A tax haven is a country in which regulations and collection practices relating to the levels of taxation to foreign businesses and individuals are deliberately kept at a minimum when compared to the profits earned. Other characteristics of tax haven include the privacy in which is conducted and the absence of tax liability to bank deposits of these overseas persons and organization.

The Caribbean has been in the business of tax haven as early as the 1960s. In spite of improvements to international mandatory regulations relating to disclosure, the region is home to some of the worlds leading tax havens. Examples of leading tax havens are The Bahamas, The Cayman Islands, Antigua and Barbuda and The British Virgin Islands.

Cayman Island and the Bahamas provide an example of how tax haven operate in the Caribbean. In these countries resident aliens and registered foreign companies do not incur income, inheritance, gifts, capital gain and corporation taxes. The respective governments earn income from sources such as value added taxes, property taxes, stamp duties, import duties and licenses fees.

a. How does the usage of a tax haven benefit an international investor or Multinational Enterprise? (5 marks)

b. Identify two sectors in Caribbean economies that have seen significant growth as a result of the development of tax havens. Identify two sectors in Caribbean economies that have seen significant growth as a result of the development of tax havens across the region. (2 marks)

c. Explain the differences in the assessment of tax liabilities by a tax planning unit of an international company versus that of a tax haven (6 marks)

d. Discuss three possible reasons why a number of Caribbean countries have established tax haven in their countries (12 marks)