada.

   Sources: Investopedia, Business Dictionary, Citizens for Tax Justice,
   Unitrust Capital Corp., AP, the Motley Fool, Investing Answers
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References

   1. http://www.voanews.com/content/panama-papers-what-is-a-tax-haven/3276065.html