Why the Persistence of Tax Havens?
posted by Frank Pasquale
The last remnants of British imperialism are still wreaking havoc today. The Canadian Governor-General’s bizarre proroguing of the Parliament there threatens to make a figurehead a kingmaker. More dangerously, tax havens like the Isle of Man, Guernsey, and Jersey cost governments worldwide billions of dollars of revenue annually:
Because of the secrecy surrounding the treasure islands, no one knows how much money they divert from developing countries. Christian Aid’s estimate – of $160 billion a year – is the lowest figure, though 60% greater than the international aid the poor world receives. The Pope suggests $255bn; the US research group Global Financial Integrity proposes $900bn. In all cases we’re talking about the means by which hundreds of thousands of lives could have been preserved in the world’s poorest countries. But Britain’s network of tax havens permits multinational companies, dodgy businessmen and corrupt leaders to snatch money from [tax authorities].
As governments face ever-greater fiscal responsibilities in the midst of crisis, many of those best able to shoulder the burden are AWOL. Even though “organised crime . . . depends on tax havens,” they persist. Why?
George Monbiot suggests that the British Labor government’s fear of being perceived as socialist has led it to take an obstructionist stance at the the global authorities who could stop it. As Geraint Anderson has put it, “Eighteen years out of power has made these jokers so paranoid about being viewed as old Labour that every time Cityboys and entrepreneurs asked for business-friendly reforms they rolled over and allowed tax and regulatory changes.” Britain’s not been helpful on a global level, either:
[T]he crime havens have become so respectable that even the British government is now depriving itself of revenue. It has become the major shareholder in the Royal Bank of Scotland, which has offshore subsidiaries in Jersey, Guernsey, the Isle of Man and Gibralter. . . Brown’s government [has] tried to undermine international efforts to address the problem. Teaming up with . . . Liechtenstein, the UK sought to strike out a paragraph from the Doha trade agreement which aimed to eradicate tax evasion. Thanks in part to British lobbying, the draft commitment was substantially weakened.
Monbiot’s column points up a deep danger in defective nationalizations of financial institutions: the nationalized may exert more control over government policymakers than vice versa.
Fortunately, the Madoff scandal may shed some light on these dark corners of the global financial system:
L’Affaire Madoff . . . has cast an unwanted spotlight onto the normally shadowy world of private bankers in Switzerland and other cozy hiding places of offshore wealth, like the Cayman Islands and Luxembourg. [W]hile there are many Swiss victims in terms of total exposure, UBP is the best-known private bank to get hit, with $700 million of its clients’ money invested with Madoff.
Offhand, I cannot think of any reason why there should not be a global norm that the financial affairs of anyone with over a $10 million net worth should be an open book. Given the disproportionate power such individuals wield in political and cultural spheres, the least they owe society is an open account of their strategies for conserving and expanding their wealth. Privacy and transparency are two facets of a larger project of constraining the powerful and empowering the otherwise constrained.
Photo Credit: Tasa M, image of church on Isle of Man.
December 29, 2008 at 8:23 pm
Posted in: International & Comparative Law, Tax
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Responses (5)
anon - December 30, 2008 at 12:38 am
Any reason? How about strange behavior by those with net worth approaching $9 million?
(Relatedly: would the disclosure forms allow the costs of rape counseling or cancer treatment to be lumped in with “medical expenses,” or would greater transparency be required?)
ParatrooperJJ - December 30, 2008 at 7:35 am
Maybe they persist because governments tax too much? Maybe people think they deserve privacy in their financial affairs?
Maryland Conservatarian - December 30, 2008 at 3:13 pm
“Offhand, I cannot think of any reason why there should not be a global norm that the financial affairs of anyone with over a $10 million net worth should be an open book.”
Really? Would that include a very rich 15 year old girl who invests in an upscale, $10.1 million private abortion facility so that her and her friends could always have access outside their parents’ purview?
A.W. - December 30, 2008 at 5:21 pm
Next mystery explored on Concurring Opinions… why is it that when you drop a cannonball, it falls to the ground?
Seriously, the answer is very simple. Why do companies go to tax shelters? to save money?
Why are tax shelters offered? To make money. either as above the board revenues, or under the table bribes. really seriously there is no mystery here.
A Voice of Sanity - January 1, 2009 at 10:59 pm
“Offhand, I cannot think of any reason why there should not be a global norm that the financial affairs of anyone with over a $10 million net worth should be an open book.”
Perhaps they feel that when they have paid $100,000 or $200,000 or $500,000 or $1,000,000 that they have paid their share? Should there not be an upper limit on taxes?
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