Small states and global finance DR WILLIAM VLCEK LECTURER IN INTERNATIONAL RELATIONS SCHOOL OF INTERNATIONAL RELATIONS UNIVERSITY OF ST ANDREWS, SCOTLAND 1 July 2014
Overview 2 What is meant by ‘global finance’? The size of capital flows The Brettons Woods institutions and other international organisations Small states and open economies Mauritius and the Cayman Islands Tax haven or OFC? The experience of Iceland with global finance 1 July 2014
Foreign assets on deposit: developed countries and offshore financial centres 3 30, 000 25, 000 US$millions 20, 000 15, 000 10, 000 5, 000 De c De. 77 c. 7 De 8 c De. 79 c. De 80 c De. 81 c. 8 De 2 c De. 83 c De. 84 c De. 85 c De. 86 c De. 87 c De. 88 c De. 89 c. De 90 c De. 91 c. 9 De 2 c De. 93 c De. 94 c De. 95 c De. 96 c De. 97 c De. 98 c De. 99 c. De 00 c De. 01 c. 0 De 2 c De. 03 c De. 04 c De. 05 c. 0 De 6 c De. 07 c De. 08 c. De 09 c. De 10 c De. 11 c. 1 2 0 Developed Countries Offshore centres Source: Bank for International Settlements (Dec 2013) BIS Quarterly Review (Basel: Bank for International Settlements), Table 6 a. 1 July 2014
BIS offshore financial centres 4 Aruba Macao SAR Bahamas Mauritius Bahrain Netherlands Antilles Barbados Panama Bermuda Samoa Cayman Islands Singapore Curacao Sint Maarten Gibraltar Vanuatu Guernsey West Indies UK (composed of Hong Kong SAR Isle of Man Jersey Lebanon Anguilla, Antigua and Barbuda, British Virgin Islands, Montserrat, and St Kitts and Nevis) 1 July 2014
Connecting Greek finance to the world 5 Source: International Monetary Fund (Oct 2010) Understanding Financial Interconnectedness, p. 19. 1 July 2014
Bretton Woods institutions 6 International Bank for Reconstruction and Development (IBRD), foundation for the World Bank Group International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency International Centre for the Settlement of Investment Disputes International Monetary Fund (IMF) 1 July 2014
Bank for International Settlements 7 The ‘Central Bank for Central Banks’ located in Basel, Switzerland Basel Committee on Banking Supervision Basel Capital Accord, 1987 Basel II, 2004 Basel III, 2011 (capital)/2013 (liquidity) 1 July 2014
International regulatory groups 8 International Organisation of Securities Commissions (IOSCO) International Association of Insurance Supervisors (IAIS) International Accounting Standards Board (IASB) Financial Action Task Force (FATF) SWIFT – Society for Worldwide Interbank Financial Telecommunication 1 July 2014
The ‘open’ economy 9 A country that is open to trade other countries A small open economy is a ‘price-taker’ 1 July 2014
Mauritius 10 1 July 2014
The Cayman Islands and the Caribbean 11 1 July 2014
‘tax haven’ versus ‘offshore financial centre’ 12 Tax haven – a jurisdiction that imposes little or no tax on mobile capital Offshore financial centre – a jurisdiction that provides a legal and financial regime specifically targeted at foreign mobile capital (and taxation may be one part of that regime) 1 July 2014
Icesave 13 An online savings bank, part of the Icelandic bank, Landsbanki 1 July 2014
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Taxing the multinational corporation 15 Home jurisdiction Host jurisdiction Intermediate corporate structures in the Caribbean 1 July 2014
Baidu, Inc. corporate structure 16 Baidu, Inc. (Cayman Islands) Baidu Holdings Limited. (British Virgin Islands) Baidu Netcom Science Technology Co. , Ltd. (affiliate, PRC) Beijing Perusal Technology Co. , Ltd. (affiliate, PRC) Beijing Baidu. Pay Science and Technology Co. , Ltd. (affiliate, PRC) B. D. Mobile Telecommunications Limited (Cayman Islands) Qunar Cayman Islands Limited (Cayman Islands) (majority-owned) (Wholly-owned) Baidu Online Network Technology (Beijing) Co. , LTD. (PRC) Baidu Japan Inc. (Japan) Qiyi. com, Inc. (Cayman Islands) Baidu (Hong Kong) Ltd. (Hong Kong SAR) Baidu (China) Co. , Ltd. (PRC) Baidu HR Consulting (Shanghai) Co. , Ltd. (affiliate, PRC) Baidu Cloud Computing Technology (Beijing) Co. , Ltd. (PRC) Baidu. com Times Technology (Beijing) Co. , Ltd. (PRC) Baidu Cloud Computing Technology (Shanxi) Co. , Ltd. (PRC) Source: Baidu. com Inc, 2011 Annual Report and SEC Form 20 -F for 2012 1 July 2014
Offshore data leak 17 Hard drive with details on some 120, 000 companies registered in the British Virgin Islands delivered anonymously to the International Consortium of Investigative Journalists (ICIJ) http: //www. icij. org/offshore/secret-files-expose-offshoresglobal-impact 1 July 2014
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