Distinction between Tax Havens and Offshore Financial Centres


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DISTINCTION BETWEEN TAX HAVENS AND OFFSHORE FINANCIAL CENTRES:
Both terms are alternately used as there is a very fine line of difference between the two.
However it is generally accepted that:
In most cases, tax havens are countries whereas offshore financial centres are locations
within a country where international banks set up operations for non-residents in nonresident
currencies.
The assurance of secrecy of financial transactions is critical for Tax Havens whereas it has
lesser importance in Offshore Financial Centres.
In Tax Havens the focus is on low / zero tax rates whereas in Offshore Financial Centres
the focus is on specialised form of banking transactions provided to non – residents.
Tax Havens are associated with tax avoidance whereas Offshore Financial Centres are
very often tax neutral.
The legislative, legal and administrative machinery is not transparent in Tax Havens while
there is greater transparency and control in Offshore Financial Centres.
In the case of tax havens the benefit of low taxation is available to both residents and nonresidents
whereas in the case of offshore financial centres this benefit is available only to
non-residents.
In the final analysis, Tax Havens are focused on a low tax regime available to both
residents and non-residents whereas Offshore Financial Centres are focused on providing
specialised banking facilities to non-residents.


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