Forbes Magazine voted Angela Merkel, the German Chancellor, the most powerful woman in the world. Merkel is now hell bent on a crusade to rid the world of tax havens. 'Iron Lady', wants all governments to join together in a Tax Cartel. The global bureaucratic enemies of tax havens are self-righteously certain their grounds for complaint are righteous and are demanding a clean-up, in what could be seen as a 'Holy Tax War'.

Tax havens develop because of the need to attract foreign investment to an economy. In particular, third world countries who are willing to vary their tax laws. Countries which able to benefit from the universal requirement for opportunities to engage in avoidance of punitive tax laws and regulations of other jurisdictions.

If you happen to reside in a developed country, your taxes are almost certainly lower than they were 30 years ago. OECD said personal income tax averaged 67% in 1980. Top personal taxes now average only 40%. Corporate taxes have slid from 50% in 1980 to a meager 27%. This is partly due to the fact tax havens exist. They put pressure on high-taxed countries, forcing them to lower their tax rates. It is this tax rivalry which creates the climate for a liberalizing process, driving tax policy down the right path.

Often asset rich people are placed under pressure by tyrannical governments. These potential victims have an alternative choice through tax havens. In some cases freedom from persecution of a racial, political, religious or ethnic nature can only be obtained when personal information is kept secret from a government.

Some argue that an early tax haven was instituted by the Vatican City in 756. Around 1100 BC, a few of the Greek islands were used as havens against the 2% tax imposed by the city-state of Athens. Trade existed between the American colonies and Latin America in the early 1700's, so as to not have to pay English taxes.

Taxes rose harshly at the end of World War I, in order to reconstruct the war damaged countries. Switzerland, having remained neutral, didn't face the same infrastructure rebuilding problems. The twentieth century screamed for new markets, cheap labor and low tax, as the majority of the world's colonies gained independence. Developing their own tax and trade regimes, they produced universal economic disparities. Between World War 1 and World War 11, tax havens were mainly used to get around personal taxation. From the 1950's onward, there was a phenomenal growth in the use of tax havens, as corporate giants attempted to reduce their global tax burden.

Claims that tax havens are an open highway designed for money laundering are false. The extensive international banking laws and regulations actually makes money laundering virtually impossible. The surprise is that America could be considered as one of the largest tax havens, in that there is no tax on interest and capital gains for foreigners who invest in America. It is estimated that there is more than $12 trillion of foreign investment in the United States.

Vanuatu, a tropical island archipelago in the South Pacific, has long been seen as a stable political and economical tax haven. The country's financial status, however, was a much debated subject leading up to the recent general elections. It has been claimed that Australia violated the sovereignty of Vanuatu through recent raids on legitimate companies, banks and private homes. Well known identities were arrested. The authorities claim they were the mastermind behind a massive tax evasion scheme. Private letters were allegedly opened when mail boxes were broken into.

All this was in the name of a movie style sting, in order to catch unsuspecting law abiding Vanuatu citizens and residents. People who abides within the legal framework of Vanuatu, but the Australian Tax Office claims it was a breach of Australian law.

Questions remain to be answered. Does the constitutional law of the land take precedence in a country, or should a country bow to the laws of a neighbour? Finally, when all opposition, or completion is demolished, an unhealthy situation arises, as there are no checks and balances.