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Tax havens, offshore financial centres and the current sanctions regimes

Norman Mugarura (Department of Research, Global Action Research and Development Initiative Limited, Barking, UK)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 2 May 2017

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Abstract

Purpose

This paper aims to articulate the complexities posed by tax havens and offshore financial centres (OFCs) in the global fight against financial crimes such as tax avoidance and money laundering. It suggests possible measures to mitigate the effect of tax avoidance on economic development of countries, especially less developed poor countries.

Design/methodology/approach

Data were evaluated using examples and case studies drawn from tax havens and OFCs in newspaper reports to demonstrate how illicit proceeds of crime are spirited out of countries for safe custody in tax haven jurisdictions around the globe. The author also carried out a scoping review of the literature to delineate the correlation between tax havens, OFCs and the growth in financial crimes such as tax avoidance and money laundering.

Findings

There is a close correlation that bank secrecy laws in OFCs fuel the growth of financial crimes such as tax avoidance and money laundering around the globe. The findings also suggest that while imposition of sanctions on countries which transgress international financial regulatory regimes is an essential component in the international efforts against financial crimes, they need to be enforced on all states so that they are not seen as politicized and subsequently undermined.

Research limitations/implications

It is important that states work in tandem to initiate desired regimes to address financial crimes but enunciating regimes alone cannot generate a far reaching impact unless they are enforced against all transgressing states.

Practical implications

The paper has practical implications for states, people, governments, oversight institutions, markets and other stakeholders because it unravels varied issues relating to tax avoidance, money laundering and policies that need to be adopted to address these challenges.

Social implications

The paper draws attention to the impact of asymmetric information and data generation capacity in some countries on tax avoidance and other financial crimes and the need for international harmonization of tax and AML regimes.

Originality/value

The issues explored in this paper help to highlight the challenges posed by tax havens and OFCs for economic development of countries. While the paper was undertaken by the review of primary and secondary data, it offers important contributions that could potentially enhance the fight against tax avoidance.

Keywords

Citation

Mugarura, N. (2017), "Tax havens, offshore financial centres and the current sanctions regimes", Journal of Financial Crime, Vol. 24 No. 2, pp. 200-222. https://doi.org/10.1108/JFC-01-2016-0008

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited