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New Report Dispels Tax Dodge Myths

by Mike Godfrey, Lowtax.net, Washington
11 June, 2014

A new report on international financial flows finds that international financial centers facilitate international investment, promote market efficiency, and encourage economic growth, and dispels myths that such centers are mainly used to channel illicit funds and to avoid tax.

The report, Moving Money, authored by Professors Andrew Morriss and Richard Gordon, finds that allegations that international financial centers allow significant illicit capital flows, enabling individuals and multinational enterprises to avoid paying a "fair" amount of tax, "rest on poor data and analysis, and on mistakes about how financial transactions, international taxation, and anti-money laundering rules actually work."

The study says that demands for more regulation without considering cost and effectiveness rely on a belief that international financial transactions are "assumed illegitimate unless tightly controlled, rather than primarily reflecting the normal, legitimate workings of an efficient market."

Moving Money concludes that the reduction of trading barriers is helping both developed and developing countries. The World Trade Organisation has found that the growth in trade has caused the doubling of income in ten developing countries with a combined population of 1.5 billion, and that the overall annual growth in the world economy – an average of 1.9 per cent per year since World War II – is largely down to increased trade and global finance.

Co-author Morriss is Chair in Law at the University of Alabama School of Law and Dean-designate at the Texas A&M University School of Law. Gordon is Director at the Institute for Global Security Law and Policy and Professor of Law at Case Western Reserve University, and teaches courses on financial sector regulation, international taxation, and financial integrity.

Chief Executive of Jersey Finance, Geoff Cook, said: "This report presents a much needed balanced view of the role of international financial centers in facilitating cross-border finance, safeguarding investments, and contributing to the global economy. Public opinion around international finance is swayed by over-heated rhetoric and calculations often not based on fact, as rigorously demonstrated in this report. Some discussions around tax evasion distract from the crucial debate around tax policy and international business, which should be based on the economic underpinnings and not baseless arguments."

"Moving Money is an extremely important contribution to the global debate in this area, and certainly the points raised in this report, particularly around the beneficial role of international finance centers in the cross-border movement of money and the high regulatory standards to which centers can adhere, are very familiar to us here in Jersey."

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