The phrase “tax haven” is usually associated with Caribbean islands, the Swiss Alps, or a developing nation seeking to improve its economy by encouraging businesses come there, a place where rich, multinational corporations can hide their wealth from their home states. They are seen as corrupt states, willing to help those who are already corrupt, but is that the whole truth? Could it be that tax havens play a key role not only in the development of a state, but also in the progress of the international economy? The answer, although complicated, can be found. By understanding key definitions and examining the effects a tax haven can have on the state in which it is located and those around it, you will see that tax havens play both a negative and positive role within the economy international through the means of foreign direct investment. Definitions The first definition to explore will be that of tax havens. As defined by the Organization for Economic Co-operation and Development (OECD), a tax haven is a state or territory where taxes are not collected or are charged at a lower rate than in most other states. Furthermore, they identify three characteristics that define whether or not a state is a tax haven. The first of these is the ability to offer non-residents and/or foreign corporations a financial system in which to hold their money with little or no income taxes. Second, states may have laws or administrative practices that ensure the anonymity of personal financial information. Finally, the lack of transparency in how the laws work and the lack of consistency in how they are applied. This may include secret deals, negotiated tax rates, or off-the-books deals given to an ind... middle of paper... surrounding states could benefit as these companies seek to expand and invest within them. Something that wouldn't be possible if they were required to operate in a non-tax haven state. Conclusion Using Delaware as a case to study tax havens and whether its effects are positive or negative is not an easy question to answer. There are many moving parts within the international economy and it is difficult to examine them all at once. Tax havens divert foreign investment from non-tax havens in the short term, which could have a negative impact on the GDP and economy of non-tax havens, and at the same time the ability to reduce costs could cause an increase in foreign investment towards non-tax havens. -tax havens in the long term, thus promoting economic and GDP growth. All that can be fully known and understood is that tax havens, such as Delaware, have an effect on the international market.