These are small countries with a number of sophisticated ex-pats who have placed themselves in positions of power to control local regulations. The result of this control is an influx of offshore funds which they manage as financiers, local board members, solicitors or other enabling corporate professionals.

These individuals make very respectable incomes doing very little work living in an area with a rock-bottom cost of living and propagate their status in society by imposing regulations that lock in the need for their services, like local directorship quotas for local companies. An individual can sit on 30~ or so local boards for $20,000 a year each with a PO box for an office. That's a cool half-mil per year to sit on the beach, drink out of a coconut, and read a few pages of board materials a day.

This isn't the case for all companies, but it sure is the case for some.

Even if what you describe sounds terrible and immoral, thing is, it's not illegal, and it's a consequence of how our capitalistic/bureaucratic system works. Let's fix the root cause instead.

indeed - it has been pointed out elsewhere that slavery/ beating your wife/ ... used to be illegal. It is up to us/ our democratic system to fix this.

You can enforce international laws about human rights, but not about economy.

Sure you can. We just don't. If you think the EU and the US couldn't get an international tax harmonization treaty that allowed countries to follow revenue into specified haven countries and tax the cash flows where the revenues were generated, you're nuts.

Viewed as distinct, large nations have a fuckton more negotiating leverage than Vanuatu's financial industry.

The real issue is that Vanuatu and other similarly placed tax havens aren't distinct. They are run by sophisticated professionals for capital holders in developed countries.

Those are the same people who are at the bargaining table; those who know about the issue in depth or that have substantial capital involved all benefit from the wealth extraction the current international regime provides.

Interesting.

I suspect that the declared tax revenues of the financial sector are just a small part of the picture. It is likely that much of the enabling infrastructure, like agencies that register companies, nominally belong to the "legal" sector, and perhaps to avoid detection, some others may be misclassified as well. Then, of course, there are lawyers. And since many companies are used as flow-through vehicles solely for money laundering, these can be counted as part of the shadow financial sector as well; while the taxes they pay are not high, they still pay some kind of taxes (say, in single digits?), and the sheer volume makes it worthwhile.

If I were to assess the actual share, I would go by elimination: everything sans tourism, minuscule local food production industry, and transportation.

>I don't see a rational reason why such tax havens should exist in the first place.

From Wikipedia:

An oasis (/oʊˈeɪsɪs/; plural: oases /oʊˈeɪsiːz/) is an isolated area in a desert, typically surrounding a spring or similar water source, such as a pond or small lake.