Sunday, March 08, 2009

The cat is out of the bag

The G-20 summit is imminent.

Political leaders from many of the world's largest and most politically (and militarily) powerful nations will be converging on London at the beginning of April to consider a once in a lifetime opportunity to make the world a saner, safer and fairer planet. They will be closely scrutinised by a large and sceptical public, not just in London, but across the planet.

It is clear that one of their agenda items -- high on the priority list -- will be secrecy jurisdictions. G-20 president Gordon Brown made this clear when he addressed the US Congress earlier this week, posing the rhetorical question: how much safer would we be "if the whole world finally came together to outlaw shadow banking systems and offshore tax havens." Interestingly, the prime minister received a particularly loud standing ovation at that stage, demonstrating that this is a live issue in the Democrat controlled Congress.

When he used the term "safer" Prime Minister Brown was referring to the safety of our savings, but the dangers posed by secrecy jurisdictions extend way beyond the safety of mere money. These places have been undermining national tax regimes for decades. They have been used as a tool for degrading regulation and the effectiveness of regulators. They have been boltholes for criminals, kleptocrats and banksters, offering secrecy to all manners of economic crime. With virtual impunity they have challenged judicial systems and democracy itself.

Today's lead editorial in Britain's influential Observer newspaper doesn't mince its words about the havoc that these places have caused: "secrecy jurisdictions" (this term is finally catching on) are where the "profits of legal activity, the spoils of fraud, terrorism, drug trafficking and plunder by despotic regimes are hidden. That is the company that global businesses keep when they operate offshore."

For decades the global business community, and their over-paid tax lawyers and accountants, have worked the offshore system to their great advantage. Secrecy jurisdictions have been the dirty little secret, shared by an unholy alliance of crooks, politicians, business people and assorted cronies. They have been protected by powerful nations and subservient media. Politicians, economists, and think-tanks have turned a blind eye to their activities, or worse, have acted as their shills. Some still do.

But the cat is out of the bag. Many of the world's political leaders have recognised the importance of taking action now. The G-20 must now take action. But as The Observer concludes in its editorial today:

"Gordon Brown also has a choice: to act against tax havens or limit himself to empty rhetoric. He would like to be thought of as a long-standing champion of global financial regulation. The reality is that, by what happens at the G-20 summit, he will be judged a late convert at best, otherwise a hypocrite."

The future security of more than our savings depends on the outcome of the G-20 summit. Democratic forms of government will come under immense pressure in the coming years as the economic crisis deepens and the totalitarians come out of the shadows. Outlawing the secrecy jurisdictions, including all the satellites of the City of London, will demonstrate a real commitment to tackling secrecy, corruption and regulatory degradation. We demand nothing less.


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