Why will tax havens never be closed down?

Or, let’s ask another question: Why do most tax havens seem to be in attractive, holiday-making places?

Answer: Because they are always easily accessible by air and where bribed politicians — or their trusted friends — can plausibly go on holiday when making cash withdrawals or, more usually, secret cash transfers. Because these transactions have to be heavily disguised in legal frameworks, then the tax haven depositories (‘banks’) have to be integrated with highly sophisticated law firms such as Mossack Fonseca in Panama.

But there are actually two sorts of tax havens. The one above is relevant to personal income tax evasion. The other is used by major corporations in order to minimise corporate taxes. The latter don’t have to be in pretty places but only in countries with stable governments and where it is plausible for the corporation to have at least some operations, however small, and call them ‘registered headquarters’ for tax purposes. Such corporations don’t need firms like Mossack Fonseca, because they can afford their own legal staff.

Politicians will never get rid of the first sort of tax havens for personal reasons, nor will governments ever get rid of the second sort because nation-states will always want to compete with one another by offering preferential corporate tax rates.

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