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 ‘development doesn’t work because of corruption’ remind them that’s wrong. ‘
‘Development 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 — 1 — they handle stolen property
What tax havens do — 2 — they redistribute wealth from the poor to the rich
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Corruption is a problem throughout the world and not just something you find in an offshore financial centre.
One of the biggest banks in recent times to be hit with such a scandal was in the US. I am sure you will know about Riggs bank.
Take a look at Google and you will find corruption cases going on all over the world and not just in offshore financial centres.
It is a problem and it does need to be tackled throughout the global banking system and those that use it. Of course, those involved with corruption will try and use corporate structures etc to try and hide their illgotten gains and as you have admirably pointed out on your blog today there is much evidence out there that suggests the US and UK are very lax when opening accounts and setting up companies.
In short, corruption is a worldwide problem and is not exclusively an offshore financial centre problem. A global approach is required right across the board and not just in the offshore financial centres.
Again, I go back to my mantra…we need a level playing field right across the board with no exception and that means all countries and not just those that may be deemed as a “tax haven”.
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