Pros And Cons Of Off Shore Tax Shelters

Off- shore tax shelters have been a major outlet for corporate and wealthy individuals to save their profit and pay minimum tax as the law allows. It is estimated that U.S technology companies that include Apple, Google and Microsoft have $1.84 trillion of cash stashed in off-shore accounts(Chu,2017). The problem extends beyond the corporate world; personal tax dodging through off-shore accounts seems very evident as well. Economists have estimated that around 8% of the global wealth, around 7.6 trillion dollars are held in offshore account. It costs government $500 billion through corporate tax avoidance and 200 billion in personal tax avoidance per year(Chu,2017). Leak of Panama and Paradise papers have once again put a spotlight on the

Tax haven are countries that have lower interest rates than a domestic country of person or companies and is used as tool to avoid taxes. Profit shifting by corporations and individuals to tax haven is a way to avoid taxes by registering its headquarters to tax shelters. Many corporations and mutual funds use tax haven to avoid double taxation. This is not illegal and as long as the end beneficiaries pay income tax it may not be unethical. The government may miss corporate tax but when the individual pays their tax, government gets the share. The whole dilemma arises when individuals use the offshore location to avoid tax by forming a trust and organizations store money overseas by avoiding dividends. This tax avoidance cost the government billions of dollars each year. The legality of using tax haven has always be questioned but with no end in sight. The law does not have any provision that makes use of tax haven illegal. On the other hand, it is certainly unethical in the fact that only the wealthy are avoiding taxes. The expenses involved with legal fees and accountants for overseas operations only favor the right. Also, when the corporation stores the money overseas it is not only avoiding the corporate tax, but it is also depriving the domestic economy from the cash that its pulling away. If the general public and small companies are paying fair share of taxes but the wealthy and big corporation

Their primary obligation is to serve for best of public interest. Public interest is considered anything done to benefit the general public and the society as a whole has interest in it. The AICPA code of professional conduct elaborates public interest principle as “to act in a way that will serve the public interest, honor the public trust and demonstrate a commitment to professionalism.”(book,408). However, the act of creating and promoting tax shelter does not seem to be in best of public interest. While tax havens are saving a significant amount of money for the wealthy clients, it is creating a global gap in affluence. Rich are staying rich while poor are getting poorer. Tax burden is shifted; ordinary people are having to pay higher tax to compensate for lost tax earnings due to offshore accounts(Zucman). It is estimated that an average American taxpayer have to pay an extra $760 to cover shortage caused by avoiding corporate tax