Tax havens have been part of the financial landscape for many years. However, their use has been limited. Organizing an offshore corporation, and making arrangements to conduct international transactions has been practical for relatively few companies. For tax authorities, monitoring tax compliance among this limited number of companies has been something they could cope with. Today, electronic commerce enables international transactions for all companies, large and small.
Tax authorities expect the use of tax havens to increase dramatically.
Indeed, the tax haven countries themselves have been promoting their benefits as worldwide e-commerce centers. The type of e-commerce most suited for tax havens is commerce in digital products and services, where the seller needs only secure telecommunications facilities to sell worldwide. OECD member countries fear two things from offshore e-commerce, unfair tax competition, and outright tax evasion. OECD countries may lose business as highly mobile e-commerce companies move to tax havens to take advantage of low tax rates. OECD countries also fear tax evasion will grow rapidly along with e-commerce.