The Economist goes offshore
The Economist carried a survey of Offshore Financial Centres (OFCs) in its 24th February edition whose leader was subtitled: ‘Tax Havens are an unavoidable part of globalisation and, ultimately, a healthy one.’ And yet the evidence presented in the supplement fails to support this conclusion, always finding negatives to counterbalance any claimed benefits, and failing to engage with the evidence. The survey appears to be, in part, a response to the Stop Tax Haven Abuse Act introduced by three American senators, including Barack Obama, the Democratic Party presidential candidate, and Senator Carl Levin, who states, rightly, that OFCs have “declared economic war on honest US taxpayers.” The Tax Justice Network agrees with Obama and Levin, and strongly objects to the survey, which contains a very large number of broad and specific errors of fact, of interpretation, and of omission.
It is quite astonishing that the word 'corruption' occurs only once in this 13,000-word survey of tax havens. Tax haven activities promote cross-border crime and corruption. Corruption has a demand side (money-launderers, tax evaders, kleptocrats, fraudsters, and their like); and a supply side: those who provide secrecy and sell the services that exploit it. The general strategy for fighting drug abuse by tackling both users and suppliers is equally applicable to the global struggle against corruption. While The Economist survey stops short of actively encouraging criminal activity, it does so indirectly, by actively advocating tax haven activities. In doing this, The Economist is indirectly encouraging cross-border crime, and corruption on a global scale.
By focusing on examples of tax haven behaviour in isolation, The Economist almost entirely misses the systemic global aspect of tax haven activities, which, as it partially recognises, are especially harmful to poor countries. In addition to this, it almost entirely ignores Africa, and poverty in the developing world. It defends tax competition between countries, which directly threatens democracy everywhere, and which is especially harmful to poor countries. Tax evasion (which illegal) and tax avoidance (which is not) provide companies with advantages over their competitors that have nothing to do with the quality or price of their goods and services. These activities taint, distort and undermine markets, and yet The Economist treats these problems as if they were minor inconveniences. They are not.
Several things in the supplement are just wrong. For example, The Economist asserts that Jersey’s maximum rate of income tax of 20 per cent had remained untouched since 1940, but doesn’t mention that from the 1960s onwards lower rates and exemptions were introduced to attract footloose capital seeking to pay minimal or no tax whatsoever. Furthermore, the claim that Jersey regulates its trusts is quite simply false. The trust administrators are regulated, but that’s different. No one has any idea how many trusts there are in Jersey. As another example, a ‘tutorial’ on the bases of taxation of companies is plain wrong: it takes no account of ‘controlled foreign company’ legislation, for a start. The list could go on, and on.
Sadly, these errors, omissions and distortions by The Economist cannot be a result of simple oversight or lack of knowledge. Their journalist consulted TJN’s John Christensen at great length, and chose to ignore almost all the issues that he raised, and failed to address convincingly any of the questions he put to The Economist. TJN is quoted twice in this survey, and dismissed, with a sneer, on both occasions.
The Economist says promoters of tax havens are expanding their activities: “Where once they advertised only in airline magazines handed out in first-class cabins, they have now embraced business class and, on some airlines, even economy class.” The survey omitted to mention that no less than eight promoters of tax haven activities (including five rather seedy ones on page 104) were advertising their wares in that very issue.
IN MORE DEPTH
The survey all but ignores poor countries. For example, it makes 20 mentions of Cayman (population: 45,000) but the word Africa (population: 750 million) is only mentioned twice: once in the context of the roaming habits of the Jersey cow, and the second mention referring to estimates that South Africa is losing $8.8bn a year – which is equivalent to nearly 15% of all government revenue last year – to tax havens. But then it fails to follow this up.
Oxfam’s report on Releasing the Hidden Billions for Development was mentioned but no serious attempt made to explain its key findings let alone analyse them from an economic perspective. TJN’s more recent reports, including Tax us if you can and Closing the Floodgates did not even get a mention (we’re not offended, honest) but once again no attempt was made by The Economist to engage on the arguments we present. Is this bad reporting, evidence of an ideological bias, or just one more nail in the coffin of objective journalism arising from the fact that such surveys are largely financed by advertising revenue from the finance industry itself? The latter is, of course, a form of corruption.
The Economist quotes TJN as estimating that global tax revenues lost to OFCs exceed $255 billion a year, then adds that “not everybody believes it.” This figure has been in the public domain for two years now, but neither The Economist, nor anyone else, has successfully demonstrated that it is wrong – or even seriously tried to do so. The figure is almost certainly a gross underestimate. The source of this figure - The Price of Offshore - is openly available so judge for yourself. What is more, this figure only refers to the assets held offshore by private individuals; it does not include tax losses arising from tax competition, or from corporate tax abuses (The Economist knew this, but did not include this inconvenient point.) We openly challenge The Economist to use its massive research facility at the Economist Intelligence Unit to prepare their own estimate, and to put pressure on the World Bank to do the same. The lack of research into the activities of tax havens is truly astonishing, and this is reflected in the survey, which had no new facts to support its argument that tax havens are good for the global financial system. This argument flies in the face of economic theory about market transparency (secrecy being a defining feature of tax havens) but let’s not get too hung up with economic theory when there’s advertising revenue at stake!
A very strong theme running throughout this survey is the assertion – presented in a nuanced way – that tax havens, once dirty, have now cleaned up. (“Today's successful tax havens thrive not because of crookery, but because they are well run and well regulated. . . “a regulator in Europe comments: ‘Tax havens have to be whiter than white. It is the only way to shake off their bad reputation—which some of them deserved not too long ago.’ . . . many successful offshore jurisdictions keep on the right side of the law, and many of the world's richest people and its biggest and most reputable companies use them quite legally to minimise their tax liability. . . some jurisdictions still ply [a] trade [as passive depositories of the cash of large companies, rich individuals and rogues]today and should be put out of business. But the best of them for example, Jersey and Bermuda, have become sophisticated, well-run financial centres in their own right.” This is ridiculous. Jersey, to quote just one example, promotes facilities for tax evasion – which is a crime – through its new trust laws. That’s what these places, even the ‘best’ of them, are all about. It might help Economist readers to refresh their memories that the client bases of the Channel Island subsidiaries of four UK banks are currently under investigation by Her Majesty’s Revenue & Customs for tax evasion (whoops!), and those who actually believe in real, functional markets might like to ponder the merits of major supermarket chains using the Channel Islands as a base for avoiding VAT on low-volume packages which are shipped out to the islands and posted back into the European Union purely to exploit a tax concession. A sign of healthy markets, or evidence of market distortions which disadvantage small retailers and undermine the principle of free markets? Again, The Economist is strangely silent on this issue.
The survey argues that tax havens make tax havens wealthy (and make nearby economies wealthy too,) and concludes that tax havens must therefore be a good thing. This is the wrong conclusion, for several reasons. Most profoundly, it ignores the systemic issue. Study isolated groups of countries, such as France, Luxembourg and Switzerland, and it might be possible to reach a conclusion favourable to tax havens. Study France, Luxembourg, Switzerland and Africa, however, and one will reach exactly the opposite conclusion. The Economist’s argument is analogous to an argument that presents the evidence of private jets, yachts and palaces owned by a rich dictator and his cronies and their families, and uses that evidence to argue that corruption must therefore be a good thing.
Yet there is much more to this, for tax havens harm citizens in the rich world too – even in tax havens. The high average wealth rates in Jersey and Cayman, for example, hide shocking disparities even in these super-wealthy parts, with high housing costs being a particular cause of material deprivation for many households in Jersey [as the Financial Times reported in its article ‘Residents bear brunt as island fights competition’ 28th February 2007]. The City of London has had similarly distorting and damaging effects, with a rapidly growing divide between rich and poor. Yet the City itself is not the only problem for Britain: international tax haven activities allow a wealthy élite to avoid their obligations to society, leaving poorer segments of society to shoulder the burden of taxes. The big risk is that “globalisation is perceived to be rigged against the average citizen,” The Economist quotes a former U.S. Treasury official as saying. The official is dead right, but the survey fails to face up to this deeply troubling problem – which goes right to the heart of the modern debates about poverty, corruption and globalisation.
In justifying tax haven activities, The Economist argues that one of the most pressing reasons not to tackle the issues is that it is difficult (“Even if today's OFCs were somehow stamped out, something like them would pop up to take their place,”’ . . . tracking down tax cheats . . . is a Sisyphean task”). TJN would argue that this argument – which is a bit like arguing against tackling drug trafficking because it is too hard – is precisely why it’s important for bigger international efforts to tackle the problem, and why The Economist’s survey is so very irresponsible.
The Economist muddies the issue of what constitutes a tax haven. Broadly, the survey uses a definition of an OFC as “a smaller jurisdiction where the lion's share of the institutions are controlled by non-residents . . . the volume of business conducted by these financial institutions often far outstrips the needs of the local economy.” While noting, correctly, that many larger centres such as the City of London exhibit tax haven characteristics, the survey broadly focuses on the smaller centres. In some cases, its analysis in this respect verges on the ridiculous. (“Luxembourg is sometimes lumped with tax havens … some people consider Switzerland as a tax haven”) These are two of the dirtiest tax havens in the world. This goes right to the heart of the matter: these places, along with the United States and the City of London, are super-tax havens that spread harm all around the global financial system. To cite an example of the harm that such places help cause: a recent study of Sub-Saharan African countries estimated that the region is a net creditor to the rest of the world in the sense that its external assets (i.e. including the stock of flight capital) exceeds external liabilities (i.e. external debt). Africa’s chronic poverty that afflicts the region arises, to a large degree, from the fact that the assets are largely in private hands, whilst the liabilities have been assigned to the African public. A very large share of these assets are held in these four countries. It is time to urgently re-appraise Transparency International’s Corruption Perceptions’ Index, which wrongly ranks these countries, which accept dirty money flows from around the world, as among the world’s cleanest. They should be ranked, instead, as among the world’s most corrupt.
The survey quotes John Christensen as saying that tax competition distorts markets, then says “many economists and businessmen disagree with Mr Christensen”. It fails to cite a single economist to back this assertion, but segues instead to a quote from Jacques de Saussure, a Swiss private banker, saying that “tax competition is the only agent of productivity for governments—it is the only competition they have.” Perhaps Mr. de Saussure has not heard of a quaint, old-fashioned concept called democracy. It should be voters that discipline bad governments: it is entirely wrong that tax havens, which are enticements to international crime, should trump what voters want. Tax competition is a classic example of the “Tragedy of the Commons” where narrow, sectional interests abuse the wider public interest. Corruption is a result of exactly the same dynamic. Or, to use another example, promoting tax competition is a bit like advocating competition on environmental standards in a race to the bottom. (Read more about tax competition on this short blog entry and, in more depth, in a special section on TJN's web site.)
The world’s rich countries have established several initiatives, such as the OECD’s initiatives on “harmful tax competition” to tackle certain aspects of this problem. These are, without exception, rich-country initiatives, aiming primarily to solve the problems of rich countries. There has been almost no co-ordinated effort by poor countries to tackles the corrupting and abusive systems promoted and encouraged by The Economist. One of the most glaring gaps in this debate is the lack of any real engagement on these issues by global civil society organisations. A big part of the problem is that the issues are so complex and difficult. That is no excuse. The Tax Justice Network exists to start to try and fill that gap, and it calls on all those people and organisations who are worried about poverty in rich and in poor nations to begin to grapple with this growing problem.
Here is the text of an unpublished letter sent to The Economist :
28th February 2007
The Editor
The Economist
25 St James's Street
London SW1A 1HG
Sir,
Tax haven activities, as you say, make some who live in tax havens wealthy ("A place in the sun," February 24th). They may even boost economic activity in nearby economies. This misses the systemic problem. Study France and Luxembourg, and your conclusion may favour tax havens. Study France, Luxembourg and Africa together, though, and you will conclude the opposite. Tax competition is a classic case of the ‘Tragedy of the Commons.’
You quote a private banker saying that tax competition is the only tax discipline governments have. What about democracy? It is the prerogative of voters, not bankers, to boot bad governments out. You add that "not everybody believes" that $255 billion in global tax revenues is lost to OFCs annually, but no-one has disproved this. It is almost certainly an under-estimate.
All tax havens harm efforts to promote transparency of ownership. This promotes cross-border crime and corruption, which taints, distorts and undermines markets. Corruption has a demand side (money-launderers, tax evaders, kleptocrats, fraudsters, and their like); and a supply side: those who provide secrecy and sell the services that exploit it. The general strategy for fighting drug abuse by tackling both users and suppliers is equally applicable to the global struggle against corruption.
Your survey is an apology for a trade in secrecy that cannot be justified. So important is this issue that we will supply a full response to your report on http://www.taxjustice.net/
Yours sincerely,
Charles Abugré, Head of Policy, Christian Aid, UK
Raymond Baker, Director, Global Financial Integrity
Raphael Calvelli, civil servant, Italy
John Christensen, Director, Tax Justice Network International Secretariat
Alex Cobham, Oxford Council on Good Governance
Rudy de Meyer, Head of Policy, 11.11.11, Belgium
Tuur Elzinga, Attac Netherlands
Raymond Favreau, Attac Quebec
François Gobbe, Kairos-Europa, Belgium
Eric Goeman, Attac Vlaanderen
Maciej Grabowski, Gdansk Institute for Market Economics
Bruno Gurtner, senior economist, AllianceSud, Switzerland
Gavin Hayman, Campaigns Director, Global Witness
James Henry, investigative journalist
Jean-Claude Huot, Berne Declaration, Switzerland
Richard Jenkins, Cymru Europa Press, Cynefin y werin
Sheila Killian, Kemmy Business School, University of Limerick
Matti Kohonen, London School of Economics
Lucy Komisar, Co-Chair, Tax Justice Network-USA
Roman Kuenzle, Attac Switzerland
Pat Lucas, Attac Jersey
Andreas Missbach, Berne Declaration, Switzerland
Professor Mick Moore, Institute of Development Studies, UK
Alvin Mosioma, Tax Justice Network for Africa, Kenya
Richard Murphy, Director, Tax Research LLP, UK
Marcelo Ramos Oliviera, Brazil
Tommaso Rondinella, Sbilanciamoci! Campaign, Italy
Professor Ronen Palan, University of Sussex
Aaron Schneider, Fellow, Institute of Development Studies, UK
Nicholas Shaxson, Associate Fellow, Chatham House
Professor Prem Sikka, University of Essex, UK
David Spencer, tax attorney, New York, USA
Chris Steel, Tax Justice Network-Jersey
Anna Thomas, Christian Aid
Catherine Vieilledent, Gauche Europeénne-MEU
Carol Wilcox, UK
David Woodward, New Economics Foundation, UK
It is quite astonishing that the word 'corruption' occurs only once in this 13,000-word survey of tax havens. Tax haven activities promote cross-border crime and corruption. Corruption has a demand side (money-launderers, tax evaders, kleptocrats, fraudsters, and their like); and a supply side: those who provide secrecy and sell the services that exploit it. The general strategy for fighting drug abuse by tackling both users and suppliers is equally applicable to the global struggle against corruption. While The Economist survey stops short of actively encouraging criminal activity, it does so indirectly, by actively advocating tax haven activities. In doing this, The Economist is indirectly encouraging cross-border crime, and corruption on a global scale.
By focusing on examples of tax haven behaviour in isolation, The Economist almost entirely misses the systemic global aspect of tax haven activities, which, as it partially recognises, are especially harmful to poor countries. In addition to this, it almost entirely ignores Africa, and poverty in the developing world. It defends tax competition between countries, which directly threatens democracy everywhere, and which is especially harmful to poor countries. Tax evasion (which illegal) and tax avoidance (which is not) provide companies with advantages over their competitors that have nothing to do with the quality or price of their goods and services. These activities taint, distort and undermine markets, and yet The Economist treats these problems as if they were minor inconveniences. They are not.
Several things in the supplement are just wrong. For example, The Economist asserts that Jersey’s maximum rate of income tax of 20 per cent had remained untouched since 1940, but doesn’t mention that from the 1960s onwards lower rates and exemptions were introduced to attract footloose capital seeking to pay minimal or no tax whatsoever. Furthermore, the claim that Jersey regulates its trusts is quite simply false. The trust administrators are regulated, but that’s different. No one has any idea how many trusts there are in Jersey. As another example, a ‘tutorial’ on the bases of taxation of companies is plain wrong: it takes no account of ‘controlled foreign company’ legislation, for a start. The list could go on, and on.
Sadly, these errors, omissions and distortions by The Economist cannot be a result of simple oversight or lack of knowledge. Their journalist consulted TJN’s John Christensen at great length, and chose to ignore almost all the issues that he raised, and failed to address convincingly any of the questions he put to The Economist. TJN is quoted twice in this survey, and dismissed, with a sneer, on both occasions.
The Economist says promoters of tax havens are expanding their activities: “Where once they advertised only in airline magazines handed out in first-class cabins, they have now embraced business class and, on some airlines, even economy class.” The survey omitted to mention that no less than eight promoters of tax haven activities (including five rather seedy ones on page 104) were advertising their wares in that very issue.
IN MORE DEPTH
The survey all but ignores poor countries. For example, it makes 20 mentions of Cayman (population: 45,000) but the word Africa (population: 750 million) is only mentioned twice: once in the context of the roaming habits of the Jersey cow, and the second mention referring to estimates that South Africa is losing $8.8bn a year – which is equivalent to nearly 15% of all government revenue last year – to tax havens. But then it fails to follow this up.
Oxfam’s report on Releasing the Hidden Billions for Development was mentioned but no serious attempt made to explain its key findings let alone analyse them from an economic perspective. TJN’s more recent reports, including Tax us if you can and Closing the Floodgates did not even get a mention (we’re not offended, honest) but once again no attempt was made by The Economist to engage on the arguments we present. Is this bad reporting, evidence of an ideological bias, or just one more nail in the coffin of objective journalism arising from the fact that such surveys are largely financed by advertising revenue from the finance industry itself? The latter is, of course, a form of corruption.
The Economist quotes TJN as estimating that global tax revenues lost to OFCs exceed $255 billion a year, then adds that “not everybody believes it.” This figure has been in the public domain for two years now, but neither The Economist, nor anyone else, has successfully demonstrated that it is wrong – or even seriously tried to do so. The figure is almost certainly a gross underestimate. The source of this figure - The Price of Offshore - is openly available so judge for yourself. What is more, this figure only refers to the assets held offshore by private individuals; it does not include tax losses arising from tax competition, or from corporate tax abuses (The Economist knew this, but did not include this inconvenient point.) We openly challenge The Economist to use its massive research facility at the Economist Intelligence Unit to prepare their own estimate, and to put pressure on the World Bank to do the same. The lack of research into the activities of tax havens is truly astonishing, and this is reflected in the survey, which had no new facts to support its argument that tax havens are good for the global financial system. This argument flies in the face of economic theory about market transparency (secrecy being a defining feature of tax havens) but let’s not get too hung up with economic theory when there’s advertising revenue at stake!
A very strong theme running throughout this survey is the assertion – presented in a nuanced way – that tax havens, once dirty, have now cleaned up. (“Today's successful tax havens thrive not because of crookery, but because they are well run and well regulated. . . “a regulator in Europe comments: ‘Tax havens have to be whiter than white. It is the only way to shake off their bad reputation—which some of them deserved not too long ago.’ . . . many successful offshore jurisdictions keep on the right side of the law, and many of the world's richest people and its biggest and most reputable companies use them quite legally to minimise their tax liability. . . some jurisdictions still ply [a] trade [as passive depositories of the cash of large companies, rich individuals and rogues]today and should be put out of business. But the best of them for example, Jersey and Bermuda, have become sophisticated, well-run financial centres in their own right.” This is ridiculous. Jersey, to quote just one example, promotes facilities for tax evasion – which is a crime – through its new trust laws. That’s what these places, even the ‘best’ of them, are all about. It might help Economist readers to refresh their memories that the client bases of the Channel Island subsidiaries of four UK banks are currently under investigation by Her Majesty’s Revenue & Customs for tax evasion (whoops!), and those who actually believe in real, functional markets might like to ponder the merits of major supermarket chains using the Channel Islands as a base for avoiding VAT on low-volume packages which are shipped out to the islands and posted back into the European Union purely to exploit a tax concession. A sign of healthy markets, or evidence of market distortions which disadvantage small retailers and undermine the principle of free markets? Again, The Economist is strangely silent on this issue.
The survey argues that tax havens make tax havens wealthy (and make nearby economies wealthy too,) and concludes that tax havens must therefore be a good thing. This is the wrong conclusion, for several reasons. Most profoundly, it ignores the systemic issue. Study isolated groups of countries, such as France, Luxembourg and Switzerland, and it might be possible to reach a conclusion favourable to tax havens. Study France, Luxembourg, Switzerland and Africa, however, and one will reach exactly the opposite conclusion. The Economist’s argument is analogous to an argument that presents the evidence of private jets, yachts and palaces owned by a rich dictator and his cronies and their families, and uses that evidence to argue that corruption must therefore be a good thing.
Yet there is much more to this, for tax havens harm citizens in the rich world too – even in tax havens. The high average wealth rates in Jersey and Cayman, for example, hide shocking disparities even in these super-wealthy parts, with high housing costs being a particular cause of material deprivation for many households in Jersey [as the Financial Times reported in its article ‘Residents bear brunt as island fights competition’ 28th February 2007]. The City of London has had similarly distorting and damaging effects, with a rapidly growing divide between rich and poor. Yet the City itself is not the only problem for Britain: international tax haven activities allow a wealthy élite to avoid their obligations to society, leaving poorer segments of society to shoulder the burden of taxes. The big risk is that “globalisation is perceived to be rigged against the average citizen,” The Economist quotes a former U.S. Treasury official as saying. The official is dead right, but the survey fails to face up to this deeply troubling problem – which goes right to the heart of the modern debates about poverty, corruption and globalisation.
In justifying tax haven activities, The Economist argues that one of the most pressing reasons not to tackle the issues is that it is difficult (“Even if today's OFCs were somehow stamped out, something like them would pop up to take their place,”’ . . . tracking down tax cheats . . . is a Sisyphean task”). TJN would argue that this argument – which is a bit like arguing against tackling drug trafficking because it is too hard – is precisely why it’s important for bigger international efforts to tackle the problem, and why The Economist’s survey is so very irresponsible.
The Economist muddies the issue of what constitutes a tax haven. Broadly, the survey uses a definition of an OFC as “a smaller jurisdiction where the lion's share of the institutions are controlled by non-residents . . . the volume of business conducted by these financial institutions often far outstrips the needs of the local economy.” While noting, correctly, that many larger centres such as the City of London exhibit tax haven characteristics, the survey broadly focuses on the smaller centres. In some cases, its analysis in this respect verges on the ridiculous. (“Luxembourg is sometimes lumped with tax havens … some people consider Switzerland as a tax haven”) These are two of the dirtiest tax havens in the world. This goes right to the heart of the matter: these places, along with the United States and the City of London, are super-tax havens that spread harm all around the global financial system. To cite an example of the harm that such places help cause: a recent study of Sub-Saharan African countries estimated that the region is a net creditor to the rest of the world in the sense that its external assets (i.e. including the stock of flight capital) exceeds external liabilities (i.e. external debt). Africa’s chronic poverty that afflicts the region arises, to a large degree, from the fact that the assets are largely in private hands, whilst the liabilities have been assigned to the African public. A very large share of these assets are held in these four countries. It is time to urgently re-appraise Transparency International’s Corruption Perceptions’ Index, which wrongly ranks these countries, which accept dirty money flows from around the world, as among the world’s cleanest. They should be ranked, instead, as among the world’s most corrupt.
The survey quotes John Christensen as saying that tax competition distorts markets, then says “many economists and businessmen disagree with Mr Christensen”. It fails to cite a single economist to back this assertion, but segues instead to a quote from Jacques de Saussure, a Swiss private banker, saying that “tax competition is the only agent of productivity for governments—it is the only competition they have.” Perhaps Mr. de Saussure has not heard of a quaint, old-fashioned concept called democracy. It should be voters that discipline bad governments: it is entirely wrong that tax havens, which are enticements to international crime, should trump what voters want. Tax competition is a classic example of the “Tragedy of the Commons” where narrow, sectional interests abuse the wider public interest. Corruption is a result of exactly the same dynamic. Or, to use another example, promoting tax competition is a bit like advocating competition on environmental standards in a race to the bottom. (Read more about tax competition on this short blog entry and, in more depth, in a special section on TJN's web site.)
The world’s rich countries have established several initiatives, such as the OECD’s initiatives on “harmful tax competition” to tackle certain aspects of this problem. These are, without exception, rich-country initiatives, aiming primarily to solve the problems of rich countries. There has been almost no co-ordinated effort by poor countries to tackles the corrupting and abusive systems promoted and encouraged by The Economist. One of the most glaring gaps in this debate is the lack of any real engagement on these issues by global civil society organisations. A big part of the problem is that the issues are so complex and difficult. That is no excuse. The Tax Justice Network exists to start to try and fill that gap, and it calls on all those people and organisations who are worried about poverty in rich and in poor nations to begin to grapple with this growing problem.
Here is the text of an unpublished letter sent to The Economist :
28th February 2007
The Editor
The Economist
25 St James's Street
London SW1A 1HG
Sir,
Tax haven activities, as you say, make some who live in tax havens wealthy ("A place in the sun," February 24th). They may even boost economic activity in nearby economies. This misses the systemic problem. Study France and Luxembourg, and your conclusion may favour tax havens. Study France, Luxembourg and Africa together, though, and you will conclude the opposite. Tax competition is a classic case of the ‘Tragedy of the Commons.’
You quote a private banker saying that tax competition is the only tax discipline governments have. What about democracy? It is the prerogative of voters, not bankers, to boot bad governments out. You add that "not everybody believes" that $255 billion in global tax revenues is lost to OFCs annually, but no-one has disproved this. It is almost certainly an under-estimate.
All tax havens harm efforts to promote transparency of ownership. This promotes cross-border crime and corruption, which taints, distorts and undermines markets. Corruption has a demand side (money-launderers, tax evaders, kleptocrats, fraudsters, and their like); and a supply side: those who provide secrecy and sell the services that exploit it. The general strategy for fighting drug abuse by tackling both users and suppliers is equally applicable to the global struggle against corruption.
Your survey is an apology for a trade in secrecy that cannot be justified. So important is this issue that we will supply a full response to your report on http://www.taxjustice.net/
Yours sincerely,
Charles Abugré, Head of Policy, Christian Aid, UK
Raymond Baker, Director, Global Financial Integrity
Raphael Calvelli, civil servant, Italy
John Christensen, Director, Tax Justice Network International Secretariat
Alex Cobham, Oxford Council on Good Governance
Rudy de Meyer, Head of Policy, 11.11.11, Belgium
Tuur Elzinga, Attac Netherlands
Raymond Favreau, Attac Quebec
François Gobbe, Kairos-Europa, Belgium
Eric Goeman, Attac Vlaanderen
Maciej Grabowski, Gdansk Institute for Market Economics
Bruno Gurtner, senior economist, AllianceSud, Switzerland
Gavin Hayman, Campaigns Director, Global Witness
James Henry, investigative journalist
Jean-Claude Huot, Berne Declaration, Switzerland
Richard Jenkins, Cymru Europa Press, Cynefin y werin
Sheila Killian, Kemmy Business School, University of Limerick
Matti Kohonen, London School of Economics
Lucy Komisar, Co-Chair, Tax Justice Network-USA
Roman Kuenzle, Attac Switzerland
Pat Lucas, Attac Jersey
Andreas Missbach, Berne Declaration, Switzerland
Professor Mick Moore, Institute of Development Studies, UK
Alvin Mosioma, Tax Justice Network for Africa, Kenya
Richard Murphy, Director, Tax Research LLP, UK
Marcelo Ramos Oliviera, Brazil
Tommaso Rondinella, Sbilanciamoci! Campaign, Italy
Professor Ronen Palan, University of Sussex
Aaron Schneider, Fellow, Institute of Development Studies, UK
Nicholas Shaxson, Associate Fellow, Chatham House
Professor Prem Sikka, University of Essex, UK
David Spencer, tax attorney, New York, USA
Chris Steel, Tax Justice Network-Jersey
Anna Thomas, Christian Aid
Catherine Vieilledent, Gauche Europeénne-MEU
Carol Wilcox, UK
David Woodward, New Economics Foundation, UK
posted by TJN at 6:37 am
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The Economist - fighting the class war on behalf of its corporate sponsors. Some things never change...
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