Offshore centers now face a perfect financial storm. In more prosperous times, revenues from the offshore sector, along with tourism, helped fuel these countries’ economies. Their governments emulated more developed nations by borrowing heavily to build up their infrastructure. They also bought votes with social programs and bloated government payrolls.

When the global economy tanked, tourist revenues fell, along with revenues from their offshore sectors. But the social programs and bloated payrolls remained.

Blame Offshore Tax Havens! (Again)

The economic crisis also led to worldwide drop in tax revenues, with the biggest losers big industrialized countries like the United States. Politicians in these countries found a convenient scapegoat to blame for falling tax revenues: dozens of mostly tiny offshore centers.

Using the economic crisis, the world’s richest and most powerful governments had the perfect opportunity to achieve a long-term goal: forcing offshore jurisdictions to enforce their tax laws. They acted through non-governmental organizations they control, such as the Organization for Economic Cooperation and Development (OECD). The OECD has the authority to issue supposedly non-binding “best practices” guidelines. And, the OECD now decrees that “best practices” meant becoming tax collectors on behalf of these rich and powerful governments. Read the rest of this entry »