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10 | Investment International blog
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Banks have been irresponsible, hedge funds “Second, your article suggests that Cayman competition and the role of international
have been irresponsible, and both use special- and others “thrived” because the second half finance centres:
ist international finance centres. So they must of the 20th century was “free-wheeling”. “Legal competition by governments to
be to blame. Nonsense. Cayman and the other top offshore attract businesses by offering the most
The bank bail outs are costing billions and financial centres all have more rigorous anti- attractive mix of low taxes and quality
the international finance centres are assisting money laundering regulatory regimes than public services is as effective in making gov-
tax evasion so if it weren’t for them, we the US or any member of the EU. Our ernments efficient as competition amongst
wouldn’t be facing the prospect of steep tax research into OFCs has consistently shown retailers, or producers of a host of household
rises. that they have better legal tools and tougher goods is in forcing private firms to be
Now, it is true many banks and hedge standards than do most onshore jurisdictions. efficient.”
funds have operations in international Craig Boise, Associate Professor of Law, Case Over the course of the coming weeks lead-
finance centres. They provide a cost effective Western Reserve University, Cleveland, OH, ing up to the G20 we will produce a series of
tax neutral administration platform in a well US; Andrew P. Morriss, H. Ross & Helen articles which address the fears and p© Graham Thobayliasor
regulated environment. Blaming them for Workman, Professor of Law and Business, around ‘Tax Havens’, and provide evidence
what has happened in the US and UK is University of Illinois, Champaign, IL, US’ that the debate should move to a more
rather like blaming the mechanic who per- So what do international finance centres do rational assessment of two kinds of financial
formed a perfectly good service on a car and what is their role in the global financial centre; those which are well regulated and
which was then crashed by a reckless driver. system? transparent and those which are not.
Given that most western governments were International finance centres or IFCs pro- Further we will make a compelling case as
already under immense pressure from a bur- vide administration and wealth management to why Jersey is firmly placed amongst the
geoning public sector, and faced with huge services to international corporates and indi- well regulated and transparent, and demon-
additional borrowing due to the financial cri- viduals around the world. They compete for strate the value and integrity of its proposi-
sis; the location of a blame candidate with no international business in exactly the same way tion.
international voice, no votes, and no way of as do many OECD and G20 nations; on a mix In 2003 the world believed that weapons of
fighting back could look like a pretty attrac- of financial expertise, lower costs, attractive mass destruction were in Iraq and that free
tive opportunity if you are a government on tax regimes, political and social stability, and nations were under threat from this menace.
the ropes. robust, flexible, laws and regulation. History has proven that all the ‘experts’ were
Is this just sour grapes from one of those IFCs act as conduits for mobile interna- wrong. Centres such as Jersey are not
niche international finance centres? tional capital so essential to the operation of weapons of tax destruction; they are agents of
Well not according to some of the world’s free markets. They attract this capital from wealth creation, making a valuable contribu-
leading academics in the field of economics, where it is not needed and route it to where it tion to free markets, international financial
law and international relations. can be most efficiently deployed. services and to global prosperity.
Major academic studies by a number of We would urge the G20 to discriminate
“As anyone who has read the FT’s coverage highly respected institutions have been com- between transparent, well regulated and
of the financial crisis would know, its roots lie pleted to evidence empirically that IFCs are cooperative jurisdictions such as Jersey, and
not in Grand Cayman or the Isle of Man but an economic accelerator and not only do they those which are opaque, less well regulated
in New York and London. If there has been not detract from major economies they pro- and cloaked in secrecy. To do anything less
any “brutal exposure” it is of the inadequacies vide a net benefit. would undermine the very basis of the demo-
of the US and European Union oversight of Irwin Stelzer commented recently in The cratic principles of fairness, justice and
their financial systems. Daily Telegraph on the G20 approach to respect.
March 2009 Investment International www.investmentinternational.com
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