With tax shelters now under scrutiny as a result of the Foreign Account Tax Compliance Act (FATCA), much of the criticism of offshore accounts has been focused on recouping lost federal tax revenue. But according to a recent article in The Atlantic, offshore tax havens appear to be similarly damaging to the political and economic climate of the places where these shelters operate.
In what is known as “the finance curse,” the increase in wealth generated by a country’s participation as a center of international finance can lead to that country to experience an increase in violence, inequality and political corruption. According to the article, this happens when a country’s financial and political interests become increasingly beholden to foreign elites, often at the expense of the local population.
