Competitiveness of Financial Centers in Light of Financial and Tax Law Equivalence Requirements

Abstract

Financial centers are best explained using D.W. Arner’s "hub and spoke model". This explanation for financial centers essentially relies on scale economies. Given the clients’ needs for a base and specialized financial services, base services are provided locally while specialized services are centered in order to justify the costs for specialization. Centers provide the expertise and infrastructure to offer these specialized services. From the specialization results a service industry which coordinates their interests to further their business. While this model to a certain extent explains why financial centers exist, it does not explain where financial centers are located, and why some financial centers flourish while others fail.

Keywords: financial centers, international financial regulation, tax law, equivalence principle, European banking and financial law

JEL Classification: K20, K22, K34, G10, G20