For a long time the sovereignty of offshore jurisdictions had never really been in question; tax havens (‘offshore’) had existed in a sphere of relative peace and solitude providing financial services of varying degrees of sophistication to onshore, whilst correspondingly supporting their own existence.
However, since the late 1990s tax havens have found themselves the target of an irrefutable movement by particular international financial organisations ‘Organisations’) within the International Financial Architecture (‘IFA’).
The Organisation of Economic Cooperation and Development (OECD) has been most critical contending that tax havens hinder economic growth and development the world over; apparently embodying behaviour and values that are the antipathy to fair and sustainable progress.
This paper investigates the veracity of the two main assertions of the OECD and the Financial Stability Forum (‘FSF’): first, tax havens perpetuate unhealthy tax competition which then erodes tax revenue bases; and secondly, deficient financial regulations in tax haven jurisdictions bring forth instability to the global financial market.
Whether offshore is indeed the origin of the distress is important because of the damage apparently done to offshore itself, by these Organisations in their counterattack to the perceived endangerment. That is to say, there maybe no justification for what is evidently a heavy coercive approach. This would appear particularly pertinent to the less sophisticated tax havens in the Pacific, but to what extent is it true that they face eventual extinction as a result?
Furthermore, due to the centrality of offshore in the process of financial globalisation, what would be the repercussions of this for the future development of the international financial market? To this end, is the overall result likely to be Pareto–superior or Pareto–inferior?European Business Law Review