Tax havens and how they work

Abstract

It's a well-known fact that people who squawk about their taxes may be divided into two classes. They are: men and women. Over a span of three generations the Schmidt family had built up a mighty cosmetics empire and still managed to keep the stock tightly in the family's hands. The Schmidts had only one problem: none of them could afford to die. German inheritance tax would have forced a sale of stock worth more than many national budgets. An answer had to be found. First I moved the Schmidts physically to tax havens -- Elke and her children to the Mediterranean, Walter and his family to the Caribbean, and Andrea who was a living advertisement for seventy years of using the family beauty products went to England, the best tax haven of them all. Then we moved the technology offshore. Not to Liechtenstein where the rights might not have been recognized in other countries, but to the Bahamas where a token factory could be set up. Finally we dealt with the children's and grandchildren's future tax problems through offshore trusts in Jersey. Now everyone could afford to die, but they still decided not to. As it has been so elegantly phrased by the American Judge Learned Hand, "There is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right." And so: welcome to the tax haven -- everyone's natural place of shelter from the blast of onshore taxation.