Global Tax Competition and Tax Cooperation

Tax avoidance and the abuses of the tax havens is a worldwide problem. It was recently epitomized by Mr. Zumwinkel scandal. The former head of the Deutsche Post was prosecuted and charged for tax frauds committed by way of channeling money to Liechtenstein, a prominent European tax haven. Tax authorities in Germany, Italy and U.K. boast that they have obtained names of hundreds of rich taxpayers who hided their money benefits in the small Alpine jurisdiction encouraged by the Liechtenstein banking secrecy laws and the family foundation scheme concept, which has a reputation of a nearly perfect tax avoidance instrument for rich families trying to avoid income and inheritance taxes. The German Tax Union, an advocacy group, estimates that Germany loses at least 30 billion Euros per year due to tax evasion.1 The scale of tax avoidance by multinational companies and individual taxpayers in Britain is estimated at £ 25 billion per year.2