ABSTRACT
This chapter examines the interrelationships between money laundenng, tax evasion and offshore financial centres (OFCs). It discusses various conceptual frameworks for examining the degree of overlap between money laundering and tax evasion, and the role of offshore financial centres in these activities. In recent years, policy concerns at an international level have arisen because some jurisdictions have been perceived as actively encouraging money laundering through lax regulatory regimes or fostering undesirable tax competition or tax evasion, and in several instances both types of behaviour. The literature on tax competition tends to focus on fiscal externalities that occur when capital or firms are not taxed efficiently. Tax base externalities arise when raising levies unilaterally in one country drives some part of the internationally mobile tax base to another jurisdiction. Consequently, one should be careful to extrapolate certain findings of the tax competition literature to particular types of countries.
