A “tax haven” (or “tax shelter”) is neither a legal, nor a political, official or scientific term. It`s purely colloquial. It is actually ill-advised to openly call any particular country a “tax haven”, because this name is disliked and frowned-upon by government officials. Therefore, in this chapter, we are NOT calling any particular country a tax haven.
A more official name for the same thing is an “international financial centre”, although many countries call themselves this way rather aspiringly, without actually having much finance to show for it.
Regardless of how you call it, countries, which offer substantial tax benefits to businesses (in particular, foreign businesses), are generally referred to as tax havens or tax paradises. In this respect, the notion of tax haven is, of course, a relative one. As compared to a 35% income tax in one country, a neighbouring country with 12% tax would very much qualify as a tax paradise – and still fare less than a country with zero taxation on income.
In the traditional sense, a tax paradise is a country where one can register a business which will remain completely tax-free in that country (except for certain government fees), as long as it does not operate inside its own country. Some tax haven jurisdictions have gone even further, by abolishing business and income taxation for all businesses, both domestic and offshore.
A proper tax haven jurisdiction would normally have a whole complete network of regulations, laws and precedents aimed at the attraction of international business to register there. Such attractions may not only include zero taxation on business, but may also feature extremely fast and efficient business incorporation procedures, minimum mandatory reporting, strict secrecy provisions in the financial and corporate sector, a developed financial system and no information-sharing agreements with foreign governments.
