Tax havens have a very chequered history. Ostensibly tax havens are a throwback to the days of the British Empire where traders could do business on a global scale and know that the British system is in place to protect their money. The majority of tax havens tend to be island countries that don’t have any other sustainable industry, they would certainly not be industrial or manufacturing based. Therefore jobs and prosperity would come from natural resources, fishing or tourism. By attracting investors, especially high net worth individuals, then the profile of the haven is enhanced as people look to gain residency in a ‘tax friendly’ environment.

World-wide there are several superior tax havens where investors can invest in relative security. These tend to be ‘British Dependent Territories’ which have been or still remain part of the Commonwealth or closely allied with Great Britain. However, in the past, there have been exceptions. Not all havens offer investor protection, some islands in the Caribbean are an obvious example. These havens have been placed on a FATF blacklist.

The benefits to investors are:

Tax Efficiency – No tax levied on money invested in the island and residency is available on liberal terms. Income tax is generally lower than developed countries. Generally, there are no capital gains or inheritance taxes. Corporation taxes are very attractive.

Confidentiality – Non-disclosure of information to third parties is a cornerstone of a tax haven. Investors can remain anonymous. Directors of companies can remain anonymous. This gives the developed world most concern as it can be abused with people involved in terrorism and illegal activities.

The most notable tax havens are:

The Isle of Man and Channel Islands offer some of the most comprehensive investor protection regulations anywhere in the world. Both are British Dependent Territories, have their own stable governments and set their own fiscal policies. However the UK is responsible for their protection and foreign policy.

For investors of a financial institution based on these islands then they have laws that protects up to 90% of the investment value if the institution is unable to meet its liabilities. No other jurisdiction offers this level of protection.