Why People Use Tax Havens

The truth is there are many different reasons why people choose to make use of tax havens, some of which are very legitimate in the eyes of the law. It’d be hard to convince anyone of the ethicality of making use of what are essentially places to hide away one’s money or wealth, which is precisely what tax havens are, even if those who make use of them aren’t doing anything illegal.

Concealing Ill-Gotten Gains

Don’t be fooled however – tax havens are indeed used by a lot of people to conceal what is often a lot of money earned from illicit activity, such as selling drugs and many others. If it was purely about avoiding tax legally, the overall costs of moving one’s money to  a tax haven and then accessing it regularly pretty much adds up to the tax they’d have to pay in any case, so why go through all the trouble then? People involved in the criminal underworld of organised crime are specifically interested in taking advantage of the banking secrecy laws which are often associated with so-called tax havens, serving as the perfect place in which to conceal their ill-gotten wealth.

Legal Tax Minimisation/Avoidance

Look, as much as parking one’s money in tax havens makes for a legal way of avoiding paying tax or just minimising the amount of tax you have to pay, it is a practice generally frowned upon by the tax-paying masses. This is simply because if this is indeed a legal option in your country, chances are it’s an option only available to people who already have large amounts of money to their names. The average hard-working man or woman on the street simply cannot afford to pay a tax practitioner specialising in tax minimisation services to map out a plan for them to strategically ship some of their money overseas and park it in a tax haven. It’s a matter of in effect placing the tax burden on those people who could do most with a tax break, while someone’s wealth status allows them to effectively forgo what is deemed to be a common responsibility.

The issue heats up when it emerges that the very politicians we entrust with running our countries make use of tax havens themselves, because it then becomes a matter of ethics and perhaps integrity. The whole secrecy aspect synonymous with tax havens only makes matters worse because it’s then simply an issue of if you’re doing nothing wrong then what are you hiding?

Look, I’m pretty sure most people would pay less tax or not pay tax at all if they had a choice in the matter, because what it comes down to essentially is that after all the expenditure on public interest projects like public infrastructure and public services, taxes turn into the wages paid to elected politicians for the services they render to the public. Are you happy with what your tax pounds are buying you though? That’s the question to which the answer justifies the use of tax havens – for those who can afford to do so, that is.

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Alison

Finance Blogger at Payday Jester
I have a passion for all things finance and business so if I can help you in anyway then please get in touch and if you have any comments or feedback please leave a message.