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:
“Perspective, as its inventor remarked, is a beautiful thing. What horrors of damp huts, where human beings languish, may not become picturesque through aerial distance! What hymning of cancerous vices may we not languish over as sublimest art in the safe remoteness of a strange language and artificial phrase! Yet we keep a repugnance to rheumatism and other painful effects when presented in our personal experience.”
—George Eliot [Mary Ann (or Marian)
“Is there something in trade that dessicates and flattens out, that turns men into dried leaves at the age of forty? Certainly there is. It is not due to trade but to intensity of self- seeking, combined with narrowness of occupation.... Business has destroyed the very knowledge in us of all other natural forces except business.”
—John Jay Chapman (1862–1933)