Pacific Islands Shine Light On Larger Tax Heaven Fight
As a result of growing concern about tax revenues worldwide, the role of offshore tax havens is under increased scrutiny. There are calls for more transparency at the G8 summit and recommendations by the OECD. To establish international tax rules at the G20 next month.
International Consortium of Investigative Journalists launched last month an online database of private offshore banks entities. This has added fuel to the fire of voter dissatisfaction with austerity measures, higher taxes, and other financial reforms.
The Global North, a group of developed nations, has not been able to resist the softening of the Global South. Where clients from the region’s wealthiest countries are able to access the majority of Pacific Island tax-haven businesses.
The economic power shift from north to south has meant that the future of tax havens in the Pacific Islands may depend on the outcome of a larger struggle between the United States of America and Europe and the emerging economies of Asia.
Spotlight On Tax Heavens
Tax havens are characterized by low tax rates and regulatory oversight, as well as thick layers of secrecy. Many believe that these offshore financial centers are part of the shadow banking system that caused the GFC. They help to create complex, high-risk financial structures far from the underlying assets.
Parallel banking systems used unregulated tax havens as a way to channel large amounts of foreign and domestic cash into mortgages. This created a speculative bubble in residential and commercial real property around the globe. This created a lot of debt, particularly between 2004 and 2007. This shadow banking system collapsed on 7 August 2007 and created the credit crisis.
Many policy-makers from the Global North regions of North America, Europe and North America have expressed concern about the widespread use of tax havens in today’s financial world in the wake of the global financial crises.
These economies are currently in a persistent recession that has seen a decline in real estate prices, household wealth, and consumption. This has led to costly government stimulus programs, as well as tax revenue shortfalls, and gaping budget deficits. This has increased the political attacks on offshore havens that facilitate tax evasion. There are calls for more regulation and elimination of offshore havens after the collapse of Iceland’s banking system and, more recently, Cyprus.
Advocate groups for the poor of developing countries have also mobilized against havens. They are accused of aiding capital flight, corruption, under-investment and drug trafficking, as well as elite wealth/public squalor within the Global South. With governments and international organizations claiming they will be limited or eliminated, tax havens appear to be fighting for their survival.
These images can help you understand the financial centres offshore in Oceania. The largest centres are Samoa and the Marshall Islands, Vanuatu, Vanuatu, and Cook Islands. However, there are small niche financial centres within the region such as Nauru or the Federated States of Micronesia.
Samoa is focused on China’s growing trade. The country’s offshore center is a major conduit for Chinese investment and the two countries have very good Tax relations.
Flags of convenience for both ships and offshore oil drilling rigs are a strong strength in the Marshall Islands. International trade declined after the GFC, which led to a shipping crisis. This accelerated maritime companies’ efforts to reduce their labour, taxes, and regulatory costs using flags of convenience offered offshore by centres like the Marshall Islands. These islands were already thriving as the legal residence of many of the largest shipping companies in the world, and have the third-largest fleet (over 2780 ships totalling more than 8 million tonnes).
Vanuatu is also a major supplier for flags of convenience. It has registered about 600 ships and 2 million tonnes of gross cargo. The Cook Islands are a leader in asset protection trusts. Vanuatu’s focus is on offshore banking, insurance and gambling. Nauru has offshore companies. For Japanese clients, the Federated States of Micronesia create offshore insurance companies.