Advantages And Disadvantages Of Tax Havens

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Usually, many users of tax havens and offshore financial centers, whether for tax evasion or transfer pricing, benefit a lot from public services and facilities of their resident countries, but they make few contributions towards their maintenance, forcing other taxpayers to make considerably large contributions instead. Therefore, tax havens destabilize essential growth by deforming the financial markets and transferring investment from productive onshore activities to unproductive offshore territories. Offshore zones also influence on competition, as MNCs which ‘play fair’ are put at a disadvantage.
The high secrecy of offshore zones is attractive not only to large corporations, but also to investors involved in financial crime or financing of terrorism. This creates a threat to security and legislation of the country. It is obvious that if the higher costs of law enforcement and crime fighting are paid directly or indirectly by means of the EU budget, expenses on other more important areas, such as motivation of growth and innovation development, is likely to be constrained. …show more content…

Moreover, lower tax revenues are likely to have a negative impact on the willingness of Member States to increase or maintain their contributions to the EU. The incentives on tax havens elimination require resources that could otherwise be used on development of economic activity and other facilities. In fact, as the result of tax havens practices and based on the author experience, nowadays large corporation even more often use transfer pricing schemes that gives a significant advantage over smaller companies, and this ruins EU efforts to develop the small and medium business

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