In a global setting, taxation places a heavy burden on enterprises that operate in different jurisdictions. A focus on the core corporate activities by limiting the administrative burden leads to professional stability. Still, aggressive tax optimization is not always considered a friendly activity. As such, governments around the world and several international organizations aim to limit abuse of the global financial system. The migration of taxation from high tax jurisdictions to low tax jurisdictions can be justifiable. Yet, moving to zero tax jurisdictions is often disapproved. Large corporations with a global coverage and multinationals may get away with these tactics. Small businesses, solo entrepreneurs and even start-up firms, on the other hand, are often heavily penalized. This can be by the lack of appropriate, and fully compliant, business planning and corporate set up, or because what they do is a violation of international rules of taxation.
The violation of tax rules can be seen as fraud against the government. Deliberate tax fraud goes one step further. It is often subject to imprisonment. The offshore financial sector is often abused by financial criminals and other illicit actors to shield ownership of their ill-gotten gains. Efforts to combat undesired conduct impose limitations of the sector and thus include both legitimate and obscure market players and their activities.
Taxation is divided into several important sectors. The most obvious but distinct taxation is personal versus corporate income tax. Personal income tax is paid over salaries received by employees. Corporate income tax is paid by the company for the profits it makes after operational costs are deducted. The debate on tax avoidance therewith is often justified by emotional triggers. In short, both personal and corporate income tax relate to citizenship. It is often ignored that corporate citizenship, in essence the country of registration of the company, can be different than the personal citizenship of the director or owner of the company.