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When you move to your Jurisdiction of Choice for commercial and/or personal reasons and the by-product is a lower tax bill, that's fine and a welcome bonus too. Merely moving to save on tax would rarely deal you a winning hand. If you are personally going to be miserable in your new jurisdiction and/or if the infra-structure to do business in your new jurisdiction is worse than your home jurisdiction, stay where you are! You are not going to gain anything. Your home jurisdiction would in all probability offer obscure tax breaks that could in some cases equal the savings you could gain elsewhere.
Let me quote from an article by Vanessa Houlder on Corporate Responsibility:
In the US, avoiding taxes has been dubbed unpatriotic. In the UK, the Inland Revenue has compared it with drinking and driving. Tax avoidance is firmly on the agenda of the "corporate social responsibility" movement, says the Organisation for Economic Co-operation and Development (OECD).
Reluctant taxpayers have long faced moral pressure. But the effort to defeat tax avoidance by appealing to the conscience of taxpayers has stepped up a gear as tax authorities around the world try to stop the erosion of the corporate tax base. Should companies take notice? Does aggressive tax planning put a company's reputation as a good corporate citizen at risk? Or is it simply minimising costs -- a duty to shareholders?
The reason these questions are being asked with increased urgency is that companies have become increasingly adept at reducing their tax bills. When Robert McIntyre, director of Citizens for Tax Justice, a campaign group, analysed the federal tax payments of 275 Fortune 500 companies in 2002 and 2003, he found the average rate was less than half the statutory 35% and 82 paid nothing.
In part, these low tax rates reflect government-inspired corporate tax breaks.
High tax countries like the US and South Africa are quick to condemn what they call "Harmful Tax Competition" when other countries offer incentives for businesses to incorporate in its jurisdiction. But, as we've seen in the above article, they often offer tax breaks enabling companies in their own jurisdiction to achieve better tax avoidance than the so-called "Harmful Tax Competition" countries. Granted, rarely are these tax breaks available to smaller entrepreneurial enterprises.
On tax morality the above article comments as follows:
Many in the tax-planning business believe tax should be a matter of law, not morals. "Taxation is no more than legalised confiscation of someone else's money," argues Stephen Edge of law firm Slaughter & May. He thinks companies, if not individuals, are justified in seeking to minimise their bills.
Scepticism about tax morality has a long tradition. "Taxes are enforced exactions, not voluntary contributions," said a US judge in 1947. "To demand more in the name of morals is mere cant."
Here's an extract from articles:
A ruling in a 1935 (UK) case involving the Duke of Westminster versus the Commissioners of The Inland Revenue states:
"Every man is entitled, if he can, to order his affairs so that tax under a tax statute is less than it otherwise would be."
It's your right to pay as little tax as you legally have to. It's your right to order your affairs in such a way that you avoid unfair taxation and boost your personal income.
Tax evasion is illegal. Tax avoidance is perfectly legal.
Yet tax officials always will attack your right. As recently as 20 June 2003, The New York Times reports in their business section under the heading: I.R.S. Seeks Names of Wealthy Clients Who Used Tax Shelters (By DAVID CAY JOHNSTON) the following:
The I.R.S. commissioner, Mark W. Everson, said that "attorneys and accountants should be pillars of our system of voluntary compliance, not the architects of its circumvention."
You've got to decide for yourself on the issue of tax morality. My mind on this issue is quite clear. You can read more by clicking here.
But the real reasons for considering a move to a Jurisdiction of Choice should not merely be to avoid tax. The real reasons are about entrepreneurial freedom and quality of life.
Ø Where you can escape the oppressive regulations governments love to enforce and concentrate on your business
Ø Where your bank has an international mind set and you can receive money and pay for commitments without petty restrictions
Ø Where your business dealings are not hampered by exchange control
Ø Where your infra structure, including telephone lines, data communication links, postal services, roads, public transport, water and electricity supply, etc., is solid, reliable, and affordable
Ø Where there are equal opportunities for all without government enforced discrimination
Ø Where you, your family, and your possessions are safe from criminals
Ø Where world class education, health services, and entertainment are available and affordable
Ø Where there is a culture of service to clients, a culture to add value
There are many such places in the world. We moved to one of them.
Kind regards.
Philip de Bruin
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