The Vatican on Offshore

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The Vatican has issued a statement as a response to the Doha summit on financing for development this weekend - a summit at which the member states of the UN were meant to re-commit their efforts to funding for development.

The document covers a lot of ground. An unofficial translation of the section on Offshore says the follwoing:

To carry out this new international financial pact, the first necessary step is to consider carefully the role, hidden but crucial, of the offshore financial system in the two faces of the global financial problem described above: the emergency of the global crisis and the inadequacy of finances for development.

Offshore markets have been an important link, both in the transmission of the present financial crisis, as well has in maintaining a host of mad economic and financial practices: flight of capital of gigantic proportions, "legal" flows motivated by objectives of tax evasion and also channelled through the of international commercial flows, re-cycling of those stemming from illegal activities. Estimates of the amount of wealth held in offshore centers are difficult to evaluate, but sufficiently impressive if the information in circulation is confirmed: it is said that an ample gamut of groups and individuals hold financial applications in offshore centers that could yield close to US$255,000: more than three times the entire amount of public aid for development on the part of countries of the Organization for Economic Cooperation and Development (OSCE).

Given that public financing for development can only come from fiscal detractions, this becomes a critical minimum in the age of globalization. In fact, the processes of globalization have changed the type of composition of the transaction, not only from direct to indirect (with the probable consequence of a lesser "progressivity" of taxes, namely, of a lesser capacity of weighing more percentage-wise over those that dispose of higher incomes), but above all have entailed a translation of the valuation of the capital to the valuation of the work.

Fiscal detraction is eroded over the most important and mobile business activities in the international field, or that can easily take recourse to the offshore centers. Valued instead primarily are the less "mobile" productive factors, which cannot easily escape from the tax burden, namely, of workers and small businesses.

These points are very complex politically. To address them means to act directly in the sphere of national fiscal sovereignty. The Draft Document speaks of this and, in point 10, proposes reinforcing international cooperation in fiscal matters, above all in view of a drastic redimension of offshore financial practices.

The messages are clear: offshore undermines integrity of the commercial system, costs money needed for development, reduces justice in the tax system, distorts the economy and undermines that which is important in terms of real value.

It is very hard to argue with any of that.