Friday, March 27, 2009

New study - Britain and the U.S. may be the dirtiest tax havens

Switzerland's Le Temps newspaper has just pointed out a remarkable new study by Jason Sharman, an offshore expert (he wrote a book on the OECD project against tax havens, reviewed here.)

Sharman has written for TJN before but is not a TJN member and this is not a TJN study; we are still trying to find the study itself. Le Temps said this:

"With a small budget, and using classified ads that proliferate on the Internet or in the press, this professor of the Center for Governance and Public Policy at Griffith University (Australia) made bids to set up shell companies in 22 countries -- some labeled as tax havens; others are very respectable members of the OECD."

What, pray, did he find?

"His conclusion is doubly embarrassing for members of the G20 currently leading the hunt for tax evasion. First, it is easy to transfer money anonymously, despite all the rules of conduct and the conventions. Second, and more surprisingly, countries where the misuse of rules is easiest are not the exotic islands, Switzerland or Liechtenstein - but the United States and Great Britain."

This does not surprise us, and we've said this kind of thing many times before, but it has colossal implications. How did he find this out?

"He began by identifying on the internet players that offer to set up front companies, and solicited 45 bids. In 17 cases, these service providers kindly provided the requested shell without bothering to check on the actual identity of the client. And it was not expensive: $800 to $3000. Interestingly, only four of these providers were located in tax havens (TJN: we presume they mean "classic" tax havens of the popular imagination), while 13 were located in OECD countries claiming to keep to the rules of verification: seven in Great Britain, four in the United States, one in Spain, and one in Canada."

The next step was to open an anonymous bank account. Here, the task proved more difficult: the process resulted in only five cases. Five out of 45? At first glance the system seems pretty tight. Jason Sharman did not believe it: he only had Google and 20,000 dollars available, "which is nothing compared to the capacity of criminal organizations," he adds.

The five successful attempts to open an anonymous account took place in Wyoming (where the laws have since changed), Nevada (a scanned driver's license was the only proof of identity requested), twice in Great Britain (via the Seychelles, Montenegro, St. Vincent and the Grenadines) and once in Liechtenstein (in a joint arrangement through Somalia). Copies of passports were sometimes required, but not certified by notary.

The Economist picked up on this study, and added:

"At issue is not banking secrecy as the Swiss once knew it, where discreet men in plush offices promised to take the names of their clients to the grave. This is a more insidious form of secrecy, in which authorities and bankers do not bother to ask for names, something long outlawed in offshore tax centres such as Jersey and Switzerland but which has persisted in America. For shady clients, this is a far better proposition: what their bankers do not know, they can never be forced to reveal. And their method is disarmingly simple. Instead of opening bank accounts in their own names, fraudsters and money launderers form anonymous companies, with which they can then open bank accounts and move assets."

And they added, regarding the United States:

"For foreigners, America is a particularly attractive place to stash cash, because it does not tax the interest income they earn. Thus with both anonymity and no taxation, America offers them all the elements of a tax haven."

and about Britain:

"in 45 minutes on the internet he formed a company without providing identification, was issued with bearer shares (which have been almost universally outlawed because they confer completely anonymous ownership) as well as nominee directors and a secretary. All was achieved at a cost of £515.95 ($753)."

Sharman's conclusion?

"The United States, Great Britain and other OECD states have chosen not to comply with the international standards which they have been largely responsible for putting in place."

Though it does not surprise us, it shocks us.


Anonymous Anonymous said...

I am not surprised at the outcome.The Western countries continue to drain poor countries of money by offering safe havens,for elites of these countries to steal on their behalf.
Who said colonialism has ended,it has simply changed form.Money laundering as well as selling arms is the main business of the west

4:30 pm  

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