Effects On International Trade
Offshore centres act as conduits for global trade and ease international capital flows. International joint ventures are often structured as companies in an offshore jurisdiction when neither party in the venture party wishes to form the company in the other party's home jurisdiction for fear of unwanted tax consequences. Although most offshore financial centres still charge little or no tax, the increasing sophistication of onshore tax codes has meant that there is often little tax benefit relative to the cost of moving a transaction structure offshore.
Recently, several studies have examined the impact of offshore financial centres on the world economy more broadly, finding the high degree of competition between banks in such jurisdictions to increase liquidity in nearby onshore markets. Proximity to small offshore centres has been found to reduce credit spreads and interest rates, while a paper by James Hines concluded, "by every measure credit is more freely available in countries which have close relationships with offshore centres."
Low-tax financial centres are becoming increasingly important as conduits for investment into emerging markets. For instance, 44% of foreign direct investment (FDI) into India came through Mauritius last year, while over two thirds of FDI into Brazil came through offshore centres. Blanco & Rogers find a positive correlation between proximity to an offshore centre and investment for least developed countries (LDCs); a $1 increase in FDI to an offshore centre translates to an average increase of $0.07 in FDI for nearby developing countries.
Read more about this topic: Offshore Financial Centre
Famous quotes containing the words effects and/or trade:
“Oh that my Pow’r to Saving were confin’d:
Why am I forc’d, like Heav’n, against my mind,
To make Examples of another Kind?
Must I at length the Sword of Justice draw?
Oh curst Effects of necessary Law!
How ill my Fear they by my Mercy scan,
Beware the Fury of a Patient Man.”
—John Dryden (1631–1700)
“I have no doubt that they lived pretty much the same sort of life in the Homeric age, for men have always thought more of eating than of fighting; then, as now, their minds ran chiefly on the “hot bread and sweet cakes;” and the fur and lumber trade is an old story to Asia and Europe.”
—Henry David Thoreau (1817–1862)