Robert J. Burrowes – 29 minute read: Tax havens are locations around the world where wealthy individuals, criminals and terrorists, as well as governments and government agencies (such as the CIA), banks, corporations, hedge funds, international organizations (such as the Vatican) and crime syndicates (such as the Mafia), can stash their money so that they can avoid regulation and oversight and, very often, evade tax. According to Nicholas Shaxson: ‘Tax havens are now at the heart of the global economy.’

Which is why, as he explains it: ‘The term “tax haven” is a bit of a misnomer, because such places aren’t just about tax. What they sell is escape: from the laws, rules and taxes of jurisdictions elsewhere, usually with secrecy as their prime offering.’ See ‘The tax haven in the heart of Britain’. A tax haven (or ‘secrecy jurisdiction’) then is a ‘place that seeks to attract business by offering politically stable facilities to help people or entities get around the rules, laws and regulations of jurisdictions elsewhere’. See Treasure Islands: Tax Havens and the Men Who Stole the World.

Tax havens are a vitally important part of the global infrastructure of corruption and criminality – see ‘Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption’ – that enables privileged individuals and their organizations to legally and illegally steal money from the rest of us, particularly those in developing countries, and to have the services of a vast network of accountants, bankers, lawyers and politicians (often from captured legislatures) to help them do it, and to ensure that they get away with it.

How many tax havens are there? Where are they? How much money do they have? Who uses them? Why? How do they work? Why does all this matter to us? And what can we do about them?

Tax Havens: how many and where are they?

In his book Treasure Islands: Tax Havens and the Men Who Stole the World, author and financial journalist Nicholas Shaxson identified about sixty ‘secrecy jurisdictions’ or ‘offshore groups’ around the world which he divided into four categories, as follows.

The most important category, by far, is those tax havens that form the spider’s network of havens centred on the City of London. It has three main layers: there are two inner rings – Britain’s Crown Dependencies of Jersey, Guernsey (which includes the sub-havens of Sark, Alderney and Brecqhou) and the Isle of Man, and its overseas territories such as the Cayman Islands, Bermuda, the British Virgin Islands and Gibralter – which are substantially controlled by Britain. The third layer is an outer ring with a more diverse array of havens, like Hong Kong, Singapore, the Bahamas, Dubai and Ireland, which are outside Britain’s direct control but have strong historical and current links to that country and the City of London (which I will discuss below). This network controls almost one half of all international bank assets.

The second category of tax havens is those in Europe notably including Switzerland, Luxembourg – see ‘Explore the Documents: Luxembourg Leaks Database’ –  the Netherlands, Belgium and Austria, as well as microstates such as Liechtenstein and Monaco. While ‘Geneva bankers had sheltered the secret money of European elites since at least the eighteenth century’, the European havens ‘got going’ during World War I as governments raised taxes sharply to pay for the war.

The third category of tax havens is that focused on the United States. It has three tiers as well. At the federal level, the US government offers a range of tax exemptions, secrecy provisions and laws designed to attract foreign money. This means, for example, that US banks can legally accept proceeds from a range of crimes as long as the crimes are committed overseas. The second tier involves individual US states such as Florida (where Central/South American elites do their banking and the countries adversely impacted are prevented by US secrecy provisions from accessing relevant data, and where much Mob and drugs money is hidden too), Delaware, Nevada and Wyoming, where even terrorist money is protected by secrecy provisions. The third tier of the US network is the overseas satellites such as the American Virgin Islands, the Marshall Islands, Liberia and Panama, with the latter, according to Jeffrey Robinson, being ‘one of the filthiest money laundering sinks in the world’. See The Sink: Terror, Crime and Dirty Money in the Offshore World.

As Shaxson notes: ‘offshore finance has quietly been at the heart of Neoconservative schemes to project US power around the globe for years. Few people have noticed.’

The fourth category of tax havens identified by Shaxson includes those that do not fit in the categories above, such as Somalia and Uganda.

The (incomplete) list of tax havens on the website ‘Tax Havens of the World’ will give you some idea of where these secrecy jurisdictions are located but there are important omissions in this list, notably including the City of London Corporation.

For a brief look at 15 tax havens (again, notably excluding some of the most important) and some of the corporations that use them, see ‘What Are the World’s Best Tax Havens?’

And for a highly instructive and utterly sobering video documentary on British Tax Havens, see ‘The Spider’s Web: Britain’s Second Empire’. This documentary will inform you, among many more important things, that the building housing Her Majesty’s Revenue and Customs, the UK tax office, is owned by an offshore company in Bermuda!

To summarize the central aspect of the development of tax havens following World War II: ‘The British Establishment – an old boys network of privileged elites – had carved out a lucrative vehicle for themselves in the offshore world after the demise of Empire. They transformed themselves from administrators of Empire to financial handlers for the global elite and multinational corporations.’ See ‘The Spider’s Web: Britain’s Second Empire’.

Before concluding this section, it is worth emphasizing that, as Shaxson explains it, ‘the offshore world is not a bunch of independent states exercising their sovereign rights to set their laws and tax systems as they see fit. It is a set of networks of influence controlled by the world’s major powers, notably Britain and the United States. Each network is deeply interconnected with the others.’ He goes on: ‘The world’s most important tax havens are not exotic palm-fringed islands, as many people suppose, but some of the world’s most powerful countries.’ Shaxson quotes Marshall Langer, a prominent supporter of secrecy jurisdictions: ‘It does not surprise anyone when I tell them that the most important tax haven in the world is an island. They are surprised,  however, when I tell them that … the island is Manhattan. Moreover, the second most-important tax haven … is located on an island. It is called the City of London.’

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