New index reveals UK runs biggest
part of global secrecy network
TJN’s 2013 Financial Secrecy
Index exposes yawning gap between G20 rhetoric and reality
the Tax Justice Network launches its 2013 Financial Secrecy Index, the biggest
ever survey of global financial secrecy. This unique index combines a secrecy
score with a weighting to create a ranking of the countries that most actively
and aggressively promote secrecy in global finance.
new edition of the Financial Secrecy Index shows that the United Kingdom is the most important global player in the financial
secrecy world. While the UK itself ranks only in 21st place, it
supports and partly controls a web of secrecy jurisdictions around the world,
from Cayman and Bermuda to Jersey and Gibraltar. Had we aggregated the entire
British network it would easily top the index, far above Switzerland. (Explore the British Connection here.)
in September by British Prime Minister David Cameron that the UK havens are no
longer a concern are baseless: our research
demonstrates that while the British Virgin Islands, Cayman Islands and some
other British jurisdictions have recently curbed some secrecy offerings, others
have expanded theirs.[i]
(See also our full narrative reports on
the Cayman Islands,
and on the British Virgin Islands.) Table 1 below shows the extent of the gap between the political rhetoric and the on-the-ground reality of British tax havens (click on the table and accompanying key to enlarge).
accompanying letter to Her Majesty The Queen highlights our concerns about
Britain’s special role.
You can also explore our tax haven globe here.
index, now expanded to cover 82 jurisdictions, also reveals how broader claims
by the G20 and leading powers to have cracked down effectively on tax havens
some welcome promises have been made and modest improvements seen, we remain
light years away from seeing the transformative changes the world so urgently
positive trends are evident. With public tolerance for offshore financial
secrecy having fallen sharply in many countries since our last index in 2011,
we see potential for real political change: for example, citizens are demanding
full disclosure in public registries of the beneficial owners that lie behind
offshore shell companies, trusts, anstalts, foundations and so on.
comes in many flavours,
and we have seen progress in some areas. Crucially, automatic information
exchange is now recognised as the effective global standard for tackling tax
evasion, which was not the case when we published our last index in 2011. More
countries are joining the OECD/Council of Europe Multilateral Tax
Convention which, while flawed, is the first that could in
principle benefit developing countries with automatic information exchange. Two
useful multinational initiatives – notably the European Union’s Savings Tax Directive and the U.S.’ Foreign Account Tax
Compliance Act (FATCA),
both involving automatic information exchange - are making headway. Country by
country reporting is gaining traction, particularly in Europe.
our index reveals that overall, financial secrecy remains alive and well.
The top ten secrecy jurisdictions
Switzerland retains a fully deserved top place in our index,
unchanged from 2011. While it has made some concessions on financial secrecy,
particularly to the U.S., these changes only pierce Swiss secrecy in narrow,
limited ways. Switzerland has also been playing the spoiler,
striving to block or derail emerging international transparency initiatives.
Although Switzerland has signed more treaties allowing information exchange
under the weak ‘on request’
model, it has often extracted painful concessions
in exchange. Switzerland has, however, recently signed
the Multilateral Tax Convention which, if ratified, would improve its secrecy
score in future.
is the dark horse of the offshore secrecy world. Offering a toxic cocktail of secrecy,
tax loopholes and lax financial regulation, it is serviced by a huge offshore
financial services industry and has recently been working with Switzerland to
derail emerging European transparency initiatives. Its membership of the
European Union keeps it off many tax haven blacklists and gives it a potent
lobbying position in the world’s biggest single economic bloc. It has made some
improvements, however, as the report explains.
Hong Kong and Singapore, two rival
fast-emerging Asian secrecy jurisdictions, have risen up our index, above all
because of the rapid growth of their offshore industries. This expansion is
principally due to economic growth in Asia, plus the displacement of some
European and North American offshore activity eastwards, and the trend has
happened in spite of welcome recent efforts by Singapore in particular to curb
the full extent of its secrecy offerings. Both jurisdictions still have high
secrecy scores, however.
Cayman Islands, part of the British network, has improved
its secrecy score measurably after making some welcome moves on financial
transparency. Significantly, its market share has risen even as its secrecy
score has improved. Even so, Cayman remains a highly secretive jurisdiction
where you can go to prison not just for revealing confidential information, but
merely for asking for it.
United States, in sixth place on our index, remains a
highly important secrecy jurisdiction, offering secrecy both at a Federal level
and on the level of individual states. The U.S. has recently taken welcome
action to protect itself against offshore secrecy, notably through its FATCA
information-sharing project and its crackdown on Swiss bankers. But it has
proven far less willing to reciprocate: reformers battling to curb the U.S.’
role as a secrecy jurisdiction have been facing immense resistance.
is a surprise newcomer to our top ten, having risen
from 22nd place in our last index to seventh place in 2013. This change is because of a dramatic growth
in Lebanon’s scale weighting, based on IMF data. The IMF has told us that this
change is the fruit of improved and more comprehensive data collection.
Although Lebanon’s share of offshore financial services is small by world
standards, its secrecy score of 79 is very high, giving it a deservedly
elevated position in our index. One to watch.
has improved its secrecy score, buoyed by its
participation in a rising tide of jurisdictions signing new international tax
agreements that allow for some information exchange. Yet Jersey’s secrecy score
of 75 remains high by international standards, most importantly with respect to
its unregistered offshore trusts and foundations.
Germany and Japan are two other
potentially surprising members of our top ten. Nevertheless, media stories and
other sources indicate that these jurisdictions both host large illicit assets
from other countries in conditions of secrecy. Germany’s and Japan’s secrecy
scores of 59 and 61 respectively are comparable to the United States’ score of
58, but they are ranked below the U.S. because their international financial
services industries are smaller. For the German readers among you, here is a link to a report on Secrecy Jurisdiction Germany.
Why has my country ranking
changed since 2011?
The 2013 Financial Secrecy Index ranking differs from the 2011 index. We have
added nine new jurisdictions and slightly modified our methodology (see here).
So the two rankings are not directly comparable: a better comparison would
involve looking at how an individual country’s secrecy score has changed. See
our secrecy scores explained here,
and see the 2011 secrecy scores here
Christensen, Director of the Tax
Justice Network, said:
Our Index reveals that Britain plays a key role in
the global market for financial secrecy.
The City of London uses a web of satellite secrecy jurisdictions based
on British Crown Dependencies and Overseas Territories to channel huge illicit
flows which feeds London’s mad property boom. Despite Prime Minister David Cameron’s encouraging
commitments to tackle Britain’s tax havens, little has been done so far to rein
in the menagerie of offshore trusts, foundations, shell companies, loopholes
and subterfuges that make up the global secrecy system. Rolling back the
secrecy that shrouds up to $32 trillion
in offshore financial assets remains one of the great challenges of the 21st
lead researcher for the Financial Secrecy Index said:
The yawning gap between fact and fiction in the
fight over global financial transparency is only just starting to shrink.
Important shifts – such as the European Union’s decision
to curb one important aspect of banking secrecy from 2015 – mask waning
momentum for other urgent changes elsewhere. Once again, our index shows how
responsibility for protecting the world’s citizens from the scourge of offshore
financial secrecy lies not with the ‘usual suspects’ in small Caribbean
islands, but with big, powerful OECD countries.
Harari, researcher for the Financial Secrecy Index said:
Our Index shows that too many jurisdictions still
help tax evaders hide their identities and assets behind shells and
smokescreens. Without public disclosure of the beneficial owners of these
assets, and the automatic exchange of information between jurisdictions to
provide the information that law enforcement and tax authorities need, it will
be impossible to tackle some of the world’s most pressing problems.
author of Treasure Islands and a writer for the index, said:
Corruption, fraud, insider trading, tax evasion and
avoidance, bribery: you name it, and the offshore system of financial secrecy
is protecting it. Tackling this system pits the world’s citizens against one
the most well-entrenched interest groups. And there is no interest group more
rich and powerful than the rich and powerful, who are the biggest beneficiaries
and protectors of this system.
For more information about the index,
John Christensen, director, Tax Justice Network, United
Meinzer, senior researcher, Tax Justice Network, Germany
3. Nick Shaxson, writer, Tax Justice Network, Germany
[i] For instance, Guernsey started offering
foundations in January of this year.