Data Havens

A Tax haven is a essentially a jurisdiction (often a country) that has taxes, tax rates, or other legal structuring that provides a lower total tax burden than other jurisdictions. The ability to lower or remove a give tax burden provides an incentive for  companies or individuals to establish a presence in these jurisdiction in order to reduce or remove the imposed tax burden of the jurisdiction for which they might currently be domiciled within. This creates tax competition across jurisdictions as these jurisdictions seek to attract businesses and and individuals. As Wikipedia puts it “the central feature of a haven is that its laws and other measures can be used to evade or avoid the tax laws or regulations of other jurisdictions.”

The same aspects that drive corporate entities and individuals to establish a presence within a given jurisdiction because of tax differentials are starting to play-out when it comes to data management. Since the revelation of and concerns around spying from the National Security Agency (NSA) and other concerns of governments’ surveillance of the Internet more broadly both within the United States and other countries in the world, companies are taking a more proactive – and public – examination of where data is stored. As Nick Wingfield and Mark Scott wrote for The New York Times, “in an interview with The Financial Times, Brad Smith, Microsoft’s general counsel, said the company’s customers should be able to “make an informed choice of where their data resides.”

I posit in the coming years we will begin to see countries compete to provide privacy over stored data in many of the same way that countries today are competing to provide attractive tax environments and incentives to entities.