ABSTRACT
Offshore financial centres (OFCs) have been used for decades by corporate entities to reduce their tax burden through complex tax planning strategies and by individuals for tax avoidance and evasion. This chapter analyses the relationships between OFCs and taxation policies. It starts from the assumption that financial regulation may be a strategic variable for countries seeking to maximise the revenues produced by money laundering. It argues that a 'name and shame' approach per se, without other initiatives, is equivalent to a third-party seal on the reputation of Lax Financial Regulation (LFR) countries. Having identified a sample of potential LFR countries, it is possible to perform some econometric exercises. Each LFR country can define the optimal degree of financial laxity and then determine its own optimal level of money laundering services. The design of financial regulations represents the contractual device that determines the relationships between the country and the illegal organisations.
