Is Dubai about to default on its £50bn debt?

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Is Dubai about to default on its £50bn debt? | Business | The First Post.

Dubai could become an economic basket case on the level of the Icelandic disaster as the cost of insuring its astonishing sovereign debt skyrockets on investor fears the city-state may default on its debts.

Yesterday, to the considerable surprise of the financial world, Dubai announced it would restructure its largest corporate entity, Dubai World, a conglomerate spanning real-estate and ports, and announced a six-month standstill on the company's debt repayments.

In all but name this is the Dubai government reneging on its debt.

And this place was going to be the next world financial centre? The place where all those Brits who were going to flee our supposedly oppressive tax system where going to set up shop?

Like Iceland, Cayman, Jersey, Guernsey, the Isle of Man, Ireland, Bermuda, the Turks & Caicos (the list goes on, and on) this is a secrecy jurisdiction whose own finances are collapsing. The business model of these places has failed.

You can't build an economy on the basis of tax incentives.

You can't win by beggaring your neighbour.

People - even in secrecy jurisdictions - need services. So tax has to be paid.

When will we realise - tax is a good thing that pays for what we all need in the world. It is, in fact, the bedrock of our prosperity.

Dubai's failure will be a crisis for some - and will have human cost. But that's inevitable until we rid ourselves of the pernicious consequences of neo-liberal economics. The sooner the better. And the smaller the human cost will be.

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