          
          
          
          
                          The World of Tax Havens
          
               Americans and other residents of high-tax
          countries often find it hard to believe, but there are
          over 25 countries who derive substantial business from
          having either no income tax or special tax incentives,
          just as a few American states have no state income tax. 
          But, unlike the benefits of going to a no-tax state in
          the U.S., using a foreign tax haven can mean no income
          tax, while the U.S. person moving to a no-tax state
          still has the federal tax to pay.
               Switzerland is an obvious haven, of course, but
          Swiss taxes are actually quite high, and Switzerland is
          more correctly thought of as a money haven rather than
          a tax haven.  Even the Swiss are heavy users of other
          tax havens.  They often use the neighboring
          Principality of Liechtenstein, which has a customs and
          currency union with Switzerland, and provides stricter
          banking secrecy than Switzerland.
               Liechtenstein specializes in being a tax haven for
          family fortunes, rather than multinational
          corporations.  A number of special legal forms have
          been developed to cater to this business.  Large and
          small fortunes receive equal respect.
               Personal and company tax rates are low, staying
          generally under 12% for local residents.  Total
          exemption from income tax is granted to any company
          domiciled in Liechtenstein, which generates no local
          income.  Unlike U.S. corporations, the shares of a
          Liechtenstein company do not have to disclose the name
          of the shareholder, but can simply be made out to
          "bearer".  While some of the newer tax havens have made
          a point of promoting the use of bearer shares, this
          type of share is customary in Europe and is not a
          product of the tax haven industry.  Many U.S. bonds
          were, until recently, in bearer form, but the custom
          for shares never caught on here.
               While Liechtenstein provides for an infinite
          variety of trusts, its concept of a foundation is quite
          unique.  Ordinarily a foundation is thought of as being
          connected with a non-profit organization, but in
          Liechtenstein a foundation can be formed for any
          purpose.  One of the more common uses is as a family
          foundation dedicated to the welfare of a particular
          family and its descendants.
               The best known Liechtensteinean legal entity is
          the "anstalt" which means "establishment", and is
          sometimes referred to as a cross between a corporation
          and a trust.  An anstalt may have shares, but need not
          do so.  Usually the control rests with the founder or
          his family;, either of which can then freely allocate
          the profits.  The law regulating the formation of an
          anstalt is extremely flexible, allowing nearly any kind
          of charter to be drafted.
               The only other tax haven which uses the Swiss
          franc for its currency is Campione, which is an Italian
          enclave entirely surrounded by Switzerland.  It is a
          town on Lake Lugano, across the lake from the Swiss
          city of Lugano, and is known for its large casino,
          which is rumored to have a larger turnover than the
          casino at Monte Carlo.  There are no border controls so
          there is complete freedom to pass in and out of
          Campione.  It uses Swiss banks, currency, post office,
          and telephone -- and even the license plates on the
          cars are Swiss -- but it is legally a part of Italy. 
          Foreigners find Campione a useful back door for Swiss
          residence, since a Campione residence permit is
          comparatively easy to obtain, and this allows the
          holder free movement in Switzerland.  As Swiss
          residence permits are now nearly impossible to obtain,
          this feature alone would make Campione attractive.  But
          in addition, Campione has no income taxes and no local
          taxes -- all Campione's income is derived from the
          municipal casino.
               Campione is also a very pleasant place to live, in
          the heart of one of the Swiss tourist areas offering
          lakes, winter sports, and the cultural activities of
          Milan, Italy are only an hour's drive away.
               The Principality of Monaco was at one time a very
          popular tax haven, and still has no personal income
          tax, but is not as popular as it once was, due to
          efforts to achieve uniformity with French law.  Because
          of not having a personal income tax, many wealthy
          Europeans maintain their residence there.  Since their
          own countries only tax residents and not citizens, they
          find living in Monaco more beneficial than an American
          would.
               An often overlooked country is Andorra, about 200
          square miles in the Pyrenees Mountains between France
          and Spain.  It has been an independent country for
          hundreds of years, and has never had an income tax. 
          The defense budget is a few bullets per year to fire on
          ceremonial occasions.  The expense of maintaining a
          customs and immigration service is eliminated by not
          having any border control at all on the Andorra side of
          the border -- although France and Spain do maintain
          border controls on their sides of the border.  One of
          the traditional Andorran industries has been smuggling
          goods between France and Spain.  Banking services are
          good, very strict secrecy is maintained, and there are
          no currency controls.  The tourist and skiing
          businesses have shown excellent growth, and the lack of
          customs duties made it an attractive shopping area for
          the highly taxed European tourist.  As of 1991 it has
          signed a customs union agreement with the European
          Community, which will apply the same duty as the EC on
          non-European goods, but it will still be exempt from
          the value added tax.  Residence permits have been easy
          to obtain, and it is a small but attractive residential
          and retirement tax haven.  A relatively high standard
          of living may be achieved and maintained in Andorra at
          a low cost.
                Gibraltar has passed special legislation to give
          tax exemption to corporations headquartered there but
          not doing local business, and Gibraltar's entry into
          the European Economic Community has helped to increase
          this business.  It is also one of the best places in
          Europe to register a private yacht, since the
          registration fees are low and being a British Crown
          Colony any yacht registered there is under the
          protection of the British flag.
               The Isle of Man, between Britain and Ireland, and
          Guernsey, Jersey, and Sark, in the English Channel, are
          also tax havens.  Except for Sark, they charge a low
          annual fee instead of an income tax on non-resident
          owned companies not doing local business.  Sark does
          not have any companies at all, but a few people reside
          there to avoid the high British taxes.
               Malta is the newest major addition to the tax
          haven scene.  A neutral island that has been fiercely
          independent for years, it only recently became a tax
          haven, passing legislation for holding companies,
          trading companies, trusts, and ship registration.  They
          insist on rigorous screening of applicants, and do not
          accept mere incorporation on the island -- businesses
          are expected to have a real presence.  The educational
          level is one of the highest in the world, and it is a
          quiet, multi-cultural tourist destination.
               The Netherlands is a prime example of a major
          country that is a tax haven for some purposes.  Because
          of the centuries old Dutch tradition of trading and
          worldwide enterprise, there is a special tax exemption
          for holding companies.  Any Dutch company that owns 25%
          or more of a foreign company is not taxed on the
          dividends received from the foreign company.  In
          addition the Netherlands has double taxation treaties
          with dozens of countries around the world, so that in
          many cases little or no tax is withheld on the dividend
          before it is sent to Holland from the foreign country. 
          Because of its developed commercial base, the
          Netherlands is also a very practical place from which
          to administer a multinational corporation.
               Since 1929 Luxembourg has been a haven for holding
          companies.  In Luxembourg a pure holding company, which
          conducts no actual business but only holds shares of
          other companies, pay only a small registration fee and
          a small annual fee.  Approximately 2,000 such companies
          are in Luxembourg, and the number is growing.  A great
          many of the major multinational corporations have
          formed holding or finance companies in Luxembourg, and
          the Luxembourg Stock Exchange is used extensively for
          issues of Eurodollar bonds.  A number of international
          banks have established operations in Luxembourg to
          handle this business, and recent legislation has been
          aimed at attracting investment companies.
               The Grand Duchy of Luxembourg is situated between
          Belgium, France, and Germany.  It is a full member of
          the European Economic Community, with a population of
          about 350,000.  Except for the special legislation,
          most taxes in Luxembourg are the same as those in
          neighboring countries.
               Greece and Jordan both have very attractive
          legislation to attract regional offices of major
          companies, and both have been rapidly gaining this
          business because of the boom in Middle East trade. 
          Greece also offers these incentives for headquarters of
          foreign shipping companies.  The package of incentives
          is quite attractive in both countries: complete
          exemption from income tax for the company, exemption
          from personal income tax for foreign employees brought
          into the country, work and immigration permits for
          whatever foreign employees are required, duty free
          import of office equipment, duty free import of
          employees' household goods, and one duty free car
          import per employee.  Both countries offer attractive
          living conditions, and both have attracted a number of
          regional offices that used to be in war torn Beirut.
               Singapore has become a major Asian money center,
          but is not a tax haven.  Hong Kong is the premier Asian
          tax haven, and like Holland, has a substantial
          commercial base which makes it a practical base from
          which to administer a multinational corporation, or
          simply a local trading company.  The Hong Kong company
          income tax is 17%, but this is somewhat irrelevant
          since there is no tax on income earned outside Hong
          Kong, whether it be from investments or from trading. 
          Thus in Hong Kong can be found a wide variety of
          commerce, aided by the fact that it is also a
          completely duty-free port, and is now becoming the
          gateway for much of the newly expanded China trade --
          which is in some ways a revival of Hong Kong's
          historical role.
               Panama is similar to Hong Kong, in that it does
          not tax a Panamanian company on income earned outside
          of Panama, although taxes on local income run very
          high.  Panama has been a traditional base for
          international trade activities ever since the Panama
          Canal was built, and the quality of the local services
          is quite high.  Panama is a major ship registration
          center, as are Liberia and Hong Kong.
               Other western hemisphere tax havens include Puerto
          Rico, Barbados, British Virgin Islands, Netherlands
          Antilles, Bahamas, Bermuda, Turks & Caicos Islands, and
          the Cayman Islands.
               Puerto Rico is a tax haven in two ways.  It does
          not tax the non-Puerto Rican income of a foreign
          company having an office in Puerto Rico.  Thus a
          company can be incorporated in Panama but be able to
          take advantage of administrative services in Puerto
          Rico to manage its trading activities from its Puerto
          Rican office.  The other major use of Puerto Rico is as
          a manufacturing base, as there are special tax
          incentives for the establishment of new factories, and
          many major American companies have set up factories in
          Puerto Rico.
               The Netherlands Antilles has long been one of the
          best known tax havens, used by many multinational
          corporations for holding and finance companies.  These
          companies pay low rates of tax, usually under 5%.   One
          of the islands, Aruba, has become separate, but its tax
          haven position has remained the same as the other
          Antilles, and all of the are a part of the Kingdom of
          The Netherlands.
                The Cayman Islands are a British Crown Colony
          near Jamaica, and have been heavily promoted in the
          U.S. as a tax haven.  But the prices of local services
          supporting the tax haven industry are quite high.  The
          islands have never had income taxes, and have developed
          special corporation and trust laws to help attract
          business.  They also have some vacation business, and
          are especially popular with divers because of their
          clear waters.
               The Bahamas is geographically the closest tax
          haven to the U.S., but political instability and a
          sharp increase in the annual company registration fee
          drove away a lot of the tax haven business.  The
          tourist and convention industries are booming again
          after a decline of several years, and the islands are
          known as a retirement haven for the very wealthy.  The
          country is now trying to regain some of the lost
          business with a very cheap incorporation fee.
               Forming a part of the Bahamas chain, but not
          legally or politically a part of the Bahamas, are the
          little known Turks & Caicos Islands.  The population is
          only a few thousand (no accurate census has been
          attempted) and there is very little local industry. 
          There has never been an income tax, and in recent years
          there have been efforts to attract a serious tax haven
          business.  This has led to the passing of new company
          and banking laws.  There are still few support
          services, but one of the international banking groups
          has recently established a trust company in the
          islands.  The islands use the U.S. dollar as their
          official currency.  
               The British Virgin Islands is another little known
          but excellent tax haven.  Although having a low income
          tax -currently 15% -- it also has international
          business companies which are exempt from even this tax. 
          It also has favorable tax treaties with Switzerland and
          Japan (the one with the U.S. was canceled).  The
          islands are suitable for forming both trusts and
          companies, and are a popular location for yacht
          registrations, since the physical facilities for
          keeping a boat are as good the legal facilities.  The
          islands have some of the best diving and sailing in the
          world, and the underwater scenes for the movie " The
          Deep" were filmed there.  The islands make an ideal
          residential haven for those liking quiet living, and
          are only a short ferry ride from the U.S. Virgin
          Islands.  Unlike the U.S. Virgin Islands, there is
          almost no crime in the British Virgin Islands.
               Barbados has high local taxes, but has passed
          special tax exemption legislation for retired
          foreigners wishing to settle in Barbados.  Living
          conditions are pleasant, with one of the highest
          literacy and educational levels in the West Indies. 
          Special legislation has been passed to attract
          international companies and major banks to establish
          headquarters in Barbados, and this follows the typical
          pattern of granting an income tax exemption.
               Bermuda is one of the best known havens, and is
          only a 90 minute flight from New York.  It is a quiet,
          conservative haven, popular for international insurance
          companies.  There is no income tax, and trusts and
          companies can both be formed there.  An investigation
          is required of anyone wishing to form a company, and
          this has helped keep out the unwelcome elements.  While
          a very pleasant residential haven, property can be very
          difficult to buy because of the small size of the
          island, and residence permits can be difficult to
          obtain.
               Extensive details of each of the tax haven
          countries, including legal, historical, and political
          information on them, is contained in The Tax Haven
          Report, published by Scope International Ltd.,
          Forestside House, Forestside, Rowlands Castle, Hants.
          PO9 6EE, Great Britain.  They will send a free catalog
          upon request.
               Another source of information is Eden Press, which
          publishes a series of special reports on different
          havens and techniques by which Americans can use them. 
          You can obtain their catalog free by writing to them at
          P. O. Box 8410, Fountain Valley CA 92728.  (This report
          is carried by Eden Press under the title "The Offshore
          Loophole.")
               If you want to gain a good understanding of how
          the government views tax havens, University Microfilms
          International, through its Books On Demand program, is
          now making available Tax Havens and Their Uses by
          United States Taxpayers by Richard Gordon.  Frequently
          referred to as "The Gordon Report," this was a 1981
          U.S. Treasury Department study prepared at the request
          of Congress.  It gives considerable detail and examples
          of the uses of tax havens.  It is available from
          University Microfilms for $67.30 softbound, or $73.30
          hardbound.  Out of print for over a decade, anyone
          interested in tax havens who has not studied the work
          will find much still useful information in it.  Copies
          can be ordered through booksellers, or directly from
          University Microfilms International, 300 North Zeeb
          Road, Ann Arbor, Michigan 48106-1346; telephone 800-
          521-0600 or 313-761-4700.  The UMI catalog number of
          the book is AU00435, and UMI accepts Visa or
          MasterCard.  (The catalog number is important as UMI
          has over 100,000 titles.)
               Every tax avoider is a special case, requiring a
          particular kind of tax haven, but with this wide a
          choice something can be found for almost anyone.  Many
          international tax planners suggest having one country
          for your citizenship, a different one for your
          residence, and a third one for your assets.  Then you
          are never at the mercy of one country, and well
          protected from revolutions, wars, confiscations, and
          similar international events.
          
          
          
          
