The recent #PanamaPapers leak involving 11.5 million documents from Mossack Fonseca, a Panama-based law firm that handles offshore shell companies, highlights the need for Nigerians to know more about the good, the bad and the ugly of tax havens.
Tax havens are politically and economically stable offshore jurisdictions or country with extensive laws and systems that provide little or no tax obligations, but high secrecy and protection to the privacy of foreign individuals and businesses.
· Tax havens do not require substantial local presence of the foreign entity or actual production of goods and provision of services or engagement in any visible trade or commerce within the host country to benefit from the tax regime.
· Tax havens do not require the individual to be resident or operate business from the jurisdiction before taking advantage of the tax policies, including exemptions from corporate, withholding, income, capital gains, local and estate or inheritance taxes.
· The primary motivation or attraction for patrons of tax havens is tax avoidance in high tax jurisdictions (legal), either through low, nominal or no tax payments, or tax evasion (illegal), while getting assurance of high secrecy about the criminal activities of persons and confidentiality of the corporate entity about disclosure of their financial details from their countries’ tax authorities.
· Tax havens are not necessarily illegal in their operations, but the various tax-avoidance and financial services, which provide financial privacy for offshore banking of other countries’ citizens, in defiance of existing treaties and agreements between countries, raises questions about the huge cost in tax revenue losses.
· Over 60 tax havens in secret offshore jurisdictions around the world hold an average of $27 trillion of private financial assets not captured under the global tax net annually, according to Tax Justice Newtork, TJN, while illicit cross-border financial flows from Africa and other developing economies to tax havens cover an estimated at $2.3 trillion every year, more than about $135billion of global foreign aid.
· Tax havens thrive on largely opaque and complicated tax system popularised by loopholes in multiple tax avoidance treaties with different jurisdictions.
· Tax havens provide the conduit for the wealthy and privileged corrupt political elites to siphon abroad and hide stolen cash to avoid the attention of tax authorities.
· Some of the jurisdictions considered as the world’s notorious tax havens include Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, Hong Kong, the Isle of Man, Mauritius, Lichtenstein, Monaco, Panama, Switzerland and St. Kitts and Nevis.
· The global Financial Secrecy Index 2015 ranks Switzerland, Hong Kong, U.S., Singapore, Cayman Islands, Luxemburg, Lebanon, Germany, Bahrain and UAE as the world’s biggest tax havens by secrecy and scale.
· The recent #PanamaPapers leak contains data on secret documents of assets belonging to over 130 Nigerian politicians, businessmen and different entities owned by Nigerians.
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