Global Policy Forum

Offshore financial centers provide secret havens for money laundering and tax evasion. In this GPF policy paper, Jason Garred pierces the veil of these mysterious places, showing how they provide services for corporations and wealthy individuals, enabling escape from onshore tax and regulatory authorities. Garred shows that offshore centers exists with the complicity of major money-center governments and banks. They assist criminal activities, pose serious problems of international financial stability and undermine long-established tax and social welfare systems. (Global Policy Forum)

Hong Kong is New Target of US Crackdown on Taxes (November 13, 2009)

Secrecy Hit, Swiss Banks Are Losing Europeans (October 30, 2009)

Christian Aid Unveils List of Most Selective Tax Havens (November 1, 2009)

Christian Aid and Tax Justice Network have compiled a global Financial Transparency Index.  The most secretive tax havens are the US, Luxembourg, Switzerland, the Cayman Islands and the UK, a result which dispels the stereotype of tax havens as consisting mainly of palm fringe islands.  The researchers singled out the UK in particular, as half of the world's secrecy jurisdictions are in the commonwealth countries, Crown dependencies and British Overseas Territories.  (Christian Today)

The Offensive Secrecy of Tax Havens (September 23, 2009)

Christian Aid estimates that the world's poorest countries lose $160 billion dollars every year due to tax havens.  Yet laws targeting these offshore centers have only been helpful to rich states, as only they have the necessary leverage to force compliance. (Guardian)

US Wealthy Opt to Surrender Their Citizenship (August 17, 2009)

Today, offshore tax havens have to comply with transparency rules, so a growing number of wealthy US citizens are handing in their passports. Under US tax law, the worldwide income of any US citizen or resident is subject to tax. The offshore centers have been a safe haven for the wealthy Americans trying to escape taxes, but now that’s about to change. When giving up their citizenship, the US citizens expect to buy a passport elsewhere, where the tax rate is low.(Wealth Bulletin)

 

IRS Steps Up Scrutiny of Offshore Funds (July 26,2009)

Hedge fund assets in offshore tax havens such as the Cayman Islands and Bermuda represent more than two thirds of the roughly $ 1.3 trillion industry.  The Internal Revenue Service is demanding that hedge funds and private equity investors disclose hundreds of billions of dollars they have invested offshore. Investors keep funds offshore for a variety of reasons including tax evasion. It's clear that new disclosure requirements will lead to additional taxation of these hidden funds.( The Wall Street Journal)

Off shore tax havens are infamous for money laundering, secrecy and criminal activities of many kinds. A new report reveals the scale of illegal money flows to these havens from developing countries. Such transfers reduce tax revenues and hinder economic growth. The report argues that nations should strengthen international tax regimes to bring an end to these damaging effects.

The Obama administration's plan to crack down on US tax evasion not only targets corporations but also powerful lobbies that helped draft the legislation which made it easier for big businesses to evade taxation. Groups including the Business Roundtable, the US Chamber of Commerce, and the National Association of Manufacturers, formed a lobbying coalition called Protect America's Competitive Edge. This lobby aims to defeat the President's tax proposals, and openly threatens the government with outsourcing jobs if such legislation is enacted. Earlier, business lobbyists successfully ruined an important housing bill that could have "prevented 20 percent of foreclosures, at no cost to taxpayers." (Huffington Post)

With the financial crisis and the bailout of banks, tax payers have realized that tax havens are a major cause of financial disruption. The Organization for Economic Co-operation and Development (OECD) has threatened countries with blacklisting unless they agree with its standards. Nevertheless, the agreement is not binding until a country signs a tax information sharing agreement (TIEA) which incorporates the OECD principles into domestic law. Nonetheless, account holders can either pay a withholding tax that allows them to remain anonymous or shift their account to countries, such as Panama and Samoa, which have not agreed to share any information with foreign authorities.(Times Online)

The OECD has released its report on countries that agreed on tax standards. The OECD blacklisted Costa Rica, Malaysia, the Philippines and Uruguay as uncooperative tax havens as they had refused to adopt new rules on financial openness. In addition, 39 jurisdictions have committed to the internationally agreed tax standard (some since 2000), but have not yet substantially implement those standards.

The corruption perception index ranks Switzerland and the UK among the least corrupt nations in the world. Unfortunately, it does not show that the UK hosts one quarter of the tax havens and that Swiss bank secrecy policy prevents the tracking of laundering money. Developing countries, mainly in Africa, are deemed the worlds most corrupt countries. But the index only examines the 3 to 5 percent of total outflow emanating from the African political elite and fails to monitor the 60 percent of capital outflow that multinational corporations declare as profits in tax havens, instead of declaring this money as profit in the country where they make it. (Thought Leader)

The OECD reported that multinational corporations have hidden some 5 to 7 trillion dollars offshore to avoid being taxed by their respective government. In order to discourage corporations from using those financial centers, a leaked French working paper proposed that G20 members punish “uncooperative� countries by breaking off state-to-state tax conventions and by reporting accounts of customers located in tax havens. Concerns remain about the US which promised to endorse the Stop Tax Haven Abuse Act, but did not provide any details on key issues. Another ambiguous country is the UK with about a third of the world's tax havens being British dependences. (Inter Press Service)

The OECD threat to blacklist tax havens has pushed Switzerland, Austria, Luxembourg, Liechtenstein and Andorra to review their rules on identity secrecy. Although tax havens are not a direct cause of the financial crisis, they deprive countries from revenues needed of domestic investment and economic stimulus. The OECD estimates that tax havens hold assets between USD$1.7 and USD$11.5 trillion. An Oxfam study reveals that tax evasion also affects developing countries whose citizens hold more than USD$6.2 trillion abroad and whose governments are facing capital evasion amounting to USD$300 billion a year. (Reuters)

This Guardian articles examines the secrecy surrounding the legal tax avoidance maneuvers of the largest UK companies. Think-tanks have estimated that the Exchequer will lose between £8.5bn and £12bn in taxes for the 2008 fiscal year. The majority of FTSE 100 companies registered their brand in virtually tax-free countries so as to be liable to their tax regulation and pay a little more than 2% of [their] overall profits. The National Audit Office points out that in 2006 more than 60% of Britain's 700 biggest companies paid less than £10m corporation tax, and 30% paid nothing.

The Washington Post reports that eighty three of the biggest one hundred corporations in US operate multiple subsidiaries in offshore tax havens that allow them to evade their US tax bills. The Government Accountability Office report lists bail-out beneficiaries such as AIG, Bank of America, Citigroup, Morgan Stanley, and Goldman Sachs. Their fiscal operations are legal but unethical, given the economic crisis. The Treasury estimates that offshore tax havens cost the US government at least USD$100 billion annually in lost tax revenue.

In December 2008,the United States Government Accountability Office released a report revealing that many bailed-out firms have tax havens. (GAO)

The EU has decided to extend its tax havens directive which impedes individuals from opening bank accounts abroad to avoid interest taxes to include legal entities. Only Luxemburg disagreed, claiming that it sees "no loopholes in the current rules." But every year, EU countries are loosing billions of euros through tax evasion. It took fourteen years of negotiations to implement the current rules and some fear that making amendments will also be a slow process. (International Herald Tribune)

The European Union wants to tackle tax havens by strengthening the 2005 savings tax directive. Skeptics say closing down these tax havens will not stop tax evaders from placing their money outside of Europe. Some estimate that tax havens around the world hold between $7 and $12 trillion. If this money was taxed, it would yield enough revenue to pay for many of the UN's Millennium Development Goals,the author states. Tax havens are the ideal means for criminals to launder money obtained by illegal practices such as drug trade and terrorism. (Independent)

A Journey From Haven to Hell March 2, 2008

Liechtenstein, one of Europe's most secretive tax havens, shelters £ 130b of other people's money.  Heinrich Kiebel, employee of lucrative private bank LGT, sold to the German Authorities a  CD-ROM containing the names of over 1,250 clients. European states are trying to crack down on tax havens such as Liechtenstein, where tax evasion is not a crime but merely an administrative issue. (Observer)

In the 1970s and 80s, politicians in the island of Jersey turned the British Chanel territory into a center for offshore financial services. The financial services industry created impressive economic growth for the last three decades. But the dark sides of this growth are now starting to show. Locals live in poverty and tourism is decreasing. (Tax Justice Network)

The island of Jersey, located in the English Channel, has long been an offshore hedge fund haven, with funds totaling US$ 81 billion. But from January 2008 officials will introduce a "zero-regulation regime" on the island, removing all restrictions on financial transactions. According to the director at Jersey Finance, a legislative institution, demands from the hedge fund community directly resulted in the new deregulation. Offshore havens, which reached a total of US $1.17 trillion in July 2006, could see competition for deregulation result in widespread fraud, financial crises and monopolies. (Wall Street Journal)

Responding to pressure from the Norwegian government, the World Bank has agreed to publish a report on offshore financial centers as part of the Bank's anti-corruption work. Preceding the World Bank decision, the Tax Justice Network and other NGOs had actively campaigned Norway and other members of the "Leading Group on Solidarity Levies to Fund Development" to address the problem of tax evasion and offshore centers. The NGOs pointed out that every year, countries loose "hundreds of billions of dollars" through tax evasion and rich countries bear "at least as much [of] the responsibility" as poor countries do.

The Bank of International Settlements, the International Monetary Fund and the Organization for Economic Cooperation and Development estimate that a total of US$5-7 trillion is held offshore. This Globalist article warns of the threat that tax evasion has on sovereign governments and argues that offshore tax evasion has broader implications to the lost profits of the tax evaded.

This Inter Press Service article highlights the increasingly common practice by high technology and pharmaceutical industries of registering patents and licenses in tax havens to avoid paying high taxes while conducting the majority of their operations in other countries. The author states that countries are beginning to pursue corporations that engage in these practices, but governments such as the US have failed to adopt "tough measures to combat such royalty-shifting."

This Christian Aid report examines the scale, nature and problems of illicit capital flows. Capital flight reduce the funds available for health and other public services in several countries. Further, tax havens and tax evasions erode the rule of law and encourage corruption. The report estimates that every year international investors move US$500 billion from developing countries. In comparison, global aid flows amount to roughly US$100 billion per year.

Tax Justice Network reviews the scale and extent of the problem of tax havens. This report assesses the damage caused by lost taxation revenues and criticizes governments for not taking appropriate steps to prevent such abuse. The report concludes that the amount diverted would be sufficient to finance the UN Millennium Development Goals.

This Wall Street Journal article calls attention to offshore tax-dodging US citizens. The article discusses the case of the Wyly brothers, who have parked large sums in trusts on the Isle of Man, a British tax haven in the English Channel. Lawmakers and US prosecutors see the base as an example of how rich individuals evade taxes and break securities laws through the use of offshore shell companies and compliant "trustees."

The borderless world of international banking has facilitated Singapore's rise as an offshore tax haven for the world's rich. In response to pressure from the European Union, Switzerland, a longtime center of offshore assets, has agreed to stiffen laws against tax evasion. As a result, many banks have relocated their operations to Singapore, which has passed laws to strengthen account secrecy and attract foreign depositors, enabling the world's richest citizens to continue evading taxes. (Wall Street Journal)

Tax revenue is an important source of government funding for basic services like health and education. Yet competition over foreign investment, trade liberalization, and the establishment of off-shore tax havens have eroded the ability of states to perform these functions, contributing to their impoverishment and weakness. Along with aid and debt cancellation, Christian Aid argues, better tax strategies provide an effective way of alleviating poverty.

Research by the Tax Justice Network suggests that "approximately US$11.5 trillion" in assets are held offshore by "high net-worth individuals." Furthermore, the taxes not paid as a result of these funds being held offshore "might exceed US$255 billion each year."

The Inspector General of Justice for Buenos Aires has banned offshore shell companies from doing business in Argentina's capital, in "a step that is the first of its kind, anywhere in the world." Shell companies, sometimes called "International Business Companies" or "mailbox" companies, conduct their business from the safety of tax havens where their beneficiaries can remain anonymous. In a country with a "huge history of tax evasion," the Buenos Aires ban helps prevent tax fraud and money laundering by not allowing owners of assets to hide their true identities by going offshore. (CorpWatch)

This article provides a list of countries labeled as tax havens by the Organization for Economic Co-Operation and Development (OECD), the International Monetary Fund (IMF), taxresearch.org and the US Stop Tax Havens Abuse Act. The OECD marked Andorra, Liechtenstein and Monaco as ncooperative because they lack tax transparency. Many of the off-shore tax havens are small countries and dependent territories of the UK, the US, New Zealand and the Netherlands. (Reuters)