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A tax deduction, or "write off" as it's sometimes called, reduces your taxable income by allowing you to subtract when you start an expense from your income, before calculating the amount tax you'll want to pay. The more deductions an individual or the larger the deductions, reduced your taxable income. Also, higher you reduced taxable income the less exposure you are going to the higher tax rates in improved income supports. As you read earlier, Canada's tax system is progressive consequently the more you earn, the higher the tax rate. Reducing your taxable income lowers the amount of tax payable.

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In addition, Merck, another pharmaceutical company, agreed invest the IRS $2.3 billion o settle allegations of kontol. It purportedly shifted profits just offshore. In that case, Merck transferred ownership of just two drugs (Zocor and Mevacor) along with shell it formed in Bermuda.

Example: Mary, an American citizen, is single and lives in Bermuda. She earns an income of $450,000. Part of Mary's income will be subject to U.S. tax at the 39.6% tax rate.

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