Small states and global finance Dr William Vlcek Lecturer in International Relations School of International Relations University of St Andrews, Scotland 4 July 2013

Overview What is meant by ‘global finance’? The size of capital flows The Brettons Woods institutions and other international organisations Small states and open economies Mauritius and the Cayman Islands Tax haven or OFC? The experience of Iceland with global finance 4 July 2013

Foreign assets on deposit: developed countries and offshore financial centres Source: Bank for International Settlements (Jan 2013) BIS Quarterly Review (Basel: Bank for International Settlements), Table 6a. 4 July 2013

BIS offshore financial centres Aruba Bahamas Bahrain Barbados Bermuda Cayman Islands Curacao Gibraltar Guernsey Hong Kong SAR Isle of Man Jersey Lebanon Macao SAR Mauritius Netherlands Antilles Panama Samoa Singapore Sint Maarten Vanuatu West Indies UK (composed of Anguilla, Antigua and Barbuda, British Virgin Islands, Montserrat, and St Kitts and Nevis) 4 July 2013

Bretton Woods institutions International Bank for Reconstruction and Development (IBRD), foundation for the World Bank Group International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency International Centre for the Settlement of Investment Disputes International Monetary Fund (IMF) 4 July 2013

Bank for International Settlements The ‘Central Bank for Central Banks’ located in Basel, Switzerland Basel Committee on Banking Supervision Basel Capital Accord, 1987 Basel II, 2004 Basel III, 2011 (capital)/2013 (liquidity) 4 July 2013

International regulatory groups International Organisation of Securities Commissions (IOSCO) International Association of Insurance Supervisors (IAIS) International Accounting Standards Board (IASB) Financial Action Task Force (FATF) SWIFT – Society for Worldwide Interbank Financial Telecommunication 4 July 2013

The ‘open’ economy A country that is open to trade other countries A small open economy is a ‘price-taker’ 4 July 2013

Mauritius 4 July 2013

The Cayman Islands and the Caribbean 4 July 2013

‘tax haven’ versus ‘offshore financial centre’ Tax haven – a jurisdiction that imposes little or no tax on mobile capital Offshore financial centre – a jurisdiction that provides a legal and financial regime specifically targeted at foreign mobile capital (and taxation may be one part of that regime) 4 July 2013

Icesave An online savings bank, part of the Icelandic bank, Landsbanki 4 July 2013

Connecting Greek finance to the world Source: International Monetary Fund (Oct 2010) Understanding Financial Interconnectedness, p. 19. 4 July 2013

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Taxing the multinational corporation Home jurisdiction Host jurisdiction Intermediate corporate structures in the Caribbean 4 July 2013

Baidu.com, Inc. Corporate Structure 16 Baidu, Inc. (Cayman Islands) Baidu Netcom Science Technology Co., Ltd. (affiliate, PRC) Baidu Holdings Limited. (British Virgin Islands) Baidu Online Network Technology (Beijing) Co., LTD. (PRC) Baidu Japan Inc. (Japan) Baidu (Hong Kong) Ltd. (Hong Kong SAR) Beijing Perusal Technology Co., Ltd. (affiliate, PRC) Beijing BaiduPay Science and Technology Co., Ltd. (affiliate, PRC) Baidu (China) Co., Ltd. (PRC) Baidu.com Times Technology (Beijing) Co., Ltd. (PRC) Baidu HR Consulting (Shanghai) Co., Ltd. B.D. Mobile Telecommunications Limited (Cayman Islands) Qunar Cayman Islands Limited (Cayman Islands) Qiyi.com, Inc. (Cayman Islands) (Wholly-owned) (majority-owned) Baidu Cloud Computing Technology (Beijing) Co., Ltd. (PRC) Baidu Cloud Computing Technology (Shanxi) Co., Ltd. (PRC) Source: Baidu.com Inc, 2006 Annual Report and SEC Form 20-F for 2007 4 July 2013