Why certain countries’ taxes are lower than most of the rest ?

Nobody wants to pay taxes, however paying some taxes is inevitable.

Taxation is an element of sovereignty of one nation. This is how states collect the money needed to survive and offer services to their citizens and businesses. This is how they pay for the defense, public schools, other public services. So, there is no way a state would be able to exist without collecting taxes from their subjects.

States differ from each other in terms of size, population, complexity and services offered to their subjects. In general, the public expenses are higher as the size and population are higher, but mainly when the services offered to the citizens and businesses are more developed or widespread. This is why, bigger and richer states have generally asked their subjects to pay more taxes.

However, there is a group of states which have chosen to tax their subjects (or some of them) lower in order to gain from other (indirect) sources.

Most of these nations are small, both in population and in size. Some of them are poorer nations, but some of them are very well off.

These nations have, most of the time, been lacking natural resources and due to the tiny size of their territory and population they cannot develop industries.

They have to focus on services and they have to take advantage of what they have: people.

These nations have decided to organize a system which does not tax extensively corporations, most of the time if they are used outside of that nation’s territory. This system would allow the nations to charge nominal fees for corporations’ registration and maintenance fee while creating a sensible base of service providers and professionals to offer services to such corporations.

This way, the nominal fees the states charge for such corporations, irrespective of their turnovers, as well as the indirect benefits associated with such corporations (most of the time professional services connected to such corporations) are enough to produce an important part of the revenue of those states.

One should not read the lines above as suggesting these nations are poor and not sophisticated.

Take BVI, Cayman Islands, Bahamas or Cyprus for example. These nations or territories are quite strong in tourism but also they are wealthy nations. Corporate services provide for s tiny part of these nations taxes, but they have managed to built, mainly Cyprus, an extremely significant group professionals, both in legal, accounting, audit but also financial fields.