Tax Havens: How Globalization Really Works

Ronen Palan, Richard Murphy and Christian Chavagneux examine tax havens as an institutional feature of the international economy rather than as a set of rogue jurisdictions. Their disciplinary base is international political economy and their argument is historical and structural.

They trace the origins of the offshore system to specific legal developments: the American state competition for incorporations that made Delaware and New Jersey attractive in the nineteenth century, the British court decisions establishing that a company could be resident where it was managed rather than where it was registered, the Swiss banking secrecy law of 1934, and the emergence of the eurodollar market in London in the 1950s, which the Bank of England permitted to operate outside domestic regulation. Their claim is that offshore finance was created by the actions of major states rather than by small islands, and that it persists because those states benefit.

The analytical sections cover the mechanics: transfer pricing within multinational groups, treaty shopping, the use of intellectual property holding structures, and the estimates of revenue loss, which Murphy in particular has worked on. They also cover the various international efforts at regulation and why they have achieved limited results. The book was published in 2010, before the automatic exchange of information regimes, the OECD base erosion project and the global minimum tax, all of which have changed the position substantially. The historical and structural argument remains the standard account.