Sovereignty, security, and the development of offshore financial centres in the Pacific Islands

Abstract

This chapter explores the dialectic between sovereignty and tax haven development in the Pacific Islands (see Figure 8.1). The most successful tax havens have been internally self-regulating and not subservient to a metropolitan power which is hostile towards haven development. On the other hand, full sovereignty (in the sense of complete political independence) has not necessarily been a crucial advantage and may even have been associated with a lack of proper security (such as that underwritten by a core power) and be an attractor of sleazy operators and clients, as in the case of Tonga. Nevertheless, in the Pacific Islands the offshore financial centres (OFCs) of the tax havens of Vanuatu, Nauru, the Cook Islands and Western Samoa have developed continuously through elaborating legal structures favouring the internationalization of capital. The OFC laws valorize individual appropriation rather than public distribution, minimize state regulation and privilege private ownership. Compared to the second, contrasting group of Pacific Island tax haven (PITH) jurisdictions which we consider next, these states have relatively full sovereignty.