Confusion and Conflict - It’s All Academic
Friday, May 11, 2012
A piece of research published earlier this year has resulted in a number of subsequent interesting media reports recently.
The research (published through the Paris School of Economics, http://www.parisschoolofeconomics.eu/docs/zucman-gabriel/sub_jan31.pdf) suggested that the raft of TIEAs signed over the last four years by offshore centres have not made very much difference in the total value of bank deposits they collectively hold.
No matter what side of the ‘tax haven’ debate fence you sit on, it does seem that there are some strange conflicting arguments entering into the equation here – particularly given this is a piece of academic research.
The research and subsequent media reports suggest, for example, that these TIEAs are ‘ineffective’. This is then followed up by claiming that ‘the [bank] deposit gains and losses correlate strongly with the number of treaties signed by each haven’. The Channel Islands, for example, have signed a significant number of such agreements which the research suggests has led to falls in their levels of bank deposits.
Either these tax agreements are useless, in which case they would have little impact, or they do serve a purpose, in which case presumably those intent on tax evasion would move their deposits elsewhere. Logically, both can’t be true?!
And surely there have been other reasons why the value of a jurisdiction’s bank deposits might fluctuate, other than the number of information exchange agreements it has - the volatility of the global markets as a result of the recession springs to mind.
It reminds me of some similarly illogical critiques that are regularly aimed at offshore centres – that they hamper the development of developing countries; that they divert tax revenues away from developed countries; that their days are numbered and that their assets are dwindling. Logically, not all these can be true.
In the lead up to the G20 Leaders’ Summit in Mexico this year, on 18th and 19th June, there will inevitably be further anti-offshore campaigns and attempts to highlight the effectiveness (or otherwise) of information exchange agreements.
From a communications point of view, IFCs will do well to untangle the conflicting critiques that will likely be aimed their way in the coming weeks, and highlight the improbability or even impossibility of the charges they are faced with, with concrete, clear facts. Possibly even backed up with credible independent academic research…