Investment Migration and Subnational Jurisdictions

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This chapter sets out to explain the position of small islands, focusing on their economic and citizenship dependence on metropolitan states. These small jurisdictions argue that their market operations could be legitimately described as improving the institutional ‘efficiency’ of financial markets. Moreover, and quite realistically, they have limited development choices to consider and are effectively playing to their narrow competitive edge, as rendered by their sub-national status, small size and islandness. These acts, suitably ring fenced, are expressions of ‘creative governance’, a blatant and market driven exploitation of political geography for economic, fiscal or strategic gain. Furthermore, the ‘governmentality’ of the territorial state – its clout and reach over the behaviour of its citizens – is being sorely tested, with the proliferation of offshore banking and dual nationality/multi-passporting for various clients, ranging from transnational corporations to ‘cosmopolites’ to those unable or unwilling to tolerate particular leaders at home. Such practices are being also abetted by the politico-economic elite at the helm of small, often island, jurisdictions: these policy shapers sense – and are reminded by the international corporate world – that they have a rare competitive advantage in widening their jurisdiction’s tax base by reducing tax rates and offering citizenship schemes. Criticism and conceptual provocations, of course, abound, and especially since the 2008 global financial crisis, when leading economies have been naming and shaming individual and corporate tax offenders in attempt to collect their tax. The very principle of ‘offshore financial services’, for all its veneer of respectability, has been subjected to disrepute because the legal products being offered are tantamount to acts of ‘selling sovereignty’. The practice has been sometimes viewed as part of a suite of desperate measures taken by small and chronically vulnerable and cash strapped territories, often connived by external elites who can capture the state to do their bidding. That said, citizenship by investment programs have recently been proliferating and this trend is expected to continue. The extra-territoriality potential offered by such spaces as the high seas, the Moon and the Planet Mars renders them attractive locales for novel governance regimes that may wish to escape the clutches of rapacious, tax-seeking states. Meanwhile, here on Planet Earth and on solid ground, subnational jurisdictions are ‘territories sui generis’ that already offer their own opportunities for creative endeavour.