The Organization of Economic Co-operation and Development (OECD) describes tax havens or offshore financial centers as countries with little to no nominal taxes, a lack of transparency and an unwillingness to exchange information with tax administrations. Small island economies, such as those present in the Caribbean, often choose to become offshore financial centers, reaping the benefits of foreign investors and financial gains and paradoxically becoming more unstable due to their dependency on external economic networks. However, there is a tension between tax havens and their taxing counterparts that plays out on the international market, namely between financial gains for one state and the tax revenue loss for other states. Despite being technically legal, offshore financial centers have been widely condemned by global economic forums as unsustainable means of economic growth, and as entities which allow for inequality to grow further. In addition to the OECD definition, territories which offer tax exemption laws for economic investment, tourism and real estate, as well as “opportunity zones” (zones franches), where companies have no taxes, may be considered tax havens as well. Both sides of St. Martin clearly falls under this category, but only the Dutch side meets the OECD definition of a tax haven.

In St. Martin the real estate and tourism industries developed with the help of the tax exemption laws implemented by the both French and Dutch governments, to attract investors and foreign residents. The Dutch side, in particular, has no property taxes, contributing to tax evasion. In 2016, The OECD conducted reviews to see how certain jurisdictions comply to their new demands of information exchange and transparency, marking Dutch side of St. Martin as “partially compliant”. The French side has not received an OECD review.

Tax exemptions facilitated foreign investments in the tourist industry. Between the beginning of the 1960s when tourism began in the Dutch side, and the beginning of the 1990s, the number of tourists and cruise ship passengers choosing St. Martin as a vacation destination increased fiftyfold. In 1990 St. Martin became the fourth most popular destination for cruise ships after Puerto Rico, the Bahamas, and the U.S. Virgin Islands. Hurricane Luis in 1995 is generally seen as the cause of the decline in tourism, due to the infrastructure it destroyed, turning hotels into wastelands which are still visibly abandoned today. Recovery of the tourism industry did not take too long; by 2004 approximately 1.5 million visitors from cruise ships arrived per year and nearly 500,000 visitors were arriving in St. Martin by air. St. Martin has become the most visited island in all of the Lesser Antilles. The French and Dutch sides of the island attract very different types of tourists. Restaurants in Grand Case and luxury boutiques in Marigot on the French side appeal to a wealthy clientele, whereas tax refund electronics stores and shops for cheap jewelry in Philipsburg and hotel-casinos on the Dutch side draw more middle-class tourists.