Offshore finance and global governance disciplining the tax nomad (international political economy series)

International Political Economy Series Offshore Finance and Global Governance Disciplining the Tax Nomad William Vlcek International Political Economy Series Series Editor Timothy M Shaw Visiting Professor, University of Massachusetts Boston, USA Emeritus Professor, University of London, UK Aim of the series The global political economy is in flux as a series of cumulative crises impacts its organization and governance The IPE series has tracked its development in both analysis and structure over the last three decades It has always had a concentration on the global South Now the South increasingly challenges the North as the centre of development, also reflected in a growing number of submissions and publications on indebted Eurozone economies in Southern Europe An indispensable resource for scholars and researchers, the series examines a variety of capitalisms and connections by focusing on emerging economies, companies and sectors, debates and policies It informs diverse policy communities as the established trans-Atlantic North declines and ‘the rest’, especially the BRICS, rise More information about this series at http://www.springer.com/series/13996 William Vlcek Offshore Finance and Global Governance Disciplining the Tax Nomad William Vlcek School of International Relations University of St Andrews St Andrews, United Kingdom International Political Economy Series ISBN 978-1-137-56180-0 ISBN 978-1-137-56181-7 DOI 10.1057/978-1-137-56181-7 (eBook) Library of Congress Control Number: 2016946995 © The Editor(s) (if applicable) and The Author(s) 2017 The author(s) has/have asserted their right(s) to be identified as the author(s) of this work in accordance with the Copyright, Designs and Patents Act This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made Cover image © Rob Friedman/iStockphoto.com Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Macmillan Publishers Ltd London PREFACE AND ACKNOWLEDGEMENTS Abstract This section sets the tone for the book on the international politics of taxation and provides my acknowledgements WHAT IS IT ABOUT INTERNATIONAL POLITICS AND TAXES? Taxation is an emotional subject, replete with a multitude of familiar quotations; for example, from Benjamin Franklin there is “in this world nothing can be said to be certain, except death and taxes” Jean-Batiste Colbert has been attributed with an agricultural metaphor for taxation: “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.” And more directly relevant to a book involving forms of cross-border tax avoidance, there are the words of Judge Learned Hand (Gregory versus Helvering 1934): “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes” (as cited in Vanistendael 1997, p. 132) These quotations are treated as aphorisms by some individuals, yet expose a further point about taxation that must be acknowledged from the start It is the fact that the normative starting point for anyone writing or commenting on taxation in any form or function will have embedded within their analysis and commentary the political context and perspective that guide their thinking and view of the world In other words, whether taxes are treated as a ‘good’ or a ‘bad’ for society and its relationship to the state (as much as the purpose of the state for society), v vi PREFACE AND ACKNOWLEDGEMENTS these views will be reflected in the tone and tenor of the text Which means that if the reader finds themselves disagreeing with any of the points made in the following chapters, it is quite likely that the disagreement arises because they have a different view of the world, and their position in it, from that of the author Yet given everyone’s intimate, personal familiarity with taxes—on their income, on the stuff they buy (beer, airplane tickets, gasoline), on their savings—why would anyone write a book on the topic, much less read it? (Well, other than the emotional release it may provide the author to vent their frustration over taxation, the state and how the state distributes the tax revenue in society; search the Internet for ‘tax blog’ to view a selection representing this approach.) One consequence of the global financial crisis was a massive increase in public debt by a number of governments as they sought to counter the impact of the crisis in their individual domestic economies And because that debt is ‘public’ it is the public which must pay off the public debt generated to protect private entities in society In other words, it is the taxpaying resident that must pay in the future for those efforts made to protect the present In amongst the debates over new taxes, increased taxes, and the elimination of tax credits as part of the effort to increase government tax revenue collections has been a call to ‘close down the tax havens’ and bring home the money concealed by citizens in those distant locations Such a call emerges from a belief that the active pursuit of anyone engaged in tax avoidance, tax minimisation, and tax evasion would in turn solve the debt problem Because, clearly, ‘I’ already pay my fair share of tax, it’s those rich people and multinational corporations that use tax havens to avoid paying their fair share that need to contribute more for the common good But as the author seeks to demonstrate here, this problem is like so many other problems in life—there is no clear, simple solution Beyond the central position of taxation in the collection of stories that fill these pages, this is a text of global political economy and it is one for a number of reasons First, taxes are economic measures that are politically defined and politically determined (as demonstrated by the statements of politicians explaining and rationalising any change in taxation) Second, to speak of a tax haven is to speak of another state, or in the context of international relations another legal, territorial jurisdiction Therefore, any discussion of taxation and tax havens in the world is in truth a conversation about global political economy, whether it is about US banks using the Cayman Islands for overnight, interest-generating deposits; PREFACE AND ACKNOWLEDGEMENTS vii multinational insurance firms using reinsurance corporations registered in Bermuda; or the kleptocratic ‘President for Life’ of a developing economy (e.g Ferdinand Marcos and Sani Abacha) using an American or Swiss bank account to hold the wealth they stole from their citizens The issues of interest here are both economic and political, and they cross state borders, which combined set this analysis in the discipline of global political economy I should also set out one disclaimer at this point, as with my previous work on offshore finance, the presence of the term ‘tax haven’ is to be understood as written ‘under erasure’ Following Jacques Derrida, this action recognises the problematic nature of the term and its contested meaning as much as its contested usage Its common usage in the media and the literature is inconsistent, conflicted, and often pejorative Hence the absence of the term from the title of this monograph despite its appearance within these pages reflecting its (mis)use by the various actors and actions under consideration REFERENCE Vanistendael, F (1997) Judicial interpretation and the role of anti-abuse provisions in tax law In G S Cooper (Ed.), Tax avoicance and the rule of law (pp 131–54) Amsterdam: IBFD Publications BV in co-operation with the Australian Tax Research Foundation ACKNOWLEDGEMENTS Before entering into the specific analysis contained in the following pages, a number of acknowledgements for help, guidance, advice, and forbearance are in order First to the AGORA workshop ‘Statehood, Sovereignty, and Global Governance’ held at the Centre for Global Governance, Norwegian Institute of International Affairs (NUPI), Oslo in 2011 The feedback and encouragement provided on the paper presented there became the nucleus for this book And my thanks to the proprietors of several Oslo brewpubs in which over the weekend after the workshop my initial thoughts for this book coalesced under the influence of the emerging Norwegian craft beer movement Beyond that workshop a number of the issues explored in this book have been presented in one form or another in workshops and at conferences over the past several years; I appreciate the feedback and comments received, both formally and informally from the other participants Particularly useful have been conversations with Godfrey Baldacchino, Bob Kudrle, Bill Maurer, Ronen Palan, Mike Rafferty, Len Seabrooke, Jason Sharman, Baldur Thorhallsson, Eleni Tsingou, Duncan Wigan, and for anyone whose name I missed, apologies My work contributing to a report prepared by the consultancy Blomeyer and Sanz for the European Parliament’s Committee on Budgetary Control helped to focus my thoughts on the policy implications with a number of the government and multilateral initiatives covered in this text I especially appreciate my conversations with the report’s lead author and editor, Roderick Ackermann Among my colleagues at the University of St Andrews, several have been especially gracious in listening to me natter on about offshore finance ix x ACKNOWLEDGEMENTS and international taxation over the past few years, and I honestly appreciate their graciousness for what was most likely quite boring for them My warmest regards to Javier Argomaniz, Faye Donnelly, Caron Gentry, Rikard Jalkebro, Jeffrey Murer, and Rashmi Singh; and to family and friends who also have graciously endured listening to me prattle on about taxation over the years, including Miriam Allam, Rosemary Bern, Linda Dilley, Jim Miller, Robert Miller, Mark Stettler, and Catherine Vlcek (my Mum made the mistake one afternoon of asking what I was working on and ended up on the receiving end of a half-hour monologue) And finally my thanks to the team at Palgrave Macmillan, Christina Brian, Tim Shaw, and Judith Allan, for their enthusiastic support with the writing of this book Formal acknowledgement is also due to Taylor and Francis, publishers of the journal Third World Quarterly, in which my article ‘Behind an offshore mask: sovereignty games in the global political economy’ was published in volume 30, issue number (December 2009), pp. 1465–1481 Elements of that article have been further developed in the chapter ‘Sovereignty and the Tax Nomad’ ... further developed in the chapter ‘Sovereignty and the Tax Nomad CONTENTS Globalisation and the Tax Nomad Sovereignty and the Tax Nomad 21 Multinational Corporations and the Digital Economy 43 A Collective... Response to the Tax Nomad , “Hegemonic Response to the Tax Nomad: Using a Financial ‘Big Stick’” and Global Tax Governance and the Tax Nomad © The Editor(s) (if applicable) and The Author(s)... In the chapter Global Tax Governance and the Tax Nomad , the analysis shifts to the proposals developed for dealing with tax nomads at the global level The use of US tax policy to achieve the