Tax havens: 10 most popular financial centers where the very rich keep money Kenya News

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  • British Virgin Islands (BVI), a British overseas territory, at the top of the list of tax havens in the world
  • Cayman Islands dropped from third to second on list of biggest catalysts for corporate tax abuse, according to Corporate Tax Haven Index 2021
  • United Arab Emirates (UAE) entered top 10 list after attracting KSh 24.1 trillion in foreign direct investment from the Netherlands

According to the Tax Justice Network, corporate tax evasion costs the world US $ 245 billion (KSh 27.1 trillion) per year.

Uhuru Kenyatta was one of the world leaders mentioned in the Pandora Papers. Photo: Getty Images.
Source: Getty Images

Corporate Tax Haven Index

The Corporate Tax Haven Index 2021 revealed that the Organization for Economic Co-operation and Development (OECD) and its dependencies account for 68% of the global risk of corporate tax abuse.

With its headquarters in Paris, France, the OECD is an intergovernmental economic organization with 38 member countries.

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It was founded in 1961 to stimulate economic progress and world trade.

How is the classification done

The index ranks countries according to financial and tax systems and allows multinationals to shift profits by paying less tax than expected.

This is determined by a Paradise Score where zero represents no possibility of corporate tax abuse, and a 100 is unlimited scope for corporate tax abuse.

Movers

According to the 2021 ranking, the Cayman Islands fell from third to second on the list of the biggest catalysts for corporate tax abuse.

This was after the British Overseas Territory increased the volume of financial activity of multinational companies by 15% during the period under review.

Most of the money from the islands is transferred to London, the capital of the United Kingdom.

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The United Arab Emirates (UAE) entered the top ten list after attracting KSh 24.1 trillion in foreign direct investment from the Netherlands.

How tax havens work

Talk to TUKO.co.keMathews Okoth, a business tax expert, said tax havens exist to help individuals and entities hide assets, income and the true beneficial owners of funds or assets.

The Managing Partner of Agnes & Mathews Law LLP said tax havens are propagated primarily by lawyers and accountants (custodians) working through a global network of trusts and shell companies based in a particular tax haven.

According to him, investments are usually in large financial holdings or in expensive real estate.

Who can open an offshore account?

Section 76 (2) (a) of the Constitution of Kenya prohibits government officials from maintaining an offshore account unless authorized by law.

Okoth said anyone can open an offshore account as long as they follow the law.

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“Opening an offshore account is not illegal, and anyone with excess funds to invest is free to do so; opening a local or offshore account is usually a matter of individual investment discretion.

“In practice, however, the people who invest in tax havens are the super-rich, including rock stars, presidents, prime ministers among other elites in society,” Okoth said.

What qualifies a country to be considered a tax haven?

The business tax expert and legal consultant said a country is considered a tax haven on the basis of its minimum taxation on foreign individuals and businesses.

“These countries generally give tax benefits even to companies that do not operate in their country and to individuals who do not reside in their country. Countries have minimal or no control over the source of investment funds and little or no transparency in the activities of trusts and shell companies through which investments are managed, ”he explained.

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Business operations in tax havens create employment opportunities for residents of the host tax haven.

“Individuals or businesses that invest in the tax haven benefit from tax savings on their income. Tax rates can range from 0% single-digit, unlike the double-digit taxes investors would pay in their homes. country of origin, ”Okoth said.

List of popular tax havens

1.British Virgin Islands

The British Virgin Islands are part of a volcanic Caribbean archipelago.

The UK Overseas Territory tops the 2021 list of tax havens facilitating corporate tax abuse.

2. Cayman Islands

It is another popular tax haven favored by the super-rich of the world.

His refuge score in 2019 was 100 out of 100.

In 2020, it moved from third to first place in the Financial Secrecy Index 2020 of the Tax Justice Network after increasing the volume of financial activity of non-residents by 21%.

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The index ranked the countries most complicit in helping individuals hide their finances under the rule of law.

3. Bermuda

Bermuda is a British Overseas Territory located north of the Atlantic Ocean and west of the Sargasso Sea.

Between 2018 and 2019, the volume of financial activity in the territory decreased by more than 16.6 trillion (19%) after the move of multinationals to the United Arab Emirates.

4. The Netherlands

The Netherlands (5.5%) is one of the conduits where individuals and multinationals store and move their billions.

Others are:

5. Switzerland (5.1%)

6. Luxembourg (4.1%)

7. Hong-Kong

8. Jersey (British Crown dependency)

9. Singapore

10. United Arab Emirates

Source: Tuko Kenya


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