Offshore Tax Evasion Essay Example | Topics and Well Written Essays - 2500 words

Offshore levy Evasion - Essay ExampleHowever, there endure numerous opportunities for juristic entities such as corporations, foundations and trusts to avoid grossation by operating in multiple, conservatively chosen jurisdictions using carefully chosen techniques designed to minimize revenuees. This report identifies various methods of appraise turning away by multinational corporations and other entities and makes policy recommendations with respect to closing these loopholes and level the playing field in the midst of competing businesses and tax jurisdictions. Outline Introduction Offshore appraise Evasion and Avoidance Tax Havens Corporate Tax Avoidance Methods Use of Tax Havens Debt Allocation Earnings Stripping Transfer Pricing Contract Manufacturing hybridization Entities Hybrid Instruments Magnitude of Losses Policy Issues Repeal of Deferral Partial Abolition of Deferral radiation diagram Aportionment Splitting Foreign Tax Credits Recommendations and Conclusions. Introduction Offshore tax avoidance has greatly change magnitude in the last decade. Multiple multinational corporations banks and even individuals have shifted their tax responsibilities and eliminated tax in their home(prenominal) businesses (Owens, 2007). Tax avoidance resulted in reduced government revenue and reduced domestic businesses activity, as heavy(p) multinationals were rewarded for their financial manipulation instead of innovation, job creation or productive investment. Lack of transparency by various governments has greatly facilitated offshore tax avoidance. Poor preparation at the policy level in countering tax abuse has resulted in many multinationals and individuals relocating their tax home to a tax haven. As mentioned by Sullivan (2008, p. 726), use of offshore accounts poses a threat to sovereign governments as companies use havens like Cayman Islands and Bahamas to table tax. Global integration of financial markets and the improved communication and infor mation technologies has made the creation of these offshore accounts and dumbfound companies easy. Globalization, coupled with lack of transparency among various countries (which is vital in tackling tax abuse) has increased the incidence of tax nonremittal and avoidance at both the individual and corporate level. In the new era of banking without borders, corporations and tight individuals are free to transfer their capital abroad and channel it to passive investments in offshore jurisdictions. This makes it realistic for them to evade paying income taxes. Offshore tax havens are countries that engage in tax competition with the high-tax regimes. As mentioned by Sullivan (2007, p. 329), offshore tax evasion and avoidance has put sustainable and responsible businesses at a competitive disadvantage as their competitors avoid taxation by the use of tax haven structures and strategies. Tax evasion deprives countries of revenue and this limits the development and modernization of in frastructure, which is vital for a strong economy. Offshore tax evasion According to Owens (2007), international tax evasion is categorized into corporations tax evasion and individuals tax evasion it stinker also be categorized into legal tax avoidance and illegal tax evasion, depending on whether the tax avoidance is broadly or narrowly defined. International tax evasion could also be lofty by the measures taken or measures that could be used in reducing the subsequent loss. Government revenue losses arising from individual tax avoidance are usually associated with the use of narrowly defined tax haven, corporate tax evasion