The Truth About Tax Havens

A new book, ‘Treasure Islands’ ( http://treasureislands.orgby Nicholas Shaxson,  has been published.

Please read the following articles in The Guardian, describing the very corrupt reality of tax havens:

According to these articles Jersey is high on the list of corrupt places. Cayman Islands, the second biggest tax haven in the world and a British Overseas Territory, is highlighted as another of these really corrupt and illegal places. Who will finally expose and rein in these places of illegal profiteering?

A quote from the second article:

‘The offshore world is all around us. More than half of world trade passes, at least on paper, through tax havens. More than half of all banking assets and a third of foreign direct investment by multinational corporations are routed offshore. An impression has been created in sections of the world’s media, since a series of stirring denunciations of tax havens by world leaders in 2008 and 2009, that the offshore system has been dismantled, or at least tamed. In fact quite the opposite has happened. The offshore system is in very rude health — and growing fast.

It is no coincidence that London, once the capital of the greatest empire the world has known, is the centre of the most important part of the global offshore system. The City’s offshore network has three main parts. Two inner rings – Britain’s crown dependencies of Jersey, Guernsey and the Isle of Man; and its overseas territories, such as the Cayman Islands – are substantially controlled by Britain, and combine futuristic offshore finance with medieval politics. The outer ring comprises a more diverse array of havens, such as Hong Kong, which are outside Britain’s direct control but have strong links.

This network of offshore satellites does several things. First, it gives the City a truly global reach. The British havens scattered all around the world’s time zones attract and catch mobile international capital flowing to and from nearby jurisdictions, just as a spider’s web catches passing insects. Much of the money attracted to these places, and the business of handling that money, is then funnelled through to London.

Second, this British spider’s web lets the City get involved in business that might be forbidden in Britain, providing sufficient distance to allow financiers in London plausible deniability of wrongdoing. Much (but not all) of the financial activity hosted in these places breaks laws and avoids regulation elsewhere.’

UPDATE 14 August 2011:

On 5 August 2011  The Guardian published another very good article addressing the issues around corporate tax  avoidance:

Time to tackle tax avoidance and raise corporate tax

A good interview on Democracy Now with Nicholas Shaxson, author of Treasure Islands, exposing the corrupt world of offshore banking and tax havens:

Offshore Banking and Tax Havens Have Become Heart of Global Economy


The Great American Bubble Machine

The article ‘The Great American Bubble Machine’  by Matt Taibbi in the Rolling Stone magazine tells the story how Goldman Sachs‘ leadership and partners recklessly enrich themselves and empoverish small investors and tax payers. It is a well researched article and helps to explain some of the reasons why there is so little appetite in Washington to close down tax havens. Rep Lloyd Doggett, a Democrat from Texas who is quoted in the article and who serves on the House Ways and Means Committee, sums up the behaviour of many banks: “With the right hand out begging for bailout money,” he said, “the left is hiding it offshore.”
Ultimately, thanks to a 15 Trillion Dollar bailout by governments worldwide, paid for by current and future tax payers, a global financial meltdown was avoided and the global banking system, including Goldman Sachs, saved. The tax havens and offshore banking haven’t saved the global financial system. They do their best to corrupt and destroy it.

You can find a re-posted version of the article exposing Goldman Sachs here (Caution: the article contains some strong language):

Article originally published by:

Nobel Laureate Prof Stiglitz Explains What Went Wrong

Nobel Laureate Prof Joseph Stiglitz explains five key mistakes made over the past 20 years that led to the current financial crisis. His article ‘Capitalist Fools’  in the magazine Vanity Fair, January 2009, is essential background reading for anyone seeking to understand what went wrong.

Please read the article ‘Capitalist Fools’ by Prof Stiglitz:  (originally published in Vanity Fair).


Tax Havens Face Serious Investigation for the First Time

The centuries old profession of some states (and some British overseas territories) to make a living by providing a safe haven for financial pirates is coming under serious pressure. These tax havens have for too long provided an easy escape route for all those who do not like to pay taxes, but at the same time like to enjoy the services of their respective homelands which are payed for by their less fortunate and/or less reckless fellow citizens.
By some estimates up to 15 trillion US dollars are stashed away and hidden away in these centres of global financial corruption (an adequate description for tax havens).
A new BBC article reports that according to research of a British Labour Union (TUC), the four biggest British banks have set up more than 1000 subsidiary companies in tax havens to avoid tax for themselves and their clients. If these four banks have set up over 1000 subsidiaries in these centres of corruption, they have done so with the intent to make tax free profits, keeping some of their activities off their balance sheet and avoid taxes wherever they can. Such activities not only defraud the average tax payer in many countries, but often lead to a lack of transparency, supervision and governance. Such working in the shadows normally encourages excessive risk taking and undisclosed high bonuses. It also often facilitates dubious financial transactions with questionable financial partners.
We need an immediate end to this global shadow banking system.
Please read the following BBC article:
Banks warned over tax avoidance

Update 4 May 2009: Finally, Obama Makes a First Move on Tax Havens

Finally, President Obama makes a first move on tax havens. Let’s hope that such a move gradually exposes the massive tax avoidance and widespread fraud committed through the global shadow banking system (including hedge funds and offshore banks).

Read more on this in the following New York Times article:

It Is Time For Governments To Govern the Financial Sector

After another epidemic of exuberance (in this decade it was the subprime bubble ) infected wide parts of the financial world with disastrous results (disastrous at least for average middle class and working class citizens and  not necessarily for the  financial oligarchy) it is now high time for governments to bring a wild west financial sector back under government control. 

Strict financial regulation and a fair taxation must be enforceable globally and this needs to be done in a globally coordinated way, to keep a check on widespread creative (fraudulent) accounting and to close the loopholes which are exploited by a multitude of highly payed tax avoidance advisers (most often lawyers and accountants).

Attempts by a financial elite to block change because they want to preserve their privileged status quo should not be accepted. The endless party of those who have benefitted richly from their influence and power and now want to send the bill for their failed speculation to the tax payer needs to be stopped. Please find a clear argument for change in the following article from Simon Johnson, former Chief Economist of the IMF (2007-2008). He should know what he is talking about.

The Quiet Coup by Simon Johnson

Update 30 March 2009: President Obama explains the need for change in the financial sector  in his interview with the Financial Times (30 March 2009). He highlights, amongst other issues, the necessity to enforce a global regulatory system for tax havens and offshore banking. You can listen to the audio file of the interview here:

Who Has the Courage to Prosecute the Unlawful Mega-rich?

There is a lot of capital hidden away in tax havens and deposited in offshore banks. Where did this capital come from and who are the account holders? Are they really morally upright citizens, concerned for the welfare of their homelands, or have they exploited every possible legal loophole to escape weak regulatory systems and then to stash away their barely legal (sometimes illegal) monetary gains? Fortunately there are still some brave citizens with a conscience left who are not afraid to speak out. For example, we have to be thankful to Robert M. Morgenthau, District Attorney of New York, who wrote in a letter to the New York Times on 4 March 2008 (‘Havens for Tax Evasion’ published by the New York Times on 11 March 2008):

“Bank deposits in the Caymans have increased by $500 billion in the last 18 months and now amount to four times the total deposits in all the banks in New York City.

The Caymans, notorious for their bank secrecy laws and lack of supervision over financial markets, have figured in many major financial scandals. For example, they were the nominal home of Long Term Capital, the giant hedge fund that collapsed in 1998. Enron Corporation used 441 Cayman affiliates to hide $2.9 billion in losses. Parmalat Finanziaria used Cayman subsidiaries to falsely claim $4.9 billion in bank deposits that it did not have.

Last year, two Bear Stearns hedge funds that were incorporated in the Caymans collapsed, following the devaluation of its subprime mortgage-backed investments — the implosion cost investors $1.6 billion in losses.

The economically developed countries need to impose severe sanctions on the tax havens and those who use them to unfair advantage. As recent history confirms, totally unsupervised markets will eventually have serious problems, with ripple effects for markets worldwide.

And offshore tax evasion alone costs the United States government more than $70 billion annually. Left unchecked, these rogue jurisdictions have the potential to do a great deal of harm to the world’s truly productive economies.”

Morgenthau’s letter was published here:

I like to invite the readers of this blog to become active wherever they are, by sharing similar information online. This will help to expose a shadow banking system that can bankrupt whole societies for the benefit of a few extremely greedy individuals.


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