Chatterbox received so many responses to his June 27 invitation for readers to explain why island nations are so often tax havens (click here to read the earlier item) that it actually became kind of a chore to wade through them all. However, Chatterbox has finally done so.
1) The Islanders Speak
Several inhabitants of islands or island nations took offense at Chatterbox’s characterization of island nations as inherently naughty. Maria Fontenelle, who said she lives in an “island nation” (but didn’t say which one), observed:
Where exactly does all this dirty money come from? There can be no launderers without suppliers. Keep blaming us for taking it, that way all the big-time drug dealers, mobsters, political con men, and other criminals can continue business as usual.
Jon Snow of Antigua added:
Offshore Banking, Tax Havens, Money Laundering, and Drug Smuggling are the only alternative options available to those of us who are sick of serving Americans piña coladas. When you offer us an alternative to institutionalized slavery in your hotels there will be huge reduction in “naughty behavior.”
Two former islanders were more inclined to look inward. John Thompson, who lived on Okinawa for 18 months when he was in the Army, wrote:
There is some truth to the legendary “rock fever.” Much like cabin fever, it seizes you at times, when you realize that no matter how big the place is, you eventually run out of road. It is almost like a form of claustrophobia. It makes you do crazy things. … Island living tends to warp your perception, perhaps adding to the sense of naughtiness.
Ruth Hadad, who says she lived the first 20 years of her life on an (unidentified) island, goes further:
Anyone who loves islands (and perforce water) will tell you that the most relaxing thing to do is to lie around and listen to the waves. And for a two-week vacation, this can be therapeutic. But like any drug, when too much is taken, serious consequences can occur. For people who live there all the time, the sound of the waves has already permanently relaxed the relatively simplistic structures of the nervous system, and has wreaked havoc severally on the more complex mental apparatus of the brain containing ethical, moral, political, and economical reasoning skills.
2) Latitude Is Destiny
Ben Kirkup has an interesting explanation for why so many more island nations are found in the tropics than in colder climes:
Most small islands in the high latitudes (north of the Hudson Bay, for example) are part of larger states. Furthermore, they are basically uninhabitable because they are so cold and unproductive, often bridged by glaciers. The middle latitudes generally lack small islands that are not closely abutting a large landmass. The few that exist are volcanic (Hawaii and Japan, for example) or sedimentary and thus on the continental shelf (Long Island, N.Y.). If they are on the continental shelf, they are unlikely to be independent states. Hawaii probably would be a hotbed of trouble were it not for U.S. national security policy which led the continental United States to require a coaling station mid-Pacific for its fleet (same for Guam and at one point the Philippines).
But the tropics have tons of small islands! Why so many there and not elsewhere? Because those islands are created by coral reefs rising from the sea. They are relatively recent, far from land, rich in sea life but poor in native species (and those species never had much competition, so they tend to be eliminated by rats and goats upon discovery).
William Christiansen elaborates:
The sun and heat result in wearing little clothing, thereby exposing much flesh. This naturally leads to an enhanced sense of hedonism and full expression of libido. Once one’s foot is set on the path of debauchery and corruption of the flesh, can any other from of corruption be far behind? No, and this explains why I’m booked for a prolonged Carribean vacation.
And David Schutz points out that such hedonistic attractions are particularly alluring to your typical shady character:
Lots of these hide-the-money scams are set up by guys from London or New York who want to move to a fun place with beaches and restaurants that serve silly drinks in tiki-god cups. They want scenery while they move their millions. The Caribbean is romantic. Why should they go to Chad?
3) The Power of Myth
Several people wrote in to say it all had to do with the pirates, real and legendary, who once buried treasure on island shores. (Incidentally, don’t miss Jack Hitt’s terrifying New York Times Magazine account of contemporary pirates who ply the South China Sea.) Alexander Adelman Berengaut has a more original take:
Why can’t island nations behave themselves? Obviously because they are all descended from the great prototypically utopian Homeric island nation of the Phaecians. The Phaecians were the fellas who sheltered Odysseus from the hegemony of Poseidon’s wrath. I would suggest that mischievous island nations are simply living up to their heritage/fate by disobeying meddlesome and imperialist tax laws. In response to obvious pundit criticism of my thesis, tax-tricky island nations today are more likely to be descended from the Phaecians than, say, the people of Ithaka because the Phaecians (like their modern-day counterparts) were not part of any Danaan league. I didn’t see any Cayman peacekeeping delegation in Kosovo.
4) A Wordplay-Based Explanation
A deconstruction by Nicholas Reyes:
“I-Land” Nations. Very self-centered by nature. All about “I” and nothing about “US”. Naturally they aren’t too interested in government and laws since government is more of an “US” concept than the term “I-Land” permits.
5) Legacy-of-Oppression-Based Explanations
Roger Hipp blames the reality, rather than the myth, of pirates and other marauders:
Islands were historically vulnerable to seaborne invaders–pirates in the Caribbean, Vikings in the Channel Islands, corsairs in the Mediterranean (and, less frequently, mutinying English crews and Norwegian archaeologists in the Pacific). The legacy of all that raping and pillaging is social acceptance of modern methods of looting wealthier nations.
And don’t forget, writes Pablo Gaston, marauding tourists:
They have an almost constant flow of American businesspeople and tourists, who march through the border with their pale legs and noisy, flashing cameras, waiting to take advantage of the warm water, picturesque beaches, cheap food, cheap drugs, and cheap sex. When government officers, after a long day of kissing diplomats’ rear ends while trying to maintain an ounce of sovereignty, decide to take a ride through their cities and see what’s going on, they inevitably feel that they aren’t much more decent than the hookers on the corners.
Which brings us to the subject of colonialism. Ernesto Rios writes:
Most islands in colonial days (doesn’t matter who the master was; Britain, Spain, Netherlands) were mere stopovers on the way to real conquest (the American continents) and as such received very little supervision from the home office. After a while it becomes insulting, from the point of view of the colonial citizens, to have to pay all those taxes to someone who doesn’t really care about you too much to begin with, so you start shaving off some sales, reporting a little extra losses, etc., etc. Not long afterward, this habit becomes institutionalized in the culture and you start cheating all authorities, even your own.
6) A Political-Science-Based Explanation
Kudos to Ellen Kuhfeld for her strikingly original libertarian analysis:
Island nations are in the same fix as many Indian tribes: Their chief resource is the fact that they have a government, and their chief source of income is renting out government legitimacy to their own members, and to outsiders.
Is there a state law against casinos? The Indian tribes have many aspects of sovereign nations. They can sponsor casinos. Is the taxman nosy? Come to beautiful Tax Island, where officials do not ask embarrassing questions.
As long as governments are in the business of thwarting human desires, there will be organizations to help people get around the thwarts. Some of those organizations will be criminal, and some will be governmental. Sometimes it is hard to tell the difference.
Less original but similarly libertarian is Virginia Robinson’s paean to Ayn Rand:
Is it really that they’re roguish, or is it more that they are objectivist? After all, Ayn Rand’s protagonists would have loved nothing more than the freedom that island isolation brings. Rand believed true happiness and freedom could only come with rejecting all outside influence and leading a life that is truly your own. Rand would argue (well, maybe not, but humor me) that to be truly objectivist, one must remove oneself from society. Only then can one reject the needs and wants of others and focus solely on one’s own needs and wants. So these island nations aren’t roguish, but rather they are facilitating our natural inclinations toward the selfishness espoused by objectivism.
The more prosaic version of this argument is that taxes are too high in the non-naughty countries. Here is David S. Lesperance, legal counsel to Global Relocation Consultants S.A.:
Currently the United States applies an amazingly heavy tax burden on the top 1 percent of taxpayers. This 1 percent pay an extraordinary 33 percent of all the taxes paid! Furthermore, this group pays one-third more of the total individual income tax than they did 10 years ago. Is it any wonder that this top 1 percent do not feel that their current tax burden is “fair”? … These tax havens have identified a need in the marketplace and are catering to this group of taxpayers. This is called capitalism. If the high tax countries don’t want this to happen they could change their tax structure so that these taxpayers feel the system is more fair to them.
7) A Marketing-Based Explanation
Christopher Hammett, a banker:
I think it’s a marketing thing. Banks often make a practice of showing how big and strong their vault is; sometimes they put it right next to the front door, which seems not the most secure place to store everyone’s money, but gets the point across that it’s really, really safe there. Plus, it’s usually in a big, heavy stone building that a fleet of bulldozers couldn’t budge. You and I both know our money’s not really there, but the message is reassuring.
So if you want to put your money where nobody will see it, what could say “haven” better than an island? They’ll have to send in boats and planes to find out what’s going on, right? Besides, no one quite knows where Malta is. Niue? Nauru? By the time they find these places, we’ll have moved our ill-gotten funds to some other dot on the map.
[Hammett wants it known that the “we” in the previous sentence refers neither to himself nor his employer.]
8) A Sea-Level-Based Explanation
From Bill May:
Islands are low, period. Travel any direction 360 degrees and you will find yourself at sea level. Dig a hole and the sea level quickly makes itself present by filling in the hole. This constant feeling of being down must eventually play on the psyche of the islanders. Everything and everybody is above you. Lofty is not in the language. So it is possibly natural that they may adopt the low position in most things they do.
As a check on this ridiculous theory, look at the Swiss. They are lofty. They live in the mountains. They are accustomed to looking down on everything. Their banking systems are the envy of the world. I rest my case.
9) The Exception That Proves the Rule
Neil Jones wants us to know that “not all island nations are ‘naughty.’ ” He offers as proof the example of Bermuda, which, this press release from the Bermuda International Business Association points out, was explicitly praised by the Organization for Economic Cooperation and Development when it issued the report on naughty island nations that inspired this item. (For some reason, the link to the report itself has gone dead. But here’s a link to the June 27 New York Times story about it.)