Tax Havens: Stunting Latin American Development
Benjamin Franklin once stated, «In this world nothing can be said to be certain, except death and taxes.» However, with battalions of highly paid «tax professionals» searching for ways around tax legislation for multi-national corporations (MNCs) and wealthy individuals, taxes are not as inevitable as Franklin envisaged. In Latin America, taxation-related problems are rampant, especially in the Caribbean, where many islands are considered offshore financial centers (OFCs) by the International Monetary Fund (IMF). Along with facilitating tax evasion and money laundering, the use of tax havens for legal tax avoidance is contributing to poverty in much of Latin America.
Tax havens are in many ways a legacy of the British Empire. The use of tax competition as a method of attracting foreign investment and promoting local development started in the 1960s when a number of countries, including many in the Caribbean, gained their independence from European powers. These newly independent nations were in search of development strategies that would be viable in tiny island states with few resources; they were led to believe that promoting «tax competition» would bring wealth to the islands. However «tax management» schemes have often been intimately related to the crippling inequality and injustice that has characterised the region. Ultimately, finance salesmen, along with social elites and multi-national corporations, are the only real beneficiaries of «tax competition.»
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