The Role of Offshore Financial Centres in Globalization

Abstract

Capitalism is inherently crisis-ridden, but shows little sign of exhausting itself. It continues to develop new ways of reinvigorating itself and generating economic returns for capital. Globalization is considered to be the most advanced phase of capitalism. The Offshore Financial Centres (OFCs; also known as tax havens) are an integral part of globalization. They facilitate growing mobility of finance by providing no/low tax, no/low regulation, secrecy and anonymity to enable footloose capital to roam the world. Their policies play a key role in tax avoidance/evasion, money laundering, flight of capital, degradation of regulation, instability and economic underdevelopment, and have serious consequences for people everywhere. Professional intermediaries, such as accountants and lawyers, play a key role in the development and expansion of OFCs. Despite the veneer of liberal democracy, some OFCs are captured by the finance industry and advance the interests of financial capital. Many OFCs are nurtured and protected by leading Western hegemons with developed capital and financial markets. This paper encourages scholars to study the operations, functions, policies and politics of OFCs by drawing attention to their significance and impact on societies.

JEL Classification: G20, G15