Switzerland is a popular financial centre for individuals and corporations. In fact, its capital Zurich is ranked number 9 in the most competitive financial centre in the world index, and is said to be one of the most broadly and deeply established. U.S. companies have taken advantage of Switzerland’s tax benefits for years. A Congressional Research Service report found that American multinational corporations reported 43 per cent of their foreign earnings in just five tax-shelter countries, and Switzerland was among them. Companies with subsidiaries in Switzerland include Marriott, Pepsi and Morgan Stanley, among others.
The United States of America is becoming one of the world’s best places to hide money from the tax collector. It is a distinction that the country would do well to shed. It is estimated that there’s $800billion (Sh 80.6 trillion) of offshore wealth stashed in the U.S. And with 6 per cent of growth annually in asset managed, the US sits at a nice place, but still behind Switzerland’s $2.7 trillion (271.9 trillion), however the growth rate is better than the competitors other than Hong Kong and Singapore.
3. HONG KONG
The country attracts large companies thatwant to do business in Asian markets due to its taxation policies: its corporate tax rate is relatively low at 16.5 per cent, and there are generally no taxes on investment income and capital gains. In 2012, the latest year for which information is available, U.S. subsidiaries in Hong Kong reported profits of $10 billion (Sh 1 trillion). Among the major U.S. corporations with subsidiaries in Hong Kong are Goldman Sachs, Morgan Stanley, Thermo Fisher Scientific, Bank of New York, J.P. Morgan Chase, Pfizer, Citigroup, PepsiCo, Bank of America, Wells Fargo and several others.
Singapore is a hub for multinational corporate subsidiaries who consider it one of the best countries for taxes. Like the Netherlands and Luxembourg, Singapore actually has “reasonable nominal corporate tax rates,” says the Oxfam report. Yet, like those nations, Singapore still finds a way to be one of the top tax havens in the world. Singapore charges a flat corporate tax rate of 17 per cent. But Oxfam says the country offers tax incentives and also doesn’t withhold taxes.
One of the most expensive countries to live in, Bermuda features a 0 per cent corporate tax rate, as well as no personal income tax. Due to the lack of corporate taxes, U.S. multinational companies have raked in huge amounts of money in Bermuda, notably recording profits of $104 billion (Sh 10.5 billion) in 2012. One company that used the country’s zero corporate tax rates to boost profits is Nike. For example, the Paradise Papers revealed that from 2005 to 2014, Nike shifted large sums of money to Bermuda by opening a subsidiary called Nike International Ltd.
Considered the most popular tax haven and also one of the cheapest countries for healthcare, Netherlands is the biggest conduit to offshore tax havens in the world, with almost a quarter of fiscal constructions having a Dutch link. The Netherlands has already come under fire for the huge tax benefits it permits foreign companies. Last year many British citizens were outraged to learn that coffee chain Starbucks had a special deal with the Dutch tax authorities which allowed it to avoid paying taxes in the UK.
Like the Netherlands, Luxembourg is one of three countries that form the Benelux countries, which also have a reputation for being tax shelters. Luxembourg’s tax-haven status comes from its business-friendly laws that allow international companies to take advantage of tax loopholes. Luxembourg has been the tax haven of choice of many corporations and mega-rich individuals around the world since the 1970s. Luxembourg charges foreign corporations an extremely low tax rate to send money into and out of the country. Corporations that funnel profits through Luxembourg are charged around 1 per cent. This is a huge incentive for large corporations that have the opportunity to save billions in corporate tax bills by moving cash to Luxembourg at such low rates.
Oxfam counts Mauritius among the 15 worst tax havens in the world with some of 1.3 million people living on the African island. For many years now, the island has been attracting money from all parts of the world without paying undue attention to its origins. Private individuals must pay an income tax rate of 15 per cent, while companies are charged just 3 per cent. Corporations that have been known to have subsidiaries in Mauritius include: Goldman Sachs (41 subsidiaries), Morgan Stanley (15 subsidiaries), JPMorgan Chase (13 subsidiaries), Citigroup (six subsidiaries) and Pepsi (two subsidiaries). Mauritius has a low corporate tax rate of 15 per cent.
Monaco is less than 1 square mile and has just fewer than 38,000 residents. This tiny principality has a giant perk, however, it hasn’t changed its residents income tax since 1869. Monaco doesn’t charge its residents income tax. This has drawn some of the world’s wealthiest people to the tiny country, as almost one in three residents is a millionaire. Companies earning more than 25 per cent of their revenue outside of Monaco, and companies whose activities consist of earning revenue from patents and literary or artistic property rights are subject to a tax of 33.33 per cent on profits but there is no direct tax on companies. And corporations like Citigroup, Hertz, Tesla and Walgreens reportedly have tax subsidiaries there.
The Bahamas is another top tax haven, thanks to the lack of corporate income tax and withholding tax. Such tax advantages can make the Bahamas an attractive tax haven for corporations.