Sovereignty for Sale


Tax Holidays is a speculative design project, dealing with the concept of extraterritoriality. It investigates the flow of global capital and speculates on the possibility of re-channeling money from corporate profit shifting schemes into carbon sinks and nature conservation through the modification of the tax law. Image courtesy of Nicolas Stephan

In 2018 the Trump administration lowered the corporate tax rate in the USA from 35% to 21%, encouraging businesses to invest within the United States. In the first half of 2018 about 270 billion dollars of profits held in tax havens were repatriated to the United States, as a result of the modified tax law. As if by magic, previously invisible money held by shell companies registered in small island nations reappeared in the US market. Large parts of it have been spent on stock buybacks as well as dividends to shareholders. Meanwhile the effect on workers’ paychecks as well as the creation of new jobs has been relatively small or non-existent.Jim Tankersley and Matt Phillips, “Trump’s Tax Cut Was Supposed to Change Corporate Behavior. Here’s What Happened,” The New York Times, November 12, 2018,

The fact that federal tax policy in the world’s largest economy was shifted in order to lure money out of a few small countries seems surprising and improbable. How is it that tax havens have become such powerful entities, and how can power operate so effectively simply by shifting the location of currency electronically across national borders and through legal agreements? I argue that this behavior, conventionally seen as an economic question, is actually a political and territorial calculation that uses the power of the state to create an economic loophole. To understand this, I will adapt Carl Schmitt’s idea of the “the state of exception.” Although Schmitt theorized the state of exception specifically in terms of state sovereignty, today I argue that we need to understand how that sovereignty has entered the global marketplace as a kind of commodity. I will provide a series of examples to show that these actions are nothing more than a capitalization of the state’s own sovereignty, which leads to a shift of power from state authorities to corporations and/or governments of other countries. In turn, we will see that the commodification of sovereignty also tends to perpetuate a decline in the rights for citizens and especially non-citizens inside and in some cases even outside the territory of the state.

State of Exception

First, we should consider what Carl Schmitt means when he speaks of the state of exception. Schmitt was a German jurist as well as a political, constitutional, and legal theorist of the early twentieth century who is perhaps best known for his critique of liberalism. Due to his involvement with National Socialism in Germany, Schmitt’s work is highly controversial today, but he is still widely considered to be “one of the most important critics of liberalism, parliamentary democracy, and liberal cosmopolitanism.”Lars Vinx, “Carl Schmitt,” Stanford Encyclopedia of Philosophy, Schmitt argued that liberal ideology could not account for the fundamental basis of state power, which was grounded in absolute sovereignty. Schmitt claimed that this sovereignty could be identified not by the one who makes the rule but instead by the one who decides on the state of exception.Carl Schmitt,Political Theology. Four Chapters on the Concept of Sovereignty, trans. by G. Schwab (Chicago: University of Chicago Press), 2005. True power was demonstrated when the sovereign suspended its own legal system and declared a state of emergency or state of exception. In this state, the sovereign uses extra-legal forces to re-establish normality in its territory. It was this very idea that was put into practice by the totalitarian regimes of Europe in the 1920s and 1930s in the pursuit of order and security. A notable critic of Schmitt, the Italian philosopher Giorgio Agamben has observed that at this time, the concentration camp became a testing ground for the state of exception and other tools of oppression.Giorgio Agamben, Homo Sacer: Sovereign Power and Bare Life, trans. By Daniel Heller-Roazen (Palo Alto: Stanford University Press), 1998.Agamben has argued that this state of exception “… actually constituted, in its very separateness, the hidden foundation on which the entire political system rested.”Agamben, Homo Sacer, 9.

In Homo Sacer (1995), Agamben develops this idea of the camp as a territorial space where political bodies are stripped of their status. Whereas Schmitt believed that politics was based on the distinction between friend and enemy, Agamben takes a different view: “The fundamental categorical pair of Western politics is not that of friend/enemy but that of bare life/political existence, zoe / bios, exclusion / inclusion.”Agamben,Homo Sacer, 8.
Bios represents the right of humans to participate in politics and makes them citizens, whereas zoe represents the reduction of humans to their biological existence. Being a citizen of a state equips individuals with certain rights and differentiates them from the homo sacer, who is reduced to bare life and can fall victim to violence at any time.Agamben, Homo Sacer, 8.


In this scenario, the function of the tax haven as the final step in multinational tax avoidance strategies has been replaced by a new form of extraterritorial space. This space exists as a large-scale landscape project where money is stored tax-free in hills, valleys, creeks and forests. To see the video, please follow the link Courtesy of Nicolas Stephan and Jakob Sieder-Semlitsch


According to the Kyoto Convention, a “free zone” is “a part of the territory of a Contracting Party where any goods introduced are generally regarded, insofar as import duties and taxes are concerned, as being outside the Customs territory.”Revised Kyoto Convention, Specific Annex D, Chapter 2. This means a free zone is a separated area inside a country where the tax laws of this country do not apply. Deriving from historic free ports, which were endowed with favorable customs regulations to simplify trade, the modern free zones have grown much larger, accommodating all types of businesses while profiting from the regulations. In this sense, the free zone shows how economic power can compel the state to declare a state of exception on its behalf.

The free economic zone (FEZ) or special economic zone (SEZ) is a tangible example of what the state of exception can look like in a neoliberal society. Even state socialist countries such as China have found ways of profiting from the neoliberal state of exception. When Shenzhen was declared China’s first SEZ in 1979, it consisted of a loose aggregation of small villages, surrounded by an 85-mile long fence.Tom Whitwell, “Inside Shenzhen: China's Silicon Valley,”The Guardian, June 13, 2014, Back then its population was about 30,000 people.Ilaria Maria Sala, “Story of cities #39: Shenzhen – from rural village to the world's largest megalopolis,”The Guardian, May 10, 2016, Attracted by the advantages the SEZ offered, new businesses and migrant workers started moving to the area, while factories and housing were built. Today, its population is over 12 million people and the special economic zone still includes the entire

To attract customers, many free zones offer not only tax breaks, but also modified laws concerning working conditions. Everything is designed for efficiency: deregulated to avoid frictions with the state, unions, or the general public. Individuals committing to working in this zone hope for a salary in a newly created job but find themselves in a state of lawlessness, detached from the protection usually provided through the nation state. Here corporate biopower supersedes national identity. According to American urbanist Keller Easterling “… they have a job, but their wages fail to support a decent standard of living. Attempts to organize or form labor unions are squelched with lockouts, threats, and firings.”Keller Easterling,Extrastatecraft (London: Verso, 2016), 55. She further describes situations where infrastructural situations are deliberately created to limit the workers field of mobility in order to keep them out of the clean business-oriented city center.Easterling,Extrastatecraft, 57. Here the contemporary homo sacer can be identified: workers from the “free” zone, stripped of their rights, exposed to the unchecked sovereignty of the multinational enterprise.

Whereas individuals are expected to fend for themselves, companies are given special consideration. They receive regulatory incentives like exemption from limits on foreign ownership; fiscal incentives like reduced private and corporate income taxes; financial incentives like low land rental and utilities rates, as well as state aid for acquiring land, and subsidies for training expenses. The film The Corporation (2003) shows how limited liability corporations have developed into a juridical entity that possesses most of the legal rights of an individual, while avoiding many of the responsibilities.The Corporation, Mark Achbar, Jennifer Abbott, Joel Bakan, New York: Big Picture Media (2003).In these economic free zones, a similar transfer of power has occurred, where juridical persons often have more rights than real ones. The film further points out that people working in these corporations are expected to commit themselves to the structure and logic of the corporation. Byung-Chul Han describes the neoliberal subjectivity as a kind of business: “As a mutant form of capitalism, neoliberalism transforms workers into entrepreneurs. […] Today, everyone is an auto-exploiting laborer in his or her own enterprise. People are master and slave in one.”Byung-Chul Han,Psychopolitics (London: Verso, 2015), 5. Michael Hardt and Antonio Negri have attempted to counter neoliberal individualism with their idea of the multitude, a community of individuals, “which acts on the basis of what the singularities share in common” against the capitalist regime of the individual.Michael Hardt and Antonio Negri,Multitude: War and Democracy in the age of Empire (New York: Penguin, 2004), 100.However, in the state of exception we find in the SEZ, it is hard to imagine the possibilities for solidarity. Instead of a mass of workers, the SEZ demands a multitude of entrepreneurs, seeking for their advantage through temporary strategic cooperation with others. This is what Byung-Chul Han calls the solitude, rather than the multitude, emphasizing the isolation of this very same class of worker into a single entrepreneur who commits self-exploitation in his or her struggle for economic survival.Han, Psychopolitics, 5

Interactive Map_offramp

This landscape is subdivided by a grid, in which every parcel can hold an individual combination of carbon sinks and habitats for endangered species. These parcels are traded like real estate or stocks. A state elected committee evaluates what kind of habitat is needed most and how much carbon should be absorbed. This has a direct influence on the price and consequences on the physical landscape. To see the video, follow the link Courtesy of Nicolas Stephan


In 2015 the leak of the Panama Papers by the anonymous source John Doe, revealed spectacular cases of money laundering through shell companies set up by the law firm Mossack Fonseca.Frederik Obermaier, Bastian Obermayer, Vanessa Wormer and Wolfgang Jaschensky, “About the Panama Papers,”Süddeutsche Zeitung, Journalists of the Süddeutsche Zeitung reported that Bashar Al-Assad used several shell companies in various tax havens registered through Mossack Fonseca to avoid sanctions and continue to buy gasoline for Syria’s warplanes. This gasoline was essential to the Syrian regime’s war against its own population.Frederik Obermaier and Bastian Obermayer “Shell companies: helping Assad's war,” Süddeutsche Zeitung,

To be classified as a tax haven by the Organization for Economic Cooperation and Development (OECD), a country must meet two of the three following criteria: no or nominal tax on the relevant income, lack of effective exchange of information, and lack of transparency. Primarily based in small island nations with limited resources, these tax havens provide financial services with little to no overhead in the hopes of accruing fees in other areas: customs and income duties, corporate registration and renewal fees, tourism and so-called “departure fees.”Warren Cassell Jr., “3 Ways Tax Haven Governments Make Money,”Investopedia, tax haven, a permanent state of exception, creates relief–a relaxation of the law. Unlike the SEZ, this particular state of exception enables greater power and less sacrifice for those who enter its zone. It enables a privileged group of wealthy individuals and companies, to elude other nation states’ control. In the tax haven, bank accounts, patents and assets are managed through shell companies–companies without employees and office spaces, founded solely for the purpose of creating limited liability and anonymity. These companies are used by celebrities, politicians and multinational corporations to hide their wealth from creditors or government authorities.

The most common use of a tax haven is the practice of tax avoidance. In contrast to tax evasion, tax avoidance is the use of legal methods of modifying a person’s or company’s financial situation in order to decrease the amount of income tax owed. Some tax avoidance schemes use loopholes in the tax law, allowing the removal of income or assets from taxable situations into ones with lower tax rates. This process is called Base Erosion and Profit Shifting (BEPS). Through these mechanisms, governments all over the world loose incredible amounts of tax money, which could be invested in social aid or infrastructure. It is estimated that the U.S. government is losing as much as 111 billion dollars each year, due to BEPS.“Broken at the Top”, Oxfam Media Briefing, April 14, 2016, was once perhaps a discrete practice known only within the financial services industry is now a fundamental aspect of multinational trade and investment. The big four accounting firms KPMG, Ernst & Young, Deloitte, and PricewaterhouseCoopers play a major role in the structural production of tax avoidance. They do not only assist multinational enterprises to avoid paying billions of dollars in taxes, they also provide advice on tax policy to governments and lobby for policy changes on international platforms like the OECD.Chris Jones, Yama Temouri, Alex Cobham, “Tax haven networks and the role of the Big 4 accountancy firms,”Journal of World Business, Volume 53, Issue 2 (2018): 177-193. These accounting firms have “hacked” the financial services industry, performing a runaround on tax regulators by using corporate identity and national identity as a series of shifting avatars.

This idea of the “hacker” accountant seems strange but the ambiguity of the idea has been there from the beginning. In The Hacker Manifesto (2004) McKenzie Wark defines hacking as knowledge production. In the process of accessing and manipulating data, hackers create what Wark describes as new abstractions: “We produce new concepts, new perceptions, new sensations, hacked out of raw data. Whatever code we hack, be it programming language, poetic language, math or music, curves or colourings, we are the abstracters of new worlds.”McKenzie Wark,A Hacker Manifesto (Cambridge, MA: Harvard University Press, 2004), 1-2. Wark contrasts the hacker class to the “vectoralist” class: the new ruling class of our time, possessing the means of digital production. “The vectoralist class wages an intensive struggle to dispossess hackers of their intellectual property. Patents and copyrights all end up in the hands, not of their creators, but of a vectoralist class that owns the means of realising the value of these abstractions. The vectoralist class struggles to monopolise abstraction.”Wark,A Hacker Manifesto, 20-21. Wark points out that the hacker class and the vectoralist classes do not necessarily stand in opposition to each other; in fact, they can work together. I would argue that, in Wark’s terms, BEPS and tax havens are the legal and territorial markers of a vectorialist hack of sovereign power.


In the zone all profits made with forestry are exempt from income tax and corporation tax. This creates a loophole, enabling multinational companies to channel profits through forestry subsidiaries, which provide the service of afforestation and maintenance of habitats. To see the video, follow the link Courtesy of Nicolas Stephan


The Republic of Nauru is an Island country in Micronesia, in the Central Pacific. At only 21 square kilometers it is the third smallest country in the world and its population includes about 11 thousand people. In 1888 it was annexed by the German Empire, then occupied by Australia. During World War II the Japanese deported 1200 Nauruans as laborers. From 1947 the island was governed by Australia, the United Kingdom and New Zealand. All these countries had a major interest in the island’s rich phosphate deposits and most of them were involved in heavy mining operations. When Nauru gained independence in 1968, its landscape was already devastated by phosphate mining. Nevertheless, mining continued under the control of the Nauruan authorities, making Nauru one of the wealthiest countries in the world. During that time, Nauru had the second highest per-capita GDP in the world, behind Saudi Arabia.Ben Doherty, “A short history of Nauru, Australia’s dumping ground for refugees,” The Guardian, 9 August 2016,

The fortune ended abruptly when the phosphate mines where almost depleted. In just a few years, Nauruans lost all their savings, overseas real estate, planes and other luxuries, due to mismanagement and bad investments. Unemployment went up to a rate of 90% and the school system collapsed almost entirely, while most of the land was unusable because of the former mining operations.Doherty, “A short history of Nauru.” From then on, Nauru, in a struggle for survival, started to capitalize on one of the last possessions it had: its own sovereignty. In 1990 it transformed into a tax haven, enabling the Russian mafia to launder an estimated $70 billion in 1998 alone. The survival strategy backfired in 2002 when the U.S. treasury classified Nauru as a money laundering state and imposed heavy sanctions on it. In 2004 Nauru passed anti-money laundering and terrorist financing laws, causing the offshore financial business to disappear.Anne Davies and Ben Doherty, “Corruption, incompetence and a musical: Nauru's cursed history,” The Guardian, 3 September, 2018,

In 2009 Nauru officially recognized Abkhazia, a disputed region of Georgia that emerged as a Russia-backed “independent” state in the Russian-Georgian war of 2008. This just happened to coincide with Nauru requesting $50 million in financial aid from Russia. Nauru also accepted a payment of $130 million from China, causing it to end diplomatic relations with Taiwan, just to reverse its decision three years later.Ellen Barry, “Abkhazia Is Recognized — by Nauru,”The New York Times, December 15, 2009, Nauru is one of the last 17 remaining countries that recognize Taiwan, while China is aggressively pumping money into the Pacific islands, to strengthen its interests.Chris Horton, “Taiwan’s Leader Heads to the South Pacific in a Bid to Fend Off China,” The New York Times, March 20, 2019,

Lately, Nauru has started doing business with Australia, accommodating refugees in return for Australian financial aid. Australian policy does not allow refugees, which come by boat, to enter the country. Instead they are sent to Nauru for so-called offshore processing.Doherty, “A short history of Nauru.” This means they are held in camps, sometimes for years, until their official status is determined. The camps on Nauru have been revealed to have terrible conditions, often described as worse than prisons. In 2014 a video appeared, showing six refugees who stitched their mouths shut in protest over plans of being moved to Cambodia.Ben Doherty, “Nauru asylum seekers sew lips shut in protest over Cambodia transfer,”The Guardian, 1 October 2014, One man set himself on fire during a visit of United Nations officials and later died in a hospital in Queensland.Helen Davidson and Ben Doherty, “Refugee who set himself alight on Nauru dies in hospital,” The Guardian, April 29,


By ensuring tax relief, this project incentivizes investments from international companies aiming to reduce their expenses while it simultaneously erodes the economic base of the tax haven. In this process, the model establishes appropriate habitats for new native species and advances the project's ultimate objective of creating carbon negative landscapes. To see the video, follow the link Courtesy of Nicolas Stephan


Each of these examples illustrates a dramatic shift of power from the nation state to multinational corporations or other more powerful state actors, which exploit their client states’ dependency. While the negative externalities of the tax haven are relatively obvious, the free zone is still favorably regarded as a tool of economic development. However, many of the same risks we encountered with tax havens can be found in the free zones as well. As Easterling explains: “Since the zone’s profits are quarantined and allowed to return directly to the multinational enterprise, there may be few lasting dividends for the host country. And if one country decides it is no longer proud to offer up its citizens as cheap labor, the zone will simply migrate to another poorer country, or will import the cheap labor like any other component of the industrial process.”Easterling, Extrastatecraft, 55.

Taken to an extreme, the results of this practice can be devastating. The small island of Nauru, facing economic collapse, finding itself forced to accept shady deals with wealthier countries, shows us how conditions for people within its territory–citizens and especially non-citizens –can become disastrous. The story of Nauru might look like the result of colonialism and mismanagement, but its political and economic strategy did not differ largely from that of many other countries. As Easterling wrote about Nauru in 2005:

“Its only true dysfunction, when compared with all of its trading partners and lenders, was that it could not proliferate enough lies, enough forms of cheating and piracy to produce sufficient camouflage. It was an offshore with no offshore of its own. It did not produce its lawlessness and exception on its own behalf; it merely sold that state of exception as a commodity.”Keller Easterling, “Confetti of Empire: Nauru’s Riches to Rags Story," Cabinet 16: The Sea (Winter) 2004.

This year, a Canadian company discovered mineral-rich rocks at the bottom of the sea around Nauru.Advance Nauru Deep Sea Mining, Nauru TV News,