" My secretary is still paying higher tax rate than I am."
Warren Buffet-Billionaire Investor.
Tax havens evoke images of sandy beaches, swaying palm trees, and voluptuous women gamboling in the swimming pools of luxury hotels. There is a less glamorous side to it as well- when one sees burly potbellied drug lords, mafia or tin pot African dictators getting themselves massaged by attractive masseuses near the poolside. There is also the breathtaking view of blue seas dotted with luxury yachts belonging to the uber- wealthy. No wonder the French call these places paradis fiscaux.
The popular stereotype of tax havens got a fresh lease of life in the movie 'The Firm'- a film based on the novel written by John Grisham- which explores the sinister relationship between a prestigious law firm and mafia money which had to be laundered in one of the island tax havens. As Hollywood movies go there is plenty of excitement with partners of the firm getting murdered by menacing mafia criminals but says very little about the true dimension of Tax havens in today's world.
Unfortunately, stereotype notions of paradis fiscaux conceal more than they reveal. As the authors of the book 'Tax Havens- How Globalization Really Works' point out that Tax havens are not exotic outposts that exist on the fringes of the global economy serving the interests of the criminally delinquent but function as main conduits for tax evasion for the so called squeaky clean multinational enterprises around the globe. Moreover, they exist not in opposition to major economies like US and UK but in accord with them.[i]
Prem Sikka, Professor of Accounting- Essex Business School, UK, in his hard hitting monograph 'The Pinstripe Mafia' says that tax avoidance is a very lucrative global industry which is operated not by shady banks in island paradises but by largest private banks of the world as well as leading law firms and accounting firms. These players are located not in exotic island resorts but in First World capitals of the world such as London, New York, Geneva, Frankfurt and Singapore.