The Church’s attitude towards globalisation has become somewhat ambivalent in recent years – if not a little hostile. This seems partly to be a misreading of the evidence on inequality and poverty, but it also reflects Pope Francis’s cultural unease with big business and transnational commercial activity. If we add the traditional Christian suspicion of finance into the mix, we certainly would not expect global offshore finance to be flavour of the month within the Church.
On this issue – which is once again in the news after a leak of 13.4 million documents known as the Paradise Papers – feelings do seem to run before thinking. A revealing sentence in a report about Jacob Rees-Mogg’s ownership of offshore investments read: “There is no suggestion the Brexiteer has avoided tax on any profit, but critics will seize upon the leak as evidence he is out of touch with voters.”
If, like others involved, Rees-Mogg has paid all tax legally and morally due, but is still seen as out of touch, perhaps voters should take a step back before condemning him. Interestingly, the Labour Party rents its headquarters from a company domiciled in the Isle of Man.
Of course, like any other set of institutions in economic life, Offshore Financial Centres (OFCs) can be abused. However, Jersey, Guernsey and the Isle of Man easily rank alongside – and normally above – most European Union countries for transparency and compliance with the best standards of probity in tax practice.
So, why do they exist at all? The main reason is because of the extraordinary complexity of tax and financial services regulation. OFCs cut out one of many overlapping layers. They are able to mobilise funds from international savers spread round the world to, among many other things, finance much-needed infrastructure development in poor countries. In the process, they can avoid double or triple taxation of particular investments or investors, especially those who are mobile. They are often described as tax havens, but that is a misnomer.
Let’s take a practical example which is in fact close to a real-life situation and relevant to many Christians. Suppose a social enterprise takes funds from investors in many countries in the world and makes loans to poor farmers in Africa and Central America. The farmers pay interest on the loans and, after costs, the investors in the social enterprise make a small return. Of course, nobody wants bankruptcy proceedings to be taken against the poor farmer who cannot repay his or her loan.
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