NEGATIVE EFFECTS OF TAX PARADISE ON INTERNATIONAL TAX COMPETITION

Abstract

As a result of the acceleration of technological developments and globalization, taxation has begun to be used as an important competitive tool. Thus, the effectiveness of taxes in the economic growth and development processes of countries has increased. The climate of tax competition, especially with tax reductions and tax incentives, has become both a national and an international tax policy.Although international tax competition is a positive factor, it also causes some negativities due to the fact that some countries do not recognize borders in their tax policies. These countries, which apply a kind of zero tax or very low tax rate, cause unfair tax competition. It is considered as a tax haven. Investors want to benefit from the zero or low rate tax liability offered by tax haven countries, and the strict rules for keeping commercial and banking transactions confidential in these countries. Especially developing countries are adversely affected by the loss of investment due to tax havens and are crushed under the harmful international tax competition. In the study, harmful tax competition caused by tax havens will be discussed. In addition, the measures applied to tax havens will be examined, and some suggestions will be made.