A tide coming in

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A tide coming in faster than a galloping horse
tax haven islands and rapid complex constant
change

• Dr Mark P Hampton
• University of Surrey

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Presentation Outline

• RC3 and tax haven islands
• Why is RC3 significant for islands?

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RC3 and tax haven islands

• Scale of offshore tax havens
• 70 tax havens holding 11 trillion
• 25 world money supply offshore
• 50 gross value world trade via tax havens
• Most tax havens in small islands
• Offshore finance since early 20th century

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BUT

• Since late 1990s unprecedented sequence of
  international initiatives
• OECD IMF G7's FATF FSF EU UN national
  governments
• RC3 (Rapid Complex Constant Change)

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'Four spaces' (Hampton, 1996b) as organising
framework for RC3

• Regulatory space
• Fiscal space
• Secrecy space
• Political space

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The Four Spaces and RC3

• Regulatory space
• G7's FSF 2000 rankings
• IMF inspections
• UK official reports (Edwards, 1998 KPMG, 2000)

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The Four Spaces and RC3

• Fiscal space
• OECD harmful tax competition 1998
• Irish Revenue success
• EU information exchange withholding taxes

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The Four Spaces and RC3

• Secrecy space (money laundering)
• G7s FATF (post 9/11 re-energised)
• UN Program against Money Laundering
• Political space

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Why is RC3 significant for island tax havens?

• Cost of new regulation enforcement
• Lack of personnel structures
• Overloads island government systems
• Creates uncertainty pressure on decision-making
• Is the impact of RC3 a function of smallness of
  islands?

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Why is RC3 significant for island tax havens?

• Links to dominant industry capture of state by
  OFC?
• Exacerbated - islands believe own PR?
• Different narratives official narrative how
  islands are in control of their OFC
• Vs.
• Reality of dominant tax haven industry its
  global agenda

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Conclusions

• For tax haven islands - how to cope with RC3 (or
  manage) external shocks?
• Trends?
• Binary - Functional OFCs Notional OFCs
• Functional OFCs - complain but comply
• Notional OFCs - ignore risk it

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Conclusions

• Football (soccer) analogy
• Premiership clubs vs. Saturday morning amateur
  league!

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And Finally

• Growing civil society response to tax havens
• Changing perceptions from broad tolerance to
  active campaigning against tax havens (Tax
  Justice Network, AABA, Attac)
• Are the golden years over for tax haven islands?

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• "What would we do instead? If the OECD closed us
  down, we would become depopulated and derelict."
• John Cashen, Chief Finance Officer,
• Isle of Man

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• "Offshore exists but they see it as a bad thing.
  If the OECD stopped imposing penal taxes on their
  own citizens, we wouldn't exist. That's all they
  need to do. They'd solve the problem. They're
  so-called capitalist countries imposing socialist
  rates of tax on their own citizens. It's more or
  less a human rights issue really."
• Isaac Legair, Director Financial Supervision
  Unit,
• St Lucia

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Thank you

• Dr Mark P Hampton
• University of Surrey
• mark.hampton_at_surrey.ac.uk