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Prime Minister Imran Khan called upon the international community to take steps to counter illicit flows of money, saying the "stolen assets" of developing countries must be returned.

The UK has three tax havens:

  1. British Virgin Island
  2. Cayman Island
  3. Bermuda

Politicians, oligarchs, and frauds of poor countries stash their illegally earned or embezzled money in these places and their respective governments are unable to touch them or prove the crime.

Also, when asked about these havens' roles in aiding frauds from all over the world, the UK government denies any responsibility saying that they can't do anything as those islands have their own local laws, local governments, etc.

Do the USA and France offer similar tax havens?

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  • 4
    A simple search for tax heavens brought: worlddata.info/tax-havens.php Also the title question and the question body question aren't the same. Are you interested in general tax heavens or just in tax heavens that also belong in some way to France or the US? Commented Mar 27, 2022 at 18:02
  • 2
    @Trilarion please note the spelling: haven, meaning "harbor," not heaven, meaning "paradise."
    – phoog
    Commented Mar 27, 2022 at 18:24
  • 3
    Weird no answer have mentioned Delaware yet. At least for American companies pulling profit out of the EU then for over 90% (maybe old number) it goes via. Luxembourg to a company registered in Delaware. Commented Mar 27, 2022 at 20:28
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    @VladimirFГероямслава interesting. French Wiktionary suggests that paradis fiscal may arise from a confused mistranslation from English, but given how much more prevalent the sense of "paradise" is in other languages, this seems a bit unlikely. Did they all take the term from French or mistranslate it independently? Perhaps the imprecise translation was intentional in some cases, if the figurative use of words for "port," "harbor," or "haven" is rare in some language. My (superficial) research does show that the term arose earlier in English than in French or German, at least.
    – phoog
    Commented Mar 28, 2022 at 11:07
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    @ThomasKoelle Corporations register in Delaware not so much because of being a "tax haven," as because it has a modern and highly predictable corporate legal system.
    – reirab
    Commented Mar 28, 2022 at 16:27

4 Answers 4

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To my knowledge, France does not offer any form of tax haven, as opposed to the US and the UK. However French people who want to hide their assets don't need to travel very far: traditionally Switzerland was a destination of choice for banking secrecy, but Luxembourg and Liechtenstein were not far behind. Additionally the principalities of Monaco and Andorra offer very moderate tax rates.

[Complement about the US added later]

The US is not traditionally considered a tax haven, even though several states have lax legislation: Delaware is often cited, but also Nevada, Montana, South Dakota, Wyoming and New York. Recently the US adopted legislation (the Foreign Account Tax Compliance Act (FATCA)) which requires foreign institutions to transmit information about US entities to the US Treasury, i.e. to fight tax evasion from the US. However the US refuses to reciprocate by sending information about foreign entities in the US to foreign countries, in effect making the US a tax haven for foreign entities.

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  • Which tax havens do the US have? Commented Mar 27, 2022 at 21:32
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    @Trilarion: The US has one of the most permissive legislation, doesn't share information with other countries (although they expect other countries to share information with them) and is consequently used as a tax haven (Wkipedia).
    – Erwan
    Commented Mar 27, 2022 at 22:55
  • @Erwan Tax haven in this question is more hiding. There is no hiding stolen assets. This was done away in the 60s with tax evasion being prosecuted. Taxes will be paid.
    – paulj
    Commented Mar 28, 2022 at 12:51
  • @paulj I'm not sure I understand your point. You're probably referring to taxes owed to the US, but the US is a tax haven for entities from other countries.
    – Erwan
    Commented Mar 28, 2022 at 14:46
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    @ohwilleke I'm certainly not as knowledgeable as you about the topic, but I think there is a misunderstanding: you're talking about federal taxation by the US treasury, whereas my answer addresses entities hiding assets in the US which are taxable by non-US countries. In this sense the US is considered a tax haven.
    – Erwan
    Commented Mar 28, 2022 at 19:59
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There is no fixed list of tax havens. Those countries continuously implement new rules that promise more transparency and obtain the exclusion from the official list. But then the finance experts find new ways to circumvent the rules, often the architects of these systems work from London or Wall Street, there is the best expertise involved.

Furthermore some places like Dubai or even some US states are not in the list.

Anyway you may want to take a look at this list, you might notice that when you listed the British tax havens you forgot the Isle of Man and Gibraltar. What about Jersey? Even that list is always changing.

Update: I noticed that the title of the question was changed. Anyway the answer by @Erwan tells only part of the story. France has a sophisticated financial system, rich French people are probably clients of most of the tax havens you can find around. Luxembourg and the Netherlands are mainly used by those entrepreneurs who need an umbrella company within the EU to shift the profit of their businesses, like Ireland does for Apple. All the other tax havens are used more to hide private wealth.

Update 2 @Trilarion comment: The situation of Monaco is ambiguous. Financial institutions there, to my knowledge, do not do so much to help rich people to hide their wealth. If someone want to live in another country and pay their taxes there it is not illegal. However if someone takes a residence in a country, but then conducts most of their life and business in another country they are committing a tax fraud, but in this case the responsibility is more of the individual than the host country.

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  • I was really curious about France.
    – user366312
    Commented Mar 27, 2022 at 19:56
  • @user366312 Maybe you mean French rich people and companies as beneficiaries of tax haven. As far as I know France has never been a provider of tax havens.
    – FluidCode
    Commented Mar 27, 2022 at 20:00
  • Maybe you mean French rich people and companies as beneficiaries of the tax haven. --- I know, they use Luxembourg.
    – user366312
    Commented Mar 27, 2022 at 20:07
  • @user366312 I noticed just now that now that the title of your question was changed. Anyway the accepted answer tells only part of the story. France has a sophisticated financial system, rich French people are probably clients of most of the tax havens you can find around. Luxembourg and the Netherlands are mainly used by those entrepreneurs who need an umbrella company within the EU to shift the profit of their businesses, like Ireland does for Apple. All the other tax havens are used more to hide private wealth.
    – FluidCode
    Commented Mar 27, 2022 at 20:38
  • What about Monaco? It seems to be a tax haven and it's really close to France. If I would be a super rich French citizen I might want to bring my money there or to Switzerland maybe too? Commented Mar 27, 2022 at 21:31
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US Definitely

https://www.washingtonpost.com/business/interactive/2021/booming-us-tax-haven-industry/

https://foreignpolicy.com/2021/11/19/delaware-illicit-finance-corruption-offshore-wealth-american-kleptocracy-book-excerpt/

https://www.cbsnews.com/news/pandora-papers-tax-haven-south-dakota/

https://www.morningbrew.com/daily/stories/2021/10/08/how-south-dakota-became-one-of-the-biggest-tax-havens-in-the-world

https://inequality.org/research/the-united-states-of-tax-havens/

Unlike the other countries in the question, this happens in normal US states, not quasi-foreign territories, but only a few like Delaware and South Dakota are offenders and it's done through trusts, not banking secrecy, but in absolute terms, the US is a top-tier international tax-haven.

France?

I haven't encountered any information about France serving as a tax haven, this may be because it doesn't, or because of the lack of English sources on the subject.

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  • write something on france, plz.
    – user366312
    Commented Mar 28, 2022 at 5:50
  • @user366312 I haven't read about France being a tax haven, the way I have about the US. Updated the answer to reflect that.
    – Eugene
    Commented Mar 28, 2022 at 6:59
  • No U.S. state offers shelter from U.S. federal income taxes which are not tax haven low. Calling these tax havens is an exaggeration.
    – ohwilleke
    Commented Mar 28, 2022 at 18:27
  • @ohwilleke did you even read any article I linked? E.g. from the CBS article: " the United States is now ranked as the world's No. 2 tax haven by the Tax Justice Network, sheltering more money than any other except for the Cayman Islands". US trusts may be leery of the IRS, but are quite happy to hide the dubious wealth of non-americans from around the world and trusts are exempt from taxes by themselves. Analogously, Swiss banks never helped Swiss citizens evade Swiss taxes. And within the US, trusts hide money from creditors, child support, alimony, etc.
    – Eugene
    Commented Mar 28, 2022 at 21:38
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    @Eugene I don't disagree that trusts are used to hide money (commonly called "asset protection"). But the notion that "trusts are exempt from taxes by themselves" is inaccurate except in cases not applicable here like charitable trusts.
    – ohwilleke
    Commented Mar 28, 2022 at 21:50
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This answer is limited to the U.S., where I have taught and practiced in this area, since I don't know much about French law in this area.

The bottom line, is that there aren't really full fledged tax havens in then U.S., although some U.S. states provide a fair amount of protection from creditors of the person forming a trust there. Asset protection and tax reduction are two distinct goals of "havens" and U.S. jurisdictions only do much for the former, not the latter.

A numbers of states, such as South Dakota, Wyoming, Nevada, Delaware, and Alaska have relaxed traditional rules that disfavor "dynasty trusts" designed to allow trusts to endure with "dead hand" control for many generations.

These states also impose only modest state taxes on trust and shell company assets (Delaware charges rather high flat fees for setting up entities there but not a tax based upon the amount of assets the entity formed there holds, or its profits.)

And, perhaps most importantly, these states have put in place strong protections for trust assets from creditors' claims and allow high levels of privacy for firms and trusts established there. Federal law anti-money laundering laws, some of which were due to take effect on January 1, 2022 but have been delayed due to delays in adopting implementing regulations, also require significant disclosures of entity ownership, undermining this historic benefit of these U.S. jurisdictions.

But none of that shields assets in these states from federal income taxation, which while hardly the highest among developed countries (U.S. corporate tax rates, in particular, were cut dramatically starting in the 2018 tax year), is also nowhere near the low rates of traditional "tax havens" like the Cayman Island and Nevis (these island nations typically finance their governmental operations primarily with customs duties and user fees).

This is why many big U.S. multinational technology companies try to locate much of their intangible "hot asset" profits from their intellectual property rights and financial investments in jurisdictions like Ireland, instead of the U.S.

It is possible in many cases for businesses based in Puerto Rico to be free of federal income taxation, but only in exchange for paying significant Commonwealth of Puerto Rico taxes. And Puerto Rico has not adopted laws that make itself attractive as a creditor-protection haven.

So, while some U.S. states are taxed at favorable rates relative to other U.S. jurisdictions and provide some asset protection, it isn't at the extreme levels associated with foreign asset protection and tax havens like Luxembourg, Switzerland, the Cayman Islands, and Nevis.

The efficacy of these protections is also overstated.

For example, I am familiar with a case where someone attempted to use South Dakota entities and trusts to shield significant assets from an IRS tax creditor and this effort failed dismally.

The option of an involuntary bankruptcy case or federal securities fraud claims can also often pierce domestic asset protection trusts and entities. And, U.S. judges are not reluctant to incarcerate debtors with associated asset protection trusts that U.S. judges believe that the debtors have a de facto ability to access for many years, in rare cases in excess of a decade.

On the other hand, while these jurisdictions in the U.S. offer only half-measures of protection, they do provide people relying on them with low levels of corruption in administering their hidden assets, and an ability to enforce their own rights in a relatively predictable and reliable legal system.

Another point worth keeping in mind is that many famous tax havens invest their assets in the U.S. securities market as non-resident foreign corporations controlled by foreign persons and not affiliated with U.S. persons.

For example, a Cayman Islands trust with a Cayman Island's trustee and Columbian beneficiaries can invest in companies traded on the New York Stock exchange without being subject to U.S. taxes on the dividends and capital gains that the Cayman Islands trust earns on those investments.

This is something that a company or trust organized under the law of a U.S. state cannot do, because U.S. entities are subject to U.S. income tax on their worldwide income. A parallel U.S. federal income tax regime also imposes high U.S. taxes on "Controlled Foreign Corporations" that are beneficially owned by U.S. persons even though they are organized abroad.

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  • Probably the only good answer to this Q, but as I have come to expect on politics SE, any question related to economics gets votes in proportionality with the superficiality of the answers. Commented Apr 1, 2022 at 5:26

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