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GENEVA, SWITZERLAND – “Tax haven” must be one of the most over-used and abused and least understood terms that is regularly unleashed by bureaucrats and politicians on unsuspecting voters who are angry about financial and tax inequality. I’m one of those voters, but I cringe when I see the term, especially coming from the US. This morning it was used by CBS News, which lumped together Ireland, Switzerland and the Bahamas as tax havens” in relation to Mitt Romney and his money.

If the name Delaware surfaces, “tax haven” is replaced by something like “no corporate tax” or “corporate friendly” by its fans and if it is Ireland we hear about “low corporate tax” or “tax friendly” from the big accounting firms, although Business Insider and Ireland’s Politico more bluntly call it a tax haven. Google is one of the key examples there.

Politico’s article on where FTSE 100 companies plant their money and which tax havens they use is a helpful contribution to the discussion.

The over-burdened taxpayer in the US or Ireland could be forgiven for saying yes, but these are companies that create jobs, so this kind of tax haven is okay, whereas the ones that cater to rich individuals (and Switzerland, Luxembourg and the Bahamas are likely to come to mind) are wrong because they’re just used by the rich to hide their wealth.

My sin, but your sensible tax policy

This isn’t a plea for higher corporate and wealth taxes or lower ones for those who aren’t rich. It is a plea to everyone, voters included, to stop using “tax haven” to mean a sin if you do it and sound tax savings practice if I do it. If we can get past that we might get somewhere in finding more balanced tax payment systems.

Here’s the US Government Audit Office (GAO) definition of the term, and keep in mind the list of countries mentioned above:

“There is no agreed-upon definition of a tax haven or agreed-upon list of jurisdictions that should be considered tax havens. However,various governmental, international, and academic sources used similar characteristics to define and identify tax havens. Some of the characteristics included no or nominal taxes; a lack of effective exchange of information with foreign tax authorities; and a lack of transparency in legislative, legal, or administrative provisions.”

This isn’t too far from the OECD one that has caused Switzerland trouble in the past two to three years: “factors to be considered are:

• Whether there is a lack of transparency
• Whether there are laws or administrative practices that prevent the effective exchange of information for tax purposes with other governments on taxpayers benefiting from the no or nominal taxation.
• Whether there is an absence of a requirement that the activity be substantial.”

For the record, I’ve paid taxes in four countries where I’ve lived and while there is room for improvement, I’d put Switzerland at the top of the fair tax list and the US at the bottom. A bonus: it takes me just an hour to do my family’s taxes in Switzerland.

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