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Offshore financial centers in the Caribbean: An overview

  • Michael Brei

This paper investigates offshore financial centers in the Caribbean from the perspective of offshore economies, onshore economies, and international investors. Using multilateral data on the international positions of banks, we analyze the flow of funds that has been transferred from the major banking systems to offshore financial centers located in the Caribbean and vice versa. We highlight that Caribbean offshore financial centers have been predominantly used by persons, resident in the United States, which send and receive most of the offshore funds, a process called round-tripping. For the major player in the Caribbean, the United States, we find that increases in offshore funds have been associated with reductions in corporate income tax revenues. These costs, however, have to be put into relation with the potential benefits, in the form of higher lending by commercial banks located in the United States. Along with the empirical analysis, we analyze the advantages and disadvantages of offshore financial centers from the perspective of offshore and onshore governments, and international corporations and investors. In particular, we provide a review of the international tax legislation, focusing on activities and investments in traditional offshore centers, treaty heavens, and special concession havens. Although the vast majority of offshore transactions seem to be perfectly legal, there exist concerns that particular corporations and individuals might misuse offshore financial centers. For this reason, we discuss as well the major international initiatives on countering the harmful practices in offshore centers and tax havens.

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File URL: http://economix.fr/pdf/dt/2013/WP_EcoX_2013-40.pdf
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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2013-40.

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Length: 53 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:drm:wpaper:2013-40
Contact details of provider: Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex
Web page: http://economix.fr
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  12. Hampton, Mark P., 1994. "Treasure islands or fool's gold: Can and should small island economies copy Jersey?," World Development, Elsevier, vol. 22(2), pages 237-250, February.
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  15. Koester, Gerrit B. & Priesmeier, Christoph, 2012. "Estimating dynamic tax revenue elasticities for Germany," Discussion Papers 23/2012, Deutsche Bundesbank, Research Centre.
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