Has the tide turned?

Posted on

Last week we had an FT editorial saying:

Supporters of bank secrecy have wrung their imaginations dry in coming up with ingenious defences for secret accounts. The very real fear of kidnapping in places such as Latin America is one of the few good reasons that might justify allowing the rich to hide their wealth. But for the most part opacity simply helps to evade taxes.

That’s about as blunt as it gets – and true.

Now Reuters is saying, post the UBS deal:

More overseas tax havens could turn into traps for tax cheats as the U.S.-Swiss settlement over UBS AG invigorates an international campaign to flush out hideaways for illicit or undisclosed money.

Global leaders campaigning for an end to secretive tax havens hope this "nowhere to hide" warning will be heard by tax cheats and jurisdictions which might host them, from tiny Vanuatu in the South Pacific, to bustling trade hub Panama and the historic Alpine principality of Liechtenstein.

Tax experts believe the high-profile U.S.-UBS deal, coupled with an ongoing campaign against tax havens by the G20 group of leading industrialized and emerging market nations, will crank up the pressure for offshore financial centres to put their houses in order with regard to tax transparency.

Several governments, including the United States, have launched programs inviting tax cheats to come clean and reveal themselves. Britain last month signed with Liechtenstein an agreement to encourage British clients with secret accounts there to voluntarily disclose their untaxed money.

But some experts say that despite the recent crackdown and increased scrutiny, tax havens will continue to exist.

"There are 55 to 60 airtight secrecy havens that dot the globe which have for the last 25 years been subjected to intense pressure by the industrialized nations -- the G8, U.S., EU, you name it -- and they withstand the pressure and they don't cave in," former federal prosecutor Charles Intriago told Reuters.

He believes that between 20 and 25 percent of the UBS accounts sought by U.S. authorities could be hiding "criminally obtained or wrongfully held assets."

"For UBS to sanctimoniously say 'We have standards; these are only people who don't like to pay taxes,' that's a bunch of baloney," said Intriago, who called for tougher measures by U.S. authorities to shut off access to tax havens.

"The way to stop this is to block financial secrecy havens from dollar clearance in the United States," Intriago said.

What’s important here are two things. First, like the FT the message is clearly anti-tax haven. Second, the excuses from the tax haven proponents are given no space. The media seems to realise their credibility has gone. This is important: we have needed to show the apologists for what they are – the peddlers of excuses for crime. I think that is now accepted to be the case.

But I’d add a footnote; Reuters note:

[Intriago] said that even in the United States it is easy to create "shell" companies that hide the owners' identity, to set up Internet bank accounts and to move money to offshore havens without leaving a trail.

"Just go on the Internet. We've got our own Caymans here," Intriago said.

Too true. Washington and London take note: the next stage is cleaning up your own acts.