THE BLOG

At Last, a Reasoned Contribution to the Debate on Offshore Financial Centres

03/07/2014 13:00 BST | Updated 01/09/2014 10:59 BST

A recently launched report, Moving Money: International Financial Flows, Taxes, and Money Laundering, has provided a powerful answer to the critics of offshore financial centres, and demonstrated the value of having an open global financial market in helping to boost global trade and economic growth.

The report, authored by Professor Richard Gordon, Director at the Institute for Global Security Law and Policy and Professor of Law at Case Western Reserve University, and Dr. Andrew Morriss, Dean at the Texas A&M University School of Law, shows that many arguments against International Financial Centres (IFCs) rest on a profound misunderstanding of how money moves around the international financial system. It is therefore unsurprising that much of the discussion around offshore finance comes in the form of over-heated rhetoric based on a partial or misleading assessment of the facts. The study also found that IFCs help to increase international financial flows facilitating trade and investment, allowing the reduction of overall financial risk.

Far from doing damage to the global economy, the removal of barriers to global trade has, according to the World Trade Organization (WTO) caused a doubling of income in 10 developing countries with a total population of 1.5 billion, and that the overall annual growth in the world economy - an average of 1.9 per cent per year since World War II - is largely down to increased trade and global finance.

Since the financial crisis in 2008, and more recently as global governments and institutions have come together to address the modernisation of the global tax system, many critics have suggested that the role of small IFCs, such as Jersey, will become redundant. That is simply untrue and completely ignores the important role played by Jersey as a conduit for investment into the UK. £1 in every £20 of money invested by foreign individuals and companies in assets located in Britain reaches the UK via Jersey. In fact, Jersey is a conduit for almost £500bn of foreign investment into Britain and supports nearly 180,000 jobs across the UK.

In an increasingly globalised world, discussions around international business and tax policy are too important to be debated on the grounds of baseless arguments, and should be firmly rooted in quantifiable economic research: Moving Money is an extremely important contribution to the international conversation in this area, and will prove valuable in moving discussions around IFCs away from the sensationalist headlines far too often associated with the financial world.