Promotional body Jersey Finance has welcomed the publication of a new discussion paper by a UK think-tank which seeks to dispel the myths surrounding international financial centres (IFCs) and calls for a more “rational debate” around the essential function of IFCs in facilitating global trade and investment.
Undertaken by the Institute of Economic Affairs (IEA), with support from Jersey Finance, the paper, “The Benefits of Capital Mobility”, examines the growing importance of IFCs in the global economy and argues they are in reality benchmarks for transparency and good governance.
In particular, the paper argues that clamping down on IFCs would not raise tax revenues for larger countries and preserve existing levels of investment but would rather change investment flows by politicising investment decisions. The paper also illustrates how the tax neutrality offered by IFCs benefits investors and countries in terms of investment in infrastructure, wealth creation and future prosperity.
Amongst the key conclusions of the paper are that:
- the success of IFCs lies in three key drivers: an increase in the global stock of investable capital; the rise of new investment opportunities outside Western Europe and North America; and the growth of tax and regulatory intervention by governments
- as more investment capital is allocated across a diverse range of jurisdictions from investors around the world, IFCs help mitigate the potential for multiple taxation, ultimately having a positive impact on investment returns which compounds over time
- undermining the existence of IFCs would harm investment, economic growth and international capital flows, while the promised benefits from intervention are unlikely to materialise
Geoff Cook, chief executive of Jersey Finance, commented on the report: “When it comes to cross-border financial services, there is still a considerable amount of misunderstanding and misrepresentation. We think it is vital to form judgments based on facts. For this reason we are committed to providing a clearer picture of the reality through research, with the aim of prompting a sensible, more focused conversation on what it is that centres like Jersey actually do.
“This paper helps in that regard, seeking to reframe the international financial services debate and clarifying, with facts, the positive impact Jersey can have on the futures of people all over the world.”
Jamie Whyte, director of Research at the IEA, added: “Offshore banking centres play an important role in the global economy, increasing international investment and economic growth. The attacks on them by European politicians are little more than demagoguery and a desire to eliminate tax competition.”