Offshore Finance and Small States: Sovereignty, Size and Money PDF
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International Political Economy Series Offshore Finance and Small States Sovereignty, Size and Money William Vlcek International Political Economy Series General Editor: Timothy M. Shaw, Professor and Director, Institute of International Relations, The University of the West Indies, Trinidad & Tobago Titles include: Leslie Elliott Armijo (editorr) FINANCIAL GLOBALIZATION AND DEMOCRACY IN EMERGING MARKETS Robert Boardman THE POLITICAL ECONOMY OF NATURE Environmental Debates and the Social Sciences Jörn Brömmelhörster and Wolf-Christian Paes(editors) THE MILITARY AS AN ECONOMIC ACTOR Soldiers in Business Gerard Clarke and Michael Jennings (editor) DEVELOPMENT, CIVIL SOCIETY AND FAITH-BASED ORGANIZATIONS Bridging the Sacred and the Secular Gordon Crawford FOREIGN AID AND POLITICAL REFORM A Comparative Analysis of Democracy Assistance and Political Conditionality Matt Davies INTERNATIONAL POLITICAL ECONOMY AND MASS COMMUNICATION IN CHILE National Intellectuals and Transnational Hegemony Martin Doornbos INSTITUTIONALIZING DEVELOPMENT POLICIES AND RESOURCE STRATEGIES IN EASTERN AFRICA AND INDIA Developing Winners and Losers Fred P. Gale THE TROPICAL TIMBER TRADE REGIME Meric S. Gertler and David A. Wolfe INNOVATION AND SOCIAL LEARNING Institutional Adaptation in an Era of Technological Change Anne Marie Goetz and Rob Jenkins REINVENTING ACCOUNTABILITY Making Democracy Work for the Poor Andrea Goldstein MULTINATIONAL COMPANIES FROM EMERGING ECONOMIES Composition, Conceptualization and Direction in the Global Economy Mary Ann Haley FREEDOM AND FINANCE Democratization and Institutional Investors in Developing Countries Keith M. Henderson and O. P. Dwivedi (editors) BUREAUCRACY AND THE ALTERNATIVES IN WORLD PERSPECTIVES Jomo K.S. and Shyamala Nagaraj (editors) GLOBALIZATION VERSUS DEVELOPMENT Angela W. Little LABOURING TO LEARN Towards a Political Economy of Plantations, People and Education in Sri Lanka John Loxley (editorr) INTERDEPENDENCE, DISEQUILIBRIUM AND GROWTH Reflections on the Political Economy of North–South Relations at the Turn of the Century Don D. Marshall CARIBBEAN POLITICAL ECONOMY AT THE CROSSROADS NAFTA and Regional Developmentalism Susan M. McMillan FOREIGN DIRECT INVESTMENT IN THREE REGIONS OF THE SOUTH AT THE END OF THE TWENTIETH CENTURY S. Javed Maswood THE SOUTH IN INTERNATIONAL ECONOMIC REGIMES Whose Globalization? John Minns THE POLITICS OF DEVELOPMENTALISM The Midas States of Mexico, South Korea and Taiwan Philip Nel THE POLITICS OF ECONOMIC INEQUALITY IN DEVELOPING COUNTRIES Lars Rudebeck, Olle Törnquist and Virgilio Rojas (editors) DEMOCRATIZATION IN THE THIRD WORLD Concrete Cases in Comparative and Theoretical Perspective Benu Schneider (editor) THE ROAD TO INTERNATIONAL FINANCIAL STABILITY Are Key Financial Standards the Answer? Howard Stein (editorr) ASIAN INDUSTRIALIZATION AND AFRICA Studies in Policy Alternatives to Structural Adjustment William Vlcek OFFSHORE FINANCE AND SMALL STATES Sovereignty, Size and Money International Political Economy Series Series Standing Order ISBN 978–0–333–71708–0 hardcover Series Standing Order ISBN 978–0–333–71110–1 paperback (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and one of the ISBNs quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England Offshore Finance and Small States Sovereignty, Size and Money William Vlcek Lecturer in International Politics Institute of Commonwealth Studies University of London © William Vlcek 2008 Softcover reprint of the hardcover 1st edition 2008 978-0-230-52220-6 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2008 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-1-349-35693-5 ISBN 978-0-230-23492-5 (eBook) DOI 10.1057/9780230234925 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufactur- ing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalogue record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 17 16 15 14 13 12 11 10 09 08 Contents Acronyms vii List of Tables and Figures ix Preface and Acknowledgments x Chapter 1 International Norms and the Practice of 1 Sovereignty What does size have to do with it? 5 Variety in definition – What is ‘small’? 10 Fundamentals of taxation (and tax competition) 11 Offshore – small state development within the terrain of 18 global finance A common legal tradition 21 Offshore financial centers as development 24 Chapter 2 Sovereignty and Taxation 26 Concepts of sovereignty 27 Defining the sovereign state 27 Sovereignty for small states 31 Remnants of empire 33 Taxation in the modern state 34 Leviathan state or benevolent state? 39 A sovereign right to tax? 41 Chapter 3 Global Financial Governance and Tax Competition 47 Money laundering – smoke screen for the harmful tax 49 competition initiative The story of the Harmful Tax Competition Initiative 50 Establishing the case against competition 52 Creating a definition of the harmful competitor 56 Taking action against the competition 62 In pursuit of the ‘level playing field’ 63 An immanent critique from OECD abstentions 65 Conclusions 66 Chapter 4 Resistance and Withdrawal 68 A critique from the islands 69 A subversion of sovereignty 70 v vi Contents The right place? 72 Common rules for a common problem? 73 The OECD rebuttal 76 State sovereignty is not under attack 76 The OECD is the correct forum 79 All states are treated equally 80 US domestic politics and harmful tax competition 81 Reflections upon the debate 84 Chapter 5 Working Together – Small States in the 88 Commonwealth and Elsewhere Small states within the Commonwealth 90 Beyond the Commonwealth 103 Concluding thoughts on collective action 108 Chapter 6 Caribbean Offshore Finance Under Pressure 111 Quantifying vulnerability 113 Caribbean offshore financial centers 118 The Bahamas 119 Dominica and St. Vincent 122 British Overseas Territories 126 Foreign assets ‘offshore’ in the Caribbean 130 Conclusions 140 Chapter 7 A Future for Sovereignty at the Margins 144 A summation 145 Sovereignty for small states 149 Maintaining sovereignty 150 Constructing sovereignty 151 Sharing sovereignty 154 The abiding significance of the state 155 Thoughts on the US presence in the tax 156 competition debate Where does this leave us? Small states in the 158 twenty-first century Notes 165 References 176 Index 195 Acronyms AOSIS Alliance of Small Island States BIS Bank for International Settlements CAP Common Agricultural Policy CARICOM Caribbean Community CHOGM Commonwealth Heads of Government Meeting CIMA Cayman Islands Monetary Authority CMGSS Commonwealth Ministerial Group on Small States CVI Commonwealth Vulnerability Index ECCB Eastern Caribbean Central Bank ECCU Eastern Caribbean Currency Union EU European Union FATF Financial Action Task Force FDI Foreign Direct Investment FTAA Free Trade Agreement of the Americas GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GNI Gross National Income HTCI Harmful Tax Competition Initiative IBC International Business Company IFC International Financial Center IFSA International Financial Services Authority IGO International Governmental Organization IMF International Monetary Fund IRS Internal Revenue Service ISO International Organization for Standardization ITIO International Trade and Investment Organization LDC Less Developed Country LLDC Lesser Less Developed Country MNC Multinational Corporation NCCT Non-Cooperative Countries and Territories NGO Non-Governmental Organization vii viii Acronyms OECD Organization for Economic Co-operation and Development OED Oxford English Dictionary OFC Offshore Financial Center RNM Regional Negotiating Machinery SAR Special Administrative Region SDEs Small and Developing Economies SIDSnet Small Island Developing States Network SIE Small Island Economy UN United Nations USA PATRIOT Act Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act VAT Value Added Tax WTO World Trade Organization List of Tables and Figures Tables 1.1 Small States by Population, 1.5 to 5 million 12 1.2 Small States by Population, 500,000 to 1.5 million 13 1.3 Small States by Population, 100,000 to 500,000 14 1.4 Small States by Population, less than 100,000 15 1.5 Non-Self-Governing Territories by Population 16 5.1 Commonwealth Members 97 6.1 The Bahamas, Offshore Entities and Employment 121 6.2 The Bahamas, Offshore License Revenue 123 6.3 St. Vincent and the Grenadines 127 6.4 Cayman Islands Offshore Entities 129 6.5 Cayman Islands Offshore License Fee Revenue 131 6.6 BIS Data Sets 136 Figures 6.1 Foreign assets on deposit, OECD and OFCs 135 6.2 Foreign assets on deposit, OECD, OFCs and 137 Commonwealth Carribean 6.3 Commercial banks’ total non-resident deposits (ECCU) 139 ix
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