Research Paper Writing Help on American Economic Journal: Economic Policy

Introduction

Tax haven refers to a country or a territory that on the national level have systems of financial secrecy put in place. This form of secrecy jurisdiction provide the following things: escape from tax, secrecy in various forms, escaping from financial regulations, averting of criminal laws and spurt of different rules in the society such as corporate governance rules.  In this case, we are focusing on three tax havens and includeLuxemburg, The British Virgin Islands and Singapore. We will analyse tax havens using PESTEL.

Luxembourg

Luxembourg has a legislative form of government with the constitutional monarchy by inheritance. Therefore, the political system of this nation has a resilient local focus. National politicians of this country begin their careers to establish their base by serving as mayors. Luxembourg is a small country that exerts very strong international influence. Billions of dollars have passed through Luxembourg, which is the heart of EU. International companies such as PepsiCo, IKEA and FedEx together with other 340 companies use this small country to reduce their tax bills (Johannesen, Niels, and Gabriel Zucman pg. 67). These companies use this country since they send money in and out with little or no tax. American companies have to pay only 1.1 percent on tax that is equivalent to $1.04 billion on over $95 billion in overseas companies. Luxemburg economy strongly relied on income taxes that account to about 5 percent of country’s GDP. However, the country possesses a highly industrialized and export extensive economy. In addition, the country faces challenges of air pollution due to high rate of industries.

British Virgin Island

This is a group of islands in the Caribbean. BVI is among the tax havens in the Caribbean region. This is one of the most popular offshore jurisdictions due to: there is well developed financial services industry in the region. There is also exemption from all local taxes for BVI business companies that carry their business outside of the Island. In the island there are no foreign exchange transaction restrictions. There is an excellent telecommunication network in BVI. There is also well developed professional infrastructure.

Taxation

BVI companies and all money paid by them to non-residents are all exempt from local taxes and stamp duty. BVI companies are not required by any law to file tax returns or any report to BVI government regarding foreign source income.

Privacy and Disclosure

Any information about the shareholders, directors, beneficial owners, directors and officers is not disclosed to the public by the government. 

Currency

BVI uses United States dollar as their currency.

Transfer of funds

There are no currency exchanges and transfer of funds controls in BVI; no approval need be obtained for the transfer of dividends, interests, royalties, other profits. Companies have permission to expel all profits, dividends and management charges. 

Political system

BVI is a self-governing, politically stable British crown colony with self-legislative assembly and have become the most important centre for offshore business activities. 

Legal system

This is based on English common law

Official language

The official language of BVI is English.

Singapore

Singapore is located towards the end of Malay Peninsula and is the smallest country in Southeast Asia. Singapore is a very stable nation politically and provides a favourable environment that encourages business investments. This tax haven offers offshore services to clients that include offshore banking, incorporation of companies and formation of offshore trusts. Singapore is regarded to be among thelowest tax haven all over the world. The little tax scheme of the country put in place for both foreign and local corporations. Companies that are doing business out of the jurisdiction are not taxed on their annual income that include profits and dividend income (Taylor, Grantley, Grant Richardson, and Ross Taplin pg. 29). Offshore banking refers to the services that are highly regarded as a tax haven. World leading institutions establish their branches in Singapore. The banking system in this country is modern and refined. Singapore provides privacy and confidentiality for clients. Singapore has very firm laws that protect the privacy of the offshore bank account holders in the jurisdiction. Singapore also provides privacy to corporation owners. There is the absence of exchange control laws that makes it easy to move cash in and out of tax haven Singapore. However, Singapore is regarded as a low tax haven due to its low taxes charged and not referred to as tax haven.

Warehouse location selection

Belgium is a peaceful nation comprised of federal, municipal and regional political units. Companies subject to Belgium corporate income tax and Belgium non-residents income tax are required to report their payments on excess of 100.00 EUR. Dominica is an offshore business center that remains the best in the world with greatly competitive costs and speedy incorporation. Dominican Republic allows bank accounts to be tax free for both residents and non-residents. Malaysia is politically and economically strong state. The official language of this nation is Bahasa Malay. However, English is also spoken and most of transactions and documents are done in English.

Reason for Luxembourg as a tax haven

There are different reasons for establishment of tax havens in the world. Tax avoidance is one of the major reasons for the existenceof many tax havens in the world.Luxembourghas provided many companies chance to decrease their tax burden. multinational corporation looks for the best tax scheme available to enable them compete favourably in the market. Tax avoidance is not against the law, and it is allowable by most nations therefore establishment of tax havens. Luxembourghas ensured that their offshore banking clients receive quality services and products. Some of the banking services available in the Luxembourg include debit cards, credit cards, and the bank account in multi-currency and issuing of bank overdrafts. Another reason for tax haven is that once a holding company is established, there is no need to disclose to the authorities who are the owners of the company. The nation has a very stable economy and political affairs. Therefore, this gives their clientssafe asset protection.

Company network requirements

For an organization to achieve its goals and objectives, individual work and organization structure need to be coordinated and managed. The structure of an organizational describes the relationship of who reports to whom (Qiu, Dongmei pg. 12). In managing multiple travels, the company use technology to cut down travel expenses.

Conclusion

Multinational companies should use best ways possible to increase their annual profits. An existence of tax havens enables them to get services at lower costs hence allowing those companies to report high profits to shareholders.

 

Work Cited

Johannesen, Niels, and Gabriel Zucman. “The end of bank secrecy? An evaluation of the G20 tax haven crackdown.” American Economic Journal: Economic Policy 6.1 (2014): 65-91.

Qiu, Dongmei. “Collecting Unpaid Tax Offshore: Caribbean Tax Havens and Foreign Direct Investment in China.” Bulletin of International Taxation 12 (2014).

Taylor, Grantley, Grant Richardson, and Ross Taplin. “Determinants of tax haven utilization: evidence from Australian firms.” Accounting & Finance (2014).