Tax: trouble abroad for the City of London?
For instance. It begins by framing the piece with some strong pro-tax haven cheerleading by two Lord Mayors of the City of London, describing British tax havens as "a fantastic adjunct" to the City of London and "a core asset of the City."
We and many others have been at pains to point out on countless occasions that not only is this activity bad for the world at large, but bad for Britain too. The article does not mention this but continues:
Jersey is the custodian of £1.2tn of wealth, nearly half of which is funnelled into UK assets that support about 112,000 jobs, according to Capital Economics, a consultancy that conducted a study of Jersey’s finance sector. It found that the City of London would lose business to rival financial centres such as New York, Hong Kong or Dubai if the Crown Dependencies did not exist.And then follows it with what appears to be a balancing opinion
"But the notion that Britain benefits from offshore centres cuts little ice with critics, not least because their reach extends far beyond the UK."And quotes Kofi Annan as saying that using offshore companies
"facilitates tax evasion and, in some countries, corruption, draining Africa of resources that should be deployed against poverty and vulnerability."That is an important balancing opinion, to be sure -- and perhaps the only full-throated one in the story (though why she has inserted the words 'in some countries' is a mystery). That balancing opinion is then balanced out subsequently by pro-tax haven statements.
More importantly, though, the story fails to include the most important point about that Jersey lobbying report: the fact that the cited numbers are complete make-believe. This blog that we published (and sent to the FT journalist at the time) reveals the Jersey report for the nonsense that it is: first, because it uses gross figures, not net figures; and noting that even that lobbyists' document did not claim that Jersey tax havenry "supports" 112,000 jobs. What they said was that "This scale of investment could potentially support 112,000 jobs." That is a very different thing. They are taking all those jobs with a Jersey connection, then applying a ridiculous scale-down factor (which our earlier blog called "an unsubstantiated, unsourced speculative number inside a paid-for lobbying document" and then insinuating that all those jobs would disappear if Jersey's tax haven industry wasn't there.
Next, the article remarks that Jersey's lobbying document
"found that the City of London would lose business to rival financial centres such as New York, Hong Kong or Dubai if the Crown Dependencies did not exist."This is the standard tax haven line, designed to stymie reforms. But we have shown in great, painstaking detail, that this would absolutely not harm Britain, even if it does cause some difficulties for the City of London.
The article then goes on to cite favourably Jason Sharman, who has done some very interesting work on tax havens but in this article is recruited as a cheerleader for them. And the article misrepresents him:
"[Sharman] also challenges the view that offshore centres are havens for illicit wealth plundered from developing countries."No, Sharman never challenged that view. He just said that his research revealed the large economies such as the UK and US to be even worse than many smaller jurisdictions, at least on the things he measured. Which is a very different thing. Not only that, but the FT article continues to take the long-obsolete view of tax havens as small islands, whereas the modern view is that the U.K. and U.S. and many other large jurisdictions are tax havens too. The view of tax havens as merely small islands, of course, can be used to great effect as a tool to blunt reform -- as Sharman himself has noted.
Then the article goes on to quote Paul Collier, a renowned economist but not a very well known person in the tax haven field, to say that London has "tackled" the tax haven problem might make it seem, at least to a busy reader, as if the problem has been solved, as far as the City is concerned.
Then the article cites us:
John Christensen, director of the Tax Justice Network and a fierce critic of offshore centres, agrees that: “There is a real danger that measures taken in one part of the world but not replicated elsewhere will lead to a displacement,” he says.Which is true, as far as it goes. But that's far from the end of the story. People seek to describe the problem as akin to squeezing a balloon at one end - where the balloon's shape changes but its overall volume remains unchanged. The correct analogy, however, is with a sponge, not a balloon. You squeeze the sponge, and the overall volume shrinks, even if there is significant displacement elsewhere too. You catch some, and you lose some. And, as Jeffrey Sachs notes in the FT:
"The havens serve countless purposes, yet not one is for the social good. They support massive tax evasion. They underpin a global system of bribery to corrupt officials. They service the accounts of drug runners, arms traders and terrorist groups. They create veils of secrecy through shell companies, which allow tax evasion, land grabs and environmental destruction."Today's FT article ends with this "nothing to see here, move along now" line.
"As they make strides towards transparency, their international standing can only improve."This is partly true, but she has not mentioned that what has happened so far is, by and large, the appearance of action against tax havens, with far less happening than is portrayed on the surface. You wouldn't get that impression from reading this article. This is an important piece of cheerleading for the City of London and for the tax haven industry, which we could quite frankly do without.
At the end of the day, there are countless newspaper articles with a balanced perspective on tax havens (for an entertaining look at what might constitute balance in such questions, take a look at this Daily Show episode where John Oliver meets the Swiss ambassador to Washington). So we can't complain too much.