A Closer Look at the Tax Justice Network’s Updated Rankings of Tax Havens
The Tax Justice Network is one of the independent authorities that attempts to stay on top of tax havens. Recently, the organization published updated rankings for its Corporate Tax Haven Index. This list indicates the countries that serve as corporate tax havens to the greatest extent.
The intention of the list is as a warning, encouraging people to push for stricter tax regulations in those jurisdictions. Corporations, however, can easily use the list to get a feel for which countries offer the lowest corporate tax rates. High-net-worth individuals can also use it in a similar way if they plan to open a business soon.
Key Figures
The updated rankings on the Corporate Tax Haven Index come along with a few notable figures. The IMF (International Monetary Fund) reports that around 40 percent of the cross-border direct investments completed today occur in ten countries. All of those countries offer corporate tax rates that are three percent or less, and that 40 percent accounts for around $18 trillion.
According to the Tax Justice Network, multinational companies globally dodge paying an estimated $500 billion through their corporate taxes.
The Rankings of Most Corrosive Corporate Tax Havens
The Corporate Tax Haven Index from the Tax Justice Network ranks the countries based on their complicity in the act of creating global corporate tax havens. The rankings indicate the extent to which each jurisdiction allows corporations to avoid taxes. The report then combines this information with the corporate activity scale in the country to determine its impact. The list ranks the countries based on this share of the world’s corporate activity that has a risk of tax avoidance. The rankings are as follows:
- British Virgin Islands.
- Bermuda.
- Cayman Islands.
- Netherlands.
- Switzerland.
- Luxembourg.
- Jersey.
- Singapore.
- Bahamas.
- Hong Kong.
Notable, the first three of these are all British territories and Jersey (number 7) is a British dependency.
Associated Figures for the Top 10
When looked at as a whole, those top ten jurisdictions account for 52 percent of the risks for corporate tax avoidance, once again based on Corporate Tax Haven Index measurements. As mentioned earlier, more than 40 percent of the world’s foreign direct investments that the IMF reports are in these countries. Not only do all of those countries have corporate tax rates under three percent, but the lowest available rates average at just 0.54 percent.
Given the prevalence of the United Kingdom’s territories and dependencies on the list, the Corporate Tax Haven Index determined the U.K. accounts for more than a third of the corporate tax avoidance risk in the world. The U.K. itself is only number 13 on the list, but it also plays a key role in spots 1, 2, 3, and 7.
Rankings Related to Annexing Tax Rights of Low Income Countries
Another key part of the updated tax haven rankings from the Tax Justice Network is the list of the countries that most aggressively drive down the tax flow of other countries via their withholding tax rates in treaties. In order, the countries on this list’s top ten are United Arab Emirates, United Kingdom, France, Switzerland, Netherlands, Sweden, Ireland, Spain, Cyprus, and Austria.
The Tax Justice Network indicates that these countries have a large potential negative impact on low-income countries. Those low-income countries experience reduced withholding rates along with a risk of corporate tax avoidance.
Other Notes About the Report
The Corporate Tax Haven Index also found that the EU (not counting the U.K.), bears responsibility for 35 percent of the corporate tax avoidance risk in the world. The Netherlands, Luxembourg, and Sweden together account for over half of this risk.
While governments may despair the lost income from these tax avoidance risks, companies appreciate the ability to maximize their profits in those jurisdictions.
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