What tax havens do – 3 – they facilitate corruption

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This series on what tax havens will have, on occasion, to state the obvious. It is obvious to 99% of the world’s population that tax havens facilitate corruption. As John Kay said in the Financial Times:

If you operate in the penumbra of legality, as havens do, it is easy to slip outside the bonds of legality altogether. Where there is legal avoidance of tax and regulation, illegal avoidance of tax and regulation is rarely far behind, and often hard to distinguish: where there is secrecy the motive is frequently impropriety; where there is impropriety, criminality is rarely far behind, and hard to distinguish. To turn a blind eye to avoidance of the law is to undermine all law.

This is what happens in tax havens.

The abuse is obvious, whether it be of the sort Enron did, the sort perpetrated by those in power in so many countries in the world, or tax evasion.

Global Financial Integrity estimates the illicit financial flow out of developing countries, almost all through tax havens / secrecy jurisdictions, is not less than $800 billion a year. That’s enough to relieve world poverty 16 times over. And this number excludes the corruption in the developed world which uses these places.

Of that sum the same organisation estimates 3 – 5% is corruption by elected officials and the like, 30% is criminality such as drug trafficking and the balance – some 65% is by commercial organisations, most relating to tax related issues. But all of it is corrupt, and all of it, as John Kay notes, relies upon the secrecy that tax havens provide.

They know this.

They knowingly facilitate this corruption. They cannot deny it. They could choose to end the secrecy that permits the abuse. They don’t. As such they are responsible for that abuse. And the consequences of it.

Remember that: the next one says ‚Äòdevelopment doesn’t work because of corruption’ remind them that’s wrong. ‚Äò

‚ÄòDevelopment is harmed tax havens’ is nearer the truth – because it’s tax havens that permit the corruption that’s being referred to.

Other articles in this series are:

What tax havens do

What tax havens do – 1 – they handle stolen property

What tax havens do – 2 – they redistribute wealth from the poor to the rich