Will tax havens survive in the new international legal environment

McLaren, J 2011, Will tax havens survive in the new international legal environment, Doctor of Philosophy (PhD), Graduate School of Business and Law, RMIT University.

Document type: Thesis
Collection: Theses

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Title Will tax havens survive in the new international legal environment
Author(s) McLaren, J
Year 2011
Abstract The main question raised in this thesis is whether tax havens and Offshore Financial Centre’s (OFCs) will survive in the new international legal environment. The conclusion supports the contention that tax havens will survive, although with a reduced volume of business. The main reasons for this conclusion are that tax havens do provide many legitimate uses for their banking and financial services that are used by foreign governments as well as individuals and Multi-National Enterprises (MNEs).

The thesis then examines four subsidiary research questions that have a direct bearing on the survival of tax havens. The first question asks whether the international income of Australian residents should be taxed on a ‘worldwide’ or ‘territorial’ basis. The simple basis for this question was that if it was so difficult for the Australian Taxation Office (ATO) to detect Australian resident taxpayers that were using tax havens then why spend millions of dollars trying to achieve an almost impossible task. The research indicated that a territorial system of taxation was inherently inequitable. Therefore, the conclusion contended that the current Australian system was good in that it was equitable and yet exempted active foreign business income from further tax in Australia.

The second subsidiary research question asked whether the OECD’s ‘harmful tax competition project’ was now part of the current international taxation law. In this context the issue was that if it is ‘soft’ international law is that one of the main reasons why many tax havens and OFCs were complying with the guidelines on transparency and exchange of information. This issue is important because many tax havens may not be able to convince their own Parliament to amend their bank secrecy laws. If the bank secrecy laws are not amended to allow for the exchange of information on non-resident taxpayers then tax havens and OFCs will continue to operate unfettered.

The third subsidiary research question concerned the reason why the Australian government has deliberately blurred the distinction between tax avoidance and tax evasion; the former being a legal activity and the later being unlawful. The conclusion was that one of the main reasons for the blurring of the distinction was to overcome any concerns on the part of tax havens and OFCs that all banking activities by Australian taxpayers constituted criminal conduct. This issue has implications for the future of tax havens and taxpayers wishing to use foreign banking services.

The fourth subsidiary research question focuses on the rights of taxpayers that use tax havens and OFCs to hold their wealth when these nations are now entering into information exchange agreements (TIEAs). It became clear from the research that taxpayers are able to protect the confidentiality and privacy of their financial details only if they are able to show that the information is protected by legal professional privilege. The future of tax havens and OFCs is arguably dependent upon them being able to protect the confidentiality of non-resident taxpayers through their bank secrecy laws. This impacts on the survival of tax havens.
Degree Doctor of Philosophy (PhD)
Institution RMIT University
School, Department or Centre Graduate School of Business and Law
Keyword(s) Tax havens
offshore financial centres
G20 nations
international taxation law
soft law
tax avoidance
tax evasion
bank secrecy
tax information exchange agreements
legal professional privilege
project wickenby
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Created: Tue, 11 Oct 2011, 15:09:33 EST by Guy Aron
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