Harmful tax competition is not just tax system, but can also undermine the interests of local communities and the environment. Tax havens are a huge drain of resources from other countries (basic non tax haven) to offshore areas. To operate, tax havens are supported economically, politically, and socially by high tax states. Also, by encouraging savings, it boosts investment and capital formation. Because they are low tax jurisdictions, they exert a higher tax on tax rates worldwide.