Tax Avoidance

This chapter introduces the issue of tax avoidance, a problem produced by the tax system itself when it begins to distinguish between different categories of taxpayers. Tax avoidance becomes an international problem when taxpayers utilise the variance that exists between different national tax regimes to reduce their total tax obligation. After unpacking the terms involved, the chapter provides a brief historical context to situate the current issues of concern which are exemplified in the public consciousness by the Panama Papers. The fact that measures to address tax avoidance are crafted in the Global North, for the benefit of their economies, is highlighted to emphasise that tax avoidance is yet another instance where global governance is established to satisfy the demands of the powerful states

Islands as Offshore Financial Centres:The Free(r) Flow of Capital

A number of islands have served as the host location for financial services over the past few decades, and these offshore financial centres (OFCs) have been the object of research and analysis since the 1970s. This contribution begins by establishing the historical context experienced by the OFC in order to explore the present situation for the island economy hosting one. The specific point of distinction determining that a financial centre is ‘offshore’, actually, is not its location on an island, but rather the operation of a legal regime to provide financial services to non-resident individuals and companies. The politico-economic rationale behind the decision to host an OFC involves several factors, including the rents collected from the services provided to foreign capital and its owners, the employment opportunities available to island residents, and the low environmental impact of an OFC as compared to alternative economic development proposals. Thus, there is a distinct difference between the island OFC when compared to a large state financial centre (e.g., Luxembourg, Netherlands, UK, or US) where these financial centres operate primarily as a complementary feature within a larger, diversified economy. At the same time, the island OFC is subjected to challenges that arise from its size and relative location within global finance which are not necessarily experienced by other financial centre jurisdictions. Several of these challenges are highlighted in this chapter, followed by some concluding thoughts on what the immediate future may hold for the island OFC