The myth is shattered – we were right all along

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I remember that soon after the TUC published my Missing Billions report last year Bill Dodwell of Deloittes said it was ‘just rubbish’.

Also not that day in day out people say on this blog and tell me I have it wrong — the international financial crisis has nothing to do with offshore.

I’ve always known Bill Dodwell to be wrong. And those who argue tax havens are innocent of blame have always been been self delusionists. But it’s good of the Guardian to provide more evidence today. As they report:

Royal Bank of Scotland tied up at least £25bn in complex international tax-avoidance schemes during its boom years, costing the British and US treasuries more than £500m in lost revenue, the Guardian can disclose.

It is the first time that a major bank has admitted the existence of such deals on this scale. The new management at RBS, mindful of the fact that it is now 70% owned by the taxpayer, has disbanded the department responsible and will put an end to the controversial practice.

"The idea that we could take support from the Treasury with one hand and somehow pick their pocket with the other would be wrong on every level. We have always sought to avoid this sort of stance and that's more important now than ever. It's not a sustainable way to do business," said an RBS source.

Note: this is not speculation by the Guardian. RBS has admitted this.

Nor was it the biggest player in this market. Barclays takes that crown — and I worked on previous investigations of similar abuse by them for the Wall Street Journal.

There’s not a shadow of a doubt that Lloyds in in this up to its neck as well. The results of the TUC survey of offshore subsidiaries of UK banks, that I researched,  at the very least hints of this. My sources confirm it.

But note this too: these banks weren’t just doing tax avoidance on a gargantuan scale, they were doing so using securitised debt from sub prime and other related sources, and all through offshore.  Note the locations: Cayman in the main. Note the partners:

  • Goldman Sachs
  • Swiss Re
  • Morgan Stanley
  • Merrill Lynch
  • AIG
  • Deutsche Bank
  • Fortis

Let’s have no pretence. Offshore finance of this sort is not some different entity. It is just banks seeking to use unregulated places to abuse the world’s tax systems and undermine democracy in the process by denying governments revenues that are rightfully theirs.  Secrecy jurisdictions deliberately provided the environment to do this.

And offshore did not, somehow, have ‘clean’ financial products when onshore did not. That is absurd. There is nothing that really happens in secrecy jurisdictions to create those clean products. They just slice and dice ‘onshore’ products for the purpose of abuse.

And now we have a major bank agree that this is exactly what it did. It has agreed this despite denying it in the past. It has agreed this despite its accounts never revealing it was involved in this activity.

Let me list the myths that are shattered:

  1. Those who deny they are involved in tax avoidance have not always been telling the truth. Since we cannot tell who has been, and who has not been, let's assume that they were all doing it.
  2. Those who claim that tax havens were not involved in tax avoidance are plain straightforwardly misrepresenting the truth;
  3. Those who claim that tax havens did not play a very significant role in creating the sub-prime crisis through securitising debt, through repackaging that debt, and by linking it to tax avoidance and regulatory abuse, are plain straightforwardly misrepresenting the truth;
  4. Those who claim that offshore is clean and onshore caused all the problems are living in a world of fantasy. Offshore is simply the agent of its onshore masters.

We know all this: it is proven.

Now let’s tackle it. The G20 can be a start.