From the letters page of the Guardian this morning:
The euro is a great concept but was badly conceived, without a central bank or political, fiscal and economic harmonisation. But the greatest problem today is how to manage state finances when billions disappear into the world's tax havens thanks to the absence of any monetary controls and politicians granting their wealthy friends and multinationals all kinds of tax advantages and favours that have diluted tax revenues to the point where there is not enough in the kitty to maintain public services.
Even Paul Krugman has admitted that a return to temporary monetary controls could be an answer. With regard to Greece I would say that, in exchange for handing over more money, all Greek funds abroad in Switzerland or elsewhere must be returned. Then the same conditions should apply to the rest of Europe's member states. According to the Tax Justice Network, over a trillion dollars lies in offshore banks and companies in tax havens. Recover this money and governments could not only reduce their debts but pave the way for a lowering of taxes across the board to encourage investment and growth, and increase spending power for the majority.
Peter Fieldman
Madrid
Actually, we think there are about $$11.5 trillion dollars in tax havens. It may well be more.
But Peter Fieldman is right: tax havens were deliberately created to subvert regulation. I call them secrecy jurisdictions. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
Unless we tackle that abuse we can't win the fight against abuse, and nor can we preserve democracy.
The biggest proponents of tax havens world wide are the Big 4 firms of accountants. That's why I said yesterday:
I've long argued the four biggest threats to democracy in the world are PWC, KPMG, Deloitte and Ernst & Young because they are, together, the biggest global network designed to undermine the revenues of democratically elected governments with intent to ensure that those governments can't command the resources needed to deliver the services their electorates want and expect which action on their part has to surely undermine democracy and faith in it faster than anything else could.
These firms are, literally, by promoting these places taking away our democratic freedoms. FT columnists realise that. It's time it was more widely recognised.
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Spot-on
If a government cannot tax then it cannot spend. If a government can neither tax nor spend then it cannot govern. If that is the case who governs? If those controlling money do not wish to govern only to extract for their own purposes then you have the pre-conditions for either anarchy or the collapse both of nations and international security.
“Tax havens” are not the cause, they are merely a catalyst to tax base competition between developed nations, which is the real cause of the international solvency problem.
Another way of looking at this is to consider the need for tax revenue as a competitive market. Would you invest (i.e. form a Government and run a country)? The market concentration is so low, it would surely (and does) end up making a loss – as countries wind up in tax-base competition with each other.
The only solution is to consider the effects of our policies beyond our borders, and actually – really – treat the citizen of foreign nations with the same respect and same priority as we treat our own in our policies.
Unfortunately, the troubles stem from the rather geographic nature of democracy, and the lack of understanding of ‘generational’ economics within many of the countries’ policymakers, who often don’t want to see beyond of their political term, particularly if it means weighing up economic growth now (and future destitution) against taking the economic balancing now.
Why do “tax havens” persist? Bordered thinking.
Why is it that there is no central bank to lend to the periphery economies at a lower interest rate than the central European countries? Bordered thinking.
Apologies if this sounds all ‘moral’, but there is a sound economic argument. You might find it is a “tax haven” with a broader vision that makes all the difference.
I’m not quite sure where your reasoning is going…
Do you?
I think what James is saying that if you abolished every conventional Tax Haven, Tax abuse would still happen because you would still get Tax competition between nation states who are governed by short term visioned politicians.
I would go along with some of that. It sounds an oxymoron I know but Tax Havens are still a visible part of the tax system – one reason e.g. being there are vast illegal flows NOT advised by the big 4 and not hitting the conventional Havens.
Which is why we need transaprency – which the Big 4 oppose, vigorously
But do really think that even if everything the bIg 4 did was stopped in its tracks then Tax evasion would go away?. At least their procedures are documented, their work is in the “visible sphere”. You (I do) can walk into a big 4 seminar and they are reasonably open in what they do offshore.
What on earth do you think happened before the Big 4 came into being – no Tax Havens, no Tax Abuse?
Their presence in tax havens makes the use of those spaces by multinational corporations possible
That means they lobby for their retention
That means they survive and the evasion with them
As such their role is inextricably linked to the evasion even though they play no part in it
You are being deliberately blind to that