Tax havens have been used not only for tax evasion, but also as for money laundering. Furthermore, tax havens work to distort international flows of capitals to the abnormal direction. Because of this phenomenon, international welfare was reduced and individual coutries' bases of policies of tax revenue and expenditure were crumbled.
Tax havens appears in the midst of international tax competitions but goes free from limited meanings of domestic systems. In other words, individual country's tax system inevitably makes reciprocal influences with one another. And thus, domestic tax systems brought fundamental changes.
Globalization makes it possible to simplify international capital flows. Means for minimization and evasion has been developed. This leads to the result that individual countries have developed harmful tax policies. Harmful tax policies that cause harms to other countries has been potential distortions to sound flows of international trade and investment. As a result, this may make entire amounts of international wealth and involuntarily change structures of domestic tax system.
Recently, why the issue of tax haven reappears is because of financial difficulties which the United States, many EU countries, and Japan have suffered from. Big capitals and corporations get many benefits from their own governments but evade their duty of taxes and wired out their incomes and profits. Consequently, tax evasion and avoid through tax havens damage sense of justice based on each community and also seriously destroy or distort capital flows that should happen based on sound competition.
Also, tax havens becomes the important place of distributing criminal revenues. In the past, OECD paid attention to tax havens just to investigate tax evasion and illicit money laundering. However, recently FATF focuses on the relation between international terrorism and proliferation of weapons of mass destruction.
Most of all, the definition of tax haven brings many debates and conflicts.
First, we should note the tax rate of income. If tax rate is too low or close to zero, it should be considered harmful. Also, bank secrecy that causes opacity of money trade is another important factor. Moreover, the fact is important, that a particular corporation does not need to make actual economic activities to enroll itself in tax havens.