Politics The General Election 2015

[Job]

I'm sure the government would give the extra tax back to the poor, not waste it building a slightly faster train or something.

 

[Scouse]

So thats not the reason for these havens. The reason is to avoid tax altogether.

Yup.

Zero tax anywhere in the chain, unless voluntary (like google's pittance).

 

[Cadelin]

Alright I may be wrong about this but here's what I think about this. If David Cameron's father set up a tax fund for international investors in a tax haven, that seems perfectly reasonable to me. After all, if you're a US resident, you pay tax on the profits you receive from that fund the instant they enter the US, right? Same with the UK (I presume). And the same for most people in most countries in the world.

So if you set up that investment fund in the UK, as an investor, you'd pay tax on the profit derived while in the UK, and then more tax once those profits land in whatever country you reside. So you'd be paying two lots of tax. So it makes perfect sense to me to set these funds up in jurisdictions that have very low or no taxes at all - because unless you reside in one of these jurisdictions, at some point, the money you've made from that fund will be taxed.

So if I've got that right, what's the big deal with people doing things like that? Obviously if they're sneaking money out of the country in a mattress in the back of an old XJ400, that's well dodgy. But if they're just availing themselves of a means to not be taxed twice, I don't see the issue - as long as when the money finally arrives at their home, they pay the correct amount of tax there.

You are unfortunately wrong.

People often think that people transfer money to tax havens just because of the low taxation, but an equally if not more important reason is the lack of regulation in the tax haven country.

The schemes all work in the same way:
Transfer money to tax haven.
Do something that would be illegal in the first country to remove all tax.
Transfer money back home when required.
There is normally quite a bit of smoke and mirrors to make it impossible to find out what is going on in any reasonable length of time, by which time the scheme will have changed.

An obvious example:
Your company buys hugely expensive "licensing" from a company in a tax haven. You wipe out the profits in your company while making huge profits in the country with no tax. Using the tax haven company you loan yourself money (which you don't pay tax on) but as you own the tax haven company you never actually have to repay the loan.