Wednesday, September 15, 2010

The hidden hands behind tax havens

We have written a lot on the role of major economies, notably the United States and Britain, in the offshore world. We have just stumbled across this little January 2009 snippet from Bruce Zagaris, published in Tax Notes International, which really speaks for itself. It's about a study by the (British) Commonwealth Secretariat:
Many Commonwealth members who are SOFCs established offshore financial centers as a result of studies, recommendations, financial, and technical assistance from donors and international financial institutions. Many of these SOFCs are small island states with few alternative development options.

One experience I had, as an example, was a project I undertook in the 1990s as a sub-contractor for U.S. Agency for International Development (USAID) in Cape Verde. To try to reduce the migratory pressures from Cape Verde, USAID funded a project to try to develop a ship registry. Ironically, at the very time the U.S. Treasury was trying to crack down on international financial centers, it was funding a project to facilitate international financial services based on zero or extremely low taxes and in a country with limited experience or laws on transparency or exchange of information.
Yes, well, just as we have been saying all along, as if more evidence were needed. And the same piece notes:
The report says the costs involved in meeting the new standards have surpassed the identifiable benefits that have resulted for both the public and private sectors. The three countries reviewed had to divert the scarce public revenues toward regulating their international financial services (IFS) sector.
This is a legitimate subject in itself, and the study does rightly point to the unfairness of an international system where fingers get pointed at small jurisdictions while the bigger OECD tax havens get exonerated, but the Commonwealth Secretariat does seem reluctant to consider the consequences that these jurisdictions' tax havenry might have on other countries.


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