It presents a scheme of the misuse of tax treaties (Double Taxation Avoidance Agreements) often carried out through the establishment of conduit companies in intermediary countries.
Within the framework of Gestell, a tax haven is a manifestation of the technological modern world: the state is no longer an ethical community, but a legal platform that can be strategically selected. Taxation itself is reduced to a matter of profit calculation.
How Are Tax Havens Sustained?
One of the main strategies of tax avoidance is profit shifting through the payment of interest, royalties, and service fees between affiliated companies located in different jurisdictions. In doing so, the tax burden can be reduced in high-tax countries, while profits are funneled into tax haven jurisdictions.Â
It provides an example of how an SPV entity is used as the recipient of royalty or interest payments, even though the entity lacks any economic substance. In this context, transfer pricing practices are often employed to set prices between entities in a manipulative manner.Â
It presents a case study illustrating how developing countries become victims of tax haven practices. These countries lose significant potential tax revenues due to their limited capacity to monitor cross-jurisdictional transactions and to negotiate fair Double Taxation Avoidance Agreements (DTAAs).Â
It presents an illustration of capital flows from developing countries to tax haven jurisdictions, highlighting the real impact of such practices. As a result, development in the source countries is hindered, economic inequality worsens, and fiscal sovereignty is undermined.Â
