When tax havens undermine peace

Posted on

Jess Drucker noted on Bloomberg yesterday that:

As a result, a handful of European tax havens may hold the key to pressuring Russia to pull back from Ukraine. The extensive use of foreign subsidiaries by Russia’s richest businessmen exposes their assets to sanctions. Yet capitalizing on this vulnerability requires help from countries that rely economically on Russian capital flight and have traditionally protected investors against foreign laws.

He makes an incredibly important point. First, he clearly does not expect tax haven cooperation on this issue. Second, as he notes, countries as well known as the Netherlands that deliberately set out to work with more opaque locations like the British Virgin Islands create, using the network of lawyers and accountants they mutually host, permit the illicit flow of billions of dollars around the world. Too often, as in the case of the Russian funds referred to by Drucker, even if questions are asked in sufficient detail consequences are ignored. That consequence of the secrecy is too often a deliberate impediment to action.

That could be on tax, but of course the consequences can be more serious still. That secrecy can undermine the ability to enforce international efforts to avoid war. To me that's even more important than the tax consequences.