Tax Havens as Producers of Corporate Law

By Moon, William J. | Michigan Law Review, April 2018 | Go to article overview

Tax Havens as Producers of Corporate Law


Moon, William J., Michigan Law Review


TAX HAVENS AS PRODUCERS OF CORPORATE LAW

RE-IMAGINING OFFSHORE FINANCE: MARKET-DOMINANT SMALL JURISDICTIONS IN A GLOBALIZING FINANCIAL WORLD. By Christopher M. Bruner. New York: Oxford University Press. 2016. Pp. xii, 236. $95.

INTRODUCTION

Bank-secrecy laws, low tax rates, and shell companies amassed at P.O. boxes are some of the common features associated with offshore financial havens that have catapulted famous vacation destinations in the Caribbean and elsewhere into magnets for global financial transactions.1 The culprits in these stories-usually abetted by small offshore jurisdictions facilitating tax evasion2-range from celebrities, including Mel Gibson and Vivienne Westwood, to corporations, including Apple and Google.3 While the topic of tax evasion is nothing new,4 a series of massive document leaks in recent years, exposing the vast scope and variations of evasion schemes, has propelled multilateral government crackdowns5 and attracted academic interests from a wide range of disciplines, including economics, international relations, and the law.

Christopher Bruner's Re-Imagining Offshore Finance: Market-Dominant Small Jurisdictions in a Globalizing Financial World6 is a significant contribution to the literature that should become required reading for both consumers and producers of knowledge concerning the regulation of global financial transactions. Bruner starts with the observation that "reducing or eliminating taxes does not itself guarantee the arrival of cross-border capital" (p. 21). Instead, the handful of small jurisdictions that have become the dominant players in cross-border finance provide more than just low taxes and banksecrecy laws: they offer "cutting-edge regulatory regimes in high value-added areas of cross-border financial services" (p. 47). Bruner's careful comparative case studies cut through ideologically charged old labels and reveal several important characteristics shared by certain small jurisdictions, like Bermuda and Singapore, that account for their disproportionate success in the global market for cross-border finance.7 Bruner terms these jurisdictions "market-dominant small jurisdictions" ("MDSJs") (pp. 7-8). There is more than semantics at play here, for MDSJs have "much to tell us about the future of financial globalization, territorial sovereignty, and territorial financial regulation in the twenty-first century" (p. 13).

Descriptively, Bruner's work provides a compelling account challenging the all-too-popular scholarly view that conceptualizes small offshore jurisdictions as parasitic entities that subsist largely at the expense of eroding the tax base of developed nations.8 To the contrary, Bruner observes that MDSJs have "promoted innovation in their areas of specialization later emulated by larger markets, and otherwise enhanced market efficiency within such larger markets" (p. 224). In doing so, Bruner complicates the debate over the function of small offshore jurisdictions, which is largely taking place in the absence of good data.

This Review situates Bruner's contribution to the literature examining the regulation of cross-border finance and highlights the import of Bruner's book for thinking about the complex (and contested) relationship between territorially configured domestic laws and the increasingly liberal movement of capital. Part I sets out the book's central thesis. I highlight Bruner's novel framework, which identifies the factors that propel certain small jurisdictions into becoming magnets for cross-border finance. I also outline the limits of this framework in accounting for the stability in the overall demand for the commercialization of sovereignty. Part II examines the rise of MDSJs and other offshore jurisdictions as they relate to the territorially configured domestic rules-a subject that has yet to attract the attention that it deserves. While Bruner views the rise of MDSJs as typifying the continued dominance of territorial sovereignty, I show that it is a reflection of a new jurisprudential tendency that deemphasizes the relationship between soil and the law. …

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