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  • Tax Havens and Sovereignty in the Pacific Islands by Anthony B Van Fossen
  • Siobhan McDonnell
Tax Havens and Sovereignty in the Pacific Islands, by Anthony B Van Fossen. St Lucia, qld: University of Queensland ePress, 2012. isbn 978-1-9219-0222-2; xi + 411 pages, map, references, index. eBook, a$38.50.

Once viewed as pathways for former island colonies to create economic growth, tax havens in a post–September 11th world have increasingly been critiqued for their links to money laundering, corporate bankruptcies, fraud, political corruption, tax evasion, drug and arms shipments, and terrorism. But who do tax havens benefit and why do so many countries in the Pacific host them? Anthony Van Fossen provides a comprehensive, methodical account of how tax havens and offshore financial centers (ofcs) have proliferated across the Pacific region since the 1960s, arguing that they have “transformed the Pacific Islands” in which they are located. Van Fossen provides a new vision of the Pacific Ocean, dotted with tax havens and ships bearing flags of convenience, existing in a virtual space [End Page 563] beyond regulation, and buffeted by the tides of global capital and the recent countermeasures against tax havens.

A tax haven is “a jurisdiction which allows residents or foreigners to minimise their tax payments” (341). An ofc “is a tax haven jurisdiction which has at least one significant institution primarily oriented towards accepting deposits and investment funds, and where the intentional government polity is oriented towards attracting the business of foreigners … to allow foreigners to minimise taxes, regulation, loss of assets, unwanted financial disclosure and forced disposition of property” (341). According to Van Fossen, OFCs also increase the power of transnational corporations over the global system by allowing them to remain stateless and unregulated (14). Although estimates are necessarily vague, it appears that around a$2.1 trillion was laundered through ofcs in 2005, while the total assets of ofcs were estimated in 2005 as being a$11.5 trillion (16–17). (One Australian dollar is approximately us$.90.)

Van Fossen rightly surmises that “sovereignty is power” and that international legal nomenclature allows the same sovereign status for small Pacific Island states as for larger states (8). Van Fossen’s thesis is that many Pacific Island states have used their postcolonial sovereignty to create and maintain tax havens, with the most successful being located in Sāmoa, Vanuatu, the Marshall Islands, and the Cook Islands, all of which have elaborate legal structures “favouring the internationalisation of capital … [and that] minimise state regulation and privilege private ownership” (11). The link between sovereignty and tax havens is made clear. What is less clear is whether any substantial benefits flow to Pacific Island countries that host tax havens. In the case of Vanuatu, Van Fossen points to levels of local employment (707 local Ni-Vanuatu employed and 85 expatriates in 2010); contributions to gross domestic product (a reasonably substantial 10 percent in 2008); as well as the role played in propping up the currency and minimizing foreign debt through foreign exchange earnings (a$22.9 million in 2006) (58–59). Finally, Vanuatu receives significant flag-ofconvenience shipping fees handled by the privately run Vanuatu Maritime Authority, of which a proportion is given to the Vanuatu government—in 2010, a$1.9 million (62–63).

ofcs in the Pacific take one of the following organizational forms: isolates, foreign professional monopoly agencies, or subcultures (33). Isolates operate outside the global offshore financial sector communities and are viewed as reasonably unstable; they operate in Norfolk Island, Nauru, Tonga, Palau, the Northern Marianas, Guam, Tuvalu, Kiribati, and (until 1990) the Marshall Islands (34). ofcs that operate as foreign professional monopoly agencies are viewed as more professional, with a long-term contract or fee-splitting payment with the “host” country (38); they include the Marshall Islands, which is run by the International Registries Incorporated Company out of Virginia, and Niue, which is operated by the Mossack Fonseca law office located in Panama (37). Subcultures exist in the ofcs of Vanuatu, the Cook Islands, and Sāmoa, all of which are directly involved in the global offshore community [End Page 564] and often supported by the formal banking sector...


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