The UK is an offshore finance centre – according to an IMF study

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The IMF have issued a working paper in the last few days with the headline grabbing title ‘Concept of Offshore Financial Centers: In Search of an Operational Definition’. As is usual in these cases the paper says the working paper only represents the views of its author, Ahmed Zorom?© and should not be reported as representing the views of the IMF. It’s hard to believe that though when the paper says:

The issue of an objective definition [of OFCs] is of crucial importance to the work of the IMF.

And that’s exactly what the paper seeks to offer.

I’m not going to critique the whole paper here. I would stress, I think there are weaknesses in it. For example its literature review appears incomplete, out of date and is not well argued. But that’s for an academic discussion. The important issue is that the paper seeks to define Offshore Finance Centres (OFCs) (which it must be stressed in this context are not the same as tax havens) on the basis of the ratio of the relevant proportion of their sales of financial services to their GDP, and suggests that the definition of an OFC is:

a country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy

Statistical analysis is used to determine those countries where this characteristic is found. The analysis is split between high and low income countries (income being per head, in broad terms, not absolute). Some data is estimated and for 23 of the 46 OFCs the IMF has been recognising to data is simply not available (most being the smaller island states). That still left over 100 territories subject to review (the Channel Islands etc not being countries, of course).

The findings are significant. Simply by considering this ratio at a level of statistical significance (and in most cases the stats are extremely clear) a new list of OFCs is produced. The following which were considered OFCs by the IMF are confirmed as such:

  • Bahamas
  • Bahrain
  • Barbados
  • Bermuda
  • Cayman Islands
  • Hong Kong
  • Cyprus
  • Guernsey
  • Ireland
  • Isle of Man
  • Jersey
  • Luxembourg
  • Malta
  • Mauritius
  • Netherlands Antilles
  • Panama
  • Singapore
  • Switzerland
  • Vanuatu

The following which the IMF thought to be tax havens fall off this list:

  • Costa Rica
  • Lebanon
  • Macao
  • Malaysia (Labaum)

But most tellingly three new OFCs are identified. they are:

  • Latvia
  • Uruguay
  • United Kingdom.

This data is objective. I’ll admit, the UK is clearly not as dependent on financial services as, for example, the Channel Islands, Cayman or Luxembourg are, but equally, compared to places like the US we’re massive players. It’s time to recognise reality. With its cohort of supporting states in the above list the UK is at the centre of the threat to world stability caused by the financial services sector and tax abuse.

I and the Tax Justice Network have been saying this for some time. Now there is objective evidence that it’s time for a change of tack before the UK sinks under the massive internal and external economic problems this policy is creating: problems like having cities where the police, firefighters, nurses and teachers can’t live, which is the sure evidence that this finding is indication of a massive problem for the UK, and not an indicator of the City’s success.