Money dislocation through offshore

Introduction Historically, tax policies have been elaborated to address domestic economic and social concerns. Conditions underpinning these policies were directly related to the level of publicly provided goods and transfers, adequately established by the governments. However, these polices were mainly aimed at fixing domestic concerns, rather than at the interaction of tax systems of the countries. Thus, the capital mobility was marginally limited and spillover effects between countries were mostly restricted. However, with the dissemination of the globalization processes, the relationship between domestic tax systems has fundamentally changed. The driving force of globalization has induced local governments to adjust their tax policies with regard to the increased role of foreign capital, which is transferred through the activity of multinational enterprises (MNEs). One the one hand, globalization and increased mobility of foreign capital have led to reduction of tax distortions between countries, prompted the development of capital and financial markets, and made countries adjust their public expenditure with regard to the need to modernize their fiscal climate for investment. However, globalization also had an adverse impact on the development of tax systems of countries, which has become possible due to their parasitic activity and intentions of some countries to attract foreign capital to their economy by exploiting the opportunities of reducing taxes. These countries have started to employ tax policies, which hamper the application of progressive tax rates, diminish global welfare and cause distortions between countries. Therefore, it should be noted that the activity of tax havens, their impact on global economy is ambiguous. This idea will be developed further in my thesis.