New study – Britain and the U.S. may be the dirtiest tax havens

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Switzerland's Le Temps newspaper has just pointed out a remarkable new study by Jason Sharman, an offshore expert (he wrote a book on the OECD project against tax havens, reviewed here.)

Le Temps said this:

With a small budget, and using classified ads that proliferate on the Internet or in the press, this professor of the Center for Governance and Public Policy at Griffith University (Australia) made bids to set up shell companies in 22 countries -- some labeled as tax havens; others are very respectable members of the OECD.

What, pray, did he find?

His conclusion is doubly embarrassing for members of the G20 currently leading the hunt for tax evasion. First, it is easy to transfer money anonymously, despite all the rules of conduct and the conventions. Second, and more surprisingly, countries where the misuse of rules is easiest are not the exotic islands, Switzerland or Liechtenstein - but the United States and Great Britain.

This does not surprise us, and we've said this kind of thing many times before, but it has colossal implications. How did he find this out?

He began by identifying on the internet players that offer to set up front companies, and solicited 45 bids. In 17 cases, these service providers kindly provided the requested shell without bothering to check on the actual identity of the client. And it was not expensive: $800 to $3000. Interestingly, only four of these providers were located in tax havens (TJN: we presume they mean "classic" tax havens of the popular imagination), while 13 were located in OECD countries claiming to keep to the rules of verification: seven in Great Britain, four in the United States, one in Spain, and one in Canada.

The next step was to open an anonymous bank account. Here, the task proved more difficult: the process resulted in only five cases. Five out of 45? At first glance the system seems pretty tight. Jason Sharman did not believe it: he only had Google and 20,000 dollars available, "which is nothing compared to the capacity of criminal organizations," he adds.

The five successful attempts to open an anonymous account took place in Wyoming (where the laws have since changed), Nevada (a scanned driver's license was the only proof of identity requested), twice in Great Britain (via the Seychelles, Montenegro, St. Vincent and the Grenadines) and once in Liechtenstein (in a joint arrangement through Somalia). Copies of passports were sometimes required, but not certified by notary.

Sharman's conclusion?

The United States, Great Britain and other OECD states have chosen not to comply with the international standards which they have been largely responsible for putting in place.

I’m not surprised. I’ve pointed out the ease with which it is possible to create companies in the UK on many occasions - and the fact that there are far too many formation agents who are willing to offer nominee services. Indeed, when Jason Sharman began this survey he asked for my help to find some likely targets, and I was only too pleased to help as I want to eliminate this abuse in the UK, as elsewhere.

I will publish my recommendations for action that follow from this report in my next blog, bit I make clear: I welcome this report. It greatly assist those asking for reform here in the UK.