Regulating Tax Competition in Offshore Financial Centers

Regulating Tax Competition in Offshore Financial Centers

Craig M. Boise (Case Western Reserve University - School of Law) published this paper at Case Legal Studies Research Paper No. 08-26

Here is the Abstract:

One of the more entrenched issues in international taxation over the last thirty years has been how to define and respond appropriately to harmful tax competition among nations, especially competition from offshore financial centers (OFCs). The Organization for Economic Co-operation and Development (OECD) and the European Union (EU) have both mounted initiatives seeking to regulate such competition, and OFCs have strongly objected to these initiatives as an abrogation of their sovereignty in tax matters. This paper provides an introduction to the debate over the regulation of international tax competition, beginning with an overview of the essential architecture of international taxation and the way that its structure creates problems for developed countries and opportunities for OFCs, and continuing with an assessment of the arguments asserted in favor of, and against, regulating tax competition.

The paper then examines how developed countries, through the OECD and EU, have defined international tax competition, and the efforts made by both organizations to regulate such competition. Finally, the paper draws on the way the OECD and EU dealt specifically with the twin touchstones of virtually all definitions of tax havens-low or no income taxation and bank secrecy-to suggest the direction that regulation of tax competition is likely to take in the future.

Available at SSRN: http://ssrn.com/abstract=1266329

The Future of Offshore

Sharman, Jason. "The Future of Offshore" Paper presented at the annual meeting of the International Studies Association 48th Annual Convention, Hilton Chicago, CHICAGO, IL, USA, Feb 28, 2007 http://www.allacademic.com/meta/p180572_index.html

Abstract: Since the turn of the century Offshore Financial Centres (OFCs), or tax havens, have been roiled by various challenges from the G7 states and international organisations including the OECD, the EU and the FATF. Collectively these interventions, premised on combatting tax evasion and money laundering, have tended to erode tax havens' traditional attractions for non-resident investors: secrecy and light regulation.Currently the pace of change has slowed enough to make a preliminary assessment of what impact these changes have had on the 'offshore world'as a whole, not just individual tax havens. Conventional wisdom, often supported by those in tax havens themselves, is that as tax havens' traditional attractions have been weakened, this decade has and will continue to be lean times.

However, there is some evidence that the pessimism concerning the future of OFCs is considerably overdone. This paper will provide a preliminary assessment of the future of offshoreusing recently published IMF studies of 42 OFCs, interview data from 15 such jurisdictions, and a ten year survey of the commercial investment press, to lay the foundations for a larger project along the same lines.

A Level Playing Field and the Space for Small States

Vlcek, William. "A Level Playing Field and the Space for Small States" Paper presented at the annual meeting of the International Studies Association 48th Annual Convention, Hilton Chicago, CHICAGO, IL, USA, Feb 28, 2007

Abstract: In the course of producing a project against tax competition, the OECD has insisted on the establishment of a level playing field. The subjects of this project are predominantly small states with offshore financial centres and few alternatives available to achieve economic development. This paper reflects upon the broad parameters of the OECD's concern with tax competition and its proposed method to resolve the issue.

The following argument is an interrogation of the meaning embedded within the term 'level playing field' as used in the debate over international tax competition. It outlines some of the broad consequences that an OECD success with implementing the project holds for small economies. The conclusion reached is that a level playing field in the global political economy is a mirage with more substance for some states than for others.

International Organisations, Blacklisting and Tax Haven Regulatory Reform

Sharman, Jason. "International Organisations, Blacklisting and Tax Haven Regulatory Reform" Paper presented at the annual meeting of the International Studies Association, Le Centre Sheraton Hotel, Montreal, Quebec, Canada, Mar 17, 2004
Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: This paper seeks to evaluate the relative success of exclusionary or coercive strategies versus inclusionary or consensual strategies employed by international organisations in securing tax haven states' compliance with new global financial regulations. In 1998 the G7 launched several related regulatory initiatives designed to tame tax competition, counter money laundering and shore up international financial stability.

These initiatives were premised on a 'top-down' or exclusionary approach, whereby standards were set in closed fora and diffused to small tax haven states by blacklisting and sanctions. This approach was intended to yield quick results and avoid 'lowest common denominator' standards. Almost six years later, this paper argues that international organisations such as the OECD significantly over-estimated their ability to secure the unwilling compliance of even the smallest tax haven states. As a result, more traditional inclusionary strategies based on sovereign equality and consensus now seem just as likely to be effective in setting global standards. Evidence is predominantly taken from the OECD's 'harmful tax competition' initiative, but also includes that body's campaign against the illicit use of corporate vehicles, the Financial Action Task Force, the Financial Stability Forum, the IMF Offshore Audit and the International Taxation Dialogue.