Taxation in the UK is the highest it has ever been, the country reeling from the Brexit fallout, the coronavirus lockdown, and a cost of living squeeze.
This hasn’t, however, extended to some of the country’s overseas territories.
These territories consist of 14 states with historical links to the UK, though operate within their own frameworks.
A major aspect of this framework is taxation, and many of the territories operate extremely lenient and favourable systems of tax, as a result attracting the rich and famous, not to mention the world’s businesses.
Of all the so-called ‘tax havens’ around the world, one campaign group listed the top three as being within Britain’s Overseas Territories.
According to the Tax Justice Network, they consist of the British Virgin Islands (BVI), the Cayman Islands, and Bermuda.
Many of the items came under British control in the 17th century, during Europe’s colonial powers’ race to capture land.
In BVI, a long relationship with Britain has seen the creation of a system with no forms of income or capital gains tax.
While the concept of residence and domicile does not exist, an individual is taxable on the islands if they are gainfully employed or transfer ownership of BVI property.
It means personal income, capital gains, net worth, and inheritances are completely exempt from taxation. And, regardless of the source of income, the business companies in BVI are completely tax-free.
Many famous names have made BVI home, including Sir Richard Branson, Morgan Freeman, and Google co-founder Larry Page.
Then there’s the Cayman Islands. The islands aren’t all that far from each other, around an hour on a direct flight, and their taxation systems are similarly closely aligned.
There is no direct taxation, meaning it is a thriving offshore financial centre. More than 99,000 active companies were registered there as of 2016, including almost 300 banks, 750 insurers, and 10,500 mutual funds.
Not only is the island renowned for its favourable taxes but also for its natural outstanding beauty. Known for its beach resorts and scuba culture, Little Cayman, the smallest of the three islands, is home to diverse wildlife, from endangered iguanas to seabirds such as red-footed boobies.
Bermuda, slightly further away from the Caribbean islands, boasts yet another favourable taxation to residents, though with a twist.
Like the others, individuals in Bermuda don’t pay personal income tax. Rather, the government levies a Payroll Tax which applies to all employers.
Employers often shift this on to employees and deduct a six percent fee from salaries to contribute towards the total Payroll Tax, still a positively low figure and much smaller than the UK’s top tax rate of 45 percent.
Bermuda also requires all homeowners and long-term tenants to pay a Land Tax twice a year, something that is based on the annual rental value of a property and can reach as much as 50 percent.
Of the other tax havens listed by the Tax Justice Network, the Netherlands comes out fourth, Switzerland fifth, and Luxembourg sixth. They are followed by Hong King, Jersey (a British Crown Dependency), Singapore, and the United Arab Emirates.
