Paradise Lost: Protests in Jersey, shootings in Cayman

Tax havens like to portray themselves as successful examples of the low-tax dream. But low taxes carry a cost, and the cost is typically borne by public sector workers, pensioners, single parents and unemployed people. Nowhere are these pressures greater than in places like Jersey, which boasts a national income per person amongst the highest in the world, but has one of the worst pension schemes in Europe for its elderly people, and is now proposing cutbacks in education. Thankfully teachers and other education workers are prepared to resist these cuts (photo credit to the Jersey Evening Post)

Jersey, a British Crown Dependency, has based its development model on a tax war with the rest of the world, using beggar-my-neighbour tax policies to attract tax avoiding business and rich tax dodgers to its shores. But this is an easy game for others to play, and Jersey is now locked into a vicious cycle of providing tax incentives to big business and public expenditure cuts. Public sector workers are expected to bear the brunt of these cuts, which will further diminish the island's already weak social capital.

Meanwhile, the situation in Cayman, an even smaller community with an even more aggressive position on tax, has deteriorated dramatically in recent years, serving as a dire warning to other small island communities. Captured by right-wing libertarian extremists from the US and UK, Cayman has no income or property tax. The island's government is head over heels in debt, but nonetheless refuses to abide with U.K. government requests to adopt a more sustainable tax regime. Public services are under-funded and inequality has reached extreme levels.

The result is an astonishing mess. With a population of around 55,000 people - many of them immigrants to meet the labour demands of the offshore financial sector - Cayman is facing social breakdown comparable to the worst inner city areas of mainland America: kidnappings, armed robberies, drive-by shootings and murder. Criminal gangs engaged in drug-running have taken root among the island's unemployed and low paid, and the already large local police force is unable to cope. U.K. reinforcements have been drafted in to provide support services.

Add the sad story of corruption in the Turks & Caicos, and Stanford's Bank scandal in Antigua, and you can see why we take such a critical stance of development models based on tax havenry.